Fundamentals of Management, Canadian Edition [9 ed.]

Citation preview

Brief Contents 1

Introduction to Management and Organizations1

SUPPLEMENT 1A A Brief History of Management

24

SUPPLEMENT 1B Small and Medium-Sized Enterprises and Organizations

30

SUPPLEMENT 1C Entrepreneurship35 2

Environmental Constraints on Managers44

3

Decision Making

4

Planning and Strategic Management104

70

5

Organizational Structure and Design 130

6

Human Resource Management

161

7

Managing Innovation and Change

194

8

Understanding Groups and Teams

220

9

Motivating and Rewarding Employees244

10 Leadership272 11 Managing Communication and

Information302

12 Foundations of Control

328

13 Operations Management

356

iii

Contents Prefaceix Acknowledgmentsxii About the Authors

1

xiii

Introduction to Management and Organizations1

What Does It Mean to Be “Global”? What Are the Different Types of Global Organizations? How Organizations Go Global Which Is More Important to a Manager: National Culture or Organizational Culture?

Why Study Management?

3

Organizational Culture Strong Versus Weak Cultures Developing an Organization’s Culture

What Is Management? Efficiency and Effectiveness

4 4

How the Environment Affects Managers Assessing Environmental Uncertainty

Who Are Managers? 4 The Organizational Setting 6 How Are Managers Different from Nonmanagerial Employees?7 What Titles Do Managers Have? 7 Is the Manager’s Job Universal? 8 What Do Managers Do? 10 Four Functions Approach 10 Management Roles Approach 12 Functions versus Roles13 Skills and Competencies Approach 13 What Factors Are Reshaping and Redefining Management?15 Why Are Customers Important to the Manager’s Job?15 Why Is Innovation Important to the Manager’s Job? 15 Importance of Social Media to the Manager’s Job 16 Importance of Sustainability to the Manager’s Job 17 Chapter Summary  18 • Learning Objectives Checklist  18 • Developing Management Skills  18 • Team Exercises  20 • Business Cases  21

SUPPLEMENT 1A A Brief History of Management24

SUPPLEMENT 1B Small and Medium-Sized Enterprises and Organizations30

SUPPLEMENT 1C Entrepreneurship35

2

Environmental Constraints on Managers

44

The External Environment The Specific Environment The General Environment

45 46 47

Understanding the Global Environment PESTEL—Global Environment

52 52

53 53 54 56 57 59 60 62 62

Chapter Summary  63 • Learning Objectives Checklist 63 • Developing Management Skills  64 • Team Exercises  66 • Business Cases  67

3

Decision Making

70

The Decision-Making Process What Defines a Decision Problem? What Is Relevant in the Decision-Making Process? How Does the Decision Maker Weigh the Criteria and Analyze Alternatives? What Determines the Best Choice?

71 72 72

Factors Affecting Decision Making What Are the Three Approaches Managers Use to Make Decisions? Types of Problems and Decisions Decision-Making Conditions Group Decision Making Individual Versus Group Decision Making Decision-Making Biases and Errors

75

72 74

76 77 79 80 81 82

Contemporary Issues in Managerial Decision Making 84 How Does National Culture Affect Managers’ Decision Making? 84 Why Are Creativity and Design Thinking Important 85 in Decision Making? How Is Big Data Changing the Way Managers Make Decisions?88 Ethics, Corporate Social Responsibility, and Decision Making Four Views of Ethics Improving Ethical Behaviour Corporate Social Responsibility

90 90 92 94

Chapter Summary  97 • Learning Objectives Checklist 97 • Developing Management Skills  98 • Team Exercises  99 • Business Cases  101

4

Planning and Strategic Management 104

What Is Planning and Why Do Managers Need to Plan? Planning Defined Why Do Managers Plan?

105 106 106

v

vi  Contents 107 107

6

How Do Managers Set Goals and Develop Plans? What Types of Goals Do Organizations Have, and How Do They Set Those Goals? What Types of Plans Do Managers Use and How Do They Develop Those Plans?

108

The Human Resource Management Process Environmental Factors Affecting HRM

108

Organizational Strategy: Choosing a Niche Why Is Strategic Management Important? The Strategic Management Process Step 1: Identify the Organization’s Current Vision, Mission, Goals, and Strategies Step 2: Do an Internal Analysis Step 3: Do an External Analysis Step 4: Formulate Strategies Step 5: Implement Strategies Step 6: Evaluate Results

113 113 114

Planning Human Resource Needs 166 (1)  How Does an Organization Do a Current HR Assessment?166 (2)  How Are Future Employee Needs Determined?168 (3)  Balancing Supply and Demand 168

What Strategies Do Managers Use? 1  Corporate Strategy 2  Competitive Strategy 3  Functional Strategy Social Media as a Strategic Weapon Big Data as a Strategic Weapon Competitive Strategies

119 119 120 121 121 122 123

Planning and Performance Criticisms of Planning

110

114 116 116 118 119 119

Chapter Summary  124 • Learning Objectives Checklist  124 • Developing Management Skills  125 • Team Exercises  126 • Business Cases  127

5

Organizational Structure and Design 130

Key Elements in Organizational Structure 131 Work Specialization 132 Departmentalization133 Chain of Command 134 138 Span of Control Centralization and Decentralization 139 Formalization140 What Contingency Variables Affect Structural Choice?141 Mechanistic or Organic142 The “If”: Contingency Variables 143 Common Organizational Designs Traditional Organizational Designs Contemporary Organizational Designs

144 144 145

Contemporary Organizational Design Challenges 150 Designing Office Space 150 Keeping Employees Connected 151 Building a Learning Organization 151 Integrating Sustainability into the Organizational Structure153 Managing Global Structural Issues 154 Designing Efficient and Effective Flexible Work Arrangements154 Chapter Summary  157 • Learning Objectives Checklist 157 • Developing Management Skills  157 • Team Exercises  158 • Business Cases  159

Human Resource Management

161 162 164

Recruiting170 Where Does a Manager Recruit Applicants? 170 Selection170 How Effective Are Tests and Interviews as Selection Devices?172 How Can You “Close the Deal”? 174 175 Orientation and Training How Are New Hires Introduced to the Organization?176 Training177 Total Rewards: Five Key Components 1  Strategic Compensation 2 Benefits 3  Work–Life Balance 4  Performance and Recognition 5  Career Development

179 179 181 181 182 183

Contemporary Human Resource Management Issues 184 How Can Workforce Diversity Be Managed? 184 What Is Sexual Harassment? 185 Bullying186 Occupational Health and Safety 187 Employee Wellness 187 Chapter Summary  188 • Summary of Learning Objectives  188 • Developing Management Skills  189 • Team Exercises  190 • Business Cases  191

7

Managing Innovation and Change

194

What Is Change and How Do Managers Deal with It? 195 Why Do Organizations Need to Change?195 Who Initiates Organizational Change? 196 How Does Organizational Change Happen?197 How Do Organizations Implement Planned Changes?198 How Do Managers Manage Resistance to Change? 199 Why Do People Resist Organizational Change? 200 What Are Some Techniques for Reducing Resistance to Organizational Change? 201 Common Approaches to Organizational Change201 Making Change Happen Successfully 202 Communicating Effectively When Undergoing Change203

Contents vii

What Reaction Do Employees Have to Organizational Change?204 What Causes Stress? Stressors 205 How Can Stress Be Reduced? 206

9

How Can Managers Encourage Innovation in an Organization?207 How Are Creativity and Innovation Related? 208 What’s Involved in Innovation? 208 How Can a Manager Foster Innovation? 210 How Does Design Thinking Influence Innovation?212

Early Theories of Motivation (1950s and 1960s) Maslow’s Hierarchy of Needs Theory McGregor’s Theory X and Theory Y Herzberg’s Two-Factor Theory McClelland’s Three-Needs Theory

Chapter Summary  213 • Learning Objectives Checklist  213 • Developing Management Skills  214 • Team Exercises  216 • Business Cases  217

8

Understanding Groups and Teams

What Is a Group and What Stages of Development Do Groups Go Through? What Is a Group? Are Work Groups and Work Teams the Same? Stages of Group Development Key Aspects of Group Behaviour 1 Roles 2a Norms 2b Conformity 3  Status Systems 4  Group Size 5  Group Cohesiveness

220 221 221 222 223 225 225 226 226 227 227 227

Turning Groups into Effective Teams 228 Characteristics of Effective Teams 229 What Contextual Factors Lead to Team Effectiveness?230 What Team Composition Factors Lead to Effectiveness? 231 How Does Work Design Affect Team Effectiveness?232 What Team Processes Are Related to Team Effectiveness?232 How Can a Manager Shape Team Behaviour?233 Current Challenges in Managing Teams 235 What’s Involved with Managing Global Teams?235 How Do Team Composition Factors Affect Managing a Global Team? 236 How Does Team Structure Affect Managing a Global Team? 236 How Do Team Processes Affect Managing a Global Team? 237 Beware! Teams Are Not Always the Answer 237 Chapter Summary  238 • Learning Objectives Checklist  238 • Developing Management Skills  239 • Team Exercises  240 • Business Cases  241

Motivating and Rewarding Employees244

Motivation245 246 246 246 247 248

Contemporary Theories of Motivation 249 Goal-Setting Theory 249 How Does Job Design Influence Motivation?250 Four-Drive Theory 252 Equity Theory 253 Expectancy Theory 255 Integrating Contemporary Theories of Motivation 257 Current Issues in Motivation Motivating Employees When the Economy Stinks Motivating Unique Groups of Workers Designing Effective Rewards Programs That Motivate Employees Employee Recognition Programs Improving Work–Life Balance Suggestions for Motivating Employees

257 258 259 261 262 264 264

Chapter Summary  266 • Learning Objectives Checklist  266 • Developing Management Skills  267 • Team Exercises  267 • Business Cases  269

10 Leadership272 Who Are Leaders and What Is Leadership?

274

What Do Early Leadership Theories Tell Us About Leadership?275 THE LEADER What Traits Do Leaders Have? 275 THE BEHAVIOURS What Behaviours Do   Leaders Exhibit? 277 Contingency Theories of Leadership 278 What Was the First Comprehensive Contingency Model?278 How Do Followers’ Willingness and Ability Influence Leaders? 280 How Participative Should a Leader Be? 282 How Do Leaders Help Followers? 282 Contemporary Views of Leadership How Do Leaders Interact with Followers? How Do Transactional Leaders Differ from Transformational Leaders? How Do Charismatic Leadership and Visionary Leadership Differ?

284 285

Current Issues in Leadership Why Do Leaders Need to Empower Employees? Team Leadership Managing Power Providing Ethical Leadership

288 288 289 290 290

285 286

viii  Contents Does National Culture Affect Leadership? 291 How Does Emotional Intelligence Affect Leadership? 292 Why Is Trust the Essence of Leadership? Why Is It Important That Followers Trust Their Leaders? A Final Thought Regarding Leadership

293 294 295

Chapter Summary  296 • Learning Objectives Checklist  296 • Developing Management Skills  297 • Team Exercises  299 • Business Cases  300

11 Managing Communication and

Information302

Effective Communication 303 How Does the Communication Process Work? 303 Are Written Communications More Effective than Verbal Ones? 305 Is the Grapevine an Effective Way to Communicate? 305 306 How Do Nonverbal Cues Affect Communication? What Barriers Keep Communication from Being Effective?307 How Can Managers Overcome Communication Barriers?310 Technology and Managerial Communication Networked Communication Wireless Communication

312 313 315

What Communication Issues Do Managers Face Today? 317 How Do We Manage Communication in an Internet World?318 How Does Knowledge Management Affect Communication?319 What’s Involved with Managing the Organization’s 320 Knowledge Resources? What Role Does Communication Play in Customer Service?321 How Can We Get Employee Input and Why Should We? 322 Why Should Managers Be Concerned with 322 Communicating Ethically? Chapter Summary  323 • Learning Objectives Checklist  323 • Developing Management Skills  324 • Team Exercises  325 • Business Cases  325

12 Foundations of Control

328

Keeping Track of an Organization’s Finances 338 Keeping Track of an Organization’s Information 340 Keeping Track of Employee Performance 340 Keeping Track Using a Balanced Scorecard Approach342 Contemporary Issues in Control Corporate Governance Cross-Cultural Differences Workplace Concerns

344 344 345 347

Chapter Summary  351 • Learning Objectives Checklist  351 • Developing Management Skills  351 • Team Exercises  352 • Business Cases  353

13 Operations Management

356

Why Is Operations Management Important to Organizations? 357 What Is Operations Management? 357 How Do Service and Manufacturing Firms Differ? 358 How Do Businesses Improve Productivity?359 What Is Value Chain Management and Why Is It Important? 1  What Is Value Chain Management? 2 How Does Value Chain Management   Benefit Businesses?

361 361 362

How Is Value Chain Management Done? 362 Supply Chain Management 363 What Are the Requirements for Successful Value Chain Management? 364 What Are the Obstacles to Value Chain Management?368 What Contemporary Issues Do Managers Face in Managing Operations? 370 What Role Does Technology Play in Operations Management?370 371 How Do Managers Control Quality? How Are Projects Managed? 375 How Does Lean Manufacturing Work? 379 379 How to Decide About Outsourcing Chapter Summary  380 • Learning Objectives Checklist  380 • Developing Management Skills  381 • Team Exercises  382 • Business Cases  382

What is Control? Why Is Control Important? Performance Standards

329 329 331

Glossary386

The Control Process What Is Measuring? What We Measure How Do Managers Compare Actual Performance to Planned Goals? What Managerial Action Can Be Taken?

331 332 333

Endnotes397

What Should Managers Control? When to Introduce Control

337 337

334 336

Your Essential Management Reading List

395

Name/Organization Index

441

Subject Index

448

List of Canadian Companies, by Province

461

List of International Companies, by Country

463

Preface

W

elcome to the ninth Canadian edition of Fundamentals of Management, by Stephen P. Robbins, David A. DeCenzo, Mary Coulter, and Ian Anderson. This edition continues the fresh approach to management coverage of the previous editions through the following: • current and relevant examples • updated theory • a new pedagogically sound design The philosophy behind this revision was to put additional emphasis on the idea that management is for everyone. Students who are not managers, or who do not envision themselves as managers, may not always see why studying management is important. We use examples from a variety of settings to help students understand the relevance of studying management to their day-to-day lives.

Chapter Pedagogical Features We have enhanced the ninth Canadian edition with a rich variety of pedagogical features, including the following: • Learning outcomes to guide student learning begin each chapter. These questions are repeated at the start of each major chapter section to reinforce the learning outcome. • An opening case starts the body of the chapter and is threaded throughout to help students apply a story to the concepts they are learning. • The use of infographics in each chapter presents information graphically to help visual learners with the related concepts. In addition, an increase in photographs enhances business concepts throughout the text. •

Sustainability is an important topic and it’s critical for our students—our future business leaders—to be familiar with it. So we added an icon to help you and your students recognize how pervasive sustainability is.

• And the Survey Says . . . provides relevant Canadian and global data to help students understand business metrics and the Canadian significance of various management topics. • Tips for Managers provide “take-aways” from the ­chapter—things that managers and would-be managers can start to put into action right now, based on what they have learned in the chapter. • Technology and the Manager’s Job looks at the impact technology has on managers.

• What’s Cooking in Hospitality? is a new feature that looks at management issues in the hospitality sector—one that employs over 600 000 Canadians and generates more than $80 billion in revenue. • Bust this Myth—Management Myths Debunked features common management myths that help illustrate what students can learn from this text. The fun video component in the Revel edition highlights the myths and why they are just that—myths—and then explains why. • A Question of Ethics was added to the ninth Canadian edition. This feature provides students with real-life ethical scenarios that managers face.

End-of-Chapter Applications The entire end-of-chapter section provides a wealth of exercises and applications. • The Summary of Learning Outcomes provides responses to the outcome-based questions identified at the beginning of each chapter. • Discussion Questions allow students to review their understanding of the chapter content. • Developing Management Skills lets students apply material to their daily lives as well as to real business situations related to the chapter material, helping them see that planning, leading, organizing, and controlling are useful in one’s day-to-day life, too. This feature includes several exercises, such as the ones described below. • Dilemma presents an everyday scenario for students to resolve using management tools. • Becoming a Manager provides suggestions for students on activities and actions they can do right now to help them prepare to become a manager. • 3BL: The Triple Bottom Line helps students apply sustainability to business situations. • Be the Consultant emphasizes the importance of interpersonal and organizational skills. • Team Exercises give students a chance to work together in groups to solve a management challenge. • Hey, You’re the Boss Now and Diversity Matters increase the diversity component of the text and give students a hands-on perspective of being a supervisor or manager. • The Business Cases are decision-focused scenarios that ask students to determine what they would do if they were in the situation described.

ix

x  Preface

New to the Ninth Canadian Edition In addition to the new pedagogical features highlighted above, we have introduced or revised other learning aids and made significant changes to content.

Case Program This edition offers a variety of cases that can be used in or out of the classroom. • End-of-Chapter Cases: At the end of each chapter we offer brief, chapter-specific cases in the Developing Management Skills and Business Cases sections. These cases include a variety of open-ended questions for classroom discussion or small-group assignment. A third case has been added to each chapter.

Chapter-by-Chapter Highlights Below, we highlight the new material that has been added to this edition. Chapter 1  • Updated opening case on Calgary mayor Naheed Nenshi • New section on the new world of management, including innovation, social media, and sustainability • New end-of-chapter (EOC) material (Hey, You’re the Boss Now on Generations X, Y, and Z, and Developing Management Skills on becoming politically adept) • Management Myth Debunked: Only those who want to be managers need to take a course in management • New exhibits on characteristics of organizations, management levels, and activities by management level • New case on Holocracy (Zappos)

• New EOC material (Be the Consultant on understanding culture) Chapter 3  • New opening case on socially responsible investing (SRI) • New case on Credit Valley Hospital • Updated case on Blue Jays Baseball • New content on national culture’s impact on decision making, creativity and design thinking, big data, and quantitative decision-making aids • New decision-making example on purchasing a car • Management Myth Debunked: A good decision should be defined by its outcome • New exhibits on the decision making process and social responsibility Chapter 4  • Updated opening case on Stantec • New cases on Zara Fast Fashion and the Prince Edward County wine region • Updated case on SilverBirch • New content on contingency factors and planning, why strategic management is important, social media as a strategic weapon, and big data as a strategic weapon • Management Myth Debunked: Planning is a waste of time because no one can predict the future • Updated EOC material on competitive intelligence Chapter 5 

• Updated case on Shopify

• Updated opening case on Empire Company (Sobeys)

• New supplement on Entrepreneurship with expanded content

• Updated cases on Pfizer and Levitt-Safety

Chapter 2  • New opening case on Spin Master • New case on the movie theatre industry • New content on the internet of things and a new case on Miovision Technologies Inc. • New sections on the sharing economy, what is the economy like today, what does it mean to be global, and national culture versus organizational culture • Management Myth Debunked: It doesn’t matter what an organization’s culture is like; I can be happy working anywhere

• New case on Yahoo • New content on today’s organizational design challenges, flexible working arrangements, and authority versus responsibility • Updated content on learning organizations, organizational structure, span of control, and work specialization • Management Myth Debunked: Bureaucracies are inefficient • New Exhibits on authority versus power and contemporary organizational designs Chapter 6  • New opening case on Freshco Retail Maintenance

• New exhibits on Gen X, Y, and Z, and how culture can be described

• Two new cases on spotting talent and dealing with ­romance in the workplace

• And the Survey Says . . . on the sharing economy

• Updated case on Wellington West

Preface xi

• New content on recruitment, closing the deal, Canadian employment legislation, and bullying • Updated content on performance management and recruitment and selection • Management Myth Debunked: Managers don’t need to know about human resources because that’s the job of the HR department • New exhibit on recruitment sources • New EOC material (Developing Your Interpersonal Skills on giving good feedback) Chapter 7  • New opening case on Article • Two new cases on Under Armour and Island Water Tech • Updated content on categories of change • Management Myth Debunked: There’s nothing managers can do to reduce the stress inherent in today’s jobs • New exhibit on categories of change Chapter 8  • Updated opening case on The Virgin Group • New case on team building • Two updated cases on Whole Foods Canada and Toyota Canada • Management Myth Debunked: Teams always outperform employees working individually • New exhibits on groups versus teams, global teams, and stages of group development • New content on team effectiveness, work design, team processes, conformity, status systems, and group cohesiveness Chapter 9  • New opening case on GestureTek (gamification) • New case on Gravity Payments • Two updated cases on DevFacto Technologies and Ubisoft Entertainment SA • Management Myth Debunked: Motivation is all about “Show me the money” • New exhibit on job characteristics • New content on burnout, job design influencing motivation, job characteristics, motivating employees when the economy stinks, and gamification and rewards • Updated content on pay for performance, diverse workforces, open-book management, flextime, and integrating contemporary theories of motivation

Chapter 10  • New opening case on HSBC Canada • Two new cases on Starbucks and developing Gen Y leaders • Updated case on ROWE • New content on Fiedler, Vroom, LMX theory, empowerment, emotional intelligence and leadership, national culture • Management Myth Debunked: Leadership can’t be taught • New exhibit on The Fiedler Model • Updated EOC material (Management Skills Builder on increasing your power) Chapter 11  • New chapter on managing communication and information • New opening case on Mini Mioche • Three new cases on Twitter, delivering bad news, and e-mail • Management Myth Debunked: Managers should try to stifle the grapevine • New exhibit on active listening • Adapted EOC material (Hey, You’re the Boss Now on getting started with social media, 3BL on communication styles of men and women, Be the Consultant on writing better e-mails) Chapter 12  • New opening case on Comptoir Agricole Ste-Anne • Two new cases on Visa OCE and Lululemon • Updated case on Balanced Scorecard • New material on workplace violence, and disciplining difficult employees • Management Myth Debunked: A lack of employee turnover is a sign of a good manager • New exhibits on acceptable range of variation and controlling workplace violence Chapter 13  • New opening case on Maple Leaf Foods • Two new cases on tragedy in fashion and cow-milking robots • New content on blockchain, value chain management, conflict management, and quality • Management Myth Debunked: In the future of manufacturing, robots will replace almost all workers

Acknowledgments A number of people have worked hard to update and enliven this ninth Canadian edition of Fundamentals of Management. Kathryn O’Handley was content developer on this project. Her attention to detail, kindness, patience, positivity, and support made working on this resource enjoyable and enriching. Kathy also played a key role in handling many aspects of the editorial work needed during the production process. Karen Townsend, portfolio manager, has a deep understanding of the market and was very supportive of new content and new directions, while continuing to always be in the author’s corner. I’d also like to thank content manager Madhu Ranadive, project manager Pippa Kennard, and copy editor Audrey Dorsch, as well as the many others—proofreaders, designers, permissions researchers, marketing and sales representatives—who have contributed to the transformation of my manuscript into this resource and seen it delivered into your hands. The Pearson Canada sales team is an exceptional group, and I know they will do everything

xii

possible to make the book successful. My local rep, Molly, is the best in the business and a pleasure to work with. Finally, I would like to thank the reviewers of this textbook for their detailed and helpful comments: Kristy Calles, Bow Valley College Cheryl Dowell, Algonquin College Sonja Johnston, St. Mary’s University Lara Loze, Durham College Edward Marinos, Sheridan College Ed McHugh, Nova Scotia Community College Carol Ann Samhaber, Algonquin College Halinka Szwender, Camosun College Susan Thompson, Trent University Peter Vogopoulos, Vanier College Wenli Yang, Centennial College I dedicate this book to my wife, Tracy, who is my loving support and inspiration, and my two sons, Shaun and Isaac. Ian Anderson

About the Authors STEPHEN P. ROBBINS received his PhD from the University of Arizona. He previously worked for the Shell Oil Company and Reynolds Metals Company and has taught at the University of Nebraska at Omaha, Concordia University in Montreal, the University of Baltimore, Southern Illinois University at Edwardsville, and San Diego State University. He is currently professor emeritus in management at San Diego State. Dr. Robbins’s research interests have focused on conflict, power, and politics in organizations, behavioural decision making, and the development of effective interpersonal skills. His articles on these and other topics have appeared in such journals as Business Horizons, the California Management Review, Business and Economic Perspectives, International Management, Management Review, Canadian Personnel, Industrial Relations, and The Journal of Management Education. Dr. Robbins is the world’s best-selling textbook author in the areas of management and organizational behaviour. His books have sold more than 5 million copies and have been translated into 20 languages. His books are currently used at more than 1500 US colleges and universities as well as hundreds of schools throughout Canada, Latin America, Australia, New Zealand, Asia, and Europe. Dr. Robbins also participates in masters track competition. Since turning 50 in 1993, he’s won 23 national championships and 14 world titles. He was inducted into the US Masters Track & Field Hall of Fame in 2005 and is currently the world record holder at 100m and 200m for men 65 and over. DAVID A. DECENZO (PhD, West Virginia University) is president of Coastal Carolina University in Conway, South Carolina. In his capacity as president, Dr. DeCenzo is responsible for the overall vision and leadership of the university. He has been at Coastal since 2002, when he took over leadership of the E. Craig Wall Sr. College of Business. Since then, the college established an economics major and developed an MBA program. During that period, student enrolment and faculty positions nearly doubled. The college also established significant internship opportunities locally, nationally, and internationally in major Fortune 100 companies. As provost, Dr. DeCenzo worked with faculty leadership to pass a revised general education core curriculum as well as institute a minimum salary level for the university’s faculty members. Before joining the Coastal faculty in 2002, he served as director of partnership development in the College of Business and Economics at Towson University in Maryland. He is an experienced industry consultant, corporate trainer, and public speaker. Dr. DeCenzo is the author of numerous textbooks that are used widely at colleges and universities throughout the United States and the world. Dr. DeCenzo and his wife, Terri, have four children and reside in Pawleys Island, South Carolina.

xiii

xiv  About the Authors MARY COULTER (PhD, University of Arkansas) held different jobs, including high school teacher, legal assistant, and city government program planner, before completing her graduate work. She has taught at Drury University, the University of Arkansas, Trinity University, and Missouri State University. She is currently professor emeritus of management at Missouri State University. Dr. Coulter’s research interests were focused on competitive strategies for not-for-profit arts organizations and the use of new media in the educational process. Her research on these and other topics has appeared in such journals as International Journal of Business Disciplines, Journal of Business Strategies, Journal of Business Research, Journal of Nonprofit and Public Sector Marketing, and Case Research Journal. In additional to Fundamentals of Management, Dr. Coulter has published other books with Prentice Hall including Management (with Stephen P. Robbins), Strategic Management in Action, and Entrepreneurship in Action. When she’s not busy writing, Dr. Coulter enjoys puttering around in her flower gardens, trying new recipes, reading different types of books, and enjoying many different activities with Ron, Sarah and James, Katie and Matt, and especially with her new grandkids, Brooklynn and Blake, who are the delights of her life! IAN ANDERSON received his Master’s of Business Administration in Innovation Leadership from the University of Fredericton. Before commencing his college teaching career, he was the director of human resources for a large Ottawa-based IT company. Ian is also a human resources and management consultant with Association Management, Consulting & Educational Services (AMCES), is a certified Change Management Professional, and has been actively consulting for more than 25 years. At Algonquin College, Ian is a professor in management, leadership, and human resources, and he coaches students in business-case and college-marketing competitions. In his spare time, Ian enjoys coaching Special Olympics soccer and volunteering with his favourite charity, the Capital City Condors. He has coached competitive and recreational hockey and soccer for more than 20 years. As a sommelier, he provides tutored tastings and wine and scotch education. Ian’s parents, Bob and Katharine, are from the Niagara area.

Supplement 1A

A Brief History of Management Henry Ford once said, “History is more or less bunk.” Well . . . Henry Ford was wrong! History is important because it can put current activities in perspective. We propose that you need to know management history because it can help you understand what today’s managers do. In this module, you’ll find an annotated timeline that discusses key milestones in management theory. We believe this approach will help you better understand the origins of many contemporary management concepts.

Early Management Management has been practised a long time. Organized endeavours directed by people responsible for planning, organizing, leading, and controlling activities have existed for thousands of years. Regardless of what these individuals were called, someone had to perform those functions. The Industrial Revolution may be the most important pre-twentiethcentury influence on management. Why? Because with the industrial age came the birth of the corporation. With large, efficient factories pumping out products, someone needed to forecast demand, make sure adequate supplies of materials were available, assign tasks to workers, and so forth. Again, that someone was managers! It was indeed a historical event for two reasons: (1) because of all the organizational aspects (hierarchy, control, job specialization, and so forth) that became a part of the way work was done and (2) because management had become a necessary component to ensure the success of the enterprise.

Transcendental Graphics/ Archive Photos/Getty Images

1780s–Mid-1800s

The Egyptian pyramids are proof that projects of tremendous scope, employing tens of thousands of people, were completed in ancient times.1 It took more than 100 000 workers some twenty years to construct a single pyramid. Someone had to plan what was to be done, organize people and materials to do it, make sure those workers got the work done, and impose some controls to ensure that everything was done as planned. That someone was managers. Stephen Studd/Getty Images

3000–2500 BCE

This is an important year because it’s the year Adam Smith’s Wealth of Nations was published. In it, he argued the economic advantages of the division of labour (or job specialization)—that is, breaking down jobs into narrow, repetitive tasks. Using division of labour, individual productivity could be increased dramatically. Job specialization continues to be a popular way to determine how work gets done in organizations. As you’ll see in Chapter 5, it does have its drawbacks.

Fotosearch/Stringer/Archive Photos/Getty Images

1776

At the arsenal of Venice, warships were floated along the canals, and at each stop, materials and riggings were added to the ship.2 Sounds a lot like a car “floating” along an assembly line, doesn’t it? In addition, the Venetians used warehouse and inventory systems to keep track of materials, human resource management functions to manage the labour force (including wine breaks), and an accounting system to keep track of revenues and costs. Antonio Natale/Getty Images

1400s

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

24

Supplement 1A  A Brief History of Management  25

Classical Approaches Beginning around the beginning of the twentieth century, the discipline of management began to evolve as a unified body of knowledge. Rules and principles were developed that could be taught and used in a variety of settings. These early management proponents were called classical theorists. 1911

Bettmann/Corbis

That’s the year Frederick W. Taylor’s Principles of Scientific Management was published. His groundbreaking book described a theory of scientific management—the use of scientific methods to determine the “one best way” for a job to be done. His theories were widely accepted and used by managers around the world, and Taylor became known as the “father” of scientific management.3 Other major contributors to scientific management were Frank and Lillian Gilbreth (early proponents of time-and-motion studies and parents of the large family described in the original book Cheaper by the Dozen) and Henry Gantt (whose work on scheduling charts was the foundation for today’s project management).

1916–1947

Hulton Archive/Getty Images

Unlike Taylor, who focused on an individual production worker’s job, Henri Fayol and Max Weber looked at organizational practices by focusing on what managers do and what constitutes good management. This approach is known as general administrative theory. Fayol was introduced in Chapter 1 as the person who first identified five management functions. He also identified fourteen principles of management—fundamental rules of management that could be applied to all organizations.4 (See Exhibit S1A-1 for a list of these fourteen principles.) Weber is known for his description and analysis of bureaucracy, which he believed was an ideal, rational form of organizational structure, especially for large organizations. In Chapter 5, we elaborate on these two important management pioneers.

Exhibit S1A-1  Fayol’s Fourteen Principles of Management 1. Division of work. This principle is the same as Adam Smith’s division of labour. Specialization increases output by making employees more efficient. 2. Authority. Managers must be able to give orders. Authority gives them this right. Along with authority, however, goes responsibility. Whenever authority is exercised, responsibility arises. 3. Discipline. Employees must obey and respect the rules that govern the organization. Good discipline is the result of effective leadership, a clear understanding between management and workers regarding the organization’s rules, and the judicious use of penalties for infractions of the rules. 4. Unity of command. Every employee should receive orders from only one superior. 5. Unity of direction. Each group of organizational activities that have the same objective should be directed by one manager using one plan. 6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organization as a whole. 7. Remuneration. Workers must be paid a fair wage for their services.

8. Centralization. Centralization refers to the degree to which subordinates are involved in decision making. Whether decision making is centralized (to management) or decentralized (to subordinates) is a question of proper proportion. The task is to find the optimum degree of centralization for each situation. 9. Scalar chain. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed to by all parties and if superiors are kept informed. Also called chain of command. 10. Order. People and materials should be in the right place at the right time. 11. Equity. Managers should be kind and fair to their subordinates. 12. Stability of tenure of personnel. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies. 13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort. 14. Esprit de corps. Promoting team spirit will build harmony and unity within the organization.

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

26  Supplement 1A

Behavioural Approach The behavioural approach to management focused on the actions of workers. How do you motivate and lead employees in order to get high levels of performance? 1960s–Today

Managers get things done by working with people. Several early management writers recognized how important people are to an organization’s success.5 For instance, Robert Owen, who was concerned about deplorable working conditions, proposed an idealistic workplace. Hugo Munsterberg, a pioneer in the field of industrial psychology, suggested using psychological tests for employee selection, learning theory concepts for employee training, and studies of human behaviour for employee motivation. Mary Parker Follett was one of the first to recognize that organizations could be viewed from both individual and group behaviour. She thought that organizations should be based on a group ethic rather than on individualism.

An organization’s people continue to be an important focus of management research. The field of study that researches the actions (behaviours) of people at work is called organizational behaviour (OB). OB researchers do empirical research on human behaviour in organizations. Much of what managers do today when managing people—motivating, leading, building trust, working with a team, managing conflict, and so forth— has come out of OB research. These topics are explored in depth in Chapter 13.

Hawthorne Works Factory of Morton College

Shutterstock

Design Pics/ Newscom

Late 1700s–Early 1900s

SelfActualization Esteem Social Safety Physiological

1930s–1950s

1924–Mid-1930s The Hawthorne studies, a series of studies that provided new insights into individual and group behaviour, were without question the most important contribution to the behavioural approach to management.6 Conducted at the Hawthorne (Cicero, Illinois) Works of the Western Electric Company, the studies were initially designed as a scientific management experiment. Company engineers wanted to see the effect of various lighting levels on worker productivity. Using control and experimental groups of workers, they expected to find that individual output in the experimental group would be directly related to the intensity of the light. However, much to their surprise, they found that productivity in both groups varied with the level of lighting. Not able to explain it, the engineers called in Harvard professor Elton Mayo. Thus began a relationship that lasted until 1932 and encompassed numerous experiments in the behaviour of people at work. What were some of their conclusions? Group pressures can significantly affect individual productivity, and people behave differently when they’re being observed. Scholars generally agree that the Hawthorne studies had a dramatic impact on management beliefs about the role of people in organizations and led to a new emphasis on the human behaviour factor in managing organizations.

The human relations movement is important to management history because its supporters never wavered from their commitment to making management practices more humane. Proponents of this movement uniformly believed in the importance of employee satisfaction—a satisfied worker was believed to be a productive worker.7 So they offered suggestions like employee participation, praise, and being nice to people to increase employee satisfaction. For instance, Abraham Maslow, a humanistic psychologist who is best known for his description of a hierarchy of five needs (a wellknown theory of employee motivation), said that once a need was substantially satisfied, it no longer served to motivate behaviour. Douglas McGregor developed Theory X and Theory Y assumptions, which related to a manager’s beliefs about an employee’s motivation to work. Even though both Maslow’s and McGregor’s theories were never fully supported by research, they are important because they represent the foundation from which contemporary motivation theories were developed. Both are described more fully in Chapter 9.

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

Supplement 1A  A Brief History of Management  27

Quantitative Approach The quantitative approach, which focuses on the application of statistics, optimization models, information models, computer simulations, and other quantitative techniques to management activities, provided tools for managers to make their jobs easier.

1950s

The quantitative approach to management—which is the use of quantitative techniques to improve decision making— evolved from mathematical and statistical solutions developed for military problems during World War II. After the war was over, many of these techniques used for military problems were applied to businesses.8 For instance, one group of military officers, dubbed the “Whiz Kids,” joined Ford Motor Company in the mid-1940s and immediately began using statistical methods to improve decision making at Ford.

After World War II, Japanese organizations enthusiastically embraced the concepts espoused by a small group of quality experts, the most famous being W. Edwards Deming (photo below) and Joseph M. Juran. As these Japanese manufacturers began beating US competitors in quality comparisons, Western managers soon took a more serious look at Deming’s and Juran’s ideas.9 Their ideas became the basis for total quality management (TQM), which is a management philosophy devoted to continual improvement and responding to customer needs and expectations. We’ll look closer at Deming and his beliefs about TQM in Chapter 6.

Richard Drew/AP Images

Bert Hardy/Hulton Archive/Getty Images

1940s

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

28  Supplement 1A

Contemporary Approaches Most of the early approaches to management focused on managers’ concerns inside the organization. Starting in the 1960s, management researchers began to look at what was happening in the external environment outside the organization.

1960s

Frederic J. Brown/Newscom

Although Chester Barnard, a telephone company executive, wrote in his 1938 book The Functions of the Executive that an organization functioned as a cooperative system, it wasn’t until the 1960s that management researchers began to look more carefully at systems theory and how it related to organizations.10 The idea of a system is a basic concept in the physical sciences. As related to organizations, the systems approach views systems as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. Organizations function as open systems, which means they are influenced by and interact with their environment. Exhibit S1A-2 illustrates an organization as an open system. A manager has to efficiently and effectively manage all parts of the system in order to achieve established goals. See Chapter 2 for additional information on the external and internal factors that affect how organizations are managed.

Exhibit S1A-2  Organization as an Open System Environment

Organization Inputs Raw Materials Human Resources Capital Technology Information

Transformation Process Employees’ Work Activities Management Activities Technology and Operations Methods

Outputs Products and Services Financial Results Information Human Results

Feedback

Environment

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

Supplement 1A  A Brief History of Management  29

Image Source/Getty Images

Contemporary Approaches

1960s

1980s–Present

Early management theorists proposed management principles that they generally assumed to be universally applicable. Later research found exceptions to many of these principles. The contingency approach (or situational approach) says that organizations, employees, and situations are different and require different ways of managing. A good way to describe contingency is “if . . . then.” If this is the way my situation is, then this is the best way for me to manage in this situation. One of the earliest contingency studies was done by Fred Fiedler and looked at what style of leadership was most effective in what situation.11 Popular contingency variables have been found to include organization size, the routineness of task technology, environmental uncertainty, and individual differences.

Although the dawn of the information age is said to have begun with Samuel Morse’s telegraph in 1837, the most dramatic changes in information technology occurred in the latter part of the twentieth century and have directly affected the manager’s job.12 Managers now may manage employees who are working from home or halfway around the world. An organization’s computing resources used to be mainframe computers locked away in temperature-controlled rooms and accessed only by the experts. Now, practically everyone in an organization is connected—wired or wireless—with devices no larger than the palm of the hand. Just like the impact of the Industrial Revolution in the 1700s on the emergence of management, the information age has brought dramatic changes that continue to influence the way organizations are managed.

Industrial Revolution The advent of machine power, mass production, and efficient transportation that began in the late eighteenth century in Great Britain. division of labour (or job specialization) The breakdown of jobs into narrow, repetitive tasks. scientific management The use of the scientific method to define the one best way for a job to be done. general administrative theory Descriptions of what managers do and what constitutes good management practice. principles of management Fayol’s fundamental or universal principles of management practice.

Hawthorne studies Research done in the late 1920s and early 1930s devised by Western Electric industrial engineers to examine the effect of different work environment changes on worker productivity, which led to a new emphasis on the human factor in the functioning of organizations and the attainment of their goals. organizational behaviour (OB) The field of study that researches the actions (behaviours) of people at work.

systems approach An approach to management that views an organization as a system, which is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. open systems Systems that dynamically interact with their environment. contingency approach (or situational approach) An approach to management that says that individual organizations, employees, and situations are different and require different ways of managing.

quantitative approach The use of quantitative techniques to improve decision making. total quality management (TQM) A managerial philosophy devoted to continual improvement and responding to customer needs and expectations.

3000 BCE–1776

1911–1947

Late 1700s–1950s

1940s–1950s

1960s–present

Early Management

Classical Approaches

Behavioural Approach

Quantitative Approach

Contemporary Approaches

Supplement 1B

Small and MediumSized Enterprises and Organizations “A big business starts small.” —Richard Branson According to billionaire serial entrepreneur Richard Branson, small businesses “are the lifeblood of the economy that drive innovation, create jobs and push humanity forward.”1 His advice to anyone thinking of starting their own business is to “start small but always think big.”2 In this module we will discuss the characteristics of small and medium-sized enterprises and organizations, and the prominent factors that are key to their success: management skills and competencies, human resources, access to financing, innovation capacity, and networks and partnerships.

What Are Small and Medium-Sized Enterprises? Small and medium-sized enterprises (SMEs) refer to all businesses with fewer than 500 employees, whereas firms with 500 or more employees are classified as “large” businesses. Canada has more than 1.5 million SMEs, which generate close to half of Canada’s private-sector gross domestic product (GDP). SMEs account for the vast majority of businesses in Canada, represent over 60 percent of private-sector employment, and generate more than 80 percent of new job creation.3 They are active in all sectors of the Canadian economy, with two-thirds in the service sector (64 percent), one-fifth in the goods-producing sector (21 percent), and a significant number (15 percent) in the resource-based sector.4 The majority of SMEs are self-managed enterprises, offering entrepreneurs the pride of personal achievement, the ability to help their customers and clients, the benefits of being their own boss, and the opportunity to make more money.5 The biggest challenges for SMEs are finding new markets and customers, dealing with finances, and handling government regulations and paperwork. Entrepreneurs also work longer hours, logging an average of 48.7 hours per week. Thirty-five percent of entrepreneurs work more than 50 hours per week, compared with 5 percent of employees.6 While about 75 percent of SMEs in Canada have been in business for five years or more, failure rates are relatively high in the first few years after startup, with two out of five firms not surviving beyond their second year of operation.7 Debt financing is the primary source of financing for SMEs, with debt accounting for 75 percent of their long-term financing structure. SMEs use more informal financing sources, including owner savings and retained earnings. Use of government financing is less important for SMEs than other types of financing.8

30

Supplement 1B  Small and Medium-Sized Enterprises and Organizations 31

Key Findings9, 10 • Canada’s 1.2 million SMEs generate 45 percent of private-sector GDP. • Eighty-six percent of Canadian exporters are SMEs, generating $106 billion in exports. • Ninety-eight percent of SMEs have less than 100 employees, and 80 percent are either self-employed businesses or micro organizations (one to four employees). • In 2014, 16% of SMEs were majority owned by women, and 20% were equally owned by women and men. • Since 2002, SMEs created over 1.2 million jobs, accounting for almost 90 percent of all private jobs created. • SMEs employ over 8 million Canadians, 70 percent of the total private labour force. • Forty-one percent of Canada’s entrepreneurs have previously owned a business.

What Are Small and Medium-Sized Organizations? Small and medium-sized organizations (SMOs) are community organizations that, like SMEs, have fewer than 500 paid staff. SMOs comprise nearly 99 percent of nonprofits in Canada. The term community organization is used broadly to include a wide variety of nonprofit organizations in Canada: charitable and voluntary organizations; parapublic organizations such as hospitals and postsecondary education institutions; and social economy organizations, community economic development organizations, and cooperatives.11 Imagine Canada, working with a consortium of organizations, conducted the largest survey of nonprofit enterprises in Canada. According to 2015 data, Canada has approximately 161 000 nonprofit and voluntary organizations, which generate revenues greater than $250 billion and employ over 2 million people.12 The organizations are spread throughout Canada, with more than 900 in PEI and more than 20 000 in Toronto alone. One-third of all organizations are hospitals, universities, and colleges, while sport and recreation organizations comprise another 21 percent.13 This sector also reports close to 20 million volunteers contributing more than 2 billion volunteer hours per year—the same as 1 million full-time jobs!14 The Capital City Condors have a membership base of 120, whereas the entire Canadian nonprofit sector features 139 million memberships.15 Exhibit S1B-1 shows the economic impact of the nonprofit sector in Canada, compared to other industries.

Key Findings16 • Canada’s nonprofit and voluntary sector is the second largest in the world; the Netherlands is the largest, while the United States is fifth. • Fifty-four percent of the estimated 161 000 nonprofits and charities in Canada are run entirely by volunteers. • Two million people are employed by these organizations, representing 11.1 percent of the economically active population. • The nonprofit and voluntary sector represents $79.1 billion, or 7.8 percent, of the GDP (larger than the automotive or manufacturing industries). • Forty-nine percent of revenues are from government, although this figure drops to 36 percent when hospitals, universities, and colleges are excluded. • Canadians contribute more than 2 billion hours annually through SMOs.

32  Supplement 1B

Exhibit S1B-1  Gross Domestic Product: Nonprofit Sector and Selected

Industries, 2006

SOURCE: Based on Statistics Canada, Satellite Account of Nonprofit Institutions and Volunteering, 2007, Catalogue no.

13-015-X (Ottawa: Statistics Canada, 2009), p. 11, http://www.statcan.gc.ca/pub/13-015-x/13-015-x2009000-eng.pdf.

Motor vehicle manufacturing

5,967

Agriculture

13,591

Retail trade

75,276

Mining

86,429

Non-profit sector

100,696 0

20,000

40,000

60,000

80,000 100,000 120,000

Millions of dollars

Looking at the Canadian nonprofit sector can help us understand that management is very similar in all organizations. SMOs participate fully in social, economic, community, and civic life. They run food banks and homeless shelters, provide child care, build bike paths, and welcome new Canadians to the country. Increasingly, governments at all levels rely on community organizations to deliver essential public services. SMOs face significant challenges, including increasing service demands, diminishing financial resources, and staff burnout. They receive most of their revenue from earned income and government sources. Large community organizations represent less than 1 percent of the market but receive almost one-third of revenues.

SMEs and SMOs in Canada: Key Characteristics SMEs and SMOs in Canada have many important similarities as well as significant differences. The key distinction between SMEs and SMOs is whether they seek to generate a profit or are nonprofit. At the same time, successful SMOs are run with a profit mentality to ensure that they remain financially viable. With the rise of social entrepreneurship, the boundaries between SMEs and SMOs may become somewhat blurred.17 Another major difference between SMEs and SMOs is their use of volunteers. While some SMEs may have unpaid family members or others who work in the enterprise, volunteers are the lifeblood of SMOs. Most SMOs rely heavily on volunteers to deliver their mission. For SMEs, success is usually defined in terms of growth—in sales, profits, firm size, and market share. SMOs, even those that provide goods and services, typically equate success with the ability of an organization to deliver on its mission and to achieve results for communities and individuals. Revenue or profit growth is not as relevant for SMOs as it is for SMES, given their different missions. The prominent key success factors for SMEs and for SMOs are management skills and competencies, human resources, access to financing, innovation capacity, and networks and partnerships.

Supplement 1B  Small and Medium-Sized Enterprises and Organizations 33

Management in SMEs and SMOs Management skills and competencies are integral to business success for SMEs. Research has shown that business failures can be attributed in large part to management and organizational weaknesses. For example, some studies have found that almost half of bankruptcies result from these internal factors rather than external ones.18 SMEs require a wide variety of management skills, including leadership, strategic planning, financial and human resources management, communications and marketing, organizational development, entrepreneurial skills, and networking and partnership skills. In the startup phase, management focuses more on vision, marketing, and communications skills. As a firm expands, financial and human resources management and expertise become more prominent. Many of these same management skills and competencies are also important for SMOs. SMOs often lack middle-management levels, featuring only an executive director and perhaps a few project managers, resulting in a lack of time for planning. The management of issues around the recruitment, training, support, recognition, and retention of volunteers, as well as volunteer burnout, is critically important for community organizations, given that they rely heavily on volunteers to deliver their missions. The ability to work effectively with boards of directors is also a unique management competency.19

Human Resources in SMEs and SMOs The supply of skilled labour is an important issue for both SMEs and SMOs. Demographic trends will likely mean even greater shortages of skilled employees and managers. Staff training and development must become more prominent to cope with this challenge. SMOs also face unique human resources challenges relating to recruiting, training, and retention of volunteers. As demand for SMOs increases, the need for volunteer leaders and long-term commitments from volunteers becomes crucial. The majority of SMOs also report significant challenges in obtaining board members.20 Lower compensation levels in the nonprofit sector contribute to difficulties in finding the right staff.

Financing in SMEs and SMOs Access to financing is equally critical for both SMEs and SMOs; however, the financing challenges they face are very different. Smaller and startup organizations have difficulty accessing external financing due to a lack of assets and collateral, smaller profits, and uncertain return on investment. A lack of investment capital is a further problem for SMEs in Canada.21 SMOs face significant challenges with regard to both financing (access to private and commercial revenue sources) and funding (grants and contributions from government/-public sources for goods and services provided). Typically funding is tied to projects and does not cover the operational, administrative, and overhead costs. SMOs must absorb or finance these costs from other sources, which limits their financial capability and flexibility.

Innovation in SMEs and SMOs Innovation applies to both SMEs and SMOs in terms of new and improved products, services, and processes. For SMEs, innovation is seen as the single most important factor for growth and success and is usually measured in terms of research and development (R&D). SMEs in Canada spend much less on R&D than larger firms, but as a

34  Supplement 1B

Exhibit S1B-2  Criteria for Successful Innovation in SMOs Adaptability

The extent to which an organization has had to adapt innovative practices to deliver programs and services

Criticality

How mission-critical the activity is for the association

Sustainability

The viability of the program/service

Replicability

The ability to duplicate the program/service in another organization

Impact

How the programs/services help to improve the organization’s work

Partnerships

Building partnerships between organizations in the sector or across sectors

percentage of revenue R&D spending by SMEs is much greater.22 Since SMEs have fewer resources, they may select innovation opportunities missed by larger firms. Their organizational flexibility can be a big advantage, but the ability to bring these innovations to market and make money on them is more challenging than for larger firms. For SMOs, innovation is their lifeblood. Through their strong local networks, hands-on experience, and community interaction, they are able to find innovative solutions to community and individual needs. The bigger challenge is how to apply these community-based innovations to other areas of activity and to other communities and regions. The Peter Drucker Canadian Foundation has studied hundreds of examples of innovation by Canadian nonprofit organizations and has identified six key criteria for successful innovation, shown in Exhibit S1B-2.

Networks and Partnerships in SMEs and SMOs Networks and partnerships are critical for organizations to access information, knowledge, expertise, and technology. Firms can use these partnerships to help predict and take advantage of strategic opportunities and to mobilize available resources. They are also important factors for fostering innovation.23 SMEs in Canada benefit from organizations such as local and national chambers of commerce, boards of trade, and the Canadian Federation of Independent Businesses (CFIB). This infrastructure fosters the exchange of knowledge and expertise as well as the development of collaboration among firms for common purposes. SMOs have much less access to infrastructure networks. Networks such as the Calgary Chamber of Charities or the British Columbia Voluntary Organizations Coalition are deliberately cross-sector and provide opportunities for collaboration and collective action, but the majority of SMOs continue to operate alone.

Supplement 1C

1

Entrepreneurship

You may decide that you want to run your own business rather than work for someone else. This type of employment will require that you manage yourself and may involve managing other people as well. Thus, an understanding of management is equally important whether you are a manager in someone else’s business or running your own. With $25 in allowance savings, Matt Hill started Lawn Troopers at the age of nine. Now an engineering graduate, Matt’s lawn care business has forty employees and has expanded to snow and waste removal. In 2014 he won Youth Entrepreneur of the Year at the Small Business Achievement Awards. One big perk of winning the award— Kevin O’Leary, formerly of CBC’s Dragon’s Den, will serve as his mentor. There are numerous factors that allow an entrepreneur to be successful. Personal traits such as optimism and dedication are high on the list. For Matt, his path was forged from the outset as a result of determination and hard work. While building his business, he paid for his education out of company profits and completed his degree at Queen’s University. Entrepreneurs need access to capital—human, financial, and technological. They need a solid business plan with the right partners. Timing and luck always play a part, but there is no substitute for hard work and “sweat equity.” In this supplement, we’re going to look at the activities engaged in by entrepreneurs like Matt Hill. We’ll start by looking at the context of entrepreneurship and then examining entrepreneurship from the perspective of the four managerial functions: planning, organizing, leading, and controlling. Running a business like Lawn Troopers requires Matt to use each of the functions. Matt has to create a detailed action plan aimed at achieving some organizational goal. For example, when Matt wanted to increase sales during the winter months when lawn care business was slow, he added snow removal to his list of services. Matt may have spent time mapping out the necessary steps needed to increase his customer base. Perhaps it involved increasing advertisements in a particular region or contacting prior customers to see if they were interested in purchasing more services. Matt also began a new business, Scooper Troopers, using a revolutionary dog waste collection technology. Once a plan is in place, Matt has to get busy getting organized. He has to allocate resources to any new business venture. He needs to identify different roles and ensure that he assigns the right number of employees (and perhaps hire more) to carry out the new venture. He then needs to delegate authority, create job descriptions, and provide direction so that his team of sales representatives can work toward higher sales numbers without having barriers in their way. As his two businesses grow, Matt spends more time connecting with his employees on an interpersonal level. He is no longer simply managing the tasks of his employees; he leads them. Not all managers can be effective leaders, but Matt is good at communicating, motivating, inspiring, and encouraging his employees to achieve greater productivity. With a plan in place, Matt decided to explore a pilot project of Scooper Troopers prior to launching it fully. This

Lawn Troopers Matt Hill, pictured with former star of Dragon’s Den Kevin O’Leary, accepts the Youth Entrepreneur of the Year Award in 2014.

35

36  Supplement 1C gave him a chance to evaluate his results against his goals. In doing so, Matt exercised control over the business. He took corrective actions to work toward his goal of creating another successful business.

What Do Entrepreneurs Do? Describing what entrepreneurs do isn’t an easy or simple task! No two entrepreneurs’ work activities are exactly alike. In a general sense, entrepreneurs create something new, something different. They search for change, respond to it, and exploit it. Initially, an entrepreneur is engaged in assessing the potential for the entrepreneurial venture and then dealing with startup issues. In exploring the entrepreneurial context, entrepreneurs gather information, identify potential opportunities, and pinpoint possible competitive advantage(s). Then, armed with this information, an entrepreneur researches the venture’s feasibility—uncovering business ideas, looking at competitors, and exploring financing options. After looking at the potential of the proposed venture and assessing the likelihood of pursuing it successfully, an entrepreneur proceeds to plan the venture. This process includes such activities as developing a viable organizational mission, exploring organizational culture issues, and creating a well-thought-out business plan. Once these planning issues have been resolved, the entrepreneur must look at organizing the venture, which involves choosing a legal form of business organization, addressing other legal issues such as patent or copyright searches, and coming up with an appropriate organizational design for structuring how work is going to be done. Only after these startup activities have been completed is the entrepreneur ready to actually launch the venture. A launch involves setting goals and strategies and establishing the technology–operations methods, marketing plans, information systems, financial–accounting systems, and cash flow management systems. Once the entrepreneurial venture is up and running, the entrepreneur’s attention switches to managing it. What’s involved with actually managing the entrepreneurial venture? An important activity is managing the various processes that are part of every business: making decisions, establishing action plans, analyzing external and internal environments, measuring and evaluating performance, and making needed changes. Also, the entrepreneur must perform activities associated with managing people, including selecting and hiring, appraising and training, motivating, managing conflict, delegating tasks, and being an effective leader. Finally, the entrepreneur must manage the venture’s growth, including such activities as developing and designing growth strategies, dealing with crises, exploring various avenues for financing growth, placing a value on the venture, and perhaps even eventually exiting the venture.

What Planning Do Entrepreneurs Need to Do? Planning is important to entrepreneurial ventures. Once a venture’s feasibility has been thoroughly researched, an entrepreneur then must look at planning the venture. The most important thing that an entrepreneur does in planning the venture is developing a business plan—a written document that summarizes a business opportunity and defines and articulates how the identified opportunity is to be seized and exploited. A written business plan can range from basic to thorough. The most basic type of business plan would simply include an executive summary, sort of a mini-business plan that’s no longer than two pages. A synopsis type of plan is a little more involved. It’s been described as an “executive summary on steroids.” In addition to the executive summary, it includes a business proposal that explains why the idea is relevant to

Supplement 1C  Entrepreneurship 37

potential investors. A summary business plan includes an executive summary and a page or so of explanation of each of the key components of a business plan. A full business plan is the traditional business plan, which we describe fully next. Finally, an operational business plan is the most detailed (fifty or more pages) and is used by ventures already operating with an existing strategy. It’s often used to “plan the business” but also can be used to raise additional money or to attract potential acquirers. It’s important for entrepreneurs to know which type of business plan they need for their purposes.

What’s in a Full Business Plan? For many would-be entrepreneurs, developing and writing a business plan seems like a daunting task. However, a good business plan is valuable. It pulls together all the elements of the entrepreneur’s vision into a single coherent document. The business plan requires careful planning and creative thinking. But if done well, it can be a convincing document that serves many functions. It serves as a blueprint and road map for operating the business. And the business plan is a “living” document, guiding organizational decisions and actions throughout the life of the business, not just in the startup stage. If an entrepreneur has completed a feasibility study, much of the information included in it becomes the basis for the business plan. A good business plan covers six major areas: executive summary, analysis of opportunity, analysis of the context, description of the business, financial data and projections, and supporting documentation. EXECUTIVE SUMMARY  The executive summary is a synopsis of the key points that

the entrepreneur wants to make about the proposed entrepreneurial venture. These might include a brief mission statement; primary goals; brief history of the entrepreneurial venture, maybe in the form of a timeline; key people involved in the venture; nature of the business; concise product or service descriptions; brief explanations of market niche, competitors, and competitive advantage; proposed strategies; and selected key financial information. ANALYSIS OF OPPORTUNITY  An analysis of opportunity details the perceived

favourable circumstance in a specific industry and market. This includes (1) sizing up the market by describing the demographics of the target market, (2) describing and evaluating industry trends, and (3) identifying and evaluating competitors. ANALYSIS OF THE CONTEXT  An analysis of the context describes the broad external changes and trends taking place in the economic, political–legal, technological, and global environments. DESCRIPTION OF THE BUSINESS  The description of the business outlines how the

entrepreneurial venture is going to be organized, launched, and managed. It includes a thorough description of the mission statement; a description of the desired organizational culture; marketing plans including overall marketing strategy, pricing, sales tactics, service–warranty policies, and advertising and promotion tactics; product development plans such as an explanation of development status, tasks, difficulties and risks, and anticipated costs; operational plans, including a description of proposed geographic location, facilities and needed improvements, equipment, and work flow; human resource plans, including a description of key management persons, composition of board of directors including their background experience and skills, current and future staffing needs, compensation and benefits, and training needs; and an overall schedule and timetable of events. FINANCIAL DATA AND PROJECTIONS  Financial data and projections should cover at least three years of projections and contain projected income statements, pro forma cash flow analysis (monthly for the first year and quarterly for the next two), pro forma balance sheets, breakeven analysis, and cost controls. If major equipment or other capital purchases are expected, the items, costs, and available collateral should

38  Supplement 1C be listed. All financial projections and analyses should include explanatory notes, especially where the data seem contradictory or questionable. SUPPORTING DOCUMENTATION  Supporting documentation is an important component of an effective business plan. The entrepreneur should back up his or her descriptions with charts, graphs, tables, photographs, or other visual tools. In addition, it might be important to include information (personal and work-related) about the key participants in the entrepreneurial venture.

Components of a Good Business Plan Just as the idea for an entrepreneurial venture takes time to germinate, so does the writing of a good business plan. It’s important for an entrepreneur to put serious thought and consideration into the plan. It’s not an easy thing to do. However, the resulting document should be valuable in current and future planning efforts.

What Issues Are Involved in Organizing an Entrepreneurial Venture? Once the startup and planning issues for the entrepreneurial venture have been addressed, the entrepreneur is ready to begin organizing the entrepreneurial venture. The main organizing issues an entrepreneur must address include the legal forms of organization, organizational design and structure, and human resource management.

What Are the Legal Forms of Organization for Entrepreneurial Ventures? The first organizing decision that an entrepreneur must make is a critical one. It’s the form of legal ownership for the venture. The two primary factors affecting this decision are taxes and legal liability. An entrepreneur wants to minimize the impact of both of these factors. The right choice can protect the entrepreneur from legal liability as well as save tax dollars, in both the short run and the long run. The three basic ways to organize an entrepreneurial venture are sole proprietorship, partnership, and corporation. However, other options exist, such as limited liability partnerships and professional corporations. Each has its own tax consequences, liability issues, and pros and cons. The decision regarding the legal form of organization is important because it has significant tax and liability consequences. Although the legal form of organization can be changed, it’s not easy to do. An entrepreneur needs to think carefully about what’s important, especially in the areas of flexibility, taxes, and amount of personal liability, in choosing the best form of organization.

What Type of Organizational Structure Should Entrepreneurial Ventures Use? The choice of an appropriate organizational structure is also an important decision when organizing an entrepreneurial venture. At some point, successful entrepreneurs find that they can’t do everything. They need people. The entrepreneur must then decide on the most appropriate structural arrangement for effectively and efficiently carrying out the organization’s activities. Without a suitable type of organizational structure, an entrepreneurial venture may soon find itself in a chaotic situation.

Supplement 1C  Entrepreneurship 39

In many small firms, the organizational structure tends to evolve with very little intentional and deliberate planning by the entrepreneur. For the most part, the structure may be very simple—one person does whatever is needed. As an entrepreneurial venture grows and the entrepreneur finds it increasingly difficult to go it alone, employees are brought on board to perform certain functions or duties that the entrepreneur can’t handle. As the company continues to grow, these individuals tend to perform those same functions. Soon, each functional area may require managers and employees. As the venture evolves to a more deliberate structure, an entrepreneur faces a whole new set of challenges. All of a sudden, he or she must share decision making and operating responsibilities, which are typically the most difficult things for an entrepreneur to do—letting go and allowing someone else to make decisions. After all, he or she reasons, how can anyone know this business as well as I do? Also, what might have been a fairly informal, loose, and flexible atmosphere that worked well when the organization was small may no longer be effective. Many entrepreneurs are greatly concerned about keeping that “small company” atmosphere alive even as the venture grows and evolves into a more structured arrangement. But having a structured organization doesn’t necessarily mean giving up flexibility, adaptability, and freedom. In fact, the structural design may be as fluid as the entrepreneur feels comfortable with and yet still have the rigidity it needs to operate efficiently. Organizational design decisions in entrepreneurial ventures also revolve around the six elements of organizational structure discussed in Chapter 5: work specialization, departmentalization, chain of command, span of control, amount of ­centralization-decentralization, and amount of formalization. Decisions about these elements will determine whether an entrepreneur designs a more mechanistic or organic organizational structure. When would each be preferable? A mechanistic structure would be preferable when cost efficiencies are critical to the venture’s competitive advantage, when more control over employees’ work activities is important, if the venture produces standardized products in a routine fashion, and when the external environment is relatively stable and certain. An organic structure would be most appropriate when innovation is critical to the organization’s competitive advantage; for smaller organizations where rigid approaches to dividing and coordinating work aren’t necessary; if the organization produces customized products in a flexible setting; and where the external environment is dynamic, complex, and uncertain.

What Human Resource Management (HRM) Issues Do Entrepreneurs Face? As an entrepreneurial venture grows, additional employees must be hired to perform the increased workload. As employees are brought on board, two HRM issues of particular importance are employee recruitment and employee retention. An entrepreneur wants to ensure that the venture has the people to do the required work. Recruiting new employees is one of the biggest challenges that entrepreneurs face. In fact, the ability of small firms to successfully recruit appropriate employees is consistently rated as one of the most important factors influencing organizational success. Entrepreneurs, particularly, look for high-potential people who can perform multiple roles during various stages of venture growth. They look for individuals who “buy into” the venture’s entrepreneurial culture—individuals who have a passion for the business. Unlike their corporate counterparts who often focus on filling a job by matching a person to the job requirements, entrepreneurs look to fill in critical skills gaps. They’re looking for people who are exceptionally capable and self-motivated, flexible, multiskilled, and who can help grow the entrepreneurial venture. While corporate managers tend to focus on using traditional HRM practices and techniques, entrepreneurs

40  Supplement 1C are more concerned with matching characteristics of the person to the values and culture of the organization; that is, they focus on matching the person to the organization. Getting competent and qualified people into the venture is just the first step in effectively managing the human resources. An entrepreneur wants to keep the people he or she has hired and trained. A unique and important employee-retention issue entrepreneurs must deal with is compensation. Whereas traditional organizations are more likely to view compensation from the perspective of monetary rewards (base pay, benefits, and incentives), smaller entrepreneurial firms are more likely to view compensation from a total rewards perspective. For these firms, compensation encompasses psychological rewards, learning opportunities, and recognition in addition to monetary rewards (base pay and incentives).

What Issues Do Entrepreneurs Face in Leading an Entrepreneurial Venture? Leading is an important function of entrepreneurs. As an entrepreneurial venture grows and people are brought on board, an entrepreneur takes on a new role—that of a leader. In this section, we want to look at what’s involved with that. First, we’re going to look at the unique personality characteristics of entrepreneurs. Then we’re going to discuss the important role entrepreneurs play in motivating employees through empowerment and leading the venture and employee teams.

What Type of Personality Do Entrepreneurs Have? Think of someone you know who is an entrepreneur. Maybe it’s someone you personally know or maybe it’s someone you’ve read about, like Bill Gates of Microsoft. How would you describe this person’s personality? One of the most researched areas of entrepreneurship has been the search to determine what—if any—psychological characteristics entrepreneurs have in common, what types of personality traits entrepreneurs have that might distinguish them from non-entrepreneurs, and what traits entrepreneurs have that might predict who will be a successful entrepreneur. Is there a classic “entrepreneurial personality”? Although trying to pinpoint specific personality characteristics that all entrepreneurs share has the same problem as identifying the trait theories of leadership—that is, being able to identify specific personality traits that all entrepreneurs share—this hasn’t stopped entrepreneurship researchers from listing common traits. For instance, one list of personality characteristics included the following: high level of motivation, abundance of self-confidence, ability to be involved for the long term, high energy level, persistent problem solver, high degree of initiative, ability to set goals, and moderate risk-taker. Another list of characteristics of “successful” entrepreneurs included high energy level, great persistence, resourcefulness, the desire and ability to be self-directed, and relatively high need for autonomy. Another development in defining entrepreneurial personality characteristics was the proactive personality scale to predict an individual’s likelihood of pursuing entrepreneurial ventures. The proactive personality is a personality trait describing those individuals who are more prone to take actions to influence their environment—that is, they’re more proactive. Obviously, an entrepreneur is likely to exhibit proactivity as he or she searches for opportunities and acts to take advantage of those opportunities. Various items on the proactive personality scale were found to be good indicators of a person’s likelihood of becoming an entrepreneur, including gender, education, having an entrepreneurial parent, and possessing a proactive personality. In addition, studies have shown that entrepreneurs have greater risk propensity than do managers. However, this propensity is moderated by the entrepreneur’s primary goal. Risk propensity is greater for entrepreneurs whose primary goal is growth versus those whose focus is on producing family income.

Supplement 1C  Entrepreneurship 41

How Can Entrepreneurs Motivate Employees? When you’re motivated to do something, don’t you find yourself energized and willing to work hard at doing whatever it is you’re excited about? Wouldn’t it be great if all of a venture’s employees were energized, excited, and willing to work hard at their jobs? Having motivated employees is an important goal for any entrepreneur, and employee empowerment is an important motivational tool entrepreneurs can use. Although it’s not easy for entrepreneurs to do, employee empowerment—giving employees the power to make decisions and take actions on their own—is an important motivational approach. Why? Because successful entrepreneurial ventures must be quick and nimble, ready to pursue opportunities and go off in new directions. Empowered employees can provide that flexibility and speed. When employees are empowered, they often display stronger work motivation, better work quality, higher job satisfaction, and lower turnover. Empowerment is a philosophical concept that entrepreneurs have to “buy into.” It doesn’t come easily. In fact, it’s hard for many entrepreneurs to do. Their life is tied up in the business. They’ve built it from the ground up. But continuing to grow the entrepreneurial venture is eventually going to require handing over more responsibilities to employees. How can entrepreneurs empower employees? For many entrepreneurs, it’s a gradual process. Entrepreneurs can begin by using participative decision making, in which employees provide input into decisions. Although getting employees to participate in decisions isn’t quite taking the full plunge into employee empowerment, at least it’s a way to begin tapping into the collective array of employees’ talents, skills, knowledge, and abilities. Another way to empower employees is through delegation—the process of assigning certain decisions or specific job duties to employees. By delegating decisions and duties, the entrepreneur is turning over the responsibility for carrying them out. When an entrepreneur is finally comfortable with the idea of employee empowerment, fully empowering employees means redesigning their jobs so they have discretion over the way they do their work. It’s allowing employees to do their work effectively and efficiently by using their creativity, imagination, knowledge, and skills. If an entrepreneur implements employee empowerment properly—that is, with complete and total commitment to the program and with appropriate employee training—results can be impressive for the entrepreneurial venture and for the ­ empowered employees. The business can enjoy significant productivity gains, quality improvements, more satisfied customers, increased employee motivation, and improved morale. Employees can enjoy the opportunities to do a greater variety of work that is more interesting and challenging.

How Can Entrepreneurs Be Leaders? The last topic we want to discuss in this section is the role of an entrepreneur as a leader. In this role, the entrepreneur has certain leadership responsibilities in leading the venture and in leading employee work teams. Today’s successful entrepreneur must be like the leader of a jazz ensemble known for its improvisation, innovation, and creativity. Max DePree, former head of Herman Miller, Inc., a leading office furniture manufacturer known for its innovative leadership approaches, said it best in his book, Leadership Jazz: “Jazz band leaders must choose the music, find the right musicians, and perform—in public. But the effect of the performance depends on so many things—the environment, the volunteers playing the band, the need for everybody to perform as individuals and as a group, the absolute dependence of the leader on the members of the band, the need for the followers to play well.... The leader of the jazz band has the beautiful opportunity to draw the best out of the other musicians. We have much to learn from jazz band leaders, for jazz, like leadership, combines the unpredictability of the future with the gifts of individuals.”

42  Supplement 1C The way an entrepreneur leads the venture should be much like the jazz leader— drawing the best out of other individuals, even given the unpredictability of the situation. One way an entrepreneur does this is through the vision he or she creates for the organization. In fact, the driving force through the early stages of the entrepreneurial venture is often the visionary leadership of the entrepreneur. The entrepreneur’s ability to articulate a coherent, inspiring, and attractive vision of the future is a key test of his or her leadership. But if an entrepreneur can do this, the results can be worthwhile. A study contrasting visionary and nonvisionary companies showed that visionary companies outperformed the nonvisionary ones by six times on standard financial criteria, and their stocks outperformed the general market by fifteen times. As we see in Chapter 8, many organizations—entrepreneurial and otherwise—are using employee work teams to perform organizational tasks, create new ideas, and resolve problems. The three most common types of employee work teams in entrepreneurial ventures are empowered teams (teams that have the authority to plan and implement process improvements), self-directed teams (teams that are nearly autonomous and responsible for many managerial activities), and cross-functional teams (work teams composed of individuals from various specialties who work together on various tasks). Developing and using teams is necessary because technology and market demands are forcing entrepreneurial ventures to make products faster, cheaper, and better. Tapping into the collective wisdom of a venture’s employees and empowering them to make decisions just may be one of the best ways to adapt to change. In addition, a team culture can improve the overall workplace environment and morale. For team efforts to work, however, entrepreneurs must shift from the traditional ­command-and-control style to a coach-and-collaboration style.

What Controlling Issues Do Entrepreneurs Face? Entrepreneurs must look at controlling their venture’s operations in order to survive and prosper in both the short run and long run. The unique control issues that face entrepreneurs include managing growth, managing downturns, exiting the venture, and managing personal life choices and challenges.

How Is Growth Managed? Growth is a natural and desirable outcome for entrepreneurial ventures. Growth is what distinguishes an entrepreneurial venture. Entrepreneurial ventures pursue growth. Growing slowly can be successful, but so can rapid growth. Growing successfully doesn’t occur randomly or by luck. Successfully pursuing growth typically requires an entrepreneur to manage all the challenges associated with growing, which entails planning, organizing, and controlling for growth.

How Are Downturns Managed? Although organizational growth is a desirable and important goal for entrepreneurial ventures, what happens when things don’t go as planned—when the growth strategies don’t result in the intended outcomes and, in fact, result in a decline in performance? There are challenges, as well, in managing the downturns. Nobody likes to fail, especially entrepreneurs. However, when an entrepreneurial venture faces times of trouble, what can be done? How can downturns be managed successfully? The first step is recognizing that a crisis is brewing. An entrepreneur should be alert to the warning signs of a business in trouble. Some signals of potential performance decline include inadequate or negative cash flow, excess number of employees, unnecessary and cumbersome administrative procedures, fear of conflict

Supplement 1C  Entrepreneurship 43

and taking risks, tolerance of work incompetence, lack of a clear mission or goals, and ineffective or poor communication within the organization. Although an entrepreneur hopes to never have to deal with organizational downturns, declines, or crises, these situations do occur. After all, nobody likes to think about things going bad or taking a turn for the worse. But that’s exactly what the entrepreneur should do—think about it before it happens. (Remember feedforward control from Chapter 12.) It’s important to have an up-to-date plan for covering crises. It’s like mapping exit routes from your home in case of a fire. An entrepreneur wants to be prepared before an emergency hits. This plan should focus on providing specific details for controlling the most fundamental and critical aspects of running the venture—cash flow, accounts receivable, costs, and debt. Beyond having a plan for controlling the venture’s critical inflows and outflows, other actions would involve identifying specific strategies for cutting costs and restructuring the venture.

What’s Involved with Exiting the Venture? Getting out of an entrepreneurial venture may seem to be a strange thing for entrepreneurs to do. However, the entrepreneur may come to a point at which he or she decides it’s time to move on. That decision may be based on the fact that the entrepreneur hopes to capitalize financially on the investment in the venture—called h ­ arvesting—or that the entrepreneur is facing serious organizational performance problems and wants to get out, or even on the entrepreneur’s desire to focus on other pursuits (­personal or business). The issues involved with exiting the venture include choosing a proper ­business valuation method and knowing what’s involved in the process of selling a business. Although the hardest part of preparing to exit a venture may involve valuing it, other factors are also important. These include being prepared, deciding who will sell the business, considering the tax implications, screening potential buyers, and deciding whether to tell employees before or after the sale. The process of exiting the entrepreneurial venture should be approached as carefully as the process of launching it. If the entrepreneur is selling the venture on a positive note, he or she wants to realize the value built up in the business. If the venture is being exited because of declining performance, the entrepreneur wants to maximize the potential return.

Chapter 1

Jeff Whyte/Shutterstock

Introduction to Management and Organizations

Learning Objectives 1.1 Explain why it’s important to study management. 1.2 Define management. 1.3 Describe who managers are and where they work. 1.4 Describe what managers do. 1.5 Describe the factors that are reshaping and redefining

management. 1

2  Chapter 1 Naheed Nenshi was born in Toronto and completed a master’s degree at Harvard in public policy. He worked for the renowned international consulting firm McKinsey, which has been referred to as “special forces training for business leadership.”1 In 2010, at 38 years of age, Nenshi became Calgary’s thirty-sixth mayor and the first Muslim mayor of a major North American city. In 2013, he was re-elected with 74 percent of the vote. After leaving McKinsey, Nenshi started a business called Ascend Group to assist public, private, and nonprofit organizations grow their businesses. He developed strategies for the Canadian marketplace for companies such as Gap, Banana Republic, and Old Navy. He was Canada’s first tenured professor in the field of nonprofit management, at Mount Royal University’s Bissett School of Business. His work as an entrepreneur taught Nenshi the most about business, but designing policy for the Alberta provincial government attracted him to politics. His main focus is to make cities like Calgary run more smoothly. He is the author of Building Up: Making Canada’s Cities Magnets for Talent and Engines of Development, and his initiatives in Calgary include an ambitious multidecade transit plan.2 Naheed Nenshi is a good example of a successful manager today and exemplifies the skills managers must have to deal with the problems and challenges of managing in the twenty-first century. This text is about the important managerial work that Mayor Nenshi and the millions of other managers like him do. It recognizes the reality faced by today’s managers: NEW technologies and new ways of organizing work are altering old approaches. Today’s successful managers must be able to blend tried-and-true management styles with new ideas. Assume for a moment that it’s your first day in an introductory physics class. Your instructor asks you to take out a piece of paper and describe Newton’s second law of motion. How would you react? I expect most students would respond with something like “How would I know? That’s why I’m taking this course!” Now let’s change the situation to the first day in an introductory management class. Your instructor asks you to write an answer to this question: “What traits does one need to be an effective leader?” When we’ve done this on the first day, we find that students always have an answer. Everyone seems to think they know what makes a good leader. This example illustrates a popular myth about the study of management: It’s just common sense. Well, we can assure you . . . it’s not! When it comes to managing, much of what passes for common sense is just plain wrong. You might be surprised to know that the academic study of management is filled with insights, based on extensive research, that often run counter to what seems to be common sense. That’s why we decided to tackle head on this common-sense perception by examining in each chapter a particular “management myth” and then “debunking” this myth by explaining how it is just a common-sense myth. Here is a common myth about management:

  Only those who need to be managers need to take a course in management.

Anyone who works in an organization—not just managers—can gain insight into how organizations work and the behaviours of their boss and co-workers by taking a course in management. This chapter’s “debunked” myth often surprises students majoring in subjects like accounting, finance, statistics, information technology, or advertising. Since they don’t expect to be managers, they see spending a semester studying management as a waste of time and irrelevant to their career goals. Later in this chapter, we’ll explain why the study of management is valuable to every student, no matter what you’re majoring in or whether you are a manager or aspire to be a manager. For full details on this management myth, check out our Bust the Myth video in Revel. Although we’d like to think that all managers are good at what they do, you may have discovered through jobs you’ve had that managers can be good at what they do or maybe not so good, or even good one day and not so good the next! One thing you need to understand is that all ­managers—good or not so good—have important jobs to do. And this text is about the work managers do. In this chapter, we introduce you to managers and management: who they are, where they work, what management is, what they do, and why you should spend your time studying management. Finally, we’ll wrap up the chapter by looking at some key factors reshaping and redefining organizations and the way managers manage.

Chapter 1  Introduction to Management and Organizations 3

Why Study Management? 1.1 Explain why it’s important to study management.

Good managers are important because • organizations need their skills and abilities, especially in today’s uncertain, complex, and chaotic environment. • they’re critical to getting things done. • they play a crucial role in employee satisfaction and engagement.

You may be wondering why you need to study management. If you are an accounting major, marketing major, or any major other than management, you may not understand how studying management will help you in your career. Let’s look at some reasons why you may want to understand more about management. First, all of us have a vested interest in improving the way organizations are managed. Why? Because we interact with them every day of our lives and an understanding of management offers insights into many organizational aspects. When you renew your driver’s licence or get your car tags, are you frustrated that a seemingly simple task takes so long? Were you surprised when well-known businesses you thought would never fail went bankrupt, or were you angry when entire industries had to rely on government bailout money to survive declining economic conditions? Are you annoyed when you use a drive-through and get ready to enjoy your food or drink and then realize something is missing or that it’s not what you ordered? Such problems are mostly the result of managers doing a poor job of managing. Organizations that are well managed—such as Apple, Canadian Tire, Tim Hortons, Nike, Westjet, and Google—develop a loyal following and find ways to prosper even when the economy stinks. Poorly managed organizations may find themselves with a declining customer base and reduced revenues and may have to file for bankruptcy protection even in a strong economy. By studying management, you will be able to recognize poor management and work to get it corrected. In addition, you will be able to recognize good management and encourage it, whether it is in an organization with which you are simply interacting or an organization in which you are employed. The second reason for studying management is the reality that for most of you, once you graduate and begin your career, you will either manage or be managed. For those who plan to be managers, an understanding of management forms the foundation on which to build your own management skills and abilities. For those of you who don’t see yourself managing, you’re still likely to have to work with managers. Also, assuming that you’ll have to work for a living and recognizing that you’re likely to work in an organization, you’re likely to have some managerial responsibilities even if you’re not a manager. Our experience tells us that you can gain a great deal of insight into the

A Question of Ethics • 26 percent of new managers feel they’re unprepared to transition into management roles.

Moving to a management position isn’t easy, as these statistics indicate.3

• 58 percent of new managers don’t receive any training to help them make the transition.

1. Does an organization have an ethical responsibility to assist its new managers in their new positions? Why or why not?

• 48 percent of first-time managers fail in that transition.

2. What could organizations do to make this transition easier?

4  Chapter 1 way your boss (and co-workers) behave and how organizations function by studying management. Our point is that you don’t have to aspire to be a manager to gain valuable information from a course in management.

What Is Management? 1.2 Define management.

management Coordinating work activities so that they are completed efficiently and effectively with and through other people.

Managers plan, lead, organize, and control, and Naheed Nenshi certainly carries out all of these tasks. He has to coordinate the work activities of over 13 000 city ­employees efficiently and effectively. Working collaboratively with City Council, he has to make sure that work is carried out consistently to protect his brand. He also has to support his managers. Nenshi likes to joke among his managerial team that the mayor is always right—but only as far as the door of his office. He will defend the decisions of his team even if he didn’t agree with them.4 Simply speaking, management is what managers do. But that simple statement does not tell us much, does it? Here is a more thorough explanation: Management is coordinating work activities so that they are completed efficiently and effectively with and through other people. Management researchers have developed three specific categories to describe what managers do: functions, roles, and skills. In this section, we’ll consider the challenges of balancing efficiency and effectiveness, and then examine the approaches that look at what managers do. In reviewing these categories, it might be helpful to understand that management is something that is a learned talent, rather than something that comes “naturally.” Many people do not know how to be a manager when they first are appointed to that role. See Supplement 1A for the history of management’s roots to understand how management theory has developed over time.

Efficiency and Effectiveness

efficiency Getting the most output from the least amount of inputs.

effectiveness Completing activities so that organizational goals are achieved.

Efficiency refers to getting the most output from the least amount of inputs or, as management expert Peter Drucker explained, “Doing things right.”5 Because managers deal with scarce inputs—including resources such as people, money, and e­ quipment— they are concerned with the efficient use of those resources by getting things done at the least cost. Just being efficient is not enough, however. Management is also responsible for being effective—completing activities so that organizational goals are achieved. Effectiveness is often described as “doing the right things”—that is, those work activities that will help the organization reach its goals. Hospitals might try to be efficient by reducing the number of days that patients stay in hospital. However, they may not be effective if patients get sick at home shortly after being released. While efficiency is about ways to get things done, effectiveness deals with the ends, or attaining organizational goals. (See Exhibit 1-1.) Management is concerned, then, not only with completing activities to meet organizational goals (effectiveness) but also with doing so as efficiently as possible. In successful organizations, high efficiency and high effectiveness typically go hand in hand. Poor management is most often due to both inefficiency and ineffectiveness or due to effectiveness achieved through inefficiency.

Who Are Managers? 1.3 Describe who managers are and where they work. As mayor of Calgary, Naheed Nenshi is responsible for more than 13 000 city employees. His focus is on developing a more effective and disciplined organization. To that end, he has instituted zero-based budget reviews of every business unit at the City.

Chapter 1  Introduction to Management and Organizations 5

Exhibit 1-1  Efficiency, Effectiveness, and Performance in Student Meetings The best student meetings are efficient and effective. Efficiency

Effectiveness

High

Low

Low

High

High Effectiveness–Low Efficiency

High Effectiveness–High Efficiency

• Each member reports on their activities, challenges, and next steps • Members may not come prepared • Meetings may not start or end on time • Meetings generally take too long

• Team members come to meetings fully prepared and engaged • Each member reports on their activities, challenges, and next steps • Meetings start and end on time

Low Effectiveness–Low Efficiency

High Efficiency–Low Effectiveness

• Meetings drag on and on • Members are late or not participating • Meetings degenerate into debates or arguments; discussion centres on previous work

• Meetings end in 10 minutes no matter what was accomplished • Members are checking e-mails and texting during meetings • Members go through the motions

Many initiatives have been citizen focused, such as a collaborative budgeting process with more than 20 000 Calgarians providing input, or creating video archives of City Council meetings for public review. Managers may not be who or what you might expect. They could be under age 18 or even over age 80. They run large corporations as well as entrepreneurial startups. They are found in government departments, hospitals, small businesses, nonprofit agencies, museums, schools, and even nontraditional organizations such as political campaign offices and consumer cooperatives. They can be found doing managerial work in every country around the globe and operate at many levels, from top-level managers to first-line managers. No matter where managers are found or what gender they are, managers have exciting and challenging jobs. And organizations need managers more than ever in these uncertain, complex, and chaotic times. Managers do matter! How do we know that? The Gallup Organization, which has polled millions of employees and tens of thousands of managers, has found that the single most important variable in employee productivity and loyalty is neither pay nor benefits nor workplace environment—it is the quality of the relationship between employees and their direct supervisors.6 A KPMG/Ipsos-Reid study found that many Canadian companies with high scores for effective human resource practices also scored high on financial performance and best long-term investment value.7 In addition, global consulting firm Watson Wyatt Worldwide found that the way a company manages its people can significantly affect its financial performance.8 We can conclude from such reports that managers do matter! Defining who managers are used to be fairly simple: Managers were the organizational members who told others what to do and how to do it. It was easy to differentiate managers from nonmanagerial employees. But life is not quite as simple anymore. In many organizations, the changing nature of work has blurred the distinction between managers and nonmanagerial employees. Many nonmanagerial jobs now include managerial activities.9 For example, at General Cable Corporation’s facility in Moose Jaw, Saskatchewan, managerial responsibilities are shared by managers and team members. Most of the employees at General Cable are cross-trained and multiskilled. Within a single shift, an employee may be a team leader, an equipment operator, a maintenance technician, a quality inspector, and an improvement planner.10

6  Chapter 1 How do we define who managers are? A manager is someone who works with and through other people by coordinating their work activities in order to accomplish organizational goals. A manager’s job is not about personal achievement—it is about helping others do their work and achieve results.

Nomad_Soul/Fotolia

The Organizational Setting All managers share one common element: They work in an organizational setting. An organization is a deliberate arrangement of people brought together to accomplish some specific purpose. For instance, your college or university is an organization, as are the United Way, your neighbourhood convenience store, the Saskatchewan Roughriders football team, fraternities and sororities, and global companies such as Nestlé, Lego, and Samsung. These and all organizations share three common characteristics. (See Exhibit 1-2.)

Ted Hall started Spearhead Timberworks by building a barn for a family friend. Now running a multimillion-dollar operation located in Nelson, British Columbia, Hall abandoned conventional tools and embraced digital design and manufacturing. As a manager of 60 employees, Hall must be on top of just-in-time delivery and compressed construction schedules. He has to wear many hats: master carpenter, technology innovator, quality-control master, mentor, trainer, and listener. With each role come unique challenges.

WHAT THREE CHARACTERISTICS DO ALL ORGANIZATIONS SHARE?  The manager Someone who works with and through other people by coordinating their work activities in order to accomplish organizational goals.

organization A deliberate arrangement of people who act together to accomplish some specific purpose.

first characteristic of an organization is that it has a distinct purpose, which is typically expressed as a goal or set of goals. For example, Bob Iger, Walt Disney Company’s president and CEO, has said his company’s goal is to create amazing family entertainment and to provide customers with extraordinary experiences, which will lead to increasing shareholder value.11 The second characteristic is that people in an organization work to achieve those goals. How? By making decisions and engaging in work activities to make the desired goal(s) a reality. For instance, at Disney, many employees work to create the content and experiences that are so important to the company’s businesses. Others provide supporting services or interact with guests (customers) directly. Finally, the third characteristic is that an organization is structured in some way that defines and limits the behaviour of its members. Disney, like most large organizations, has a fairly complex structure with different businesses, departments, and functional areas. Within that structure, rules, regulations, and policies might guide what people can or cannot do; some m ­ embers will supervise other members; work teams might be formed or disbanded; or job descriptions might be created or changed so organizational members know what they’re supposed to do. That structure is the setting within which managers manage.

Exhibit 1-2  Three Characteristics of Organizations Goals

People B

A

Structure

Pressmaster/Shutterstock

Chapter 1  Introduction to Management and Organizations 7

This retail supervisor can also have tasks of his own, apart from supervising employees.

How Are Managers Different from Nonmanagerial Employees? Although managers work in organizations, not everyone who works in an organization is a manager. For simplicity’s sake, we’ll divide organizational members into two categories: nonmanagerial employees and managers. Nonmanagerial employees are people who work directly on a job or task and have no responsibility for overseeing the work of others. The employees who ring up your sale at Home Depot, take your order at the Starbucks drive-through, or process your class registration forms are all nonmanagerial employees. These nonmanagerial employees may be called associates, team members, contributors, or even employee partners. Managers, on the other hand, are individuals in an organization who direct and oversee the activities of other people in the organization so organizational goals can be accomplished. A manager’s job isn’t about personal achievement—it’s about helping others do their work. That may mean coordinating the work of a departmental group, leading an entire organization, or supervising a single person. It could involve coordinating the work activities of a team with people from different departments or even people outside the organization, such as temporary employees or individuals who work for the organization’s suppliers. This distinction doesn’t mean, however, that managers don’t ever work directly on tasks. Some managers do have work duties not directly related to overseeing the activities of others.

What Titles Do Managers Have? Although they can have a variety of titles, identifying exactly who the managers are in an organization shouldn’t be difficult. In a broad sense, managers can be classified as top, middle, first-line, or team leaders. (See Exhibit 1-3.) Top ­managers are those at or near the top of an organization. They’re usually responsible for making decisions about the direction of the organization and defining policies and values that affect all organizational members. Top managers typically have titles such as vice-president, president, chancellor, managing director, chief operating officer, chief executive officer, or chairperson of the board. In the chapter

nonmanagerial employees People who work directly on a job or task and have no responsibility for overseeing the work of others.

top managers Managers at or near the top level of the organization, who are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization.

Exhibit 1-3  Management Levels Management level

Example job title

Top Manager

Managing Director

Middle Manager

District Manager

First-Line Manager

Shift Manager

Team Leader

Production Team Leader

8  Chapter 1 middle managers Managers between the first-line level and the top level of the organization, who manage the work of first-line managers.

lower-level managers Managers at the lowest level of the organization, who manage the work of nonmanagerial employees directly or indirectly involved with the production or creation of the organization’s products.

first-line managers Supervisors responsible for directing the day-to-day activities of nonmanagerial employees.

team leaders Individuals who are responsible for managing and facilitating the activities of a work team.

opening case, Naheed Nenshi is the popular and successful mayor of Canada’s ­fourth-largest city. He is involved in creating and implementing broad and comprehensive changes that affect the entire city of Calgary and the province of Alberta. Middle managers are those managers found between the lowest and top levels of the organization. These individuals often manage other managers and maybe some nonmanagerial employees and are typically responsible for translating the goals set by top managers into specific details that lower-level managers will see get done. Middle managers may have such titles as department or agency head, project leader, unit chief, district manager, division manager, or store manager. First-line managers are those individuals responsible for directing the day-to-day activities of nonmanagerial employees. First-line managers are often called supervisors, shift managers, office managers, department managers, or unit coordinators. We want to point out a special type of manager that has become more common as organizations use employee work teams. These managers, or team leaders, are individuals who are responsible for managing and facilitating the activities of a work team. Not all organizations get work done using a traditional pyramidal form, with the four levels of managers on the top of the pyramid. Some organizations, for example, are more flexible and loosely structured, with work being done by everchanging teams of employees who move from one project to another as work demands arise. Although it is not as easy to tell who the managers are in these organizations, we do know that someone must fulfill that role—there must be someone who works with and through other people by coordinating their work to accomplish organizational goals.

Is the Manager’s Job Universal? So far, we’ve discussed the manager’s job as if it were a generic activity. If management is truly a generic discipline, then what a manager does should be the same whether he or she is a top-level executive or a first-line supervisor; in a business firm or a government agency; in a large corporation or a small business; or located in Paris, Ontario, or Paris, France. Is that the case? Let’s take a closer look. LEVEL IN THE ORGANIZATION.  Although a supervisor of the Genius Bar in an

Apple Store may not do exactly the same things that Apple’s CEO Tim Cook does, it doesn’t mean that their jobs are inherently different. The differences are of degree and emphasis but not of activity. As managers move up in the organization, they do more planning and less direct overseeing of others. (See Exhibit 1-4.) All managers, regardless of level, make

Exhibit 1-4  Management Activities by Organizational Level SOURCE: Based on T. A. Mahoney, T. H. Jerdee, and S. J. Carroll, “The Job(s) of Management,” Industrial Relations

4, no. 2 (1965), p. 103.

Organizing 24% Planning 15% Controlling 10%

Leading 51%

First-Level Managers

Planning 18% Controlling 13%

Organizing 33%

Leading 36%

Middle Managers

Planning 28%

Organizing 36%

Controlling 14% Leading 22%

Top Managers

Chapter 1  Introduction to Management and Organizations 9

decisions. They plan, organize, lead, and control, but the amount of time they spend on each activity is not necessarily constant. In addition, “what” they plan, organize, lead, and control changes with the manager’s level. For example, as we’ll demonstrate in Chapter 5, top managers are concerned with designing the overall organization’s structure, whereas lower-level managers focus on designing the jobs of individuals and work groups. PROFIT VERSUS NOT-FOR-PROFIT.  Does a manager who works for the Canadian

Cancer Society or the City of Calgary do the same things that a manager at Shopify or Amazon does? That is, is the manager’s job the same in both profit and not-for-profit organizations? The answer, for the most part, is yes. All managers make decisions, set goals, create workable organization structures, hire and motivate employees, secure legitimacy for their organization’s existence, and develop internal political support in order to implement programs. Of course, the most important difference between the two is how performance is measured. Profit—the “bottom line”—is an unambiguous measure of a business organization’s effectiveness. Not-for-profit organizations don’t have such a universal measure, which makes performance measurement more difficult. But don’t think this means that managers in those organizations can ignore finances. Even not-for-profit organizations need to make money to continue operating. However, in not-for-profit organizations, “making a profit” for the “owners” is not the primary focus. Managers work in a variety of situations, and therefore the people to whom they are held accountable vary considerably. Large organizations in the private sector are often publicly held, which typically means that their shares are available on the stock exchange for public trading. Managers of publicly held companies report to a board of directors that is responsible to shareholders (also known as stockholders). There are also numerous privately held organizations (whose shares are not available on the stock exchange), both large and small. Privately held organizations can be individually owned, family owned, or owned by some other group of individuals. A number of managers work in the nonprofit sector, where the emphasis is on providing charity or services rather than on making a profit. Examples of such organizations include the SPCA (Society for the Prevention of Cruelty to Animals), Toronto’s Royal Ontario Museum, and Vancouver’s Bard on the Beach Festival. Other organizational forms, such as nongovernmental ­organizations (NGOs), partnerships, and cooperatives, also require managers. Many of these nonprofit organizations are referred to as SMOs (small and medium-sized organizations). Supplement 1B compares SMOs and SMEs (small and medium-sized enterprises) in Canada. Many managers work in the public sector as civil servants for the local, provincial, or federal government. The challenges of managing within government departments can be quite different from the challenges of managing in publicly held organizations. Critics argue that working for governments is less demanding because there are few measurable performance objectives, allowing employees to feel less accountable for their actions. Some managers and employees work for Crown corporations, such as Canada Post, the CBC, and the Business Development Bank of Canada. Crown corporations are structured like private sector corporations and have boards of directors, chief executive officers (CEOs), and so on but are owned by governments rather than shareholders. Employees in Crown corporations are not civil servants, and managers in Crown corporations are more independent than the senior bureaucrats who manage government departments. Many of Canada’s larger organizations are actually subsidiaries of American parent organizations (e.g., Safeway, General Motors, and Ford Motor Company). Their managers often report to American top managers and are not always free to set their

private sector The part of the economy run by organizations that are free from direct government control; enterprises in this sector operate to make a profit.

publicly held organization A company whose shares are available on the stock exchange for public trading by brokers/dealers.

privately held organizations Companies whose shares are not available on the stock exchange but are privately held.

nonprofit sector The part of the economy run by organizations that operate for purposes other than making a profit (that is, providing charity or services).

nongovernmental organization (NGO) A nongovernmental organization that emphasizes humanitarian issues, development, and sustainability.

public sector The part of the economy directly controlled by government.

civil servants People who work in a local, provincial, or federal government department.

Crown corporations Commercial companies owned by the government but independently managed.

Marie Laure JOSSELIN/AFP/Getty Images

10  Chapter 1 own goals and targets. Conflicts can arise when Canadian managers and the American managers to whom they report do not agree on how things should be done. SIZE OF ORGANIZATION.  Would you expect the job of a

manager in a local FedEx store that employs twelve people to be different from that of a manager who runs the FedEx global distribution centre in Toronto? This question is best answered by looking at the jobs of managers in small businesses and comparing them with our previous discussion of managerial roles. First, however, let’s define a small business. No commonly agreed-upon definition of a small business is available because different criteria are used to define small. For example, an organization can be classified as a small busiAs mayor of Calgary, Naheed Nenshi works closely with City ness using such criteria as number of employees, annual sales, Council, which acts as a de facto board of directors. A municipal or total assets. Small businesses (those that employ fewer than government is dramatically different than a federal one. Nenshi 100 individuals) represent 98 percent of all Canadian comsays, “If the federal government disappeared while we were talkpanies. These businesses employ almost half of all Canadian ing, it would take a couple of weeks to notice. But if the municipal government disappeared, there go the traffic lights, the water, the workers. See Supplement 1B for more data on small and electricity, the gas. ... [Y]ou would, frankly, notice pretty quickly medium enterprises and their contribution to the economy. because you might be dead.”12 So, is the job of managing a small business different from that of managing a large one? Managers in both small and large organizations perform essentially the same activities, but how they go about those activities and the proportion of time they spend on each are different. (You can find more information on managing small, entrepreneurial organizations in Supplement 1C: Entrepreneurship.)

universality of management The reality that management is needed in all types and sizes of organizations, at all organizational levels, in all organizational work areas, and in organizations in all countries around the globe.

MANAGEMENT CONCEPTS AND NATIONAL BORDERS.  The last generic issue concerns whether management concepts are transferable across national borders. If managerial concepts were completely generic, they would also apply universally in any country in the world, regardless of economic, social, political, or cultural differences. Studies that have compared managerial practices among countries have not generally supported the universality of management concepts. In Chapter 2, we’ll examine some specific differences between countries and describe their effect on managing. At this point, it’s important for you to understand that most of the concepts discussed in the rest of the text primarily apply to Canada, Great Britain, Australia, and other Englishspeaking countries. Managers likely will have to modify these concepts if they want to apply them in India, China, Chile, or other countries whose economic, political, social, or cultural environments differ from that of the so-called free-market democracies.

What Do Managers Do? 1.4 Describe what managers do. planning A management function that involves defining goals, establishing a strategy for achieving those goals, and developing plans to integrate and coordinate activities.

management functions Planning, organizing, leading, and controlling.

No Two Organizations Are Alike, and neither are managers’ jobs. But their jobs do share some common elements, as you’ll see in these three approaches to describing what managers do.

Four Functions Approach According to the functions approach, managers perform certain activities or duties as they efficiently and effectively coordinate the work of others. What are these activities or functions? In the early part of the twentieth century, French industrialist Henri Fayol first proposed that all managers perform five functions: planning, organizing, commanding, coordinating, and controlling.13 Today, most management texts (including this one) are organized around four ­management functions: planning, organizing, leading, and controlling. (See Exhibit 1-5.) But you do not have to be a manager to have a need

Chapter 1  Introduction to Management and Organizations 11

Exhibit 1-5  Management Functions NINGning goal s, AN fi PL ludes de strategy

, and Inc blishing a est loping plans to ve e te activities d rdina coo

In arin mp g any signi co correctin fica nt d an iations v e d

LEADING  Every organization contains people. Part of a manager’s job is to work with

and through people to accomplish organizational goals. This task is the leading function. When managers motivate subordinates, direct the work of individuals or teams, select the most effective communication channel, or resolve behaviour issues, they are leading. Knowing how to manage and lead effectively is an important, and sometimes difficult, skill because it requires the ability to successfully communicate. Leading is not just for managers, however. As a student, you might want to practise leadership skills when working in groups or club activities. You might also want to evaluate whether you need to improve your leadership skills in anticipation of the needs of future jobs.

ZING

ORGANIZING  Managers are also responsible for arranging work to accomplish the organization’s goals. We call this function organizing. When managers organize, they determine what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom (i.e., they define authority relationships), and where decisions are to be made. When you work in a student group, you engage in some of these same organizing activities—deciding on a division of labour and what tasks will be carried out to get an assignment completed.

Achieving the organization's stated purpose

NI GA determining what tasks a ORludes o is to do them, how t re to b h he e ,w Inc t d, who rep o a r t s ne oupe to w sks do e gr a h ill make decisi b ons om re ho w to , dw an

take any road. However, if you have some place in particular you want to go, you have to plan the best way to get there. Because organizations exist to achieve some particular purpose, someone must clearly define that purpose and the means for its achievement. Managers performing the planning function define goals, establish an overall strategy for achieving those goals, and develop plans to integrate and coordinate activities. This work can be done by the CEO and senior management team for the overall organization. Middle managers often have a planning role within their units. Planning, by the way, is not just for managers. As a student, for example, you need to plan for exams and for your financial needs.

ING ROLL NT onitoring perform COcludes mg it with goals, ance,

PLANNING  If you have no particular destination in mind, then you can

LEA DIN G s, In c ee oy l d ir u d e s m o t i v a ti n g e m p l r s , e e ct h ot in g t sel m u ts h e a c ti viti e s o f e com nflic n ic c t in g t h e e v i t o c c a ti o m o s t e ffe in g n ch a n n e l, a n d r e s o l v

organizing A management function that involves determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made.

leading A management function that involves motivating subordinates, directing the work of individuals or teams, selecting the most effective communication channels, and resolving employee behaviour issues.

CONTROLLING  The final management function is controlling. After the goals are set (planning), the plans formulated (planning), the structural arrangements determined controlling (organizing), and the people hired, trained, and motivated (leading), there has to be some A management function that evaluation of whether things are going as planned (controlling). To ensure that work involves monitoring actual is proceeding as it should, managers need to monitor and evaluate employees’ perfor- performance, comparing actual mance. Actual ­performance must be compared with previously set goals. If the perfor- performance to a standard, and mance of individuals or units does not match the goals set, the manager’s job is to get taking corrective action when performance back on track. This process of monitoring, comparing, and ­correcting is what necessary. we mean by the controlling function. Individuals, whether working in groups or alone, also face the responsibility of controlling; that is, they must make sure the goals and actions are achieved and take corrective action when necessary. The budget is the most common example of controlling. The functions approach suggests that managers always plan, organize, lead, and then control, which in practice may not always happen in this logical and sequential order. Regardless of the order in which the functions are carried out, managers do plan, organize, lead, and control as they manage. Some have argued that this approach is not appropriate or relevant.14 In the next section we will look at another perspective—the management roles perspective, developed by Henry Mintzberg. A leader has to be many things.

Z_amir/Fotolia

to plan, organize, lead, and control, so understanding these processes is important for everyone. Let us briefly define what each of these functions encompasses.

12  Chapter 1

And the Survey Says...15 Canadian companies on the Toronto Stock Exchange featured women in leadership roles as follows:

A Fortune 500 study found that organizations with two or more women on their boards

69 percent of companies had at least one female director.

• had 53 percent higher return on equity

33 percent of newly created or vacated board seats were filled by women.

• demonstrated greater accountability

54 percent had a written board diversity policy.

• conducted more extensive regular reviews of nonfinancial performance indicators

Reetu Gupta (right) became the new president and CEO of the Easton’s Group of Hotels in 2018. After starting as a receptionist, Reetu worked her way up to accounting and then sales. She was named as one of Canada’s Top 40 under 40.16

Chris So/The Toronto Star/Getty Images

What’s Cooking in Hospitality?

As you study management functions in more depth, the exercises in Team Exercises, found at the end of each chapter, will give you the opportunity to practise some of the key skills that are part of doing what a manager does. Skill-building exercises cannot make you an instant managerial expert, but they can provide you with a basic understanding of some of the skills you will need to master to become an effective manager.

Management Roles Approach • Henry Mintzberg, a prominent management researcher at McGill University, studied actual managers at work and discovered they spent little time in reflection, and most time in reaction. management roles Specific categories of managerial behaviour.

• Management roles refer to specific managerial actions or behaviours. (Think of the different roles you play and the different behaviours you are expected to perform in the roles of student, employee, volunteer, etc.) • These ten roles, shown in Exhibit 1-6, are grouped around interpersonal relationships, the transfer of information, and decision making.

Exhibit 1-6  Mintzberg’s Managerial Roles Role

Description

Examples of Identifiable Activities

Figurehead

Symbolic head; performs routine legal or social duties

Greeting visitors; signing legal documents

Leader

Motivates subordinates; oversees staffing, training, and associated duties

Performing virtually all activities that ­involve subordinates

Liaison

Maintains network of contacts who provide favours and information

Acknowledging e-mail; external board work; meeting with stakeholders

Interpersonal

Chapter 1  Introduction to Management and Organizations 13

Role

Description

Examples of Identifiable Activities

Monitor

Sifts through a wide variety of internal and external information

Reading periodicals and reports; ­maintaining business network; LinkedIn

Disseminator

Conveys complex information to members of the organization

Holding informational meetings; making/ taking phone calls

Spokesperson

Communicates with stakeholders on organizational plans and actions

Holding board meetings and media sessions

Entrepreneur

Identifies opportunities and brings about corrective changes

Organizing strategy to develop new programs

Disturbance handler

Takes corrective action when ­ rganization faces major disturbances o

Resolving disturbances and crises

Resource allocator

Makes or approves all significant ­organizational decisions

Scheduling; requesting authorization; budgeting

Negotiator

Represents the organization at major negotiations; sets purchasing and contract terms

Union contract negotiations

Informational

Decisional

You just learned about Mintzberg’s ten management roles. You can learn to be more effective at managing people by using the following tips to enhance those management roles: Mintzberg’s Ten Roles

How to Enhance Your Managerial Skills

Figurehead

Lead by example, improve your reputation, and be a good role model.

Leader

Improve your emotional intelligence and earn respect from your team.

Liaison

Work on your professional networking skills; use tools such as LinkedIn.

Monitor

Keep up to date with industry news by learning how to gather and process information more effectively.

Disseminator

Develop your communication skills and learn how best to share information through written communication and informal briefings.

Spokesperson

Work on your presentation skills; attend conferences and workshops.

Entrepreneur

Develop your creativity and problem-solving skills; learn more about change management.

Disturbance handler

Read about mediation and practise conflict resolution.

Resource allocator

Practise managing budgets and prioritizing your time effectively.

Negotiator

Practise with role playing to learn about win-win negotiations.

Functions versus Roles • Both approaches appear to do a good job of describing what managers actually do. • Many of Mintzberg’s roles align well with one or more of the functions. • The functions approach stands out because of its simplicity and clarity. Managers carry out so many diverse activities and utilize such varying techniques that functions are needed for categorizing ways to achieve organizational goals.17 But don’t disregard the roles approach; it offers another way to understand and appreciate what managers do.

Skills and Competencies Approach • Says that managers need certain skills and competencies as they manage others. • What these researchers say managers do: They identified four general management skills, including18

14  Chapter 1 conceptual skills A manager’s ability to analyze and diagnose complex situations.

– Conceptual skills: Analyzing and diagnosing complex situations to see how things fit together and to facilitate making good decisions.

Analyze and diagnose Simon/Fotolia

interpersonal skills A manager’s ability to work with, understand, mentor, and motivate others, both individually and in groups.

– Interpersonal skills: Working well with other people both individually and in groups by communicating, motivating, mentoring, delegating, etc.

Working well with others Simon/Fotolia

technical skills Job-specific knowledge and techniques needed to perform work tasks.

– Technical skills: Job-specific knowledge, expertise, and techniques needed to perform work tasks. (For top-level managers, knowledge of the industry and a general understanding of the organization’s processes and products; for middleand lower-level managers, specialized knowledge required in the areas where they work—finance, human resources, marketing, computer systems, manufacturing, and information technology.)

Possessing expert job knowledge Simon/Fotolia

political skills A manager’s ability to build a power base and establish the right connections.

– Political skills: Building a power base and establishing the right connections to get needed resources for their groups.

Political adeptness Simon/Fotolia

– Other important managerial competencies:19 decision making, team building, decisiveness, assertiveness, politeness, personal responsibility, trustworthiness, loyalty, professionalism, tolerance, adaptability, creative thinking, resilience, listening, self-development.

Who: Robert Katz and others When: 1970s to present How: Studies by various researchers

Chapter 1  Introduction to Management and Organizations 15

What Factors Are Reshaping and Redefining Management? 1.5 Describe the factors that are reshaping and redefining management.

Welcome to the new world of management! Changing Workplaces + Changing Workforce In today’s world, managers are dealing with changing workplaces, a changing workforce, changing technology, and global uncertainties. For example, grocery stores continue to struggle to retain their customer base and to keep costs down. At Overwaitea’s Save-on-Foods, a grocery chain in British Columbia, everyone, including managers, is looking for ways to better serve customers. The company’s president, Darrell Jones, who started his career bagging groceries while still in high school, is guiding the company through these challenges by keeping everyone’s focus—baggers, checkers, and stockers—on exceptional customer service. The pace of change in recent years has quickened, and customers are more interested in their food and its nutritional value—organics, hormone free and grass fed, for example—which makes the job more complex.20 Managers everywhere are likely to have to manage in changing circumstances, and the fact is that how managers manage is changing. Throughout the rest of this text, we’ll be discussing these changes and how they’re affecting the way managers plan, organize, lead, and control. We want to highlight four specific changes that are increasingly important to organizations and managers everywhere: customers, innovation, social media, and sustainability.

Why Are Customers Important to the Manager’s Job?

Matthi/Shutterstock

A manager must understand the importance of customers. Without them, most organizations would cease to exist. Yet, focusing on the customer has long been thought by many managers to be the responsibility of the marketers. We’re discovering, however, that employee attitudes and behaviours play a big role in customer satisfaction. Think of the times you’ve been treated poorly (or superbly) by an employee during a service encounter and how that affected the way you felt about the situation. Managers are recognizing that delivering consistent high-quality customer service is essential for survival and success in today’s competitive environment and that employees are an important part of that equation.22 The implication is clear—they must create a customer-responsive organization where employees are friendly and courteous, accessible, knowledgeable, prompt in responding to customer needs, and willing to do what’s necessary to please the customer.23

Why Is Innovation Important to the Manager’s Job? Success in business today demands innovation. Innovation means doing things differently, exploring new territory, and taking risks. And innovation isn’t just for high-tech or other technologically sophisticated organizations; innovative efforts are needed in all types, all levels, all areas, and all sizes of organizations. You’d expect companies such as Apple, Google, Toyota, and Instagram to be on a list of the world’s fifty most

John Chambers, CEO of Cisco Systems, likes to listen to voice mails forwarded to him from dissatisfied customers because he wants to hear first-hand the emotions and frustrations they’re experiencing. He can’t get that type of insight by reading an e-mail.21

16  Chapter 1

Technology and the Manager’s Job

Is It Still Managing When What You’re Managing Are Robots? The office of tomorrow is likely to include workers that are faster, smarter, more responsible—and who just happen to be robots.24 Surprised? Although robots have been used in factory and industrial settings for a long time, it’s becoming more common to find robots in the office, and it’s bringing about new ways of looking at how work is done and at what and how managers manage. So what would a manager’s job be like managing robots? And even more intriguing is how these “workers” might affect how human co-workers interact with them. As machines have become smarter and smarter, researchers have been exploring the human–machine interaction and how people interact with the smart devices that are now such an integral part of our professional and personal lives. One insight is that people find it easy to bond with a robot, even one that doesn’t look or sound anything like a real person. In a workplace setting, if a robot moves around in a “purposeful way,” people tend to view it, in some ways, as a coworker. People name their robots and can even describe the robot’s moods and tendencies. As telepresence robots become more common, the humanness becomes even more evident. For example, when Erwin Deininger, the electrical engineer at Reimers Electra Steam, a small company

in Clear Brook, Virginia, moved to the Dominican Republic when his wife’s job transferred her there, he was able to still be “present” at the company via his VGo robot. Now “robot” Deininger moves easily around the office and shop floor, allowing the “real” Deininger to do his job just as if he were there in person. The company’s president, satisfied with how the robot solution has worked out, has been surprised at how he acts around it, feeling at times that he’s interacting with Deininger himself. There’s no doubt that robotic technology will continue to be incorporated into organizational settings. The manager’s job will become even more exciting and challenging as humans and machines work together to accomplish the organization’s goals.

Discussion Questions 1. What’s your response to the title of this box: Is it still managing when what you’re managing are robots? Discuss. 2. If you had to manage people and robots, how do you think your job as manager might be different than what the chapter describes? (Think in terms of functions, roles, and skills/competencies.)

innovative companies.25 But what about the likes of Panera Bread? Here’s a company that’s using technology to improve everything it does. It’s installing a new master system across its North American locations (over 1800) that will provide customers with new ways to order their food (and even entertain themselves) and kitchen staff with capabilities to better handle custom orders. Or how about Kickstarter, which created the crowdfunding phenomenon? Now, it’s looking at ways to better encourage creativity among potential projects and startups and is also expanding its business beyond fundraising into publishing and distribution. In today’s challenging environment, innovation is critical, and managers need to understand what, when, where, how, and why innovation can be fostered and encouraged throughout an organization. In a presentation a few years ago, a manager in charge of Walmart’s global business explained his recipe for success (personal and organizational): Continually look for new ways to do your job better; that is, be innovative. Managers not only need to be innovative personally but also encourage their employees to be innovative. We’ll share stories of innovative practices and approaches throughout the text.

Importance of Social Media to the Manager’s Job social media Forms of electronic communication through which users create online communities to share ideas, information, personal messages, and other content.

You probably can’t imagine a time when employees did their work without e-mail or Internet access. Yet, some twenty years ago, as these communication tools were becoming more common in workplaces, managers struggled with the challenges of providing guidelines for using them. Today, it’s all about social media, which are forms of electronic communication through which users create online communities to share ideas, information, personal messages, and other content. Social platforms such as Facebook, Twitter, LinkedIn, Tumblr, Instagram, and others are used by more than a billion people.26 And employees don’t use these just on their personal time but also for work purposes. That’s why managers again are struggling with guidelines for

Chapter 1  Introduction to Management and Organizations 17

employee use as they attempt to navigate the power and peril of social media. Martell Home Builders is an Atlantic Canadian custom homebuilder. Social media allowed them to create a direct-to-consumer model where they were no longer reliant on a middleman to bring them business. Using content creation and blogging such as “14 Must-Have Tools for New Homeowners” and “Home Staging Tips & Techniques,” Martell was able to grab the attention of homebuyers. Today, about 86 percent of all their leads come directly from consumers.27 And they’re not alone. More and more businesses are turning to social media not just as a way to connect with customers but also as a way to manage their human resources and tap into their innovation and talent. That’s the potential power of social media. But the potential peril is in how it’s used. When the social media platform becomes a way for boastful employees to brag about their accomplishments, for managers to publish one-way messages to employees, or for employees to argue or gripe about something or someone they don’t like at work, then it’s lost its usefulness. To avoid this, managers need to remember that social media are tools that needs to be managed to be beneficial. With innovative social media strategies, Martell has made the homebuilding experience more connected. They use photo galleries of the clients’ homes being built, which allows the homebuyer to share their excitement with their family and friends on social networks.28 In the remainder of the text, we’ll look at how social media is impacting how managers manage, especially in the areas of human resource management, communication, teams, and strategy.

Importance of Sustainability to the Manager’s Job BMW is probably not a company that would come to mind in a section describing sustainability. Yet, BMW, the iconic German manufacturer of highperformance luxury autos, is making a huge bet on green, wired cars for people who reside in cities.29 Its all-electric car, called the i3, is unlike anything that BMW—or any other car ­manufacturer—has made. The car’s weight-saving, carbonfibre body is layered with electronic services and smartphone apps ready to make life simpler and more efficient for the owner and better for the planet. Company executives recognized that it had to add products that would meet the challenges of a changing world. This corporate action by a well-known global company affirms that sustainability and green management have become mainstream issues for managers. What’s emerging in the twenty-first century is the concept of managing in a sustainable way, which has had the effect of widening corporate responsibility not only to managing in an efficient and effective way but also to responding strategically to a wide range of environmental and societal challenges.30 Although “sustainability” may mean different things to different people, the World Business Council for Sustainable Development describes a scenario in which all Earth’s inhabitants can live well with adequate resources.31 From a business perspective, sustainability has been defined as a company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies.32 Sustainability issues are now moving up the business agenda. Managers at BMW, Walmart, and other global businesses are discovering that running an organization in a more sustainable way will mean making informed business decisions based on (1) communicating openly with various stakeholders and understanding their requirements and (2) factoring economic, environmental, and social aspects into how they pursue their business goals. Throughout the rest of the text, we’ll explore sustainability as it relates to various aspects of managing. Just look for this

for those conversations, and look for the 3BL: Triple Bottom Line discussions

at the end of each chapter.

sustainability A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies.

18  Chapter 1

Chapter Summary Learning Objectives Checklist 1.1 Explain why it’s important to study management. One reason it’s important to study management is that all of us interact with organizations daily, so we have a vested interest in seeing that organizations are well managed. Another reason is the reality that in your career you will either manage or be managed. By studying management you can gain insights into the way your boss and fellow employees behave and how organizations function.

1.2 Define management. Management is the process of getting things done, effectively and efficiently, with and through other people. Efficiency means doing a task correctly (“doing things right”) and getting the most output from the least amount of inputs. Effectiveness means “doing the right things” by doing those work tasks that help the organization reach its goals.

1.3 Describe who managers are and where they work. Managers are individuals who work in an organization directing and overseeing the activities of other people. Managers are usually classified as top, middle, first-line, or team leader. Organizations, which are where managers work, have three characteristics: goals, people, and a deliberate structure.

1.4 Describe what managers do. What managers do can be described using three approaches: functions, roles, and skills/competencies. The functions approach says that managers perform four functions: planning, organizing, leading, and controlling. Mintzberg’s roles ­approach says that what managers do is based on the ten roles they use at work, which are grouped around interpersonal ­relationships, the transfer of information, and decision making. The skills/competencies approach looks at what managers do in terms of the skills and competencies they need and use. Four critical management skills are conceptual, ­interpersonal, technical, and political. Additional managerial

competencies include aspects such as dependability, personal orientation, emotional control, communication, and so forth. All managers plan, organize, lead, and control, although how they do these activities and how often they do them may vary according to level in the organization, whether the organization is profit or not-for-profit, the size of the organization, and the geographic location of the organization.

1.5 Describe the factors that are reshaping and redefining management. In today’s world, managers are dealing with changing workplaces, a changing workforce, global economic and political uncertainties, and changing technology. Four areas of critical importance to managers are delivering high-quality customer service, encouraging innovative efforts, using social media efficiently and effectively, and recognizing how sustainability contributes to an organization’s effectiveness.

Discussion Questions 1. How does a manager’s job vary with his or her level in the organization? 2. What are the three skills that affect managerial effectiveness? 3. How is management universal? 4. Are effective organizations always efficient? Discuss. If you had to choose between being effective or being efficient, which would you say is more important? Why? 5. Is your instructor a manager? Discuss in terms of planning, organizing, leading, and controlling and in terms of Mintzberg’s managerial roles. 6. What similarities exist with the job activities of the owner of an automotive repair shop that employs two people and those of the executive director of the Canadian Cancer Society? 7. What are some of the skills that an entrepreneur must possess?

Developing Management Skills Dilemma Management is about achieving the highest possible return given the investment of money, people, time, and other resources. It is also about achieving results in the most efficient manner. Think about where you hope to be in your life five years from now (that is, your major goal). What is your competitive advantage for achieving your goal? Your education is a way of managing yourself and developing your

career, which helps you achieve that goal. Here are some other things you can do to get the most out of yourself.

Becoming a Manager • What is a better way of completing this task? • What is my 80/20 rule—what 20 percent of my efforts are resulting in 80 percent of my outputs?

Chapter 1  Introduction to Management and Organizations 19

• What is the best use of my time today? • How can I make better use of the abilities and time of my colleagues, subordinates, and superiors? • Am I thinking for myself as much as I could?

Becoming Politically Adept Anyone who has had much work experience knows that organizational politics exists everywhere. That is, people try to influence the distribution of advantages and disadvantages within the organization in their favour. Those who understand organizational politics typically thrive. Those who don’t, regardless of how good their actual job skills are, often suffer by receiving less positive performance reviews, fewer promotions, and smaller salary increases. If you want to succeed as a manager, it helps to be politically adept. Research has shown that people differ in their political skills.33 Those who are politically skilled are more effective in their use of influence tactics. Political skill also appears to be more effective when the stakes are high. Finally, politically skilled individuals are able to exert their influence without others detecting it, which is important in being effective so that you’re not labelled as playing politics. A person’s political skill is determined by (1) networking ability, (2) interpersonal influence, (3) social astuteness, and (4) apparent sincerity. SKILL BASICS Forget, for a moment, the ethics of politicking and any negative impressions you might have of people who engage in organizational politics. If you want to become more politically adept in your organization, follow these steps: • Develop your networking ability. A good network can be a powerful tool. You can begin building a network by getting to know important people in your work area and the organization and then developing relationships with individuals in positions of power. Volunteer for committees or offer your help on projects that will be noticed by those in positions of power. Attend important organizational functions so that you can be seen as a team player and someone who’s interested in the organization’s success. Start a file list of individuals you meet, even if for a brief moment. Then, when you need advice on work, use your connections and network with others throughout the organization. • Work on gaining interpersonal influence. People will listen to you when they’re comfortable and feel at ease around you. Work on your communication skills so that you can communicate easily and effectively with others. Work on developing a good rapport with people in all areas and at all levels of your organization. Be open, friendly, and willing to pitch in. The amount

of interpersonal influence you have will be affected by how well people like you. • Develop your social astuteness. Some people have an innate ability to understand people and sense what they’re thinking. If you don’t have that ability, you’ll have to work at developing your social astuteness by doing things such as saying the right things at the right time, paying close attention to people’s facial expressions, and trying to determine whether others have hidden agendas. • Be sincere. Sincerity is important to getting people to want to associate with you. Be genuine in what you say and do. And show a genuine interest in others and their situations.

Diversity Matters Innovation is a term that is mentioned frequently as a driver of business growth. More recently diversity among employees and senior leaders has been tied to innovation.34 The report Innovation, Diversity and Market Growth identifies two types of diversity. Inherent diversity is the gender, racial, and socioeconomic diversity of an organization, which leads to a higher number of innovative ideas. Employees who reflect the diversity of the Canadian and global marketplace are much more able to identify unmet client needs. Acquired diversity focuses on how a company’s leadership acquires a global mindset and social media skills to enable it to better understand and appreciate diversity. Studies have demonstrated that organizations with both inherent and acquired diversity were 75 percent more likely to see ideas go to market, 70 percent more likely to have captured a new market in the past twelve months, and 45 percent more likely to have improved market share during that same period than organizations that don’t have these traits.35 Organizations with strong inherent and acquired diversity are more likely to have a culture with these six key characteristics: Employees who are 1. listened to frequently 2. encouraged to propose new ideas 3. empowered to make decisions

inherent diversity The gender, racial, and socioeconomic diversity of an organization

acquired diversity A company’s acquisition of a global mindset and social media skills to enable it to better understand and appreciate diversity

20  Chapter 1 Leaders who are 1. freely taking advice from their team 2. giving regular and actionable feedback 3. sharing credit for organizational success

Hey, You’re the Boss Now! Generation X (1961–1980), Generation Y (1981–1995), and Generation Z (born after 1995) will constitute the majority of the Canadian workforce in the near future. According to the Canadian Management Centre, millennials (born 1980–2000) make up 29 percent of today’s workplace and will constitute roughly 75 percent of the workforce by 2028. This will provide challenges and opportunities for employers as each generation has its own attitudes and styles. Those styles fundamentally clash, indicating that there is work to be done by the organization to ensure a smooth transition of millennials into the workforce. As a manager in an organization, mentoring is an excellent way to ease this transition of millennials (including you). Jeanne Meister and Karie Willyerd, cofounders of the executive development firm Future Workplace, identify three kinds of mentoring that can help organizations prepare millennials for success.36

With reverse mentoring, the purpose of matching you with a senior executive is to provide your insight and expertise on a certain topic of interest to the executive, such as social media, technology, or cloud computing. You will benefit from their experience in other areas but will bring strengths to the table as well. In group mentoring, millennials have a peer-to-peer connection to deal with common issues of relevance. Use of technology can assist individuals and groups in the sharing of ideas, allowing 24/7 access to virtual members across the globe. With anonymous mentoring, you select a mentor outside your organization. When thrust into a management role without a lot of experience, you may be hesitant to share your shortcomings within your company. An outside mentor provides anonymity and perspective. reverse mentoring A junior employee providing insight and expertise on a certain topic to a senior executive.

group mentoring Millennials sharing ideas in groups in a peer-to-peer format.

anonymous mentoring Using a mentor outside an organization who can provide anonymity and perspective.

Team Exercises 3BL: The Triple Bottom Line WHAT ARE THE BUSINESS CASE BENEFITS OF 3BL? The components of the triple bottom line are people, profit, and planet. The focus on people deals with employee aspects, such as diversity, empowerment, and health and safety. It also expands to charitable contributions and corporate relations. Organizations that focus on more than the financial

bottom line typically generate profit through ethical behaviour as well as cost savings through sustainable practices. The planet element looks beyond environmentalism and finds eco-efficiency in operations, manufacturing, and product development.37 Over the next twelve chapters, we will examine 3BL in practical circumstances. THINKING STRATEGICALLY ABOUT 3BL The business case benefits of 3BL are illustrated in Exhibit 1-7.

Exhibit 1-7  The Business Case Benefits of 3BL SOURCE: Adapted from B. Willard, The Next Sustainability Wave (Canada: New Society Publishers, 2005), p. 130.

Business Case Benefits

Business Case Components

Reduction in human resources (HR) costs

Recruiting costs are lower due to stronger employer branding; higher employee morale decreases turnover costs.

Reduction in operational costs

Manufacturing expenses are lowered through cost savings and continuous improvement; water, energy, and consumables expenses are reduced.

Decreased risk

Risks of nonsustainable practices are reduced; stakeholder relations are improved; and access to financing is increased.

Business improvements

Productivity is increased due to higher employee morale; sustainability awareness leads to higher innovation.

Financial improvements

Revenue increases due to greater market access and customer loyalty; improved relationships with regulators.

Chapter 1  Introduction to Management and Organizations 21

Be the Consultant In teams of four or five people, discuss the following scenario. One person will report to the class on your recommendations. Your student association has decided to open a new campus comedy club. They have strong financial backing with a bank loan of $750 000. They have little experience in the hospitality industry or with managing small businesses and have asked your team for advice and support. A student employment program from Human

Resources and Skills Development Canada has provided each of you with a six-month contract to help get the club up and running. How will you split up the key management functions of planning, organizing, leading, and controlling? What are three key decisions that you will have to make in each of the four functions that will help the comedy club become successful? What metrics will you use to evaluate the effectiveness of your managerial roles at the end of six months? 

Business Cases Shopify It may surprise you that two snowboard enthusiasts who simply wanted a better way to sell their snowboards online created an ecommerce platform that now has over 600 000 merchants in 175 countries, including Pixar, Angry Birds, and the Foo Fighters.38 Shopify became Canada’s first Internet startup since the dot-com crash to reach a billiondollar valuation, thanks to $100 million in venture capital raised primarily through the Ontario Municipal Employees Retirement System (OMERS Ventures).39 Tobias Lütke, CEO and cofounder, has created a business that allows companies of all sizes to set up online stores, simplifying a task that used to take months and trimming it down to as little as half an hour. Shopify takes care of everything behind the scenes in return for a subscription fee and transaction fees. A typical Shopify customer spends less than $100 per month for the software use, a drop in the bucket compared to the cost to retailers a few years ago to operate an ecommerce site. Retailers using Shopify have made more than $63 billion in sales.40 “I think everyone in the company has a sense Shopify is doing well,” said Lütke, noting that the 3000+ employees own a significant chunk of the firm. “Most don’t realize how well it’s going.” Joining the “unicorn club” by reaching the $­ 1-billion level is very rare. In the past decade only 40 tech firms, including Facebook and Twitter, have reached this elusive level. Shopify has been doubling in size every year for the past four years and has emerged as the poster child of a group of online software providers who have substantially reduced the cost of ecommerce, enabling even small companies to build a commanding web presence. The accolades have poured in, with Shopify featured as one of Fast Company’s 50 Most Innovative Companies.41 Shopify focuses on developing entrepreneurs, both internally and externally. It launched a Build-A-Business contest, inviting online entrepreneurs to dream up something to sell using Shopify and compete to bring in the most revenue within two months for the chance to win more than $500 000 in prizes. “Our first two competitions were extremely

successful. In total 4438 new businesses were created, selling over $15 million worth of products,” said Lütke.42 Harley Finkelstein, Shopify’s chief platform officer, is a judge for the Future Entrepreneurial Leaders (FuEL) Awards.43 Shopify’s commitment to its people is evident even in the little details. It has moved its head office for the second time in a year to accommodate its recently doubled workforce. Its new office is in Ottawa’s trendy Byward Market area, so staff members have a great variety of fun places to eat and play after work. The office itself is a mix of glass and exposed brick, with open concept workspaces. Shopify has many benefits and perks, including very popular company video-game tournaments, share options for all employees, daily catered lunches, and even the chance to go to any conference at the company’s expense. They believe employees will produce their best work when they can wear their choice of clothing, start work later in the morning, and play video games whenever they need a break. “Our mission continues to be to make it as easy as possible for retailers of all sizes to start and run a business online,” said Lütke.44 That mission also extends to its employees—hardworking, talented individuals who get ­ things done and always push themselves to improve.

Discussion Questions 1. As a company gets bigger, does it become harder to stay innovative? Why or why not? 2. What are the perks that appeal to you?

Building a Better Boss Google doesn’t do anything halfway. So when it decided to “build a better boss,” it did what it does best: look at data. Using data from performance reviews, feedback surveys, and supporting papers turned in for individuals being nominated for top-manager awards, Google tried to identify what a great boss is and does. The project, dubbed Project Oxygen, examined some 100 variables and ultimately identified seven characteristics or habits of Google’s most effective managers. The “big seven” are as follows:

22  Chapter 1 • Provide an unambiguous vision of the future. • Express interest in employees’ well-being. (Make new team members feel welcome and get to know your employees as people.) • Focus on being productive and on end results. (Focus on helping the team achieve its goals by prioritizing work and getting rid of obstacles.) • Display good communication skills, especially listening. (Learn to listen and to share information; encourage open dialogue, and pay attention to the team’s concerns.) • Help individuals reach their long-term work goals. (Notice employees’ efforts so they can see how their hard work is furthering their careers; appreciate employees’ efforts and make that appreciation known.) • Provide an unambiguous vision of the future. (Lead the team, but keep everyone involved in developing and working toward the team’s vision.) • Ensure that you have the necessary technical abilities to support employee efforts. (Understand the challenges facing the team and be able to help team members solve problems.) Now, managers at Google aren’t just encouraged to be great managers; they know what being a great manager ­involves. And the company is doing its part as well. Using the list, Google started training managers as well as providing individual coaching and performance review sessions. You could say that Project Oxygen breathed new life into Google’s managers. Laszlo Bock, Google’s senior vicepresident for people operations, says the company’s efforts paid off quickly. “We were able to have a statistically significant improvement in manager quality for 75 percent of our worst-performing managers.”

Discussion Questions 1. Describe the findings of Project Oxygen using Mintzberg’s role approach. 2. Are you surprised at what Google found out about “building a better boss”? Explain your answer. 3. What is the difference between encouraging managers to be great managers and knowing what being a great manager involves? 4. What could other companies learn from Google’s experiences? 5. Would you want to work for a company like Google? Why or why not?

Who Needs a Boss? “Holacracy.”45 That’s the word of the day at Zappos, the Nevada-based online shoe and apparel retailer. During a four-hour, year-end employee meeting in 2013, CEO Tony

Hsieh announced that he was eliminating the company’s traditional managerial and structural hierarchy to implement a holacracy. What is a holacracy, you ask? In a nutshell, it’s an organizational system with no job titles, no managers, and no top-down hierarchy with upper, middle, or lower levels where decisions can get hung up. The idea behind this new type of arrangement is to focus on the work that needs to be done and not on some hierarchical structure where great ideas and suggestions can get lost in the channels of reporting. The holacracy concept was dreamed up by Brian Robertson, the founder of a Pennsylvania software startup. Its name comes from the Greek word holos, a single, autonomous, self-sufficient unit that’s also dependent on a larger unit.46 A simple explanation of Robertson’s vision of a holacracy is workers as partners, job descriptions as roles, and partners organized into circles.47 At Zappos, they’re learning how to manage without managers! At Zappos, work (and the 1500 employees who do it) will be organized around self-governing employee ­circles—about 400 of these circles. (It might help you grasp this idea by thinking of these employee circles as types of overlapping employee “groups” but with more fluid membership and individual roles/responsibilities.) In these circles, employees can take on any number of roles, and the expectation is that each employee will help out wherever he or she can. Without titles or a hierarchy, anyone can initiate a project and implement innovative ideas. The hope is that circle members will pool ideas and watch out for each other. The goal is radical transparency and to get more people to take charge. Yet, trusting individuals who probably know the details of the job better than any “manager” to work conscientiously, creatively, and efficiently is good as long as there is a way to keep standards high. The last thing Zappos wants is for a “slacker” mentality to take hold. Hsieh has always approached leading his business in unique and radical ways. He strongly believes in the power of the individual and has created a highly successful organization (which is now part of Amazon) that’s known for its zany culture, where corporate values are matched with personal values, and where “weirdness and humility” are celebrated.48 However, as the company moves away from the traditional work model to this new system, it may face some challenges. Both Zappos and Robertson caution that while a holacracy might eliminate the traditional manager’s job, there is still structure and accountability. Poor performers will be obvious because they won’t have enough “roles” to fill their time, or a circle charged with monitoring the company’s culture may decide they’re not a good fit. Also, just because there are no “traditional” managers doesn’t mean that leaders won’t emerge. But it will be important to watch for dominant personalities emerging as authority figures, which could potentially cause other employees to be resentful or to rebel. Zappos says that it will not be leaderless.

Chapter 1  Introduction to Management and Organizations 23

Some individuals will have a bigger role and scope of purpose, but leadership is also distributed and expected in each role. “Everybody is expected to lead and be an entrepreneur in their own roles, and holacracy empowers them to do so.”49 Also, there will be some structure arrangement where “the broadest circles can to some extent tell sub-groups what they’re accountable for doing.”50 But accountability, rather than flowing only up, will flow throughout the organization in different paths. Other challenges they’re still trying to figure out include who has the ultimate authority to hire, fire, and decide pay. The hope is that eventually the authority for each of these roles will be done within the holacratic framework as well. So, if no one has a title and there are no bosses, is Tony Hsieh still the CEO? So far, he hasn’t publicly commented about how his own role is impacted. In March 2015, Hsieh sent a memo to employees stating it was taking too long to make the transition to the new

management system.51 He offered all employees who felt they couldn’t work under this radically new management system the choice to stay or to leave with three months’ severance. About 18 percent of the company’s workforce (210 employees) chose to leave over the next 10 months. However, by 2016 the company was up to 1600 ­employees.52 Obviously, some individuals felt that holacracy was not for them.

Discussion Questions 1. What is a holacracy? 2. What benefits do you see to an organization where there are no job titles, no managers, and no hierarchy? 3. What challenges does a holacratic approach have? 4. Discuss why you would or would not like to work in an organization like this.

Chapter 2

Chrisdorney/Shutterstock

Environmental Constraints on Managers

Learning Objectives 2.1 Explain what the external environment is and why it is important. 2.2 Describe globalization and discuss how it affects organizations. 2.3 Define what organizational culture is and explain why it is important. 2.4 Explain how the environment affects managers. Spin Master started in 1994 when cofounder Ronnen Harary approached his childhood friend Anton Rabie and they developed a novelty toy called the Earth Buddy, which became a huge success. That was followed by air-powered, radio controlled toy aircraft called Air Hogs. This entrepreneur-run business won hundreds of awards due to its creative focus.1 Where it struggled was in operations. Rabie convinced Ben Gadbois, a Montreal-bred CPA who was global president of a large US firm based in Chicago, to join Spin Master and help it through a major crisis.2 They had launched a new toy that had high sales, but Spin Master was unable to manage its growth and was on the brink of failure due to excessive overhead. Gadbois conducted an operational review, pinpointing three major challenges: management decision making, sales forecasting, and the lack of an effective global expansion model.3 The new operational focus hasn’t stifled innovation. A toy called Hatchimals was such a smash hit that it sold out at Christmas in 2016. Their cartoon Paw Patrol was the top-ranked TV show in 2017 among kids aged 2 to 5 years old.4

44

Chapter 2  Environmental Constraints on Managers 45 Spin Master has grown into a $5.3 billion toy powerhouse, featuring returns for investors of 170 percent since its initial public offering in July 2015. This has outperformed Canada’s stock index with returns of 18 percent over the same time period.5 In recent years Spin Master has expanded operations in Asia, Europe, Mexico, and Australia. In 2019 they expanded to Russia, Switzerland, Austria, and Greece, with the goal of generating 40 percent of sales outside of North America.6 They have capitalized on a strong fit with the external environment and a good understanding of globalization issues. The senior managers at Spin Master are responsible for overseeing the production and sales of toys and television programs. But how much actual impact does a manager have on an organization’s success or failure? Can managers do anything they want? These questions raise more general questions: Do managers control their environment, or are they controlled by it? Are they affected more by circumstances outside or inside the organization? In this chapter, we consider the impact of an organization’s external environment on the ability of managers to act. We begin our exploration by considering the degree of control managers have over an organization’s performance.

The External Environment 2.1 Explain what the external environment is and why it is important.

One of the biggest mistakes managers make today is failing to adapt to the changing world. When the Eyjafjallajökull volcano erupted in Iceland, who would have thought that it would lead to a shutdown at the BMW plant in Spartanburg, South Carolina, or the Nissan Motor auto assembly facility in Japan?7 Yet, in our globalized and interconnected world, such an occurrence shouldn’t be surprising at all. As volcanic ash grounded planes across Europe, supplies of tire-pressure sensors from a company in Ireland couldn’t be delivered on time to the BMW plant or to the Nissan plant. Because we live in a “connected” world, managers need to be aware of the impact of the external environment on their organization. As we discussed in Chapter 1, management is no longer constrained by national borders. Managers in all sizes and types of organizations are faced with the opportunities and challenges of managing in a global environment. For example, global sourcing of ingredients can provide a competitive advantage for food processors but can also come with risks if the foreign country’s food inspection standards are lower than those in North America. The term external environment refers to forces and institutions outside the organization that potentially can affect its performance. The external environment is made up of three components, as shown in Exhibit 2-1: the specific environment, the general environment, and the global environment. In this section, we identify some of the critical environmental forces that affect managers and show how they constrain managerial discretion.

What Is the Economy Like Today? Snapshots of the economic context • A blue-ribbon company like General Motors goes bankrupt and then new management leads it back to profitability. • Global news stories are reporting signs that deflation might be making a return in some countries. • Entry-level jobs now are more “thinking” oriented and include more sophisticated responsibilities. •

Climate change is reshaping supply networks, manufacturing processes, and resource availability.

external environment Outside forces and institutions that can potentially affect the organization’s performance.

46  Chapter 2

Exhibit 2-1  The External Environment GLOBAL ENVIRONMEN T AL ENVIRO R E N E G NM EN THE T E C N I F V I I C R E O P N S ME NT TH E

al

Ec on o

Customers

c iti

Employees

l Po

m ic

THE

Social and Political Action Groups

Unions

Shareholders

Competitors

n nme Enviro

Trade and Industry Associations

Communities

Legal

Organization

tal

Suppliers

Governments

Media

Te chn olo gica l

l ra tu l cu cio o S

The Specific Environment specific environment The part of the external environment that is directly relevant to the achievement of an organization’s goals.

stakeholders Any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions.

The specific environment represents the micro level and includes those external forces that have a direct and immediate impact on managers’ decisions and actions and are directly relevant to the achievement of the organization’s goals. Each organization’s specific environment is unique and changes with conditions. For example, Timex and Rolex both make watches, but their specific environments differ because they operate in distinctly different market niches. Managers are affected by the nature of the relationships they have with external stakeholders. The more obvious and secure these relationships become, the more influence managers will have over organizational outcomes. Who are stakeholders? We define them as groups in the organization’s external environment that are affected by or have an effect on the organization’s decisions and actions. These groups have a stake in or are significantly influenced by what the organization does. In turn, these groups can influence the organization. For example, think of the groups that might be affected by the decisions and actions of Starbucks’s ­managers—coffee bean farmers, employees, specialty-coffee competitors, local communities, and so forth. Some of these stakeholders may also affect the decisions and actions of Starbucks’s managers. Starbucks recently changed the way it purchased

Chapter 2  Environmental Constraints on Managers 47

coffee beans after activists pressured the company to stop buying from plantations that treated their workers poorly. What types of stakeholders might an organization have to deal with? The inner circle of Exhibit 2-1 identifies some of the most common. Stakeholders include internal and external groups. Why? Because both can affect what an organization does and how it operates. Internal stakeholders are often called primary stakeholders in that they engage in direct transactions with the business (such as shareholders, customers, suppliers, creditors, and employees). Secondary stakeholders are predominantly external and are on the periphery but can still be impacted by or have some influence on the organization (such as the general public, local communities, and the media). We will address the equally important issue of internal stakeholders, primarily employees, throughout the rest of the text. Why is stakeholder-relationship management important? Why should managers care about stakeholders?8 Taking stakeholders’ interests into account in management decisions can lead to organizational outcomes such as improved predictability of environmental changes, more successful innovations, a greater degree of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. But does this management style affect organizational performance? The answer is yes! Management researchers who have looked at this issue are finding that managers of high-performing companies tend to consider the interests of all major stakeholder groups as they make decisions.9 Another reason given for managing external stakeholder relationships is that it is the “right” thing to do. What does this mean? It means that an organization depends on these external groups as sources of inputs (resources) and as outlets for outputs (goods and services), and managers should consider these external groups’ interests as they make decisions and take actions. The more critical the stakeholder and the more uncertain the environment, the more managers need to rely on establishing explicit stakeholder partnerships rather than just acknowledging their existence.

The General Environment The general environment represents the macro level and includes the broad political, economic, sociocultural, technological, environmental, and legal conditions that may affect the organization. Changes in any of these areas usually do not have as large an impact as changes in the specific environment, but managers must consider them as they plan, organize, lead, and control. PESTEL is an acronym for the six macro environmental factors and will be discussed in more detail later. POLITICAL CONDITIONS  Political conditions include the political climate, the gen-

eral stability of a country in which an organization operates, and the attitudes that elected government officials hold toward business. The political environment influences businesses and also has a major impact on consumer confidence and spending. In Canada, organizations have generally operated in a stable political environment. The stability of the Canadian political landscape allows businesses to invest in and enter new markets. One challenging aspect of the Canadian marketplace is the government policies concerning taxation and regulation, which may vary from province to province. Organizations spend a great deal of time and money meeting government regulations, but the effects of these regulations go beyond time and money.10 They can also reduce managerial discretion by limiting the choices available to managers. In a 2016 interview for CBC Radio, Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, said that such trade obstacles are among the top ten barriers to Canadian competitiveness. Such restrictions have far reaching consequences. Beatty cited a Senate report that estimates 3 to 7 percent of Canada’s gross domestic product (GDP) is lost to these interprovincial trade barriers every year.11

general environment Broad external conditions that may affect the organization.

48  Chapter 2

Metamorworks/Shutterstock

The Competition Act of 1985 created the Bureau of Competition Policy (now called the Competition Bureau) to oversee and encourage competition in Canada. For example, if two major competing companies consider merging, they will come under scrutiny from the bureau. Heather Reisman and Gerry Schwartz’s purchase of Chapters in 2001 needed approval before they could merge Chapters with their Indigo bookstores. Before approving the merger, the bureau imposed a number of conditions, including the sale or closing of twenty stores and a code of conduct for dealing with publishers. The code of conduct was the result of publishers’ complaints about the way Chapters had treated them in the past. These rules affected the way Chapters Indigo could do business until 2006. Beyond that time, the bookseller was allowed to operate without restraint by the Competition Bureau.12 To protect farmers, the Canadian government has created marketing boards that regulate the pricing and production of such items as milk and eggs. Those who decide they want to manufacture small amounts of cheese would have great difficulty doing so, because the Canadian government does not open production quotas to new producers very often. Marketing boards restrict imports of some products, but the unintended result is that foreign governments oppose exports from Canada. ECONOMIC CONDITIONS  Interest rates, inflation, changes in disposable income, stock market fluctuations, and the stage of the general business cycle are some of the economic factors that can affect management practices in Canada. For example, many specialty retailers such as IKEA, Roots, Birks, and Williams-Sonoma are acutely aware of the impact consumer disposable income has on their sales. When consumers’ incomes fall or confidence about job security declines, such as happened in 2009, consumers will postpone purchasing anything that is not a necessity. Even charitable organizations such as the United Way and the Heart and Stroke Foundation feel the impact of economic factors. During economic downturns, not only does the demand for their services increase, but their contributions also typically decrease. Economic indicators such as GDP, price indices, and unemployment are used to reflect the health of the economy. The GDP is the broadest indicator of a country’s economic activity, expressed in the market value of goods and services produced in a country. The consumer price index (CPI) measures purchasing power and rises and falls with inflation and deflation. It has an impact on wages paid and the prices of products and services. The Bank of Canada’s commodity price index (BCPI) measures the price of 24 Canadian commodities on the world market, while the MLS® Home Price Index (HPI) compares home prices across the country. The unemployment rate is calculated by the number of workers above age 16 who are not working. There are several complicating factors, such as seasonal and cyclical changes, but the unemployment rate is used by government and businesses for planning purposes. Have you used Airbnb, Uber, Zipcar, SnapGoods, KickStarter, MeetUp? These are just a few of the companies that are part of a fast-growing phenomenon called the “sharing economy.” What is the sharing economy? It’s an economic environment in which asset owners share with other individuals through a peer-to-peer service, for a fee, their underutilized physical assets (such as a home, car, Twenty-five billion. That’s the number of “things” (smartphones, smartwatches, clothing, tools, or other physical assets). Some climate-control system sensors, kitchen refrigerators, cars, etc.) that Gartner Inc. analysts have included the sharing of knowlpredicts will be connected to the Internet by 2020. This Internet of Things (IoT) is edge, expertise, skills, or time, as well.14 transforming businesses and disrupting industries and societies around the world.13

Chapter 2  Environmental Constraints on Managers 49

And the Survey Says... • Ten Million+—A 2014 study that surveyed over 90K people in the US, UK, and Canada on their use of sharing platforms estimates there are over 10M sharers in Canada. http://www. visioncritical.com/sites/default/files/pdf/sharing-new-buyingcollaborative-economy-report.pdf (Vision Critical and Crowd Companies, “Sharing is the new buying,” March 3, 2014, p.6) • 45 percent Willing—45 percent of Canadians are willing to rent their stuff from others. Similarly, 42 percent are willing to rent from others. http://strategyonline.ca/2014/06/02/canadians-open-toa-sharing-economy-study/#ixzz3NJlRmlsQ (Strategyonline.ca, June 2, 2014; numbers reference a global Nielson study) • 40 percent once/month—Kijiji estimates that 40 percent of Canadians (14M) use their website on a monthly basis. http://kijijiblog.ca/about-us/(Kijiji blog, 2015) • $54M in 1 Year—Economic impact of Airbnb’s operations in Montreal in one year. Airbnb visitors stayed 5 nights and spent $909 vs. 2.7 nights, $760 by typical visitors. http:// publicpolicy.airbnb.com/new-study-airbnb-communitymontreal/(Airbnb public policy blog, November 13, 2014) • 5 cities & growing—Uber is now available in 5 Canadian cities (Toronto, Montreal, Ottawa, Halifax, Edmonton) and is hoping to expand to Calgary and Vancouver. https://www.uber.com/ cities (Uber.com, January 2015)

• $3.2M in one month—Canadians can crowdfund: In its first month in Canada, over 47k backers pledged over $3.2M CAD for over 300 projects posted on Kickstarter Canada. https://www.kickstarter.com/blog/kickstarter-in-canada-thefirst-month (Kickstarter blog, October 10, 2013) • 182—Number of dogs available to “borrow” on Part Time Pooch—a Vancouver-based startup focused on shared dog care. Dogs are sortable by barking and shedding level. http://www.parttimepooch.com/browse-dogs (Part Time Pooch, January 15, 2015) • $400,000 for P2P learning—Provided by the Canada Media Fund for E-180—a Canadian startup that promotes P2P learning via one-on-one, face-to-face matches. http://www. techvibes.com/blog/e-180-2014-07-24 (TechVibes, July 24, 2014) • $76,247—Total earnings in less than five years by “BuckTornado”—a Canadian-based freelancer ranked 16th best graphic designer worldwide on DesignCrowd. http://designers.designcrowd.ca/designer/24106/ bucktornado (DesignCrowd, January 15, 2015) SOURCE: DMCPI+. (February 2015). Back to the Future: The Sharing Economy:

A Report for DMCPI, Annex C.

The concept behind the sharing economy (or collaborative consumption) is putting underutilized assets to good use. Asset owners “rent out” assets they’re not using to consumers who need those assets but who don’t want to or who can’t afford to purchase them. For instance, SnapGoods is a service through which individuals lend and borrow expensive household items, such as cameras, musical instruments, kitchenware, etc., for a fee.15 A new startup called Kitsplit has set up a sharing arrangement between customers looking for sophisticated, high-end, creative-type equipment such as drones, Google Glass headsets, Oculus Rift systems, or expensive cameras and production companies, studios, and individuals looking to lease their unused equipment for short time periods.16 Some economics experts have said that these arrangements aren’t really “sharing” but better described as marketmediated, since there’s a service or company that mediates the exchange between consumers. They suggest that the arrangement is more like an “access economy,” because what consumers are looking for is convenient access to assets they need but don’t have, and they’re not concerned with developing a business or social relationship with the asset owner.17 Whatever form or definition it takes, the concept is likely to remain a component of our economic system. SOCIOCULTURAL CONDITIONS  Responding to societal dietary concerns, in 2004 Frito-Lay Canada announced that it was eliminating trans fatty acids (TFAs) from Doritos, Tostitos, and SunChips. (It had already done so for its Lay’s, Ruffles, and Miss Vickie’s chips). Marc Guay, president of Frito-Lay Canada, explained his decision at the time: “Eliminating trans fat is a major step in Frito-Lay Canada’s on-going commitment to offer consumers a wide variety of great-tasting snacks made with more healthful oils.”18

Jonathan Vasata/Fotolia

50  Chapter 2 Why did Frito-Lay Canada and Voortman Cookies change their products? Because health officials and consumers became increasingly anxious about the link between TFAs and heart disease.19 Managers must adapt their practices to the changing expectations of the societies in which they operate. As societal values, customs, and tastes change, managers also must change. For example, as employees have begun seeking more balance in their lives, organizations have had to adjust by offering family leave policies, more flexible work hours, and even on-site childcare facilities. These trends may pose a constraint on managers’ decisions and actions. If an organization does business in other countries, managers need to be familiar with those countries’ values Burlington, Ontario–based Voortman Cookies was the first Canadian and cultures and manage in ways that recognize and cookie maker to drop TFAs from its products. President and cofounder embrace those specific sociocultural aspects. Harry Voortman said he dropped the TFAs after his daughter, Lynn, Demographics are part of sociocultural conditions a naturopathic doctor, became concerned enough that she stopped 20 and encompass trends in the physical characteristics of eating her father’s cookies altogether. a population, such as gender, age, level of education, geographic location, income, family composition, and so forth. Changes in these characteristics may constrain how managers plan, organize, lead, and control. The five largest demographic groups are demonstrated in Exhibit 2-2. TECHNOLOGICAL CONDITIONS  In terms of the general environment, the most

rapid changes have occurred in technology. We live in a time of continuous technological change. Information gadgets are getting smaller and more powerful. We have automated offices, electronic meetings, robotic manufacturing, lasers, integrated circuits, faster and more powerful microprocessors, synthetic fuels, and entirely new models of doing business in an electronic age. Companies that capitalize on technology, such as Apple, eBay, and Google, prosper. In addition, many successful retailers, such as

Exhibit 2-2  Gen X Y Z and the Others SOURCE: Barclays, Talking about My Generation: Exploring the Benefits Engagement Challenge, September 2013, https://wealth.barclays.com/global-stock-

and-rewards/en_gb/home/research-centre/talking-about-my-generation.html. Adapted from Barclays-study092013.pdf

Talking a different language Formative experiences

Maturists (pre–1945)

Baby boomers (1945–1960)

(1961–1980)

Generation X

(1981–1995)

Generation Y

Generation Z

Wartime rationing Rock’n’roll Nuclear families Defined gender roles – particularly for women

Cold War ‘Swinging Sixties’ Moon landings Youth culture Woodstock Family-orientated

Fall of Berlin Wall Reagan/Gorbachev/ Thatcherism Live Aid Early mobile technology Divorce rate rises

9/11 terrorists attacks Social media Invasion of Iraq Reality TV Google Earth

Economic downturn Global warming Mobile devices Cloud computing Wiki-leaks

(Born after 1995)

Attitude toward career

Jobs for life

Organisational careers are defined by employees

“Portfolio” careers loyal to profession, not to employer

Digital entrepreneurs work “with” organisations

Multitaskers – will move seamlessly between organisations and “pop-up” businesses

Signature product

Automobile

Television

Personal computer

Tablet/smartphone

Google glass, 3-D printing

Communication media

Formal letter

Telephone

E-mail and text message

Text or social media

Hand-held communication devices

Preference when making financial decisions

Face-to-face meetings

Face-to-face ideally but increasingly will go online

Online – would prefer face-to-face if time permitting

Face-to-face

Solutions will be digitally crowd-sourced

Chapter 2  Environmental Constraints on Managers 51

Diversity Matters

Gen Y Is Transforming the Hospitality Industry Globalization has impacted hospitality in many positive ways, including exposure to different cultures and markets, and access to advanced technology. It has also led to some negative impacts on developing countries who lack infrastructure and suffer due to the lingering effects of seasonal employment. Serving international customers requires diversity in employees—not only cultural and religious diversity but the unique perspectives brought to a company due to many factors, including work and life experience, age, education, physical abilities, and gender identity. A diverse workforce typically leads to higher productivity and more innovation. Hospitality companies with diverse workforces can also design their service offerings to be more inclusive and reflective of their individual customer’s needs. Nik-Keisha Moodie of Starwood Hotels and Resorts Inc. explains that “the hospitality industry takes pride in creating experiences for each individual guest. Employers want employees who can connect with guests from different backgrounds with different beliefs and expectations.” SOURCE: Gracie Goad, “Diversity in Hospitality: How Gen-Y Is Transforming the Industry,” Talent Egg, retrieved from https://talentegg.ca/incubator/2016/07/05/diversity-hospitality-geny-transforming-industry/.

Walmart, use sophisticated information systems to keep on top of current sales trends. Similarly, hospitals, universities, airports, police departments, and even military organizations that adapt to major technological advances have a competitive edge over those that do not. The whole area of technology is radically changing the fundamental ways that organizations are structured and the way that managers manage. ENVIRONMENTAL CONDITIONS  The environment has become a big-

ger issue in terms of sustainability of raw materials. The triple bottom line approach discussed throughout the text indicates the importance of the environmental bottom line for companies. Reducing the carbon footprint has become a focus for many organizations as they attempt to reduce waste; protect air, water, and land quality; and increase biodegradable and recyclable packaging. The Canadian Association of Petroleum Producers developed a Responsible Canadian Energy program to track greenhouse gas emissions, fresh water usage, and land cleared and reclaimed for mining operations.21 For the oil industry, becoming more environmentally responsible is as much about financial and marketing conditions as it is about the environment. Cleaner extraction methods make oil more marketable in markets with low carbon-fuel standards, such as California.22 LEGAL CONDITIONS  The legal environment is often closely related to the political

environment, because laws and regulations are enacted by politicians. Laws related to employment, health and safety, and product safety can have a major impact on how businesses operate. Federal, provincial, and local governments influence what organizations can and cannot do. Some federal legislation has significant implications. The Canadian Human Rights Act makes it illegal for any employer or service provider falling within federal jurisdiction to discriminate on the following grounds: race, national or ethnic origin, colour, religion, age, sex (including pregnancy and childbirth), marital status, family status, mental or physical disability (including previous or current drug or alcohol dependence), pardoned conviction, or sexual orientation. The Act covers federal departments and agencies, Crown corporations, chartered banks, national airlines, interprovincial communications and telephone companies, interprovincial

52  Chapter 2 transportation companies, and other federally regulated industries, including certain mining operations. Canada’s Employment Equity Act of 1995 protects several categories of employees from employment barriers: Indigenous peoples (whether First Nation, Inuit, or Métis); persons with disabilities; members of visible minorities (non-Caucasian in race or nonwhite in colour); and women. This legislation aims to ensure that members of these four groups are treated equitably. Employers covered by the Canadian Human Rights Act are also covered by the Employment Equity Act.

Understanding the Global Environment 2.2 Describe globalization and discuss how it affects organizations. The global environment presents both opportunities and challenges for managers. With the entire world as a market and national borders becoming increasingly irrelevant, the potential for organizations to grow is expanding dramatically. However, even large successful organizations with talented managers face challenges in managing in the global environment. Managers must deal with cultural, economic, and political differences. Meanwhile, new competitors can suddenly appear at any time from any place on the globe. Managers who make no attempt to learn and adapt to changes in the global environment end up reacting rather than innovating. As a result, their organizations often become uncompetitive and fail.23 Below, we discuss the issues managers have to face in managing in a global environment. What is the global environment like? An important feature is global trade. When trade is allowed to flow freely, countries benefit from economic growth and productivity gains because they produce the goods they are best at producing and import goods that are more efficiently produced elsewhere. Global trade is constantly changing for countries like Canada. In 2018, Canada’s largest trade agreement NAFTA (the North American Free Trade Agreement) was replaced with the USMCA (the United States– Canada–Mexico Agreement). Canada is also part of the Trans-Pacific Partnership (TPP), a group of nine countries comprising the United States, Australia, New Zealand, Singapore, Peru, Vietnam, Malaysia, Brunei, and Chile, which is intending to revolutionize Asian trade relations. Canada joined the TPP in October 2015.24 Canada spent four years negotiating a new free trade agreement with the European Union (EU), which was Canada’s largest trade initiative since NAFTA. The agreement should boost bilateral trade by 20 percent, growing the Canadian economy by $12 billion a year and creating 80 000 new jobs.25 The agreement covers goods and services as well as procurement and provisions on labour and the environment. Canada has also completed eight rounds of negotiation with India, a massive market that currently represents less than 1 percent of Canadian exports.

PESTEL—Global Environment Canadian managers are accustomed to stable legal and political systems. Changes are slow, and legal and political procedures are well established. The stability of laws governing the actions of individuals and institutions allows for accurate predictions. The same cannot be said for all countries. Managers in a global organization must stay informed of the specific laws in countries where they do business. Some countries have a history of unstable governments. Managers of businesses in these countries face dramatically greater uncertainty as a result of political instability or interference. The Chinese government controls what organizations do and how they do it within China’s borders. Google has struggled with determining how to manage its website in China. “Figuring out how to deal with China has been a difficult exercise for Google,” said Elliot Schrage, former vice-president of global

Chapter 2  Environmental Constraints on Managers 53

communications and public affairs at Google. “The requirements of doing business in China include self-censorship—something that runs counter to Google’s most basic values and commitments as a company.”26 The legal and political environments do not have to be unstable or revolutionary to be a concern to managers. Just the fact that a country’s laws and political system differ from those of Canada is important. Managers must recognize these differences to understand the constraints under which they operate and the opportunities that exist. The global manager must also be aware of economic issues when doing business in other countries. Understanding the type of economic system under which the country operates is crucial. The two major types are a market economy and a planned economy. A market economy is one in which resources are primarily owned and controlled by the private sector. A planned economy is one in which all economic decisions are planned by a central government. In actuality, no economy is purely market or planned. Canada and the United States are two countries at the market end of the spectrum, but they do have some governmental control. The economies of Vietnam and North Korea, however, are more plan based. Then there is China, a country that has utilized a planned economy for decades but is moving toward becoming more market based. Why would managers need to know about a country’s economic system? Because it has the potential to constrain decisions and actions. Other economic issues a manager would need to understand include currency exchange rates, inflation rates, and diverse tax policies.

What Does It Mean to Be “Global”? There are three different ways for organizations to be considered “global.” For instance, organizations are considered global if they exchange goods and services with consumers in other countries. Such marketplace globalization is the most common approach to being global. However, many organizations, especially high-tech organizations, are considered global because they use managerial and technical employee talent from other countries. One factor that affects talent globalization is immigration laws and regulations. Managers must be alert to changes in those laws. Finally, an organization can be considered global if it uses financial sources and resources outside its home country, which is known as financial globalization.27 As might be expected, the global economic slowdown severely affected the availability of financial resources globally. And even as countries’ economies began the slow process of recovery, the impact continued to be felt globally.

market economy An economic system in which resources are primarily owned and controlled by the private sector.

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

multinational corporation (MNC) A broad term referring to any and all types of international companies that maintain operations in multiple countries.

multidomestic corporation An international company that decentralizes management and other decisions to the local country.

What Are the Different Types of Global Organizations?

Multinational corporation (MNC):  Any type of international company that maintains operations in ­multiple countries.

“Which product is right for you?” Multidomestic corporation:  An MNC in which management and other decisions are decentralized to the local country in which it is operating. It • relies on local employees to manage the business. • tailors strategies to each country’s unique characteristics. • is used by many consumer product companies.

Lyroky/Alamy Stock Photo

Organizations in different industries and from different countries are pursuing global opportunities. In this section, we look at different types of global organizations and how they do business in the global marketplace.

John Deere’s green-and-yellow tractors are a familiar sight in farm country. Although John Deere once struggled selling its farm equipment overseas, its line of highly customizable products has made the company a ton of profits.

54  Chapter 2 Oleksiy Maksymenko Photography/Alamy Stock Photo

“We don’t want people to think we’re based in any one place.” Transnational (borderless) organization (TNC):  An MNC where artificial geographical boundaries are eliminated. • The country of origin or place where business is conducted becomes irrelevant.

Mouse in the House/Alamy Stock Photo

A sport utility vehicle has changed the way Ford develops and makes cars. Ford’s Escape is made from a common set of components that are used in Ford cars around the world.

A type of international company in which artificial geographical barriers are eliminated.

global corporation An international company that centralizes management and other decisions in the home country.

global sourcing Purchasing materials or labour from around the world, wherever they are cheapest.

“This decision we’re making at headquarters has ­company-wide, worldwide implications.” Global corporation:  An MNC in which management and other decisions are centralized in the home country. •  The world market is treated as an integrated whole. •  The focus is on control and global efficiency.

Sony Corporation’s strengths in product innovation are legendary: the Walkman, the Handycam, the PlayStation. New products are developed and launched globally under the guidance and oversight of corporate headquarters.

transnational (borderless) organization (TNC)

• It increases efficiency and effectiveness in a competitive global marketplace.

How Organizations Go Global

When organizations do go global, they often use different approaches depending on whether they are just starting or have been doing business internationally for a while. (See Exhibit 2-3.) During the initial stages of going global, managers look at ways to get into a global market without having to invest a lot of capital. At this stage, companies may start with global sourcing (also called global outsourcing), which refers to the purchasing of materials or labour from around the world, wherever it is cheapest. The goal is to take advantage of lower costs in order to be more competitive. In 2006, for example, Montreal-based Bell Canada contracted with Sitel India and two other Indian companies to provide technical support and customer care to Canadian customers. Some of that business was pulled back in 2009 due to Canadian customer complaints, but outsourcing call centres globally continues to rise. Recently, the Philippines overtook India as the hub of call centres.28 Although global sourcing is often the first step in going global, many organizations continue to use this approach even as they become more international, because of the competitive

Exhibit 2-3  How Organizations Go Global Minimal Global Investment

• Global Sourcing

Significant Global Investment

• Exporting and Importing • Licensing • Franchising

• Strategic Alliance/ Joint Venture • Foreign Subsidiary

Chapter 2  Environmental Constraints on Managers 55

advantages it offers. Beyond global sourcing, however, each successive stage of becoming more international requires more investment and thus entails more risk for the organization. IMPORTING AND EXPORTING  An organization can go global by exporting its

exporting

products to other countries—that is, by making products at home and selling them overseas. In addition, an organization can go global by importing products—that is, by selling products at home that are made abroad. Both exporting and importing are small steps toward becoming a global business and usually involve minimal investment and minimal risk. Many organizations start doing business globally this way. Many, especially small businesses, continue with exporting or importing as the way they do business globally. For example, Haribhai’s Spice Emporium, a small business in Durban, South Africa, exports spices and rice to customers all over Africa, Europe, and the United States. Montreal-based Mega Brands (now owned by Mattel), with sales in over 100 countries, focuses on exporting. The company holds the number-one position in Canada and Spain, and has a 43 percent share of the UK market.29 The company operates in eight countries, with more than 1000 employees. Mega Brands is only one example of Canada’s increasing reliance on export business. The value of merchandise exported from Canada totalled $484 billion in 2017.30 Of that amount, over 75 percent was exports to the United States. China was the second largest destination for exports, at 4 percent.31 Transportation equipment manufacturing, primary metal manufacturing, and paper manufacturing account for the largest volume of Canadian exports.

An approach to going global that involves making products at home and selling them abroad.

LICENSING AND FRANCHISING  Some managers use licensing or franchising in the early stages of doing business internationally. Licensing and franchising are similar in that they both involve one organization giving another the right to use its brand name, technology, or product specifications in return for a lump-sum payment or a fee that is usually based on sales. The only difference is that licensing is primarily used by manufacturing organizations that make or sell another company’s products, and franchising is commonly used by service organizations that want to use another company’s name and operating methods. For example, Russian consumers can enjoy McDonald’s hamburgers because McDonald’s Canada opened the first Russian franchise in Moscow. Franchises have also made it possible for Mexicans to dine on Richmond, BC–based Boston Pizza food and Koreans to consume frozen yogurt from Markham, Ontario–based Coolbrands’ Yogen Früz. Currently, US franchisors are making Canada a priority for growth. Puroclean, a US property-disaster restoration firm, is aggressively expanding into the Canadian market, and franchises have been performing twice as well as those in the United States.32 Licensing and franchising involve more investment and risk than exporting and importing because the company’s brand is more at stake. STRATEGIC ALLIANCE  Typically, once an organization has been doing business

internationally for some time and has gained experience in international markets, managers may decide to make a more direct investment. One way they can do this is through a strategic alliance—a partnership between two companies in which both share resources and knowledge in developing new products or building production facilities. The partners also share the risks and rewards of this alliance. Finding a partner, however, is not always easy. When Starbucks decided to open coffee shops in France, four major French food companies it approached as possible joint venture partners turned the proposal down. Jean-Paul Brayer, former head of one of the food

importing An approach to going global that involves acquiring products made abroad and selling them at home.

licensing An approach to going global in which a manufacturer gives another organization the right to use its brand name, technology, or product specifications.

franchising An approach to going global in which a service organization gives a person or group the right to sell a product, using specific business methods and practices that are standardized.

strategic alliance An approach to going global that involves a partnership between a domestic and a foreign company in which both share resources and knowledge in developing new products or building production facilities.

Photocritical/Shutterstock

56  Chapter 2

Toys “R” Us Canada became untethered from its bankrupt US parent. Fairfax Financial Holdings, led by billionaire Prem Watsa, paid $300 million for the 82 Canadian stores. That caused organizations like Spin Master to have to alter business strategies in the United States.

joint venture An approach to going global in which the partners agree to form a separate, independent organization for some business purpose; it is a type of strategic alliance.

foreign subsidiary An approach to going global that involves a direct investment in a foreign country by setting up a separate and independent production facility or office.

companies Starbucks approached, commented, “Their contract was way too expensive. It was a win-win situation—but only for Starbucks.”33 Starbucks ended up partnering with a Spanish firm, Grupo VIPS, and together they opened the first Parisian Starbucks in January 2004. A specific type of strategic alliance in which the partners agree to form a separate, independent organization for some business purpose is called a joint venture. Hewlett-Packard (HP) has had numerous joint ventures with various suppliers around the globe to develop different components for its computer equipment, such as Tokyo-based Hitachi, which supplies hard drives for HP. These partnerships provide a faster and more inexpensive way for companies to compete globally than doing it on their own.

FOREIGN SUBSIDIARY  Managers can make a direct investment in a foreign country by setting up a foreign subsidiary, a separate and independent production facility or office. This subsidiary can be managed as an MNC (domestic control) or a TNC, or borderless, organization (foreign or global control). As you can probably guess, this arrangement involves the greatest commitment of resources and poses the greatest amount of risk. Many of the larger companies operating in Canada are actually subsidiaries of US corporations, including GM Canada, Procter & Gamble Canada, and McDonald’s Canada. Canadian subsidiaries manage their operations and set their own targets and goals, but they also report to a head office in the United States.

Tips for Global Managers FXR Racing, a Canadian manufacturer of snowmobile and motocross racing gear, learned a difficult lesson when working with European suppliers. Founder Milt Reimer shares his strategies to avoid getting burned by a foreign distributor:34 • Get references. • Consider all tax implications. • Do not use the same model in all countries. • Create safeguards.

Which Is More Important to a Manager: National Culture or Organizational Culture? national culture The values and attitudes shared by individuals from a specific country that shape their behaviour and beliefs about what is important.

• Geert Hofstede, a professor at Maastricht University in the Netherlands, developed one of the most widely referenced approaches to understanding six key dimensions of national cultures. (See Exhibit 2-4.) • Hofstede indicates that national culture has a greater effect on employees than does their organization’s culture.35 • Imagine Swedish employees at IKEA in Vancouver. The organizational culture will certainly shape the employees, but not nearly as influentially as the Canadian culture.

Chapter 2  Environmental Constraints on Managers 57

Exhibit 2-4  Hofstede’s Six Dimensions Power Distance

Hofstede used the term power distance as a measure of the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally. High power distance—Accepts wide differences in power; has a great deal of respect for those in authority; titles, rank, and status carry a lot of weight. Low power distance—Plays down inequalities; employees are not afraid to approach; nor are they in awe of the boss.

Individualism vs. Collectivism

Individualism is the degree to which people in a country prefer to act as individuals rather than as members of groups. Collectivism is characterized by a social framework in which people prefer to act as members of groups. Individualistic—People look after their own and family interests because of the freedom afforded by society. Collectivistic—People expect the group to look after and protect them.

Masculinity vs. Femininity

The masculinity side of this dimension represents a preference in society for achievement, while the femininity side is more nurturing. Achievement—Values such as assertiveness, acquiring money and goods, and heroism prevail. Society is competitive. Nurturing—Values such as relationships, concern for others, cooperation, and the quality of life prevail. Society is consensus-oriented.

Uncertainty Avoidance

Uncertainty avoidance describes the degree to which people tolerate risk and prefer structured over unstructured ­situations. Since the future is uncertain, should we try to control the future or just let it happen? High uncertainty avoidance—Threatened by ambiguity and experience high levels of anxiety and stress; intolerant of unorthodox ideas. Low uncertainty avoidance—Comfortable with risk; tolerant of different behaviours and opinions.

Pragmatic vs. Normative

This dimension describes how people relate to the fact that so much that happens around us cannot be explained. Normative—In societies with a normative orientation, most people have a strong desire to explain as much as possible. People in such societies have a strong concern with establishing the absolute truth and a need for personal stability. They exhibit great respect for social conventions and traditions, a relatively small propensity to save for the future, and a focus on achieving quick results. Pragmatic—In societies with a pragmatic orientation, most people do not have a need to explain everything, as they believe that it is impossible to understand fully the complexity of life. The challenge is not to know the truth but to live a virtuous life. In societies with a pragmatic orientation, people believe that truth depends very much on situation, ­context, and time. They show an ability to accept contradictions, adapt according to the circumstances, show a strong propensity to save and invest, and demonstrate thriftiness and perseverance in achieving results.

Indulgence vs. Restraint

Indulgence in society refers to willingness to have fun and enjoy life, while restraint refers to suppression of the ­gratification of needs through social norms. Indulgent—People look to the future and value gratification and freedom of expression. Restrained—People value tradition and the past and are comfortable suppressing their needs.

The ratings in each of the six dimensions for Canada, the United States, and China are illustrated in Exhibit 2-5. Hofstede’s findings may help your future interactions. As you appreciate different cultural perspectives, your interactions will improve and you will face less conflict. Hey, You’re the Boss Now! (at the end of the chapter) encourages you to think about how to become more comfortable when interacting with people from different cultures.

Organizational Culture 2.3 Define what organizational culture is, and explain why it is important. Organizational culture is a system of shared meaning and beliefs held by organizational members that determines, in large degree, how they act. It represents a common perception held by an organization’s members that influences how they behave. In every organization, there are values, symbols, rituals, myths, and practices that have evolved over time.36 These shared values and experiences mainly determine what employees perceive and how they respond to their world.37 When faced with problems or issues, the organizational culture—the way we do things around

organizational culture A system of shared values, norms, and beliefs held by organization members that determines, in large degree, how employees act.

58  Chapter 2

Exhibit 2-5  Hofstede’s 6-D Model SOURCE: Based on Intercultural Management Courses, Retrieved from http://geerthofstede.com/interculturalmanagement-courses.html

39 40

Power Distance

80 80 91

Individualism 20 52

Masculinity/ Femininity

Canada

62 66

US

48 46

Uncertainty Avoidance

China

30 36

Pragmatism

26 87 68 68

Indulgence 24 0

10

20

30

40

50

60

70

80

90

100

here—influences what employees can do and how they conceptualize, define, analyze, and resolve issues. Our definition of organizational culture implies three things: • Culture is perceived. It’s not something that can be physically touched or seen, but employees perceive it on the basis of what they experience within the organization. • Culture is shared. Even though individuals may have different backgrounds or work at different organizational levels, they tend to describe the organization’s culture in similar terms. • Culture is descriptive. It’s concerned with how members perceive or describe the culture, not with whether they like it. Research suggests there are seven dimensions that capture the essence of an organization’s culture.38 These dimensions are described in Exhibit 2-6. Each dimension ranges from low (not very typical of the culture) to high (very typical of the culture). Appraising an organization on these seven dimensions gives a composite picture of the organization’s culture. In many organizations, one of these cultural dimensions is often emphasized more than the others and essentially shapes the organization’s personality and the way organization members work. For example, at Sony Corporation the focus is on product innovation. The company “lives and breathes” new-product development (outcome orientation), and employees’ work decisions, behaviours, and actions support that goal. In contrast, WestJet Airlines has made its employees a central part of its culture (people orientation). However, its admission of engaging in corporate espionage against Air Canada may cause employees to question WestJet’s corporate values. When Onex purchased WestJet in 2019, it clearly felt the strong culture was an appealing asset.

Chapter 2  Environmental Constraints on Managers 59

Exhibit 2-6  Dimensions of Organizational Culture Degree to which employees are expected to exhibit precision, analysis, and attention to detail

Degree to which employees are encouraged to be innovative and to take risks

Attention to Detail Innovation and Risk-Taking

Outcome Orientation Organizational Culture

Stability

Degree to which organizational decisions and actions emphasize maintaining the status quo

Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved

Aggressiveness

Degree to which employees are aggressive and competitive rather than cooperative

People Orientation Degree to which management decisions take into account the effects on people in the organization

Team Orientation

Degree to which work is organized around teams rather than individuals

Here is a common myth about organizational culture:   It

doesn’t matter what an organization’s culture is like. I can be happy working anywhere.

MANAGEMENT MYTH DEBUNKED Anyone who thinks they can be happy working in any type of organizational setting might be in for a big surprise! Even working at a company rated as “a best company to work for” won’t be for everyone. To be happy, don’t just “settle” for a job . . . find a workplace and a culture that “fit” you! For full details on this management myth, check out our Bust the Myth video in Revel.

Strong Versus Weak Cultures Although all organizations have cultures, not all cultures have an equal impact on employees’ behaviours and actions. Strong cultures—cultures in which the key values are deeply held and widely shared—have a greater influence on employees than do weak cultures. The more employees accept the organization’s key values and the greater their commitment to those values, the stronger the culture is. Whether an organization’s culture is strong, weak, or somewhere in between depends on factors such as the size of the organization, how long it has been around, how much turnover there has been among employees, and the intensity with which the culture began. Some organizations do not make clear what is important and what is not. This lack of clarity is a characteristic of weak cultures. In such organizations, culture is unlikely to greatly influence managers. Most organizations, however, have moderate to strong cultures. There is relatively high agreement on what is important,

strong cultures Organizational cultures in which the key values are deeply held and widely shared.

Uladzik Kryhin/Shutterstock

60  Chapter 2 what defines “good” employee behaviour, what it takes to get ahead, and so forth. Tips for Managers—Creating a More Ethical Culture provides some suggestions for managers who want to build and maintain a more ethical culture in the workplace. A growing body of evidence suggests that strong cultures are associated with high organizational performance.39 It is easy to understand why a strong culture enhances performance. After all, when values are clear and widely accepted, employees know what they are supposed to do and what is expected of them. They are able to act quickly to take care of problems, preventing any potential performance decline. However, the drawback Google’s company culture is synonymous with employee engagement, and is is that the same strong culture might prevent constantly innovating and experimenting with its culture. Google has very high employees from trying new approaches, espeemployee satisfaction and a 4.4/5 rating on Glassdoor. cially during periods of rapid change.40 Strong cultures do not always yield positive results.41 Enron had a very strong and unethical culture. It enabled employees and top management to engage in unethical behaviour that was concealed from public scrutiny.

How Can Culture Be Described? Where Does Culture Come From?

How Do Employees Learn the Culture?

Usually reflects the vision or mission of founders.

Organizational stories: narrative tales of significant events or people.

Founders project an image of what the organization should be and what its values are.

Corporate rituals: repetitive sequences of activities that express and reinforce important organizational values and goals.

Founders can “impose” their vision on employees because of new organization’s small size.

Material symbols or artifacts: layout of facilities, how employees dress, size of offices, material perks provided to executives, furnishings, and so forth.

Organizational members create a shared history that binds them into a community and reminds them of “who we are.”

Language: special acronyms; unique terms to describe equipment, key personnel, customers, suppliers, processes, products.

Developing an Organization’s Culture An organization’s culture is derived from the founders’ philosophy. The culture, in turn, strongly influences the selection criteria used to hire new employees. Clan control requires careful selection and socialization of employees who will support

Tips 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 behaviour without fear.

Chapter 2  Environmental Constraints on Managers 61

Exhibit 2-7  Managerial Decisions Affected by Organizational Culture Planning The degree of risk that plans should contain Culture

Whether plans should be developed by individuals or teams The degree of environmental scanning in which management will engage

Leading

Culture

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

Controlling

The degree to which managers are concerned with increasing employee job satisfaction

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

What leadership styles are appropriate

What criteria should be emphasized in employee performance evaluations

Whether all disagreements— even constructive ones— should be eliminated

Culture

Culture

What repercussions will occur from exceeding one’s budget

the organization’s culture, both of which include making sure to manage diversity in the workforce. The actions of the current top managers set the general expectations as to what is acceptable behaviour and what is not. Through the socialization process, new employees learn the organization’s way of doing things. If socialization is successful, new employees will learn the values of the organization and behave accordingly, and the organization’s culture will be preserved. HOW CULTURE AFFECTS MANAGERS  An organization’s culture does more than

influence employee behaviour; it also constrains a manager’s decision-making options in all management functions. Exhibit 2-7 shows the major areas of a manager’s job that are affected by the culture in which he or she operates.

A Question of Ethics Ever heard of Waze? It’s an extremely popular mobile traffic software app by Google that provides real-time traffic guidance and warnings about traffic congestion, construction zones, speed traps, stalled vehicles, unsafe weather conditions, etc. However, there’s one feature that has law enforcement officers across North America very worried.42 Police are pleading with Google to turn off the feature that warns drivers when police are nearby, fearing that making their location known is an officer-safety threat and possibly even a public-safety threat. Although there are no known connections between any attacks on police and the use of Waze, law enforcement associations are concerned that it’s only a matter of time before a would-be terrorist or cop

killer uses the app to find where a police officer target is parked. A Waze spokesperson said that the company is very conscious of safety and security concerns and has worked with the police departments and others by sharing information.

Discussion Questions 1. Is there an ethical issue here? Why or why not? 2. What stakeholders might have a vested interest in this issue, and what do you think their position might be? How can identifying stakeholders help a manager decide the most responsible approach?

62  Chapter 2

How the Environment Affects Managers 2.4 Explain how the environment affects managers. Knowing what the various components of the environment are is important to managers. However, understanding how the environment affects managers is equally important. The environment affects managers through the degree of environmental uncertainty that is present, through the various stakeholder relationships that exist between the organization and its external constituencies, and through the challenges of managing in a global environment.

Assessing Environmental Uncertainty

Shutterstock

Not all environments are the same. They differ by what we call their degree of ­environmental uncertainty, which can be defined as the degree of change and complexity in an organization’s environment. (See Exhibit 2-8.) The first dimension is the degree of change. If components in an organization’s environment change frequently, we call it a dynamic environment. If change is minimal, we call it a stable one. A stable environment might be one in which there are no Zippo, founded in 1932, recently celebrated its 500 millionth new competitors, few technological breakthroughs by current lighter produced. competitors, little activity by pressure groups to influence the environmental uncertainty organization, and so forth. Zippo Canada, best known for its Zippo lighters, enjoys The degree of change and the a relatively stable environment, with few competitors and little technological change. degree of complexity in an The main environmental concern for the company is the declining trend in tobacco organization’s environment. smokers, although the company’s lighters have other uses and global markets remain attractive. In contrast, the recorded music industry faces a dynamic (highly uncertain and unpredictable) environment. Digital formats, apps, music-streaming sites,

Exhibit 2-8  Environmental Uncertainty Matrix Degree of Change

Simple

Degree of Complexity

Dynamic

Stable and predictable environment Few components in environment Components are somewhat similar and remain basically the same Minimal need for sophisticated knowledge of components

Dynamic and unpredictable environment Few components in environment Components are somewhat similar but are in continual process of change Minimal need for sophisticated knowledge of components

Complex

Stable

Stable and predictable environment Many components in environment Components are not similar to one another and remain basically the same High need for sophisticated knowledge of components

Dynamic and unpredictable environment Many components in environment Components are not similar to one another and are in continual process of change High need for sophisticated knowledge of components

Chapter 2  Environmental Constraints on Managers 63

and artists releasing selected songs on their personal social media accounts have turned the industry upside down and brought high levels of uncertainty. The second dimension of uncertainty describes the degree of environmental ­complexity. Degree of complexity refers to the number of components in an organization’s environment and the extent of the knowledge the organization has about those components. For example, Hasbro, the world’s second largest toy manufacturer (behind Mattel), has simplified its environment by acquiring many of its competitors, such as Tiger Electronics, Wizards of the Coast, Kenner Toys, Parker Brothers, and Tonka Toys. The fewer competitors, customers, suppliers, government agencies, and so forth that an organization must deal with, the less complexity and, therefore, the less uncertainty in its environment. Complexity is also measured in terms of the knowledge an organization needs to have about its environment. For example, managers at the online brokerage E*TRADE must know a great deal about their Internet service provider’s operations if they want to ensure that their website is available, reliable, and secure for their stock-trading customers. On the other hand, managers of grocery stores have a minimal need for sophisticated knowledge about their suppliers. How does the concept of environmental uncertainty influence managers? Looking again at Exhibit 2-8, each of the four cells represents different combinations of degree of complexity and degree of change. Cell 1 (an environment that is stable and simple) represents the lowest level of environmental uncertainty. Cell 4 (an environment that is dynamic and complex) represents the highest. Not surprisingly, managers’ influence on organizational outcomes is greatest in cell 1 and least in cell 4. Because uncertainty is a threat to an organization’s effectiveness, managers try to minimize it. Given a choice, managers would prefer to operate in environments such as those in cell 1. However, they rarely have full control over that choice. Most industries today are facing greater dynamic change, making their environments more uncertain. Thus, managers, as planners, need to consider the environment they currently face, as well as thinking ahead about possible changes in the environment, and act accordingly. In a simple, stable environment, a manager may decide to continue doing things in the usual way. In a dynamic, complex environment, a manager may want to establish plans to keep the organization ahead of competitors or develop new niches in which to operate.

environmental complexity The number of components in an organization’s environment and the extent of the organization’s knowledge about those components.

Chapter Summary Learning Objectives Checklist 2.1 Explain what the external environment is and why it is important. The external environment plays a major role in shaping managers’ actions. In the specific environment, managers have to be responsive to customers and suppliers while being aware of competitors and public pressure groups. As well, political, economic, sociocultural, technological, environmental, and legal conditions in the general environment affect the issues managers face in doing their job. Spin Master sold a lot of their toys in the US market. When Toys “R” Us closed their US stores, Spin Master needed to look at other markets such as Europe and Asia for their exports.

2.2 Describe globalization, and discuss how it affects organizations. Organizations are considered global if they exchange goods and services with consumers in other countries, if they use managerial and technical employee talent from other countries, or if they use financial sources and resources outside their home country. Businesses going global are usually referred to as multinational corporations (MNCs). As an MNC, they may operate as a multidomestic corporation, a global corporation, or a transnational, or borderless, organization. When a business goes global, it may start with global sourcing, move to exporting or importing, use

64  Chapter 2 l­icensing or franchising, pursue a global strategic alliance, or set up a foreign subsidiary. In doing business globally, managers need to be aware of different laws and political and economic systems. But the biggest challenge is in understanding the different country cultures. A ­cross-cultural framework that managers can use is Hofstede’s.

today’s global environment requires incredible sensitivity and understanding. Canadian managers may have some advantages over their American counterparts in doing business internationally, because American companies are sometimes viewed as trying to impose American culture on foreign countries.

2.3 Define what organizational culture is and explain

Discussion Questions

why it is important. Organizational culture is the shared values, principles, traditions, and ways of doing things that influence the way organizational members act. It’s important because of the impact it has on decisions, behaviours, and actions of organizational employees.

2.4 Explain how the environment affects managers. Because environments can change, sometimes even unexpectedly, managers have to be aware of the degree of environmental uncertainty they face. They also have to be aware of the complexity of their environment. Managers need to manage relationships with their stakeholders—­individuals who are influenced by and have an influence on the organization’s decisions and actions. Successfully managing in

1. Describe the components of the specific and general environments. 2. Contrast multinational corporations, multidomestic corporations, global companies, and transnational, or borderless organizations. 3. How is an organization’s culture formed and sustained? 4. Is organizational culture an asset or a liability? Explain. 5. Compare the advantages and disadvantages of the various approaches to going global. 6. What challenges might confront a Mexican manager transferred to Canada to manage a manufacturing plant in Winnipeg? Will these be the same for a Canadian manager transferred to Guadalajara, Mexico? Explain.

Developing Management Skills Dilemma You are considering organizing an event to raise funds for a special cause (children living in poverty, breast cancer research, illiteracy, or another cause of your choice). Think about who you might invite to this event (that is, your “customers”—those who will buy tickets to the event). What type of event might appeal to them? What suppliers might you approach for help in organizing the event? What legal issues might you face in setting up this event? After considering all these specific environmental forces, describe the challenges you could face in holding this event.

Becoming a Manager • Familiarize yourself with current global political, economic, and cultural issues. • If given the opportunity, try to have your class projects or reports (in this class and other classes) cover global issues or global companies. • Talk to instructors or students from other countries and ask them what the business world is like in their countries.

• When you evaluate companies for class assignments (for this class and others you may be enrolled in), make a habit of looking at the stakeholders that might be affected by these companies’ decisions and actions.

    Hey, You’re the Boss Now! Workplaces around the world are becoming increasingly diverse. Thus, new managers need to recognize that not all employees want the same thing, act in the same manner, and can be managed in the same way. What is a diverse workforce? It is one that is heterogeneous in terms of gender, race, ethnicity, age, and other characteristics that reflect differences. Valuing diversity and helping a diverse workforce achieve its maximum potential are becoming indispensable skills for more and more managers. The diversity issues an individual manager might face are many. They could include communicating with employees whose familiarity with the language might be limited; creating career development programs that fit the skills, needs, and values of a variety of employees; helping a diverse team cope with a conflict over goals or work

Chapter 2  Environmental Constraints on Managers 65

assignments; or learning which rewards are valued by different groups of employees. You can improve your handling of diversity issues by following these eight behaviours:43 1. Fully accept diversity. Successfully valuing diversity starts with each individual accepting the principle of multiculturalism. Accept the value of diversity for its own sake—not simply because you have to. Accepting and valuing diversity is important because it is the right thing to do. And it is important that you reflect your acceptance in all you say and do. 2. Recruit broadly. When you have job openings, work to get a diverse applicant pool. Although referrals from current employees can be a good source of applicants, they tend to produce candidates similar to the current workforce. 3. Select fairly. Make sure that the selection process does not discriminate. One suggestion is to use ­job-specific tests rather than general aptitude or knowledge tests. Such tests measure specific skills, not subjective characteristics. 4. Provide orientation and training for minorities. Making the transition from outsider to insider can be particularly difficult for an employee who belongs to a minority group. Provide support either through a group or through a mentoring arrangement. 5. Sensitize nonminorities. Not only do you personally need to accept and value diversity but as a manager you need to encourage all your employees to do so. Many organizations do this through diversity training programs, in which employees examine the cultural norms of different groups. The most important thing a manager can do is show by his or her actions that diversity is valued. 6. Strive to be flexible. Part of valuing diversity is recognizing that different groups have different needs and values. Be flexible in accommodating employees’ requests. 7. Seek to motivate individually. Motivating employees is an important skill for any manager; motivating a diverse workforce has its own special challenges. Managers must be more in tune with the background, cultures, and values of employees. What motivates a single mother with two young children who is working full-time to support her family is likely to be different from the needs of a young, single, part-time employee or an older employee who is working to supplement his or her retirement income. 8. Reinforce employee differences. Encourage individuals to embrace and value diverse views. Create traditions and ceremonies that promote diversity. Celebrate diversity by accentuating its positive aspects. However, be prepared to deal with the

challenges of diversity, such as mistrust, miscommunication, lack of cohesiveness, attitudinal differences, and stress. Be aware of differences in the Hofstede’s six dimensions of national cultures.

Questions 1. UK-based company Commisceo has several cultural awareness “quizzes” on its website (https://www. commisceo-global.com/resources/quizzes/culturalawareness-quizzes?view=qcategory). Go to the company’s website and try two or three of these quizzes. Were you surprised at your results? 2. What advice might you give to a supervisor who has little experience working with people from other countries?

    3BL: The Triple Bottom Line CAN TECHNOLOGY IMPROVE THE WAY MANAGERS MANAGE? Continuing advancements in technology offer many exciting possibilities for how workers work and managers manage. Technology includes any equipment, tools, or operating methods that are designed to make work more efficient. One area in which technology has had an impact is in the process by which inputs (labour, raw materials, and the like) are transformed into outputs (goods and services to be sold). In years past, this transformation was usually performed by human labour. With technology, however, human labour has been replaced with electronic and computer equipment. Whether through robots in offices, online banking systems, or social networks where employees interact with customers, technology has made the work of creating and delivering goods and services more efficient and effective. Another area in which technology has had a major impact is in information. Information technology (IT) has created the ability to circumvent the physical confines of working only in a specified organizational location. With notebook and desktop computers, tablets, smartphones, organizational intranets, and other IT tools, organizational members who work mainly with information can do that work from any place at any time. Finally, technology is also changing the way managers manage, especially in terms of how they interact with employees who may be working anywhere and anytime. Effectively communicating with telecommuting individuals who may simply be working from home or who may be working halfway around the world and ensuring that work goals are being met are challenges that managers must address. Throughout the rest of the book, we’ll look at how managers are meeting those challenges in the ways they plan, organize, lead, and control.

66  Chapter 2 THINKING STRATEGICALLY ABOUT 3BL 1. What are the 3BL implications for the Internet of Things? 2. Is management easier or harder with all the available technology? Explain your position.

3. What benefits does technology provide, and what problems does technology pose for (a) employees and (b) managers?

Team Exercises Be the Consultant: Understanding Culture An organization’s culture is a system of shared meaning. When you understand your organization’s culture, you know, for example, whether it encourages teamwork, rewards innovation, or stifles initiative. When interviewing for a job, the more accurate you are at assessing the culture, the more likely you are to find a good p ­ erson-organization fit. And once inside an organization, understanding the culture allows you to know what behaviours are likely to be rewarded and which are likely to be punished.44 Organizational cultures differ. So do individuals. The better you’re able to match your personal preferences to an organization’s culture, the more likely you are to find satisfaction in your work, the less likely you are to leave, and the greater the probability that you’ll receive positive performance evaluations. The ability to read an organization’s culture can be a valuable skill. For instance, if you’re looking for a job, you’ll want to choose an employer whose culture is compatible with your values and in which you’ll feel comfortable. If you can accurately assess a potential employer’s culture before you make your job decision, you may be able to save yourself a lot of grief and reduce the likelihood of making a poor choice. Similarly, you’ll undoubtedly have business transactions with numerous organizations during your professional career, such as selling a product or service, negotiating a contract, arranging a joint work project, or merely seeking out who controls certain decisions in an organization. The ability to assess another organization’s culture can be a definite plus in successfully performing those pursuits. In teams of three or four people, pick an organization and try to find out the following about its culture: 1. Social media background work. Do you share any contacts on LinkedIn? Do they have a Facebook page? Look for clues in stories told on social media, in annual reports, and in other organizational literature. Does it sound like a place you would like to work? 2. Observe the physical clues. Find pictures of their office space online. Pay attention to signs, posters, pictures, style of dress, and office furnishings and arrangements. What do they tell you about the company?

3. How would you characterize the organization’s style of communication? Read some of the content on their website and on Twitter. Is it formal? Casual? Serious? Funny? What do you think this means for people that work with this organization?

Assessing Employees’ Global ­Aptitudes Moving to a foreign country is not easy, no matter how many times you have done it or how receptive you are to new experiences. Successful global organizations are able to identify the best candidates for global assignments, and one of the ways they do this is through individual assessments prior to assigning people to global facilities. Form groups of three to five individuals. Your newly formed team, the Global Assignment Task Force, has been given the responsibility for developing a global aptitude assessment form for Zara, the successful European clothing retailer.45 Although the company is not well known in North America, Zara’s managers have positioned the company for continued global success. Their success is based on a simple principle—in fashion, nothing is as important as time to market. Zara’s store managers (more than 600 worldwide) offer suggestions every day on cuts, fabrics, and even new lines. After reviewing the ideas, a team at headquarters in La Coruna, Spain, decides what to make. Designers draw up the ideas and send them over the company’s intranet to nearby factories. Within days, the cutting, dyeing, sewing, and assembling start. In three weeks, the clothes will be in stores as far away as Barcelona, Berlin, and Buenos Aires. That is 12 times faster than its competitors. Zara has a twice-a-week delivery schedule that restocks old styles and brings in new designs. Competitors tend to get new designs once or twice a season. Because Zara is expanding its global operations significantly, management wants to make sure they are sending the best possible people to the various global locations. Your team’s assignment is to come up with a rough draft of a form to assess people’s global aptitudes. Think about the characteristics, skills, attitudes, and so on that you think a successful global employee would need. Your team’s draft should be at least a half page but not longer than one page. Be prepared to present your ideas to your classmates and instructor.

Chapter 2  Environmental Constraints on Managers 67

Business Cases Joe Fresh Joe Fresh was founded in 2006 as one of Canada’s premiere sources for modern style and accessible design collections for men, women, and children. Joe Fresh products are available in over 340 Loblaw Companies Ltd. stores in Canada, as well in 650 JCPenney stores in the United States. Pioneered by one of Canada’s leading fashion moguls, Joe Mimran, Joe Fresh signed three partnership agreements in 2014 that brought the brand into 23 new countries. The agreements represented the first expansion beyond North America into key growth markets in the Middle East, North Africa, Europe, and South Korea.46 With the backing of grocery giant Loblaw, the discount clothing line is on pace to meet its goal of 141 new Joe Fresh stores in 23 countries over four years. “This is representative of what has been a long-standing belief on our part that there is an international level of opportunity for the Joe Fresh brand,” said Galen G. Weston, Loblaw’s executive chairman.47 Going global for Joe Fresh meant partnering with companies that had integral knowledge and expertise of the local retail dynamics and consumer preferences.48 When Joe Fresh entered the United States, it chose to stay away from the large capital cost of opening stand-alone stores and entered into a supply arrangement with JCPenney. Weston said the deal hasn’t gone according to plan due to restructuring and leadership changes at the struggling US retailer.49 So instead of putting clothing in existing stores, the global strategy is a partnership to build new stores and leverage local expertise from companies such as Fawaz A. Alhokair & Co. and Retail Arabia International. Joe Fresh’s “extreme pricing” is one of its selling points, but in 2013 that approach was brought into question with the collapse of a factory in Dhaka, Bangladesh, killing 1100 people.50 Called the worst disaster in the history of the garment industry, the tragedy spurred Loblaw to join fellow retailers Sears Canada and Walmart Canada at an emergency meeting of the Retail Council of Canada to make plans to improve working conditions in sweatshops.51 These types of tragedies typically bring enormous pressure on retailers to investigate the rights of Third World factory workers. In these countries, rampant corruption exists at every level, where garment factories are policed by thugs who threaten workers who do not want to enter unsafe premises or who try to leave before working 13- or 14-hour shifts, typically seven days a week.52 Loblaw provided compensation for the families of victims as well as aid and resources to the neighbourhood of Savar, where the collapse took place. Senior Loblaw executives met with local officials to discuss “finding an approach

that ensures safe working conditions, drives lasting change in the industry and [helps prevent] other tragedies,” the company said in a press release.53 Queen’s University marketing professor Tandy Thomas said Loblaw has the power to ensure working conditions are up to a certain standard by saying, “You’re not gonna get our business unless you do things correctly.”54 This type of economic pressure is effective in eliciting a faster response than waiting for local governments to make changes. The typical consumer reaction to this sort of incident, Thomas said, is usually boycotting, but she felt Loblaw was doing the things it should be doing to make it right. Rather than using a PR firm to boost its image, Loblaw is working at a local level to prevent these tragedies from happening in the future. Thomas said consumers will take notice of the mistake and the response of Joe Fresh. Thomas believes consumers will forgive, “and, in many cases, they come back with a stronger level of loyalty because they know they can trust the company to do the right thing again in the future.”55

Discussion Questions 1. Who is to judge what is morally correct for companies operating in the global marketplace? 2. Joe Fresh continues to manufacture clothing in Bangladesh. Do you believe this is ethical behaviour?

Not Sold Out Competitors in the movie theatre industry had hoped that they were through the challenges they’d faced during the economic downturn. Ticket sales revenue has been declining: From 2012 to 2015 it fell 10 percent.56 The numbers of people going to see a movie continue to stall. So the industry has tried to pump up revenue with high-profile movies, higher ticket prices, and premium amenities. What will get customers into movie theatres? The number of movie screens in Canada totals 2600 (compared to 40 000 in the United States).57 Canadians reported going to movie theatres less often than in the past. The overall change was a reduction of 18 percent, with 28 percent reporting going less and 10 percent reporting going more.58 One important factor, according to industry analysts, is the uncertainty over how people want their movies delivered, which is largely a trade-off between convenience and quality (or what the experts call fidelity experience). Will consumers choose convenience over quality and use mobile devices such as iPads? Will they trade some quality for convenience and watch at home,

68  Chapter 2

Exhibit 2-9 SOURCE: Telefilm Canada, “Audiences in Canada: Trend Report,” 2017, pg. 5,

retrieved from https://telefilm.c a/wp-content/uploads/audiences-in-canadatrend-report.pdf

Portion of Film Viewing That Occurs at the Movie Theatre 25 21 20 Percentage

18 15

15

14

10

5

ye 55 ar s1

ye 35 ar –54 -o ld s

ye 18 ar –34 -o ld s

0

ye 15 ar –17 -o ld s

using streaming services on surround-sound, flat-screen, high-definition home theatre systems? Or will they go to a movie theatre with wide screens, high-quality sound systems, and the social experience of being with other moviegoers and enjoy the highest-fidelity experience— even with the inconveniences? Movie theatre managers believe that mobile devices aren’t much of a threat, even though they may be convenient. On the other hand, home theatre systems may be more of a threat as they’ve become extremely affordable and have “acceptable” quality. Although not likely to replace any of these higher-quality offerings, drive-in theatres, analysts note, are experiencing a resurgence, especially in geographic locations where they can be open year-round. The movie theatre chains are also battling IMAX Corporation for customers as movie screens get bigger and bigger. The number of these oversized screens built by the five largest theatre companies has grown to the point where it almost equals the number of IMAX locations. The movie theatre chains have invested in these formats because it can add several extra dollars to the ticket price, resulting in increased revenues. Another factor that managers need to wrestle with is the impression consumers have of the movie-going experience. Canadian data listed the main reasons for going less often to movie theatres: cost, a preference for watching movies at home, and a perception that there aren’t enough movies that need to be seen on the big screen.59 A final question facing the movie theatre industry and the major film studios is how to be proactive in avoiding the problems that the recorded music industry faced with the illegal downloading of songs. The amount of entertainment streamed online (which includes both music and video) continues to experience double-digit growth. The biggest threat so far has been YouTube, which has become a powerful force in the media world with owner Google’s backing. But now Amazon, Netflix, and other competitors are flexing their movie muscles as well. To counter that threat, industry executives have asked for filtering mechanisms to keep unlawful material off these sites and to develop some type of licensing arrangements whereby the industry has some protection over its copyrighted film content. Given these factors, what are the movie theatre chains doing? They’re finding ways to make the movie-going experience something special by providing expensive presentation formats that can’t be replicated or accessed in the home, comfortable surroundings (think reclining seats and blankets plus gourmet food brought to you), valet parking, babysitting, beefed-up concession stands, and so forth. These are just some of the ways that movie theatres are working to keep their seats filled.

Discussion Questions 1. Using Exhibit 2-9, what external components might be most important for managers in movie theatre chains to know about? Why? 2. According to the case, what external trends do managers at the movie theatre chains have to deal with? 3. How do you think these trends might constrain decisions made by managers at the movie theatre chains? 4. What stakeholders do you think might be most important to movie theatre chains? What interests might these stakeholders have?

Miovision Technologies Inc. (­Internet of Things) Kitchener, Ontario–based Miovision Technologies Inc. is a leader in the Internet of Things (IoT) market in Canada. Known as a “smart” traffic company, they are helping cities modernize infrastructure and develop data networks to improve the lives of residents. Smart cities are driven by data, and Miovision’s mission is to use connected networks and devices to allow cities to access data and build “smart city” applications.60 The Internet of Things (IoT) is the growing network of physical objects that are connected to the Internet, enabling them to collect data, communicate with other networked objects and change their behaviour in real time. Cisco estimated that there were 4.9 billion such machine-to-machine

Chapter 2  Environmental Constraints on Managers 69

connections in 2015 and that this number will grow to 12.2 billion in 2020.61 One of Miovision’s devices, Spectrum, creates identifiers for different vehicles on the road, which can be analyzed in real time to optimize traffic flow. The company’s solutions have been adopted by nearly 650 customers in 50 countries. What started as a traffic solution company has grown through innovation to giving cities control of data that allows them to enhance their operations and improve the lives of their residents, such as the reduction of commuting times and the enhanced safety of cyclists and pedestrians. Miovision’s technology uses open data architecture: transparent, nonproprietary data collection and storage. Cities no longer rely on traditional analogue machines for urban planning, since they have access to digital data.62 In 2018, Miovision raised $15 million in investments to expand its smart intersection products, which feature video

data collection powered by artificial intelligence. Their technology measures traffic flows and allows adjustments to traffic signals, such as when emergency vehicles need to get through. Historically, the city needed hardware in the emergency vehicles and the intersection, but with Miovision it’s all software-enabled. These smart program can be crucial: “If you can knock a minute off a response time for a fire truck, it makes the difference between a kitchen fire and a house fire.”63

Discussion Questions 1. What other applications are there for cities using Miovision’s smart intersection products? 2. The growth in the Internet of Things market is partially due to mobile phones. How can mobile phones be used with Miovision’s smart intersection products?

Chapter 3

Circlephoto/Shutterstock

Decision Making

Learning Objectives 3.1 Describe the steps in the decision-making process. 3.2 Define the factors that affect how decisions are made. 3.3 Discuss contemporary issues in managerial decision making. 3.4 Describe how ethics and social responsibility relate to decision

making. Green investments, also known as socially responsible investing (SRI), reached the $10 trillion mark in 2018 thanks to investments in renewable energy, green construction, cleantech startup funding, energy efficiency, and peer-to-peer lending.1 In Canada, exchange-traded funds (ETF) are very popular for socially responsible investing focusing on companies with low carbon emissions and other themes, such as gender diversity.2 Mary Hagerman, a portfolio manager with Desjardins Wealth Management in Montreal, said the new ETFs will help her respond to rising demand from clients for SRI investing. “These funds make it a lot easier to build robust portfolios,” she said.3 The Canadian stock market’s first socially responsible ETF was introduced in 2007. A new entry is the Horizons Global Sustainability Leaders Index ETF (ETHI), which started trading in November 2018 and holds the shares of large global companies that score well in reducing carbon emissions and are not involved in businesses such as tobacco, guns, animal cruelty, and gambling.4 Making good decisions is something that every manager strives to do, since the overall quality of managerial decisions has a major influence on organizational success or failure. In this chapter, we examine the concept of decision making and how managers can make ethical decisions. But we will also consider some common biases and errors that can undermine the quality of decisions and will discuss contemporary issues facing managerial decision makers.

70

Chapter 3  Decision Making 71

Here is a common myth about decision making:

  A good decision should be defined by its outcome. MANAGEMENT MYTH DEBUNKED A good decision should be judged by the process used, not the results achieved. In some cases, a good decision results in an undesirable outcome. As a decision maker, you can control the process. But in the real world, factors outside your control can adversely affect the outcome. Using the right process may not always result in a desirable outcome, but it increases the probability! For full details on this management myth, check out our Bust the Myth video in Revel.

The Decision-Making Process 3.1 Describe the steps in the decision-making process. While watching a sports competition, have you ever felt that you could make better decisions than the coaches on the field or court? In the Helsinki, Finland, suburb of Pukinmäki, the fans of PK-35, an amateur soccer team, get that chance!5 The coach does not make decisions about what to do on the field by himself but instead relies on 300 fans who text their instructions via their cellphones. Each week the coach posts between three and ten questions about training, team selection, and game tactics to the fans. They have three minutes to respond via cellphone text messaging, and they receive immediate feedback on what others think. Does shared decision making work? During the first season of the experiment, the team won first place in its division and was promoted to the next higher division. Although we are unlikely to see this type of wireless interactive decision making in organizations any time soon, it does illustrate that decisions, and maybe even how they are made, play a role in performance. Individuals must continually make decisions. Although decision making is typically described as “choosing among alternatives,” that view is simplistic. Why? Because decision making is a comprehensive process, not just a simple act of choosing among alternatives.6 Even for something as straightforward as deciding where to go for lunch, you do more than just choose burgers or pizza. You may consider various restaurants, how you will get there, who might go with you. Granted, you may not spend a lot of time contemplating a lunch decision, but you still go through a process when making that decision. What does the decision-making process involve? Exhibit 3-1 illustrates the decision-making process, a set of eight steps that begins with identifying a problem, the decision criteria, and the weights for those criteria; moves to developing, analyzing, and selecting an alternative that can resolve the problem; then moves to implementing the alternative; and concludes with evaluating the

decision A choice from two or more alternatives.

decision-making process A set of eight steps that includes identifying a problem, selecting an alternative, and evaluating the decision’s effectiveness.

Exhibit 3-1  The Decision-Making Process Identification of a Problem

Identification of Decision Criteria

Allocation of Weights to Criteria

Development of Alternatives Evaluation of Decision Effectiveness

Analysis of Alternatives

Selection of an Alternative

Implementation of the Alternative

72  Chapter 3 decision’s effectiveness. Many individuals use most or all of the steps implicitly, if not explicitly. Often, when a poor decision is made, it is because one of the steps was not carefully considered. This process is as relevant to your personal decision about what movie to see on a Friday night as it is to a corporate action such as a decision to use technology in managing client relationships. The process can also be used to describe both individual and group decisions. Let us take a closer look at the process in order to understand what each step involves. We will use an example—a manager deciding what car is best to purchase—to illustrate these steps.

What Defines a Decision Problem? STEP 1: IDENTIFY A PROBLEM  The decision-making process begins with the exisproblem A discrepancy between an existing and a desired state of affairs.

tence of a problem, or more specifically, a discrepancy between an existing and a desired state of affairs.7 Take Amanda, a sales manager who is on the road a lot and spent nearly $6000 on auto repairs over the past few years. Now her car has a blown engine and cost estimates indicate it’s not economical to repair. Furthermore, convenient public transportation is unavailable. So, we have a problem—a discrepancy between the manager’s need to have a car that works and the fact that her current one doesn’t. In our example, a blown engine is a clear signal to the manager that she needs a new car, but few problems are that obvious. In the real world, most problems don’t come with neon signs identifying them as such. And problem identification is subjective. A manager who mistakenly solves the wrong problem perfectly is just as likely to perform poorly as the manager who fails to identify the right problem and does nothing. So, how do managers become aware they have a problem? They have to make a comparison between current reality and some standard, which can be (1) past performance, (2) previously set goals, or (3) the performance of some other unit within the organization or in other organizations. In our car-buying example, the standard is past performance—a car that runs.

What Is Relevant in the Decision-Making Process? STEP 2: IDENTIFY DECISION CRITERIA  Once a manager has identified a problem decision criteria Criteria that define what is relevant in making a decision.

that needs attention, the decision criteria that will be important in solving the problem must be identified. In our vehicle-buying example, the sales manager assesses the factors that are relevant in her decision, which might include criteria such as price, model (twodoor or four-door), size (compact or intermediate), manufacturer (French, Japanese, South Korean, German, North American), optional equipment (navigation system, sideimpact protection, leather interior), and repair records. These criteria reflect what she thinks is relevant in her decision. Every decision maker has criteria—whether explicitly stated or not—that guide his or her decision making. Note that in this step in the decision-making process, what’s not identified can be as important as what is because it’s still guiding the decision. For instance, although the sales manager didn’t consider fuel economy to be a criterion and won’t use it to influence her choice of car, she had to assess that criteria before choosing to include or not include it in her relevant criteria.

How Does the Decision Maker Weigh the Criteria and Analyze Alternatives? STEP 3: ALLOCATE WEIGHTS TO CRITERIA  If the criteria identified in Step 2 are

not equally important, the decision maker must weigh the items in order to give them the correct priority in the decision. How do you weight criteria? A simple approach is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard. Thus, a criterion with a weight of 10 would be twice as

Chapter 3  Decision Making 73

Exhibit 3-2  Criteria and Weights for Car-Buying Decision Criterion

Weight

Price

10

Interior comfort

8

Durability

5

Repair record

5

Performance

3

Handling

1

important as one given a 5. Of course, you could use 100 or 1000 or any number you select as the highest weight. The idea is to prioritize the criteria you identified in Step 2 by assigning a weight to each. Exhibit 3-2 lists the criteria and weights that our manager developed for her vehicle replacement decision. What is the most important criterion in her decision? Price. What has low importance? Performance and handling. STEP 4: DEVELOP ALTERNATIVES  The fourth step requires the decision maker to list viable alternatives that could successfully resolve the problem. No attempt is made in this step to evaluate these alternatives, only to list them. Let’s assume that our sales manager, Amanda, identifies 12 cars as viable choices: Jeep Compass, Ford Focus, Hyundai Elantra, Ford Fiesta SES, Volkswagen Golf, Toyota Prius, Mazda 3 MT, Kia Soul, BMW i3, Nissan Cube, Toyota Camry, and Honda Fit Sport MT. STEP 5: ANALYZE ALTERNATIVES  Once the alternatives have been identified, the decision maker critically analyzes each one. How? By evaluating it against the criteria. The strengths and weaknesses of each alternative become evident as they’re compared with the criteria and weights established in steps 2 and 3. Exhibit 3-3 shows the assessed values that the manager assigned each of her 12 alternatives after she had test-driven each car. Keep in mind that the ratings shown are based on the assessment made by the sales manager. Again, we’re using a scale of 1 to 10. Some assessments can be achieved in a relatively objective fashion. For instance, the purchase price represents the best price the manager can get online or from local dealers, and consumer magazines report data from owners on frequency of repairs. Others, like how well the car handles, are clearly personal judgments.

Exhibit 3-3  Assessment of Possible Car Alternatives Alternatives

Initial Price

Interior Comfort

Durability

Repair Record

Performance

Handling

Total

Jeep Compass

 2

10

 8

 7

 5

 5

37

Ford Focus

 9

 6

 5

 6

 8

 6

40

Hyundai Elantra

 8

 5

 6

 6

 4

 6

35

Ford Fiesta SES

 9

 5

 6

 7

 6

 5

38

Volkswagen Golf

 5

 6

 9

10

 7

 7

44

Toyota Prius

10

 5

 6

 4

 3

 3

31

Mazda 3 MT

 4

 8

 7

 6

 8

 9

42

Kia Soul

 7

 6

 8

 6

 5

 6

38

BMW i3

 9

 7

 6

 4

 4

 7

37

Nissan Cube

 5

 8

 5

 4

10

10

42

Toyota Camry

 6

 5

10

10

 6

 6

43

Honda Fit Sport MT

 8

 6

 6

 5

 7

 8

40

74  Chapter 3

Exhibit 3-4  Evaluation of Car Alternatives: Assessment Criteria * Criteria Weight​ Alternatives

Initial Price [10]

Interior Comfort [8]

Jeep Compass

 2

 20

10

80

 8

40

 7

35

 5

15

 5

5

195

Ford Focus

 9

 90

 6

48

 5

25

 6

30

 8

24

 6

6

223

Hyundai Elantra

 8

 80

 5

40

 6

30

 6

30

 4

12

 6

6

198

Ford Fiesta SES

 9

 90

 5

40

 6

30

 7

35

 6

18

 5

5

218

Durability [5]

Repair RECORD [5]

Performance [3]

Handling [1]

Total

Volkswagen Golf

 5

 50

 6

48

 9

45

10

50

 7

21

 7

7

221

Toyota Prius

10

100

 5

40

 6

30

 4

20

 3

 9

 3

3

202

Mazda 3 MT

 4

 40

 8

64

 7

35

 6

30

 8

24

 9

9

202

Kia Soul

 7

 70

 6

48

 8

40

 6

30

 5

15

 6

6

209

BMW i3

 9

 90

 7

56

 6

30

 4

20

 4

12

 7

7

215

Nissan Cube

 5

 50

 8

64

 5

25

 4

20

10

30

10

10

199

Toyota Camry

 6

 60

 5

40

10

50

10

50

 6

18

 6

6

224

Honda Fit Sport MT

 8

 80

 6

48

 6

30

 5

25

 7

21

 8

8

212

The point is that most decisions by managers involve judgments—the criteria chosen in Step 2, the weights given to the criteria in Step 3, and the analysis of alternatives in Step 5. This fact explains why two car buyers with the same amount of money may look at two totally different sets of alternatives or even rate the same alternatives differently. Exhibit 3-3 shows only an assessment of the 12 alternatives against the decision criteria; it does not reflect the weighting done in step 3. If one choice had scored 10 on every criterion, obviously you wouldn’t need to consider the weights. Similarly, if all the weights were equal—that is, all the criteria were equally important to you—each alternative would be evaluated merely by summing up the appropriate lines in Exhibit 3-3. For instance, the Ford Fiesta SES would have a score of 38, and the Toyota Camry a score of 43. But if you multiply each alternative assessment against its weight, you get the figures in Exhibit 3-4. For instance, the Kia Soul scored a 40 on durability, which was determined by multiplying the weight given to durability [5] by the manager’s appraisal of the car on this criterion [8]. The sum of these scores represents an evaluation of each alternative against the previously established criteria and weights. Notice that the weighting of the criteria has changed the ranking of alternatives in our example. The Volkswagen Golf, for example, has gone from first to third. Looking at the analysis, both initial price and interior comfort worked against the Volkswagen.

What Determines the Best Choice? STEP 6: SELECT AN ALTERNATIVE  Now it’s time to choose the best alternative from among those assessed. Because we determined all the pertinent factors in the decision, weighted them appropriately, and identified and assessed the viable alternatives, this step is fairly simple. We merely choose the alternative that generated the highest score in step 5. In our vehicle example (Exhibit 3-4), the manager would choose the Toyota Camry. On the basis of the criteria identified, the weights given to the criteria, and her assessment of each car on the criteria, the Toyota scored highest [224 points] and, thus, became the best alternative. STEP 7: IMPLEMENT THE ALTERNATIVE  Step 7 is concerned with putting the decision into action. This step involves conveying the decision to those affected by it and getting their commitment to it. Managers often fail to get buy-in from those around them before making a decision, even though successful implementation

Chapter 3  Decision Making 75

requires participation. One study found that managers used participation in only 20 percent of decisions, even though broad participation in decisions led to successful implementation 80 percent of the time. The same study found that managers most commonly tried to implement decisions through power or persuasion (used in 60 percent of decisions). These tactics were successful in only one of three decisions, however.8 Want people to be committed to a decision? Let them participate in the decision-making process. We’ll discuss later in the chapter how groups can help a manager do this. STEP 8: EVALUATE DECISION EFFECTIVENESS  In the last step in the decision-

making process, managers appraise the outcome of the decision to see whether the problem was resolved. Did the alternative chosen in step 6 and implemented in step 7 accomplish the desired result? For our sales manager, that means does she have a car that reliably works? Evaluating the results of a decision is part of the managerial control process, which we’ll discuss in Chapter 12. To learn more about creativity and decision making, see Be the Consultant—Solving Problems Creatively later in the chapter.

Factors Affecting Decision Making Decision making is the essence of management.9 • Everyone in an organization makes decisions, but it is particularly important to managers. • Managers make decisions—mostly routine ones like which employee will work what shift, what information to include in a report, how to resolve a customer’s complaint, and so on—as they plan, organize, lead, and control. Exhibit 3-5 lists some of the most common decisions.

Mihaela19750405/Fotolia

3.2 Define the factors that affect how decisions are made.

Exhibit 3-5  Decisions in the Management Functions Planning

Leading

• What are the organization’s long-term objectives?

• How do I handle employees who appear to be low in motivation?

• What strategies will best achieve those objectives?

• What is the most effective leadership style in a given situation?

• What should the organization’s short-term objectives be?

• How will a specific change affect worker productivity?

• How difficult should individual goals be?

• When is the right time to stimulate conflict?

Organizing

Controlling

• How many employees should I have report directly to me?

• What activities in the organization need to be controlled?

• How much centralization should there be in the organization?

• How should those activities be controlled?

• How should jobs be designed?

• When is a performance deviation significant?

• When should the organization implement a different structure?

• What type of management information system should the organization have?

McCarony/Fotolia

• Managers want to be good decision makers and exhibit good decision-making ­behaviours so they appear competent and intelligent to their boss, employees, and co-workers.

76  Chapter 3

What Are the Three Approaches Managers Use to Make Decisions? 1  RATIONAL MODEL

• This approach assumes that decision makers must act rationally.10 How? Use rational decision making—that is, make logical and consistent choices to maximize value.11

iQoncept/Fotolia

2  BOUNDED RATIONALITY

rational decision making Making decisions that are consistent and value-maximizing within specified constraints.

bounded rationality Limitations on a person’s ability to interpret, process, and act on information.

satisfice To accept solutions that are “good enough.”

• Bounded rationality means managers make rational decisions but are limited (bounded) by their ability to process information.12 Exhibit 3-6 illustrates the five types of bounded decision making, including bounded rationality. • Most decisions managers make do not fit the assumption of perfect rationality. • No one can possibly analyze all information on all alternatives, so they satisfice—that is, they accept solutions that are “good enough,” rather than spend time and resources trying to maximize. • Most managerial decisions do not fit the assumptions of perfect rationality but can still be influenced by (1) the organization’s culture, (2) internal politics, (3) political considerations, and (4) a phenomenon called escalation of commitment—an increased commitment to a previous decision despite evidence that it may have been wrong.13 • Why would anyone—especially managers—escalate commitment to a bad decision? Two reasons: (1) They hate to admit that their initial decision may have been flawed; and (2) they do not want to search for new alternatives. Example: As a newly graduated finance major, you look for a job as a financial planner—minimum salary of $47k and within 100 kilometres of your hometown. After searching several different options, you accept a job as a business credit analyst at a bank 50 kilometres away at a starting salary of $42k. Hooray! If, however, you had

Exhibit 3-6  Bounded Decision Making SOURCE: Based on Rotman Magazine, Winter 2009, Q&A with Dolly Chugh—The NYU professor discusses the

foibles of bounded willpower, bounded awareness, and bounded self-interest and what can be done to combat them, interview by Karen Christensen, pp. 91–95.

Definition

Example

Bounded Awareness

People overlook important information during the decision-making process.

The music industry failed to see the threat of Napster and file sharing.

Bounded Ethicality

Personal ethical preferences may not be in sync with our actual behaviour.

A hiring manager views himself or herself as egalitarian but has different eye contact and body language with one group of people versus another.

Bounded Rationality

We employ shortcuts (heuristics) to help make sense of things.

Limited time to perform or a lack of understanding of financial ratios might lead to decisions made with improper financial support.

Bounded Willpower

We give too much focus to the present and not enough to the future.

A person does not save enough for retirement early in their career.

Bounded Self-Interest

We attach priority to the outcomes of others rather than simply try to maximize our own payoffs.

Employ principles of fairness rather than trying to crush your competitors.

Chapter 3  Decision Making 77

maximized—that is, continued to search all possible alternatives—you would have found this financial planning job at a trust company 25 kilometres away with a starting salary of $43k. However, the first job offer was satisfactory—“good enough.” Your decision making was still rational . . . but within the bounds of your ability to process information! 3 INTUITION AND MANAGERIAL DECISION MAKING  When deciding yay or

• Intuitive decision making—also described as unconscious reasoning—is making decisions on the basis of experience, feelings, and accumulated judgment. • Exhibit 3-7 illustrates five different aspects of intuition. Some studies have linked intuition and creativity.15 Later in the chapter, Be The Consultant looks at ways of moving past intuition and attempting to creatively solve problems.

Smalik/Fotolia

nay on new shoe styles, Diego Della Valle, chair of Tod’s luxury shoe empire, does not use common decision-making tools like focus groups or poll testing. Nope . . . he wears the shoes for a few days. If they are not to his liking, his verdict: No! His intuitive decision approach has helped make Tod’s a successful multinational company.14

intuitive decision making Making decisions on the basis of experience, feelings, and accumulated judgment.

Types of Problems and Decisions Laura Ipsen is a senior vice president and general manager at Smart Grid, a business unit of Cisco Systems that is working on helping utility companies find ways to build open, interconnected systems. She describes her job as “like having to put together a 1000-piece puzzle, but with no box top with the picture of what it looks like and with some pieces missing.”16 Decision making in that type of environment is quite different from decision making done by a manager of a local Gap store. The types of problems managers face in decision-making situations often determine how a decision is handled. In this section, we describe a categorization scheme for problems and types of decisions and then show how the type of decision making a manager uses should reflect the characteristics of the problem.

Exhibit 3-7  What Is Intuition? SOURCE: Based on E. Dane and M. G. Pratt, “Exploring Intuition and Its Role in Managerial Decision Making,” Academy of Management

Review, January 2007, pp. 33–54; M. H. Bazerman and D. Chugh, “Decisions Without Blinders,” Harvard Business Review, January 2006, pp. 88–97; C. C. Miller and R. D. Ireland, “Intuition in Strategic Decision Making: Friend or Foe in the Fast-Paced 21st Century,” Academy of Management Executive, February 2005, pp. 19–30; E. Sadler-Smith and E. Shefy, “The Intuitive Executive: Understanding and Applying ‘Gut Feel’ in Decision-Making,” Academy of Management Executive, November 2004, pp. 76–91; L. A. Burke and J. K. Miller, “Taking the Mystery Out of Intuitive Decision Making,” Academy of Management, November 1999, Vol. 13 Issue 4, pp. 91–99. Managers make decisions based on their past experiences.

Managers make decisions based on ethical values or culture.

Managers make decisions based on feelings or emotions.

Experience-Based Decisions Values- or EthicsBased Decisions

Affect-Initiated Decisions Intuition

Subconscious Mental Processing

Managers use data from the subconscious mind to help them make decisions.

Cognitive-Based Decisions

Managers make decisions based on skills, knowledge, and training.

78  Chapter 3 HOW DO PROBLEMS DIFFER?  Some problems are straightforward. The goal of

structured problems A straightforward, familiar, and easily defined problem.

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

programmed decision A repetitive decision that can be handled using a routine approach.

the decision maker is clear, the problem familiar, and information about the problem easily defined and complete. Examples might include a supplier who is late with an important delivery, a customer who wants to return an Internet purchase, a TV news team that has to respond to an unexpected and fast-breaking event, or a university that must help a student who is applying for financial aid. Such situations are called structured problems. Many situations faced by managers, however, are unstructured problems. They are new or unusual. Information about such problems is ambiguous or incomplete. Examples of unstructured problems include the decision to enter a new market segment, to hire an architect to design a new office park, or to merge two organizations. So, too, is the decision to invest in a new, unproven technology. For instance, when Takeshi Idezawa founded his mobile messaging app LINE, he faced a situation best described as an unstructured problem.17 Decisions are also divided into two categories: programmed and nonprogrammed (described in the next section). Programmed, or routine, decisions are the most efficient way to handle structured problems. An auto mechanic damages a customer’s rim while changing a tire. What does the shop manager do? Because the company probably has a standardized method for handling this type of problem, it’s considered a programmed decision. For example, the manager may replace the rim at the company’s expense. Decisions are programmed to the extent that (1) they are repetitive and routine and (2) a specific approach has been worked out for handling them. Because the problem is well structured, the manager does not have to go to the trouble and expense of an involved decision process. Programmed decision making is relatively simple and tends to rely heavily on previous solutions. The develop-the-alternatives stage in the decision-making process is either nonexistent or given little attention. Why? Because once the structured problem is defined and its solution is usually self-evident or at least reduced to only a few alternatives that are familiar and that have proved successful in the past. In many cases, programmed decision making becomes decision making by precedent. Managers simply do what they and others have done previously in the same situation. The damaged rim does not require the manager to identify and weight decision criteria or develop a long list of possible solutions.

Managers make programmed decisions by falling back on procedures, rules, and policies. procedure

PROCEDURES  A procedure is a series of interrelated sequential steps that a

A series of interrelated, sequential steps used to respond to a structured problem.

­ anager can use when responding to a well-structured problem. The only real difm ficulty is identifying the problem. Once the problem is clear, so is the procedure. For instance, a purchasing manager receives a request from computing services for licensing arrangements to install 250 copies of Norton Antivirus Software. The purchasing manager knows that a definite procedure is in place for handling this decision. Has the requisition been properly filled out and approved? If not, he can send the requisition back with a note explaining what is deficient. If the request is complete, the approximate costs are estimated. If the total exceeds $8500, three bids must be obtained. If the total is $8500 or less, only one vendor need be identified and the order placed. The decision-making process is merely executing a simple series of sequential steps.

rule

RULES  A rule is an explicit statement that tells a manager what he or she must—or must not—do. Rules are frequently used by managers who confront a structured problem because they’re simple to follow and ensure consistency. In the preceding example, the $8500 cutoff rule simplifies the purchasing manager’s decision about when to use multiple bids.

An explicit statement that tells a decision maker what he or she can or cannot do.

Adrian Grosu/Shutterstock

Chapter 3  Decision Making 79

Information technology is providing managers with a wealth of decision-making support, such as decision-making tools like Neural networks.19 This tool uses computer software to imitate the structure of brain cells and connections among them. It can distinguish patterns and trends too subtle or complex for human beings. It can also perceive correlations among hundreds of variables, unlike our limited human brain capacity, which can easily assimilate no more than two or three variables at once. Banks use these systems to catch fraud in a matter of minutes because the tool can perform many operations simultaneously, recognize patterns, make associations, and learn through experience.

POLICIES  A third guide for making programmed decisions is a policy. It provides

policy

guidelines to channel a manager’s thinking in a specific direction. The statement that “we promote from within, whenever possible” is an example of a policy. In contrast to a rule, a policy establishes parameters for the decision maker rather than specifically stating what should or should not be done. Policies often leave interpretation up to the decision maker. It’s in such instances that ethical standards may come into play.

A guideline for making a decision.

HOW DO NONPROGRAMMED DECISIONS DIFFER FROM PROGRAMMED DECISIONS?  When problems are unstructured, managers must rely on ­nonprogrammed

decisions to develop unique solutions. Examples of nonprogrammed decisions include deciding whether to acquire another organization, deciding which global markets offer the most potential, or deciding whether to sell off an unprofitable division. Such decisions are unique and nonrecurring. When a manager confronts an unstructured problem, no cutand-dried solution is available. A custom-made, nonprogrammed response is required. The creation of a new organizational strategy is a nonprogrammed decision. This decision is different from previous organizational decisions because the issue is new; a different set of environmental factors exists, and other conditions have changed. For example, Amazon’s strategy to “get big fast” helped the company grow tremendously. But this strategy came at a cost—perennial financial losses. To turn a profit, CEO Jeff Bezos made decisions regarding how to organize orders, anticipate demand, ship more efficiently, establish foreign partnerships, and create a marketplace for other sellers to sell their books on Amazon. As a result, Amazon has achieved massive profitability.18

Decision-Making Conditions When managers make decisions, they face three conditions: certainty, risk, and uncertainty. What are the characteristics of each?

nonprogrammed decisions Decisions that are unique and nonrecurring and require custommade solutions.

80  Chapter 3 CERTAINTY  The ideal condition for making decisions is one of certainty—that

Thinglass/Fotolia

is, a condition in which a decision maker can make accurate decisions because the outcome of every alternative is known. For example, when Alberta’s finance minister Joe Ceci was deciding in which bank to deposit provincial funds, he knew the exact interest rate being offered by each bank and the amount that would be earned on the funds. He was certain about the outcomes of each alternative. As you might expect, most managerial decisions are not like this. One of the easiest ways to practise decision making is to list all the pros and cons of an alternative.

certainty A condition in which a decision maker can make accurate decisions because the outcome of every alternative is known.

risk A situation in which a decision maker is able to estimate the likelihood of certain outcomes.

uncertainty A condition in which a decision maker is not certain about the outcomes and cannot even make reasonable probability estimates.

RISK  A far more common condition is one of risk, a condition in which a

decision maker is able to estimate the likelihood of certain outcomes. The a­ bility to assign probabilities to outcomes may be the result of personal experiences or secondary information. With risk, managers have historical data that let them assign probabilities to different alternatives. Let us work through an example. Suppose that you manage a ski resort in Whistler, British Columbia. You are thinking about adding another lift to your current facility. Obviously your decision will be influenced by the additional revenue that the new lift would generate, and additional revenue will depend on snowfall. The decision is made somewhat clearer because you have fairly reliable weather data from the past ten years on snowfall levels in your area—three years of heavy snowfall, five years of normal snowfall, and two years of light snowfall. Can you use this information to help you make your decision about adding the new lift? If you have good information on the amount of revenues generated during each level of snowfall, the answer is yes.

UNCERTAINTY  What happens if you have a decision where you are not certain

about the outcomes and cannot even make reasonable probability estimates? We call such a condition uncertainty. Managers do face decision-making situations of uncertainty. Under these conditions, the choice of alternative is influenced by the limited amount of information available to the decision maker and by the psychological orientation of the decision maker. The optimistic manager will follow a maximax choice (maximizing the maximum possible payoff) in order to get the largest possible gain. The pessimist will follow a maximin choice (maximizing the minimum possible payoff) to make the best of a situation should the worst possible outcome occur. The manager who desires to minimize his or her maximum “regret” will opt for a minimax choice, to avoid having big regrets after decisions play out.

Xtock/Fotolia

Group Decision Making Many organizational decisions are made by groups. It is a rare organization that does not at some time use committees, task forces, review panels, study teams, or similar groups to make decisions. Studies show that managers may spend up to 30 hours a week in group meetings.20 Undoubtedly, a large portion of that time is spent identifying problems, developing solutions, and determining how to implement the solutions. It is possible, in fact, for groups to be assigned any of the eight steps in the decisionmaking process. In this section, we look at the advantages and disadvantages of group decision making, discuss when groups would be preferred, and review some techniques for improving group decision making. For a look at the issues associated with diversity and making decisions, see Diversity Matters—The Value of Diversity in Decision Making at the end of the chapter. What advantages do group decisions have over individual decisions?

Estimating the outcomes of risk is like navigating with a compass.

• More complete information and knowledge.  A group brings a diversity of experience and perspectives to the decision process that an individual cannot.

Chapter 3  Decision Making 81

• More diverse alternatives.  Because groups have a greater amount and diversity of information, they can identify more diverse alternatives than an individual. Denisismagilov/Fotolia

• Increased acceptance of a solution.  Group members are reluctant to fight or undermine a decision they have helped develop. • Increased legitimacy.  Decisions made by groups may be perceived as more legitimate than decisions made unilaterally by one person. If groups are so good at making decisions, how did the phrase “A camel is a horse put together by a committee” become so popular? The answer, of course, is that group decisions also have disadvantages:

Do you think individuals or groups make better decisions?

• Increased time to reach a solution.  Groups almost always take more time to reach a solution than it would take an individual. • Opportunity for minority domination.  The inequality of group members creates the opportunity for one or more members to dominate others. A dominant and vocal minority frequently can have an excessive influence on the final decision. • Ambiguous responsibility.  Group members share responsibility, but the responsibility of any single member is diluted. • Pressures to conform.  There can be pressures to conform in groups. This pressure undermines critical thinking in the group and eventually harms the quality of the final decision.21 This is called groupthink.

The Tragedy of Groupthink What Does It Do?

groupthink The withholding by group members of different views in order to appear to be in agreement.

It hinders decision making, possibly jeopardizing the quality of the decision by • undermining critical thinking in the group. • affecting a group’s ability to objectively appraise alternatives. • deterring individuals from critically appraising unusual, minority, or unpopular views. How Does It Occur? Here are some things to watch out for: • Group members rationalize resistance to assumptions. • Members directly pressure those who express doubts or question the majority’s views and arguments. • Members who have doubts or differing points of view avoid deviating from what appears to be group consensus. • An illusion of unanimity prevails. Full agreement is assumed if no one speaks up. What Can Be Done to Minimize Groupthink? • Encourage cohesiveness. • Foster open discussion. • Have an impartial leader who seeks input from all members.22

This behaviour is a form of conformity in which group members withhold deviant, minority, or unpopular views in order to give the appearance of agreement. As a result, groupthink undermines critical thinking in the group and eventually harms the quality of the final decision.

Determining whether a group or an individual will be more effective in making a particular decision depends on the criteria you use to assess effectiveness.23 Group decisions are preferable when accuracy, creativity, and degree of acceptance are required, while individual decision making offers greater speed and efficiency. Keep in mind, however, that the effectiveness of group decision making is also influenced by the size of the group. Although a larger group provides

Rawpixel/Fotolia

Individual Versus Group Decision Making

Luminis/Fotolia

82  Chapter 3

In 2003, Richard Branson, founder of the Virgin Group of companies, wanted to compete with Apple’s entry in the MP3 music player industry—the iPod. Virgin’s management team was strongly opposed to Virgin producing its own MP3 player. Branson insisted they launch the Virgin Pulse, at a design cost of $20 million. However, it bombed, and they had to write off the investment. Had Branson listened more to his management employees, the huge investment failure could have been avoided.25

greater opportunity for diverse representation, it also requires more coordination and more time for members to contribute their ideas. So groups should not be too large. Evidence indicates, in fact, that groups of five or, to a lesser extent, seven are the most effective.24 Having an odd number in the group helps avoid decision deadlocks. These groups are large enough for members to shift roles and withdraw from unfavourable positions but still small enough for quieter members to participate actively in discussions. Employee involvement, present in every organization to some extent, leads to higher commitment from the employees for the decisions. A recent study found that employee involvement also increases skill variety and feelings of autonomy, which results in higher job enrichment and motivation.26 What is the right amount of employee involvement? Exhibit 3-8 looks at the situational factors that have an impact on the effectiveness of employee involvement outcomes.27 The four contingencies are

• Decision structure.  Programmed decisions require less employee involvement. • Source of decision knowledge.  Employees may have more relevant and timely information than managers, increasing the need for involvement. • Decision commitment.  If participants might be against a decision without their input, then involvement is more necessary. • Risk of conflict.  If there are conflicting employee and organizational goals, involvement is useful in minimizing conflict.

Decision-Making Biases and Errors heuristics Rules of thumb that managers use to simplify decision making.

When managers make decisions, not only do they use their own particular style, but many use “rules of thumb,” or heuristics, to simplify their decision making. Rules of thumb can be useful to decision makers because they help make sense of complex,

Exhibit 3-8  Employee Involvement in Decision Making SOURCE: S. McShane and S. Steen, Canadian Organizational Behaviour 2008. McGraw-Hill Ryerson; reproduced

with permission of McGraw-Hill Ryerson Ltd.

Contingencies of employee involvement • Decision structure • Source of decision knowledge • Decision commitment • Risk of conflict Employee involvement

Outcomes of employee involvement • Better problem identification • More/better choices generated • More likely to select the best alternative • Stronger commitment to the decision

Chapter 3  Decision Making 83

Exhibit 3-9  Common Decision-Making Biases and Errors Overconfidence

Selective Perception

Hindsight

Self-serving

Decision-Making Errors and Biases

Escalation of Commitment

Confirmation

Sunk Costs

uncertain, and ambiguous information.28 Even though managers may use rules of thumb, that does not mean those rules are reliable. Why? Because they may lead to errors and biases in processing and evaluating information. Exhibit 3-9 identifies seven common decision-making biases and errors. Let us take a quick look at each of them.29 • Overconfidence bias.  Decision makers tend to think they know more than they do or hold unrealistically positive views of themselves and their performance. For example, a sales manager brags that his presentation was so good that there is no doubt the sale will be his. Later he learns that he lost the sale because the client found him obnoxious. • Sunk-costs error.  Decision makers forget that current choices cannot correct the past. They incorrectly fixate on past expenditures of time, money, or effort in assessing choices rather than on future consequences. For example, Hakan has spent thousands of dollars and several months introducing new procedures for handling customer complaints. Both customers and employees are complaining about the new procedures. Hakan does not want to consider the possibility that the procedures are needlessly complicated because of the investment in time and money he has already made. • Selective perception bias.  Decision makers selectively organize and interpret events based on their biased perceptions. This bias influences the information they pay attention to, the problems they identify, and the alternatives they develop. For example, before John meets with two job candidates, he learns that one went to his alma mater. He does not seriously consider the other job candidate because he believes that graduating from the same university as he did makes the first candidate superior. • Confirmation bias.  Decision makers seek out information that reaffirms their past choices and discount information that contradicts past judgments. These people tend to accept at face value information that confirms their preconceived views and are critical and skeptical of information that challenges these views. For example, Pierre continues to give business to the same supplier, even though the supplier has been late on several deliveries. Pierre thinks the supplier is a nice person, and the supplier keeps promising to deliver on time. • Escalation-of-commitment error.  Decisions can also be influenced by a phenomenon called escalation of commitment, which is an increased commitment to a previous decision despite evidence that it might have been wrong.30 For example, studies of the events leading up to the space shuttle Columbia disaster in 2003 point to an escalation of commitment by decision makers to ignore the possible damage that foam striking the shuttle at takeoff might have had,

escalation of commitment An increased commitment to a previous decision despite evidence that the decision might have been wrong.

84  Chapter 3 even though the decision was questioned by some individuals. Why would decision makers want to escalate commitment to a bad decision? Because they don’t want to admit that their initial decision might have been flawed. Rather than  search for new alternatives, they simply increase their commitment to the original solution. • Self-serving bias.  Decision makers take credit for their successes and blame failure on outside factors. For example, Jesse dismisses his team’s efforts when he wins a contract, although he blames them for the small error that was in the final report. • Hindsight bias.  Once an outcome is actually known, decision makers falsely believe that they would have accurately predicted that outcome. For example, after a client cancelled a contract that had been drawn up, Cindy tells her manager she knew ahead of time that was going to happen, even though she’d had no such thoughts before the contract was cancelled. After the fact, some outcomes seem more obvious than they did beforehand. How can managers avoid the negative effects of these decision errors and biases? The main strategy is to be aware of them and then try not to exhibit them. Beyond that, managers should also pay attention to “how” they make decisions: They should try to identify the heuristics they typically use and critically evaluate how appropriate those are. Finally, managers might want to ask people around them to help identify weaknesses in their decision-making style and try to improve.

Contemporary Issues in Managerial Decision Making 3.3 Discuss contemporary issues in managerial decision making. Today’s business world revolves around making decisions, often risky ones, usually with incomplete or inadequate information, and under intense time pressure. Most managers make one decision after another; and as if that weren’t challenging enough, more is at stake than ever before since bad decisions can cost millions. We’re going to look at three important issues—national culture, creativity and design thinking, and big data—that managers face in today’s fast-moving and global world.

How Does National Culture Affect Managers’ Decision Making? Research shows that, to some extent, decision-making practices differ from country to country.31 The way decisions are made—whether by group, by team members, participatively, or autocratically by an individual manager—and the degree of risk a decision maker is willing to take are just two examples of decision variables that reflect a country’s cultural environment. For example, in India, power distance and uncertainty avoidance are high. There, only very senior-level managers make decisions, and they’re likely to make safe decisions. In contrast, in Sweden, power distance and uncertainty avoidance are low. Swedish managers are not afraid to make risky decisions. Senior managers in Sweden also push decisions down to lower levels. They encourage lower-level managers and employees to take part in decisions that affect them. In countries such as Egypt, where time pressures are low, managers make decisions at a slower and more deliberate pace than managers do in Canada.32 Senior managers in France and Germany also adapt their decision styles to their countries’ cultures. In France, for instance, autocratic decision making is widely practised, and managers avoid risks. Managerial styles in Germany reflect the German culture’s

Chapter 3  Decision Making 85

Hey, You’re the Boss Now! Tips for Managing a Diverse Workforce As millennials take on increasing responsibilities at work among a diverse population, managing and leading employees of different ages, genders, races, and religions becomes the reality. By utilizing the right combination of tact, consideration, and strategy, you can successfully navigate the potential career minefield. Use the following tips to deal with your older and more experienced employees: 1. Be confident. You are in the position for a reason, so have conviction in what you know, and do not second guess yourself. People tend to believe you when you sound like you know what you are talking about! 2. Ask for input, not guidance. Your employees’ life or cultural experiences may give you added perspective, and learning from them makes you a stronger manager. Solicit feedback regularly. When you are open to feedback, you will get it. 3. Be open-minded. Avoid making assumptions, and try to understand your employees’ challenges. Older workers are more accustomed to face-to-face encounters than using technology. They are familiar with meeting regularly to discuss goals and projects, and they may have different perspectives on loyalty and work–life balance. Men may be more interested in conveying facts, while women may pay attention to emotions. 4. You do not have to “be the boss.” Give your employees time to get used to you instead of appearing to be the heavy. Your lack of experience can be complemented by their individual skills. 5. Communicate. Constantly keep your employees informed. Understand that communication styles may be different. An older employee might prefer a two-minute conversation instead of “Shoot me an email,” and other cultures have different communication needs. 6. Show respect and motivate your team. Treat older employees like everyone else on your team, but recognize that they may have different hot buttons. Educate the team on respecting individual differences, whether based on age, gender, religion, or culture. 7. Start a mentorship program. A diverse workforce has so much knowledge to pass on. Validate your employees’ experience by demonstrating that their opinion and experience count. 8. Train them. There may be things your older employees need to learn. Remember that they can learn from you, too.

concern for structure and order. Consequently, German organizations generally operate under extensive rules and regulations. Managers have well-defined responsibilities and accept that decisions must go through channels. As managers deal with employees from diverse cultures, they need to recognize common and accepted behaviour when asking them to make decisions. Some individuals may not be as comfortable as others with being closely involved in decision making, or they may not be willing to experiment with something radically different. Managers who accommodate the diversity in decision-making philosophies and practices can expect a high payoff if they capture the perspectives and strengths that a diverse workforce offers.

Why Are Creativity and Design Thinking Important in Decision Making? How do most of you take and save photos today? It’s highly unlikely that you’ve ever had to insert film into a camera, shoot the photos you wanted while hoping you “got the shot,” remove the film from the camera, take the film to be processed, and then pick up your photos later. When Apple, Facebook, and Instagram wanted to make this process easier and better, someone making decisions about future products had to be creative and they had to use design thinking. Both are important to decision makers today.

86  Chapter 3 creativity

UNDERSTANDING CREATIVITY  A decision maker needs creativity: the ability to

The ability to produce novel and useful ideas.

produce novel and useful ideas. These ideas are different from what’s been done before but are also appropriate to the problem or opportunity presented. Why is creativity important to decision making? It allows the decision maker to appraise and understand the problem more fully, including “seeing” problems others can’t see. However, creativity’s most obvious value is in helping the decision maker identify all viable alternatives. Most people have creative potential that they can use when confronted with a ­decision-making problem. But to unleash that potential, they have to get out of the psychological ruts most of us get into and learn how to think about a problem in divergent ways.

Learn to unleash YOUR creativity. We can start with the obvious. People differ in their inherent creativity. Einstein, Edison, Dali, and Mozart were individuals of exceptional creativity. Not surprisingly, exceptional creativity is scarce. A study of lifetime creativity of 461 men and women found that • fewer than 1 percent were exceptionally creative. • 10 percent were highly creative. • about 60 percent were somewhat creative. These findings suggest that most of us have some creative potential, if we can learn to unleash it. Given that most people have the capacity to be at least moderately creative, what can individuals and organizations do to stimulate employee creativity? The best answer to this question lies in the three-component model of creativity based on an extensive body of research.33 This model proposes that individual creativity essentially requires expertise, creative-thinking skills, and intrinsic task motivation. Studies confirm that the higher the level of each of these three components, the higher the creativity. Expertise is the foundation of all creative work. Dali’s understanding of art and Einstein’s knowledge of physics were necessary conditions for them to be able to make creative contributions to their fields. And you wouldn’t expect someone with a minimal knowledge of programming to be highly creative as a software engineer. The potential for creativity is enhanced when individuals have abilities, knowledge, proficiencies, and similar expertise in their fields of endeavour. The second component is creative-thinking skills. It encompasses personality characteristics associated with creativity, the ability to use analogies, as well as the talent to see the familiar in a different light. For instance, the following individual traits have been found to be associated with the development of creative ideas: intelligence, independence, self-confidence, risk taking, internal locus of control, tolerance for ambiguity, and perseverance in the face of frustration. The effective use of analogies allows decision makers to apply an idea from one context to another. One of the most famous examples in which analogy resulted in a creative breakthrough was Alexander Graham Bell’s observation that it might be possible to take concepts that operate in the ear and apply them to his “talking box.” He noticed that the bones in the ear are operated by a delicate, thin membrane. He wondered why, then, a thicker and stronger piece of membrane shouldn’t be able to move a piece of steel. Out of that analogy the telephone was conceived. Of course, some people have developed their skill at being able to see problems in a new way. They’re able to make the strange familiar and the familiar strange. For instance, most of us think of hens laying eggs. But how many of us have considered that a hen is only an egg’s way of making another egg? The final component in our model is intrinsic task motivation—the desire to work on something because it’s interesting, involving, exciting, satisfying, or personally challenging. This motivational component is what turns creative potential into actual

Chapter 3  Decision Making 87

creative ideas. It determines the extent to which individuals fully engage their expertise and creative skills. So creative people often love their work, to the point of seeming obsessed. Importantly, an individual’s work environment and the organization’s culture (which we discussed in Chapter 2) can have a significant effect on intrinsic motivation. Five organizational factors have been found that can impede your creativity: • expected evaluation—focusing on how your work is going to be evaluated • surveillance—being watched while you’re working • external motivators—emphasizing external, tangible rewards • competition—facing win–lose situations with your peers • constrained choices—being given limits on how you can do your work

Be the Consultant: Solving Problems Creatively Creativity is a frame of mind. You need to expand your mind’s capabilities—that is, open up your mind to new ideas. Every individual has the ability to improve his or her creativity, but many people simply don’t try to develop that ability. In a global business environment, where changes are fast and furious, organizations desperately need creative people. The uniqueness and variety of problems that managers face demand that they be able to solve problems creatively.

Steps in Developing the Skill You can be more effective at solving problems creatively if you use the following 10 suggestions:34 1. Think of yourself as creative. Although this may be a simple suggestion, research shows that if you think you cannot be creative, you won’t be. Believing in your ability to be creative is the first step in becoming more creative. 2. Pay attention to your intuition. Every individual has a subconscious mind that works well. Sometimes answers will come to you when you least expect them. Listen to that “inner voice.” In fact, most creative people keep notepads near their beds and write down ideas when the thoughts come to them. That way they don’t forget them. 3. Move away from your comfort zone. Every individual has a comfort zone in which certainty exists. But creativity and the known often do not mix. To be creative, you need to move away from the status quo and focus your mind on something new. 4. Determine what you want to do. Make sure you include taking time to understand a problem before attempting to try to resolve it, getting all the facts in mind, and trying to identify the most important ones. 5. Look for ways to tackle the problem. This process can be accomplished by setting aside a block of time to focus on it; working out a plan for attacking it; establishing subgoals; imagining or actually using analogies wherever possible (e.g., could you approach your problem like a fish out of water and look at what the fish does to cope? Or can you use the things you have to do to find your way when it’s foggy to help you solve your problem?); using different problem-solving strategies such as verbal, visual, mathematical, theatrical (e.g., you might draw a diagram of the decision or problem to help you visualize it better, or you might talk to yourself out loud about the problem, telling it as you would tell a story to someone); trusting your intuition; and playing with possible ideas and approaches (e.g., look at your problem from a different perspective, or ask yourself what someone else, such as your grandmother, might do if faced with the same situation). 6. Look for ways to do things better. Find new approaches by trying consciously to be original, not worrying about looking foolish, eliminating cultural taboos (such as gender stereotypes) that might influence your possible solutions, keeping an open mind, being alert to odd or puzzling facts, thinking of unconventional ways to use objects and the environment (e.g., thinking about how you could use newspaper or magazine headlines to help you be a better problem solver), discarding usual or habitual ways of doing things, and striving for objectivity by being as critical of your own ideas as you would be of those coming from someone else. 7. Find several right answers. Being creative means continuing to look for other solutions even when you think you have solved the problem. A better, more creative solution might be just around the corner. 8. Believe in finding a workable solution. Like believing in yourself, you also need to believe in your ideas. If you don’t think you can find a solution, you probably won’t. 9. Brainstorm with others. Creativity is not an isolated activity. Bouncing ideas off others creates synergy. 10. Turn creative ideas into action. Coming up with creative ideas is only part of the process. Once the ideas are generated, they must be implemented. Keeping great ideas in your mind, or on papers that no one will read, does little to expand your creative abilities.

Practising the Skill How many words can you make using the letters in the word brainstorm? (There are at least 95.)

88  Chapter 3

PIXXart/Shutterstock

UNDERSTANDING DESIGN THINKING  The way managers approach decision making—using a rational and analytical mindset in identifying problems, coming up with alternatives, evaluating alternatives, and choosing one of those alternatives— may not be the best and certainly not the only choice in today’s environment. That’s design thinking where design thinking comes in. Design thinking has been described as “­approaching Approaching management management problems as designers approach design problems.”35 More organiproblems as designers approach zations are beginning to recognize how design thinking can benefit them.36 For design problems. instance, Apple has long been celebrated for its design thinking. The company’s lead designer, Jonathan “Jony” Ive (who was behind some of Apple’s most successful products, including the iPod and iPhone) had this to say about Apple’s design approach: “We try to develop products that seem somehow inevitable. That leave you with the sense that that’s the only possible solution that makes sense.”37 While many managers don’t deal specifically with product or process design decisions, they still make decisions about work issues that arise, and design thinking can help them be better decision makers. What can the design thinking approach teach managers about making better decisions? Well, it begins with the first step in the decision-making process of identifying problems. Design thinking says that managers should look at problem identification collaboratively and integratively, with the goal of gaining a deep understanding of the situation. They should look not only at the rational aspects, but also at the emotional elements. Then invariably, of course, design thinking would influence how managers identify and evaluate alternatives—steps 2 through 5 in the decision-making process. A traditional manager (educated in a business school, of course) would look at the alternatives, rationally evaluate them, and select the one with the Design thinking leads the strategic decisions of Jack Dorsey, co-founder of Twitter highest payoff. However, using design thinking, and CEO of Square, a mobile payments processor for smartphones and tablets. a manager would say, “What is something comDorsey used observation and inquiry in deciding to start a company based on the pletely new that would be lovely if it existed but idea that people needed an easy way to make payments in person. doesn’t now?”38 Design thinking means opening up your perspective and gaining insights by using observation and inquiry skills, and not relying simply on rational analysis. We’re not saying that rational analysis isn’t needed; we are saying that there’s more needed in making effective decisions, especially in today’s world.

How Is Big Data Changing the Way Managers Make Decisions? Big data is changing the way managers make decisions. Big Data Understood.

• Amazon.com, Earth’s biggest online retailer, earns billions of dollars of revenue each year—estimated at one-third of sales—from its “personalization technologies” such as product recommendations and computer-generated e-mails.39

Chapter 3  Decision Making 89

• At AutoZone, decision makers are using new software that gleans information from a variety of databases and allows its 5000-plus local stores to target deals and hopefully reduce the chance that customers will walk away without making a purchase. AutoZone’s chief information officer says, “We think this is the direction of the future.”40 • It’s not just businesses that are exploiting big data. A team of San Francisco researchers was able to predict the magnitude of a disease outbreak halfway around the world by analyzing phone patterns from mobile phone usage.41 Yes, there’s a ton of information out there—100 petabytes here in the decade of the 2010s, according to experts. (In bytes, that translates to 1 plus 17 zeroes, in case you were wondering!)42 And businesses—and other organizations—are finally figuring out how to use it. So what is big data? It’s the vast amount of quantifiable information that can be analyzed by highly sophisticated data processing. One IT expert described big data with “3V’s: high volume, high velocity, and/or high variety information assets.”43 What does big data have to do with decision making? A lot, as you can imagine. With this type of data at hand, decision makers have very powerful tools to help them make decisions. However, experts caution that collecting and analyzing data for data’s sake is wasted effort. Goals are needed when collecting and using this type of information. As one individual said, “Big data is a descendant of Taylor’s ‘scientific management’ of more than a century ago.”44 While Taylor used a stopwatch to time and monitor a worker’s every movement, big data is using math modelling, predictive algorithms, and artificial intelligence software to measure and monitor people and machines like never before. But managers need to really examine and evaluate how big data might contribute to their decision making before jumping in with both feet.

big data The vast amount of quantifiable information that can be analyzed by highly sophisticated data processing.

And the Survey Says...45 • 7 percentage points higher financial results is what organizers gained from reducing bias in their decision-making processes.

• 59 percent of employees say a key obstacle to their job is more attention is paid to placing blame than to solving problems.

• 20+ options and people’s decision making is more likely to be paralyzed or frustrated.

• 77 percent of managers said the number of decisions they make during a typical workday has increased.

• 84 percent of companies use teams to solve special projects.46

• 43 percent of managers said the amount of time given to each decision has decreased.

• 40 percent more ideas are generated with electronic brainstorming than with individuals brainstorming alone.

QUANTITATIVE DECISION-MAKING AIDS  Managers sometimes use aids and

techniques such as the following to assist in the decision-making process and provide more complete information to make better-informed decisions. Payoff matrices are used in decision making to identify risk in daily and billiondollar decisions by considering the expected monetary value (EMV) of the outcome. A decision is selected if it fits the risk preferences of the business. Payoff matrices are also popular in game theory.

90  Chapter 3 Decision trees are typically used to encompass expected value analysis by assigning probabilities to each possible outcome and calculating payoffs for each decision path. Break-even analysis is a technique for identifying the point at which total revenue is just sufficient to cover total costs. Ratio analysis is used to compare two significant figures from the financial statements and express them as a percentage or ratio. Linear programming is a mathematical technique that solves resource allocation problems. Queuing theory is a way of balancing the cost of having a waiting line versus the cost of maintaining the line. Management wants to have as few stations open as possible to minimize costs without testing the patience of its customers. Economic order quantity is a model that seeks to balance the costs involved in ordering and carrying inventory, thus minimizing total costs associated with ordering and carrying costs.

Ethics, Corporate Social Responsibility, and Decision Making 3.4 Describe how ethics and social responsibility relate to decision making.

ethics Rules and principles that define right and wrong behaviour.

When you see top managers such as those formerly at Merrill-Lynch, AIG, and some of the other major financial institutions acting with greed and using financial manipulations, lying, and group pressure to deceive others, you might conclude that corporations have no ethics. Although that is by no means true, what is true is that managers—at all levels, in all areas, and in all kinds of organizations—will face ethical issues and dilemmas. As managers plan, organize, lead, and control, they must consider ethical dimensions. What do we mean by ethics? The term ethics refers to rules and principles that define right and wrong behaviour.47 Unfortunately, the ethics of a situation are not always black and white. For some decisions, you can make choices exercising complete freedom of choice, with no regard for others. For other decisions, your behaviour will be guided by a set of laws. In between are situations where you might want to consider the impact of your decision on others, even though there are no laws regarding your behaviour. This middle zone is the grey area of behaviour. Laws often develop because people did not act responsibly when they had a choice. For example, not too long ago drinking and driving did not have the penalties that are in place now. Many people have talked about laws banning cellphones in various situations for much the same reason: Individuals may not think about the impact of cellphone use on others. In this section, we examine the ethical dimensions of managerial decisions. Many decisions that managers make require them to consider who may be affected— in terms of the result as well as the process.48 To better understand the complicated issues involved in managerial ethics, we will look at four different views of ethics and the factors that influence a person’s ethics, and will offer some suggestions for what organizations can do to improve the ethical behaviour of employees.

Four Views of Ethics There are four views of ethics: the utilitarian view, the rights view, the theory of justice view, and the integrative social contracts theory.49

Chapter 3  Decision Making 91

The utilitarian view of ethics maintains that ethical decisions are made solely on the basis of their outcomes or consequences. Utilitarian theory uses a quantitative method for making ethical decisions by looking at how to provide the greatest good for the greatest number. Following the utilitarian view, a manager might conclude that laying off 20 percent of the workforce in the plant is justified because it will increase the plant’s profitability, improve job security for the remaining 80 percent, and be in the best interest of shareholders. Utilitarianism encourages efficiency and productivity and is consistent with the goal of profit maximization. However, it can result in biased allocations of resources, especially when some of those affected by the decision lack representation or a voice in the decision. Utilitarianism can also result in the rights of some stakeholders being ignored. The rights view of ethics is concerned with respecting and protecting individual liberties and privileges such as the rights to privacy, freedom of conscience, free speech, life and safety, and due process. This view would include, for example, protecting the free speech rights of employees who report legal violations by their employers. The positive side of the rights perspective is that it protects individuals’ basic rights. The drawback, however, is that it can hinder productivity and efficiency by creating a work climate more concerned with protecting individuals’ rights than with getting the job done. For example, an individual’s right to privacy might make it difficult to make special arrangements for an employee whose illness is preventing her or him from carrying out job responsibilities. According to the theory of justice view of ethics, managers impose and enforce rules fairly and impartially, and do so by following all legal rules and regulations. A manager following this view would decide to provide the same rate of pay to individuals who are similar in their levels of skills, performance, or responsibility, and not base that decision on arbitrary differences such as gender, personality, race, or personal favourites. Using standards of justice also has pluses and minuses. It protects the interests of those stakeholders who may be underrepresented or lack power, but it can encourage a sense of entitlement that might make employees reduce risk taking, innovation, and productivity. The integrative social contracts theory proposes that ethical decisions be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong. This view of ethics is based on the integration of two “contracts”: the general social contract that allows businesses to operate and defines the acceptable ground rules, and a more specific contract among members of a community that addresses acceptable ways of behaving. In deciding what wage to pay employees in a new factory in Ciudad Juarez, Mexico, Canadian managers following the integrative social contracts theory would base the decision on existing wage levels in the community, rather than paying what Canadians might consider a “fair wage” in that context. Although this theory focuses on looking at existing practices, the problem is that some of these practices may be unethical.50 Which approach to ethics do most businesspeople follow? Not surprisingly, most follow the utilitarian approach. Why? It’s consistent with such business goals as efficiency, productivity, and profits. However, that perspective needs to change because of the changing world facing managers. Trends toward individual rights, social justice, and community standards mean that managers need ethical standards based on nonutilitarian criteria. This new demand is an obvious challenge for managers, because making decisions based on such criteria involves far more ambiguities than using utilitarian criteria such as efficiency and profits. The result, of course, is that managers increasingly find themselves struggling with the question of the right thing to do.

utilitarian view of ethics A view of ethics maintaining that ethical decisions are made solely on the basis of their outcomes or consequences.

rights view of ethics A view of ethics concerned with respecting and protecting individual liberties and privileges.

theory of justice view of ethics A view of ethics in which managers impose and enforce rules fairly and impartially, and do so by following all legal rules and regulations.

integrative social contracts theory A view of ethics proposing that ethical decisions be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong.

92  Chapter 3

Improving Ethical Behaviour Managers can do a number of things if they are serious about reducing unethical behaviour in their organizations. They can seek to hire individuals with high ethical standards, establish codes of ethics and decision rules, lead by example, delineate job goals and performance appraisal mechanisms, provide ethics training, conduct independent social audits, and provide support to individuals facing ethical dilemmas. Taken individually, these actions will probably not have much impact. But when all or most of them are implemented as part of a comprehensive ethics program, they have the potential to significantly improve an organization’s ethical climate. The key term here, however, is potential. There are no guarantees that a well-designed ethics program will lead to the desired outcome. The complexity of ethical dilemmas requires organizations to balance transparency with confidentiality. A focus on ethics is a constant part of day to day actions and not just something to consider when facing a crisis. As an employee you can learn to recognize ethical warning flags associated with comments such as “No one will ever know,” “Well maybe just this once,” or “Everyone does it.” Ethical decision making is based on the same principles as discussed earlier in the chapter. Start by getting the facts and identifying whether the problem is an ethical one. Are there societal or organizational rules or values that apply? Identify alternative solutions from multiple stakeholder perspectives and implement the decision that is not only the “best” but also the “most ethical.” Some firms implement codes of ethics to help encourage regular discussion of ethical issues both within organizations and across the industry. CODES OF ETHICS AND DECISION RULES  Toronto-based Royal Bank of Canada

has had a corporate code of conduct for more than 25 years. Christina Donely, the bank’s senior adviser on employee relations and policy governance, says that the code “focuses on outlining behaviours that support honesty and integrity . . . and covers environmental [and] social issues.”53 However, that is not the way it is in all organizations. The US government passed the Sarbanes–Oxley Act in 2002 to crack down on business wrongdoing in publicly traded companies. Following the American example, the Canadian Securities Administrators put best corporate governance practices into effect in March 2004, although these are not as tough as the American rules.54 As well, the securities regulators in all ten provinces and three territories have proposed that all public companies adopt written codes of ethics and conduct or explain why they do not have them.55 But these proposals carry no enforcement requirements or mechanisms.

What’s Cooking in Hospitality? White Spot Limited restaurants believe in “saving the world, one forkful at a time.” British Columbia’s iconic restaurant brand celebrates over 80 years in business, with an amazing statistic—over 87 percent of British Columbians who dined out in 2010 did so at a White Spot restaurant. White Spot is in the hospitality business, operating the White Spot brand of 64 family casual dining restaurants, and the Triple O’s brand of 55 premium quick-service restaurants. Both concepts are renowned for their unique-tasting food, including the award-winning legendary

burger with secret “Triple O” sauce; their warm and genuine service; and their wide appeal to any demographic, any time. White Spot was named of one Canada’s 50 Best Managed Companies and has taken an aggressive approach to expansion in BC, Alberta, and the Asian market. It features a continuously evolving menu, and a successful Red Seal chef apprenticeship and certification program.51 Triple O’s restaurants have led the way in recycling and composting waste, and have made the decision to switch to only serving fair trade coffee.52

Chapter 3  Decision Making 93

A Question of Ethics Discuss each of the following scenarios and come to an agreement on the most ethical course of action in each situation. Scenario 1: You work for a large Canadian nonprofit organization that holds a big annual conference. The conference rotates throughout Canada on a yearly basis. A resort and conference company in Hawaii invites you and one other person down for a one-week paid vacation so that you can check out their conference facilities. Should you (a) accept the vacation? (b) turn down the vacation? (c) accept the vacation if your boss poses no objection? (d) accept the vacation if the majority of the conference attendees are in favour of holding the conference in Hawaii? Scenario 2: You work for a large conference centre in Saskatchewan. You are anticipating that a bid you submitted for a big tourism project is going to be successful. The final decision is being delayed by bureaucracy with the federal government. It is likely that you are to be awarded the contract, and the tight timelines mean that you need to get started right away. You begin negotiations with a supplier and decide to tell them (a) “Approval is done. We can skip the technical details and start production immediately.”

(b) “Start producing the product and we’ll cover your costs when we sign the contract.” (c) “We are anticipating that the proposal will be approved. We can sign an interim contract to cover the first phase of the project, which we will initiate on a tentative basis.” (d) “The deal is almost done. It is going to be a big deal for both of us, but we need you to shoulder the startup costs until the contract is signed. Then we can work out a contract between the two of us.” Scenario 3: Your newest hire at the restaurant is a friend of yours. Her performance is lacking and her relationships with her coworkers are poor. What do you do? (a) Call her in to discuss her poor performance. (b) Meet with her co-workers and tell them to give her some slack. (c) Ask HR to meet with her and develop a performance management plan. (d) Do nothing because she is new on the job and will perform better in the future.

Ambiguity about what is and is not ethical can be a problem for employees. A code of ethics—a formal statement of an organization’s primary values and the ethical rules it expects its employees to follow—is a popular choice for reducing that ambiguity. About 60 percent of Canada’s 650 largest corporations have some sort of ethics code.56 Codes of ethics are also becoming more popular globally. A survey of business organizations in 80 countries found that 80 percent have formally stated ethics standards and codes of ethics.57 What should a code of ethics look like? It has been suggested that codes should be specific enough to show employees the spirit in which they are supposed to do things yet loose enough to allow for freedom of judgment.58 A survey of companies’ codes of ethics found their content tended to fall into three categories: (1) be a dependable organizational citizen; (2) don’t do anything unlawful or improper that will harm the organization; and (3) be good to customers.59 How well do codes of ethics work? In reality, they are not always effective in encouraging ethical behaviour in organizations. While no comparable Canadian data are available, a survey of employees in US businesses with ethics codes found that 75 percent of those surveyed had observed ethical or legal violations in the previous 12 months, including such things as deceptive sales practices, unsafe working conditions, sexual harassment, conflicts of interest, and environmental violations.60 Companies with codes of ethics may not do enough monitoring. For example, David Nitkin, president of Toronto-based EthicScan Canada, an ethics consultancy, notes that “only about 15 percent of [larger Canadian corporations with codes of ethics] have designated an ethics officer or ombudsman” or provide an ethics hotline, and less than 10 percent offer whistle-blower protection.61 Vancouver public employees were concerned enough about whistle-blower protection that the issue was one of the major stumbling blocks in reaching an agreement for a new collective agreement in summer 2007, leading to a 12-week strike.

code of ethics A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow.

94  Chapter 3

Aleksandar Mijatovic/Fotolia

Does this mean that codes of ethics should not be developed? No. But there are some suggestions that managers can follow. First, an organization’s code of ethics should be developed and then communicated clearly to employees. Second, all levels of management should continually reaffirm the importance of the ethics code and the organization’s commitment to it, and consistently discipline those who break it. When managers consider the code of ethics important, regularly affirm its content, and publicly reprimand rule breakers, ethics codes can supply a strong foundation for an effective corporate ethics program.62 Finally, an organization’s code of ethics might be designed around the ten questions listed in Exhibit 3-10, which can be used as decision rules to guide managers when they handle ethical dilemmas in decision making.63

Corporate Social Responsibility

social responsiveness

Few terms have been defined in as many different ways as social responsibility—profit maximization, going beyond profit making, voluntary activities, and concern for the broader social system are but a few.64 These descriptions fall into two camps. On one side is the classical—or purely economic—view that management’s only social responsibility is to maximize profits.65 On the other side is the socioeconomic position, which holds that management’s responsibility goes beyond making profits to include protecting and improving society’s welfare.66 When we talk about social responsibility (also known as corporate social responsibility, or CSR), we mean a business firm’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. Note that this definition assumes that a business obeys the law and pursues economic interests. But also note that this definition views a business as a moral agent. In its effort to do good for society, it must differentiate between right and wrong. We can understand social responsibility better if we compare it to two similar concepts. Social obligations are those activities a business firm engages in to meet certain economic and legal responsibilities. It does the minimum that the law requires and pursues social goals only to the extent that they contribute to its economic goals. Social responsiveness is characteristic of the business firm that engages in social actions in response to some popular social need. Managers in these companies are guided by social norms and values and make practical, market-oriented decisions

When a business firm engages in social actions in response to some popular social need.

Exhibit 3-10  Ten Questions for Examining the Ethics of a Business Decision

One of Canada’s infamous cases of political corruption occurred under Jean Chrétien’s leadership, when three contracts worth $1.6 million were awarded to Montreal-based Groupaction Marketing Inc. to write three reports on ways to improve the federal government’s profile in Quebec. An audit was called for after it was discovered that two of the three reports were virtually identical, even containing the same spelling errors. The third report was never found.

social responsibility (corporate social responsibility, or CSR) A business firm’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society.

social obligation When a business firm engages in social actions because of its obligation to meet certain economic and legal responsibilities.

SOURCE: Based on L. L. Nash, “Ethics Without the Sermon,” Harvard Business Review,

November–December 1981.

1. Have you defined the problem or issue correctly? 2. How much harm or benefit will occur to others as a result of this action? 3. Will your decision be valid in a month or year from now? 4. Would you view the situation differently from another party’s perspective? 5. How does this activity fit with your own beliefs, values and conscience? 6. How long after the action will the consequences occur, and what is the likelihood of the consequences being bad? 7. How did this situation occur in the first place? 8. Can you discuss the problem with the affected parties before you make the decision? 9. How many people are affected by this action? 10. How would you feel if your actions were published in the newspaper for your mother to read?

Canadastock/Shutterstock

Chapter 3  Decision Making 95

Joel Bakan, professor of law at the University of British Columbia and author of The Corporation, suggests that today’s corporations have many of the same characteristics as a psychopathic personality (that is, self-interested, lacking empathy, manipulative, and reckless in one’s disregard of others). Bakan notes that even though companies have a tendency to act psychopathically, this behaviour is not why they are fixated on profits. Rather, though they may have social responsibilities, the only legal responsibility corporations have is to maximize organizational profits for shareholders.69 He suggests that more laws and more restraints need to be put in place if corporations are to behave more socially responsible, because current laws direct corporations to be responsible to their shareholders, and they make little mention of responsibility toward other stakeholders.

about their actions.67 A Canadian business that meets federal pollution standards or safe-packaging regulations is meeting its social obligation because laws mandate these actions. However, when it provides on-site child-care facilities for employees or packages products using recycled paper, it’s being socially responsive to working parents and environmentalists who have voiced these social concerns and demanded such actions. For many businesses, their social actions are probably better viewed as being socially responsive rather than socially responsible, at least according to our definitions. However, such actions are still good for society. Social responsibility adds an ethical imperative to do those things that make society better and to not do those that could make it worse. A great deal of attention has been focused on the extent to which organizations and management should act in socially responsible ways. On one side is the classical—or purely economic—view, and on the other side is the socioeconomic view. Some even try to measure their “triple bottom line,” which takes into account not only financial responsibilities but social and environmental ones as well.68 Examples of triple bottom line (3BL) issues are presented at the end of each chapter throughout the text. Exhibit 3-11 shows four different approaches an organization can take toward corporate social responsibility.70 The defensive approach is consistent with the classical view, while the accommodative and proactive approaches are consistent with the socioeconomic view.

investments as a popular way for investors to be more socially responsible. How do socially responsible activities affect a company’s economic performance? Findings from a number of research studies can help us answer this question.71 The majority of these studies show a positive relationship between social involvement and economic performance. One study found that

Tannene/Fotolia

CORPORATE SOCIAL RESPONSIBILITY AND ECONOMIC PERFORMANCE  In the opening vignette, we discussed green

A proactive approach requires strong leadership to guide employees to become socially responsible.

96  Chapter 3

Exhibit 3-11  Approaches to Corporate Social Responsibility Obstructionist Approach

Defensive Approach

Accommodative Approach

Proactive Approach

Disregard for social responsibility

Minimal commitment to social responsibility

Moderate commitment to social responsibility

Strong commitment to social responsibility

No Social Responsibility

High Social Responsibility

firms’ corporate social performance was positively associated with both prior and future financial performance.72 But we should be cautious about making any compelling assumptions from these findings because of methodological questions associated with trying to measure “corporate social responsibility” and “economic performance.”73 Most of these studies determined a company’s social performance by analyzing the content of annual reports, citations of social actions in news articles on the company, or “reputation” indexes based on public perception. Such criteria certainly have drawbacks as reliable measures of corporate social responsibility. We can also look at what consumers say about corporate social responsibility. A recent survey conducted by GlobeScan, which specializes in corporate issues, found that “83 percent of Canadians believe that corporations should go beyond their traditional economic role; 51 percent say they have punished a socially irresponsible company in the past year.”74 As for naming a socially responsible company, 43 percent of Canadians said they could not do so. The importance of corporate social responsibility surfaced in the 1960s when social activists questioned the singular economic objective of business. Even today, good arguments can be made for and against businesses being socially responsible. (See Exhibit 3-12.) Yet, arguments aside, times have changed. Managers regularly confront decisions that have a dimension of social responsibility: philanthropy, pricing, employee relations, resource conservation, product quality, and doing business in countries with oppressive governments are just a few. To address these issues, managers may reassess packaging design, recyclability of products, environmental safety practices, outsourcing decisions, foreign supplier practices, employee policies, and the like. Another way to look at this issue is whether social involvement affects a company’s economic performance, which numerous studies have done.75 Although most found a small positive relationship between social involvement and economic performance, no generalizable conclusions can be made because these studies have shown that the relationship is affected by various contextual factors such as firm size, industry, economic conditions, and regulatory environment.76 Other researchers have questioned causation. If a study showed that social involvement and economic performance were positively related, this didn’t necessarily mean that social involvement caused higher economic performance. It could simply mean that high profits afforded companies the “luxury” of being socially involved.77 Such concerns can’t be taken lightly. In fact, one study found that if the flawed empirical analyses in these studies were “corrected,” social responsibility had a neutral impact on a company’s financial performance.78 Another found that participating in social issues not related to the organization’s primary stakeholders had a negative effect on shareholder value.79 Despite all these concerns, after reanalyzing several studies, other researchers have concluded that managers can afford to be (and should be) socially responsible.80

Chapter 3  Decision Making 97

Exhibit 3-12  Arguments For and Against Social Responsibility SOURCE: S. P. Robbins and M. Coulter, Management, 13th Ed., © 2016, p. 154. Reprinted and electronically

reproduced by permission of Pearson Education, Inc., New York, NY.

FOR

AGAINST

Public expectations

Public opinion now supports businesses pursuing economic and social goals.

Long-run profits Socially responsible companies tend to have more secure long-run profits.

Ethical obligation

Businesses should be socially responsible because responsible actions are the right thing to do.

Public image

Businesses can create a favourable public image by pursuing social goals.

Better environment

Business involvement can help solve difficult social problems.

Discouragement of further governmental regulation

By becoming socially responsible, businesses can expect less government regulation.

Balance of responsibility and power

Businesses have a lot of power and an equally large amount of responsibility is needed to balance against that power.

Stockholder interests

Social responsibility will improve a business’s stock price in the long run.

Possession of resources

Businesses have the resources to support public and charitable projects that need assistance.

Superiority of prevention over cures

Businesses should address social problems before they become serious and costly to correct.

Violation of profit maximization

Business is being socially responsible only when it pursues its economic interests.

Dilution of purpose

Pursuing social goals dilutes business’s primary purpose—economic productivity.

Costs

Many socially responsible actions do not cover their costs and someone must pay those costs.

Too much power

Businesses have a lot of power already; if they pursue social goals, they will have even more.

Lack of skills

Business leaders lack the necessary skills to address social issues.

Lack of accountability There are no direct lines of accountability for social actions.

Chapter Summary Learning Objectives Checklist 3.1 Describe the steps in the decision-making process.

3.2

The steps include identifying a problem and the decision criteria; allocating weights to those criteria; developing, analyzing, and selecting an alternative that can resolve the problem; implementing the alternative; and evaluating the decision’s effectiveness.

It is often assumed that managers make decisions that follow the steps of the rational decision-making process. However, not all decisions follow that process for a variety of reasons. Often managers work with bounded rationality because they are not able to collect and process all the information

Define the factors that affect how decisions are made.

98  Chapter 3 on all possible alternatives. Or they might make a satisficing decision—one that is “good enough” rather than the “best.” Managers sometimes use intuition to enhance their decisionmaking process. Managers also need to decide whether they should make decisions themselves or encourage a team to help make the decision. Teams can make better decisions in many cases, but the time taken to make the decision generally increases. Managers are affected by a variety of biases and errors: overconfidence bias, selective perception bias, confirmation bias, sunk-costs error, escalation-of-commitment error, self-serving bias, and hindsight bias.

3.3 Discuss contemporary issues in managerial decision making. As managers deal with employees from diverse cultures, they need to recognize common and accepted behaviour when asking them to make decisions. Some individuals may not be as comfortable as others with being closely involved in decision making, or they may not be willing to experiment with something radically different. Also, managers need to be creative in their decision making because creativity allows them to appraise and understand the problem more fully, including “seeing” problems that others can’t see. Design thinking also influences the way that managers approach decision making, especially in terms of identifying problems and how they identify and evaluate alternatives. Finally, big data is changing what and how decisions are made, but managers need to evaluate how big data might contribute to their decision making.

3.4 Describe how ethics and social responsibility relate to decision making. Ethics refers to rules and principles that define right and wrong conduct. There are four views of ethics: the utilitarian view, the rights view, the theory of justice view, and the integrative social contracts theory. The utilitarian view of ethics maintains that ethical decisions are made solely on the basis of their outcomes or consequences. The rights view of ethics is concerned with respecting and protecting individual liberties and privileges. According to the theory of justice view of ethics, managers impose and enforce rules fairly and impartially,

following all legal rules and regulations. The integrative social contracts theory proposes that ethical decisions be based on existing ethical norms in industries and communities. To improve ethical behaviour, managers can hire individuals with high ethical standards, design and implement a code of ethics, lead by example, undertake performance appraisals, provide ethics training, conduct independent social audits, and provide formal protective mechanisms for employees who face ethical dilemmas. Beyond ethics, managers are increasingly asked to be more socially responsible in the decisions they make. In doing so, some organizations are likely to simply give lip service to social responsibility, while others are much more committed to actually being socially responsible.

Discussion Questions 1. Describe a decision you have made that closely aligns with the assumptions of perfect rationality. Compare this with the process you used (or would use) to select your major. Did you depart from the rational model in your choice of major? Explain. 2. Is the order in which alternatives are considered more critical under assumptions of perfect rationality or bounded rationality? Why? 3. Explain how a manager might deal with making decisions under conditions of uncertainty. 4. Give an example drawn from your personal decision making that illustrates satisficing. What steps would be necessary to make a better decision in that situation? 5. How does escalation of commitment affect decision making? Have you had an example of this in your decision making? 6. Why do you think organizations have increased the use of groups for making decisions and when would you recommend using groups to make decisions? 7. Is there a difference between wrong decisions and bad decisions? Why do good managers sometimes make wrong decisions? Bad decisions? How might managers improve their decision-making skills? 8. Discuss the role that stakeholders play in the four approaches to corporate social responsibility. 

Developing Management Skills Dilemma Suppose you are sitting at your desk examining a request a customer has just emailed to you. The customer is proposing a project that would be very lucrative for your company but has an extremely demanding time schedule over the next two weeks. Yesterday, one of your long-time

employees gave two weeks’ notice of his desire to leave the company and spend more time with his ailing mother. Your employee is well qualified to meet the requirements of the request but it would force his last two weeks to be tremendously busy. How would you decide whether you should take the customer up on her request?

Chapter 3  Decision Making 99

Becoming a Manager • Pay close attention to decisions you make and how you make them. • When you feel you have not made a good decision, assess how you could have made a better one. Which step of the decision-making process could you have improved? • Work at developing good decision-making skills. • Read books about decision making. • Ask people you admire for advice on how they make good decisions.

Diversity Matters: The Value of Diversity in Decision Making81 Have you decided what your major is going to be? How did you decide? Do you feel your decision is a good one? Is there anything you could have done differently to make sure that your decision was the best one? Making good decisions is tough! Managers are continuously making decisions—for example, developing new products, establishing weekly or monthly goals, implementing advertising campaigns, reassigning employees to different work groups, resolving customers’ complaints, or purchasing new tablets for sales representatives. One important suggestion for making

better decisions is to tap into the diversity of the work group. Drawing upon the ideas of diverse employees can prove valuable to a manager’s decision making. Why? Diverse employees can provide fresh perspectives on issues. They can offer differing interpretations on how a problem is defined and may be more open to trying new ways of doing things. Diverse employees usually are more creative in generating alternatives and more flexible in resolving issues. Getting input from diverse sources increases the likelihood of finding creative and unique solutions. Even though diversity in decision making can be valuable, it has drawbacks. The lack of a common perspective usually means that more time is spent discussing the issues. Communication may be a problem, particularly if language barriers are present. Seeking out diverse opinions can make the decision-making process more complex, confusing, and ambiguous. With multiple perspectives on the decision, it may also be difficult to reach a single agreement or to agree on specific actions. Although these drawbacks are valid concerns, the value of diversity in decision making outweighs the potential disadvantages. When you have worked in teams, what advantages and disadvantages arose because of the diversity (or lack of diversity) in the group? What measures could be taken to make sure that diversity is an asset for a team, rather than something that causes problems?

Team Exercises 3BL: The Triple Bottom Line A Canadian clothing company was losing market share to some of its US competitors and began to outsource manufacturing of most of its products to Sri Lanka. This practice resulted in a negligible increase in product defects, but the cost savings were driving increased profitability by upward of 15 percent per month. Management was thrilled, and the company shareholders were buoyed by the results. An investigative journalism report uncovered some illegal practices at the Sri Lankan factory. Toxic effluent was being disposed of without proper handling and safeguard protections, and much of the waste was being dumped in back alleys and open spaces. Wages were paid on productivity targets, and basic pay was cut if management targets were not achieved. Intimidation and abuse were common when workers failed to reach production targets—in one example, 50 workers were locked in an unventilated room

without access to toilet facilities, water, and food for over four hours as a punishment. The report found that excessive overtime was an accepted practice, and workers were forced to work up to 130 hours per month in overtime, with one-quarter of the employees not receiving any additional pay for their overtime. Three-quarters of the workers at this factory in Sri Lanka were young women from rural areas. They were told when recruited that the factories prefer them not to marry and were given pregnancy tests to weed out pregnant women. Sexual intimidation and abuse were common. A decision that was having a positive impact on profit was turning out to be negative for people and the planet. What could the company do to deal with this situation?

THINKING STRATEGICALLY ABOUT 3BL There are eight steps that can be used to help navigate confusing ethical issues such as the Sri Lankan factory problems.

100  Chapter 3 1. Recognize the ethical issue.

Although labour practices may be more lax in Sri Lanka, the treatment of the workers is an ethical dilemma.

2. Who will be affected?

Company employees and shareholders might be concerned, but the buck stops with the management team of the Canadian company.

3. Get the facts.

The investigative report may have its own agenda. Get information from workers at the factory as well as the company running it on behalf of the Canadian company.

4. Is it a case of right versus wrong?

Could you defend your choice to the broader public? To your friends and family?

5. Is it a choice between two “goods” or between two “bads”?

Are there core values that are pitted against each other? Is it business needs (like staying in business) versus the needs of the broader community? Is it a truth versus loyalty situation (that exists for whistle-blowers)?

6. Apply ethical standards and principles to evaluate alternative courses of action.

Which option will produce the most good and do the least harm? Which option best serves the community as a whole?

7. Make a decision.

You can bury yourself in facts and opinions, but at some point you just have to make the ethical decision.

8. Reflect and act on the outcome.

How can you apply this learning to future decisions? What ethical dilemmas can we anticipate?

Individual Versus Group Decisions Objective: To contrast individual and group decision making. Time: 15 minutes. Step 1: You have five minutes to read the following story and individually respond to each of the 11 statements as either true, false, or unknown. THE STORY A sales clerk had just turned off the lights in the store when a man appeared and demanded money. The owner opened a cash register. The contents of the cash register were scooped up, and the man sped away. A member of the police force was notified promptly.  STATEMENTS ABOUT THE STORY 1. A man appeared after the owner had turned off his store lights. True, false, or unknown? 2. The robber was a man. True, false, or unknown? 3. The man did not demand money. True, false, or unknown? 4. The man who opened the cash register was the owner. True, false, or unknown? 5. The store owner scooped up the contents of the cash register and ran away. True, false, or unknown? 6. Someone opened a cash register. True, false, or unknown? 7. After the man who demanded the money scooped up the contents of the cash register, he ran away. True, false, or unknown? 8. The cash register contained money, but the story does not state how much. True, false, or unknown?

9. The robber demanded money of the owner. True, false, or unknown? 10. The story concerns a series of events in which only three persons are referred to: the owner of the store, a man who demanded money, and a member of the police force. True, false, or unknown? 11. The following events in the story are true: Someone demanded money; a cash register was opened; its contents were scooped up; a man dashed out of the store. True, false, or unknown? Step 2: After you have answered the 11 questions individually, form groups of four or five members each. The groups have 10 minutes to discuss their answers and agree on the correct answers to each of the 11 statements. Step 3: Your instructor will give you the correct answers. How many correct answers did you get at the conclusion of Step 1? How many did your group achieve at the conclusion of Step 2? Did the group outperform the average individual? Who was the best individual? Discuss the implications of these results. Step 4: Analyze your team’s decision making by answering the following questions: • Did you clearly identify the desired outcome? • Were all members prepared to discuss the statements? • Did you encourage open and active discussion of the story? • Did you make and communicate guidelines for the decisions? • Did you direct and manage the discussion? • Did you get a commitment from all members of the team on the correct answers?

Chapter 3  Decision Making 101

Business Cases The Business of Blue Jays Baseball Baseball has long been called “America’s national pastime” with a long history of traditions such as large groups of scouts watching thousands of games to find players for their ball club. Commonly used statistics such as stolen bases, runs batted in, and batting averages that were typically used to evaluate players’ abilities and performances were becoming inadequate and poor gauges of potential. The game changed with Sabermetrics, the use of advanced statistics to predict a player’s future performance. As the film Moneyball (based on an earlier book by the same name) emphasized, statistics—the “right” statistics—are crucial aspects of effective decision making in the sport of baseball. The central premise of Moneyball was that the collected wisdom of baseball insiders (players, managers, coaches, scouts, the front office) had pretty much been flawed almost from the onset of the game. Rigorous statistical analysis showed that on-base percentages and slugging percentages were better indicators of a player’s offensive potential. It has turned the game of baseball into a game of number crunching. In 2013, the Toronto Blue Jays hired a baseball operations analyst to capitalize on Sabermetrics. The Jays used what was at the time an advanced metric called fWAR (Wins Above Replacement), a complete measure of a player’s contributions to his team. The WAR value indicates how many more wins the player contributed for his team than a replacement player would produce. In 2018, wRC+ was the hottest metric, standing for weighted runs created plus. According to Fangraphs, wRC+ is used to measure a batter’s value.

was hired as a bench coach for Toronto. He was the hitting coach for the Houston Astros from 2015 to 2018. They had the highest wRC+ of all MLB teams during that four-year span (110 wRC+).82 The goal of all this number crunching? To make better decisions. Team managers want to allocate their limited payroll in the best way possible to help the team be a winner. The use of this kind of data analysis helps balance qualitative and quantitative decision making. It is not just the Blue Jays. The Edmonton Oilers and Toronto Maple Leafs have also begun working with advanced data analysis to make hockey decisions.

Questions 1. Is it appropriate for baseball managers to use only quantitative, objective criteria in evaluating their players? Why? 2. Describe how baseball front-office executives and college coaches could use each of the following to make better decisions: (a) rationality; (b) bounded rationality; and (c) intuition. 3. Can there be too much information in managing the business of baseball? Discuss.

Coca-Cola and the Science of OJ

Logo of Fangraphs

The Coca-Cola Company (Coke) is in a league by itself.83 As the world’s largest and number one nonalcoholic beverage company, Coke makes or licenses more than 3500 drinks in more than 200 countries. Coke has built $15-­billion brands and also claims four of the top five soft-drink brands (Coke, Diet Coke, Fanta, and Sprite). Each year since 2001, global brand consulting firm Interbrand, in conjunction with Bloomberg BusinessWeek, has identified Coke as the number one best global brand. Coke’s executives Weighted Runs Created Plus (wRC+) is a rate statistic which attempts to credit and managers are focusing on ambitious, longa hitter for the value of each outcome (single, double, etc.) rather than treating term growth for the ­company—­doubling Coke’s all hits or times on base equally, while also controlling for park effects and the business by 2020. current run environment. wRC+ is scaled so that league average is 100 each year and every point above or below 100 is equal to 1 percentage point better or A big part of achieving this goal is building worse than league average. This makes wRC+ a better representation of offensive up its Simply Orange juice business into a powervalue than batting average, RBI, OPS, or wOBA. ful global juice brand. Decision making is playing (wRAA/PA + LgR/PA) + (LgR/PA - (Park Factor * LgR/PA)) a crucial role as managers try to beat rival PepwRC+ = * 100 (AL or NL wRC/PA excluding pitchers) siCo, which has a 40 percent market share in the SOURCE: S. Slowinski, WRC and WRC+, https://www.fangraphs.com/library/offense/wrc/. not-from-concentrate juice category compared to Coke’s 28 percent share. And those managers are not leavIn 2018, the Jays made two other hires to propel them ing anything to chance in this hot—umm, cold—pursuit! back into contention in the toughest division in baseball, the You would think that making orange juice (OJ) would AL East. Charlie Montoyo was hired as manager, someone be relatively simple—pick, squeeze, pour. While that would with a reputation for working with data driven front offices probably be the case in your own kitchen, in Coke’s case, and innovative baseball moves such as aggressive defensive that glass of 100 percent OJ is possible only through “satellite shifts, player platoons, and bullpen openers. Dave Hudgens

FANGRAPHS

102  Chapter 3 imagery, complicated data algorithms, and even a juice pipeline.” The purchasing director for Coke’s massive Florida juice packaging facility says, “Mother Nature doesn’t like to be standardized.” Yet standardization is what it takes for Coke to make this work profitably. And producing a juice beverage is far more complicated than bottling soda. Using what it calls its “Black Book model,” Coke wants to ensure that customers have consistently fresh, tasty OJ 12 months a year despite a peak growing season that is only three months long. To help in this, Coke is relying on a “revenue analytic consultant.” He says, “Orange juice is definitely one of the most complex applications of business analytics.” To consistently deliver an optimal blend given the challenges of nature requires some 1 quintillion (that is 1 followed by 18 zeroes) decisions. There is no secret formula to Black Book; it is simply an algorithm. It includes detailed data about the more than 600 different flavours that make up an orange and about customer preferences. This data is correlated to a profile of each batch of raw juice. The algorithm then determines how to blend batches to match a certain taste and consistency. At the juice bottling plant, “blend technicians carry out Black Book instructions prior to bottling.” The weekly OJ recipe they use is “tweaked” constantly. Black Book also includes data on external factors such as weather patterns, crop yields, and other cost pressures. This is useful for Coke’s decision makers as they ensure they will have enough supplies for at least 15 months. One Coke executive says, “If we have a hurricane or freeze, we can quickly replan the business in five or ten minutes just because we’ve mathematically modelled it.”

Credit Valley Hospital

Questions

Questions

The Credit Valley Hospital is known for its innovative, can-do approach to providing quality patient care to the people of Mississauga and the surrounding region (approximately one million people). It also developed an ethical decision-making framework called IDEA which stands for • Identify the facts. • Determine the relevant ethical principles. • Explore the options. • Act. Healthcare organizations face major financial constraints yet must still provide quality care, which leads to making difficult decisions. IDEA provides a step-by-step process to guide hospitals and their administrators in dealing with ethical issues that come up in the delivery of healthcare. Healthcare organizations face ethical issues primarily at two levels: clinical and organizational. Clinical ethical decisions may involve specific patients or staff members (e.g., Should this patient’s treatment be discontinued?). Organizational ethical decisions tend to impact groups of patients or staff rather than individuals, and may deal with organizational units and systems (e.g., Should the cancer treatment program be reduced?). At Credit Valley Health, IDEA helps employees ­approach difficult ethical issues in a systematic and effective way.

1. Which decisions in this story could be considered unstructured problems? Structured problems?

1. What is the importance of IDEA being a step-by-step process?

2. How does the Black Book help Coke’s managers and other employees in decision making?

2. Can this approach be used by organizations outside of healthcare?

3. What does Coke’s big data have to do with its goals?

Chapter 3  Decision Making 103

Ethical Decision-Making Framework If you answer YES to any of the following questions, you may be encountering an ethical issue. 1) Is this an issue of “right or wrong”? 2) Is there a conflict of values and beliefs? 3) Would I feel comfortable telling my mother about this?

Identify the facts

What is the ethical issue? • What is the medically recommended course of action? • What are the patient’s preferences? • What evidence is relevant to this dilemma? • Are there any contextual factors to consider?

Have relevant stakeholders provided their perspective? • Is there a code of ethics or do our standards of medical practice apply here? Determine the • What principles/criteria do stakeholders consider most relevant to this issue? relevant ethical • Are there any additional factors that ought to be considered? principles

Explore the options

Act

What is the most ethically justifiable alternative? • What are 2-3 possible alternative course of action? • What are the pros and cons of each alternative? • Are the options consistent with legislation and policies? With the mission and vision? • Does this support our commitment to serve and protect our patients?

Are we comfortable with this decision? • How best to implement the recommendation to ensure the best possible health outcome for the patient? • Can we validate this decision with other health care professionals? • Is there anything we could do to produce a better outcome for the patient?

SOURCE: Based on The IDEA: Ethical Decision-Making Framework by Trillium Health Partners (2013). Available at https://­

trilliumhealthpartners.ca/aboutus/Documents/IDEA-Framework-THP.pdf.

Chapter 4

Stefan Riches/Stantec

Planning and Strategic Management

Learning Objectives 4.1 Discuss the nature and purposes of planning. 4.2 Compare and contrast approaches to goal setting and planning. 4.3 Describe the steps in strategic management. 4.4 Describe what kinds of strategies managers use. Planning provides companies an opportunity to align their resources with their key priorities. Stantec is a professional consulting firm focusing on planning, engineering, architecture, interior design, surveying, environmental sciences, and project economics. With 22 000 employees in more than 400 locations (including seventy in Canada), Stantec is a top-ten global design firm. In 2014, the company aligned its internal structure to mesh more closely with that of its clients and began to focus on five business operating units: buildings, energy and resources, environmental services, infrastructure, and water. This realignment provides enhanced client support and greater leadership accountability, and better positions Stantec for future growth and success while maintaining the core strategic elements. This change in strategic focus was all about creating vibrant communities and designing with community in mind, Stantec’s new mantra. The philosophy was linked with company values, and then initiatives were developed relating to employees, clients, business processes, and overall firm performance. Stantec has focused on organization-wide communication of the values that provide the foundation of its strategic plan. Their business objective is to leverage local strength, knowledge, and relationships to meet client needs in more creative and personalized ways. Stantec attempts to connect to projects on a personal level and advance the quality of life in communities across the globe.

104

Chapter 4  Planning and Strategic Management 105 Stantec follows a long-range, five-year strategy process that includes review of current strategies, plans made, and challenges in its business environment. As you learn more about this company, its business, and the challenges it has faced in recent years, think about all the different aspects of the business that the company’s managers and board of directors have to consider when making their plans for the future. Managers everywhere need to plan. In this chapter, we present the basics of planning: what it is, why managers plan, and how they plan. We also discuss the importance of strategic management and choosing effective strategies to develop a competitive advantage. The success of any strategy depends partly on how effectively it is communicated to employees, clients, and investors.

Here is a common myth about planning:

 Planning is a waste of time because no one can predict the future. MANAGEMENT MYTH DEBUNKED People say that the future is unpredictable. No matter how well you plan, there’s always the unexpected. For managers it might be a sudden recession, a new and innovative product from a competitor, the loss of a key customer, the loss of a key employee, or the breakdown of a long-established business model. This logic has led many to conclude that planning is a waste of time. Well, it’s not. Flexible planning that includes multiple scenarios can prepare managers for a variety of situations, eliminating some of the unpredictability. For full details on this management myth, check out our Bust the Myth video in Revel.

What Is Planning and Why Do Managers Need to Plan? 4.1 Discuss the nature and purposes of planning. As we stated in Chapter 1, planning involves defining goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate the work needed to achieve the goals. It is concerned both with ends (what is to be done) and means (how it is to be done). For example, you and your classmates may want to organize a large graduation dinner dance. To do so, you would set goals, establish a strategy, develop plans, and assign committees to get the work done. Those committees would meet on a regular basis to plan all of the activities

planning A management function that involves defining goals, establishing a strategy for achieving those goals, and developing plans to integrate and coordinate activities.

Be the Consultant: Making Meetings More Effective Try these tips at your next group meeting, and discuss the impact they made on your meeting. Objectify Yourself

The meeting needs to have a clear outcome: “At the end of the meeting, we will . . .”

Make a decision? Generate ideas? Update status?

The Basket Case

Collect everyone’s tablet or cell phone at the start of the meeting and return them at the end of the meeting.

Collecting or turning off electronic devices will reduce distractions and keep people on task.

Share and Share Again

Distribute the agenda in advance. Get the minutes out quickly.

Attendees can prepare more effectively in advance. Having an agenda allows you to keep the meeting on track and on time. Momentum will not be lost if you can get the action items in the hands of the participants.

Take a Stand

Motivational speaker and author Jon Petz suggests having the meeting in a space with no chairs, tables, or laptops— only a whiteboard.

People will work more quickly and will not extend the time of the meeting unnecessarily.

Two-Minute Warning

Petz suggests that each participant gets two minutes uninterrupted to state his or her case or provide information.

Participants must stay focused. Cut people off if they go over, and reward them if they finish sooner.

106  Chapter 4 associated with the graduation event. The Be the Consultant box offers some tips for those meetings.

Pressmaster/Shutterstock

Planning Defined Planning can either be formal or informal. In informal planning, nothing is written down, and there is little or no sharing of goals with others. Informal planning is general and lacks continuity. Although more common in smaller organizations where the ownermanager has a vision of where he or she wants the business to go and how to get there, informal planning does exist in some large organizations. At the same time, some small businesses may have very sophisticated planning processes and formal plans. When we use the term planning in this text, we A two-hour meeting with four people leads to a potential productivity loss of mean formal planning. In formal planning, specific eight hours. goals covering a period of years are defined. These goals are written and shared with organization members. Then a specific action program for the achievement of these goals is developed: Managers clearly define the path they want to take to get the organization and the various work units from where they are to where they want them to be. Setting goals, establishing a strategy to achieve those goals, and developing a set of plans to integrate and coordinate activities seem pretty complicated. So why would managers want to plan? Does planning affect performance? We address these issues next. Effective plans need to be ongoing, accurate, and flexible.

Why Do Managers Plan? Planning is often called the primary management function because it establishes the basis for all the other functions that managers perform. Without planning, managers would not know what to organize, lead, or control. In fact, without plans, there would not be anything to organize, lead, or control! So why do managers plan? Managers plan for at least four key reasons. (See Exhibit 4-1  Reasons for Planning Exhibit 4-1.) e aus Bec

nges in the Enviro of Cha nme nt

Set the standards to facilitate control

Provide direction

Managers engage in planning to:

Minimize waste and redundancy

Reduce the impact of change

Planning provides direction to both managers and •  ­employees.  When everyone in the organization or work unit understands what they must contribute to reach goals, they can coordinate their activities, cooperate with each other, and do what it takes to accomplish those goals. Without planning, departments and individuals might work at cross purposes, preventing the organization from moving efficiently toward its goals. •  Second, planning reduces uncertainty  by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. This increased preparation for change helps develop managers’ skills and provides flexibility to the organization. •  Third, planning reduces overlapping and     wasteful ­activities.  Coordinating work activ    ities in advance is likely to uncover redundancy and enhance time management. Furthermore, when means and ends are made clear through planning, inefficiencies become obvious and can be corrected or eliminated.

Chapter 4  Planning and Strategic Management 107

Golden Pixels LLC/Shutterstock

•  Finally, planning establishes the goals or standards that facilitate control.  If employees are unsure of what they are trying to accomplish, how can they determine whether they have actually achieved it? When managers plan, they develop the goals and the plans. When managers control, they compare actual performance against the goals, identify any significant deviations, and take any necessary corrective action. Without planning, there are no goals against which to measure or evaluate work efforts.

Planning and Performance Is planning worthwhile? Do managers and organizations that plan outperform those that do not? Intuitively, you would expect the answer to be a resounding yes. While results from studies examining performance in organizations that plan are generally positive, we cannot say organizations that formally plan always outperform those that do not plan.

Planning is like a blueprint for growing a business. What actions must be taken and expenditures made to accelerate the company’s revenue growth?

Studies show that formal planning is associated with higher profits and higher return on assets.1

Criticisms of Planning It makes sense for an organization to establish its direction. But critics have challenged some of the basic assumptions underlying planning. • Planning may create rigidity.2  Formal planning efforts can lock an organization into specific goals to be achieved within specific time-tables. Such goals may have been set under the assumption that the environment would not change. Forcing a course of action when the environment is fluid can be a recipe for disaster. What to do about it? Managers need to remain flexible and not be tied to a course of action simply because it is the plan. • Formal plans cannot replace intuition and creativity.3  Successful organizations are typically the result of someone’s innovative vision, which has a tendency to become formalized as it evolves. If formal planning efforts turn that vision into a programmed routine, disaster may be awaiting the firm. What to do about it? Planning is meant to enhance and support intuition and creativity instead of replacing it. • Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival.4  Formal planning has a tendency to focus on how to capitalize on existing business opportunities within an industry. It often does not allow managers to consider creating or reinventing an industry. What to do about it? Managers need to be open to untapped opportunities and new directions. • Formal planning reinforces success, which may lead to failure.5  A familiar adage is, “If it ain’t broke, don’t fix it.” However, successful plans may provide a false sense of security, generating more confidence in the formal plans than is warranted. Many managers will not face the unknown until they are forced to do so by environmental changes. By then, it may be too late! What to do about it? Managers need to face the unknown and be prepared to adapt before environmental changes make it too late to do so.

108  Chapter 4

How Do Managers Set Goals and Develop Plans? 4.2 Compare and contrast approaches to goal setting and planning. goals (objectives) Desired outcomes for individuals, groups, or entire organizations.

plans Documents that outline how goals are going to be met and describe resource allocations, schedules, and other necessary actions to accomplish the goals.

Planning involves two important elements: goals and plans. Goals (objectives) are the desired outcomes for individuals, groups, or entire organizations.6 Plans are documents that outline how goals are going to be met and that typically describe resource allocations, schedules, and other necessary actions to accomplish the goals. As managers plan, they are developing both goals and plans.

What Types of Goals Do Organizations Have, and How Do They Set Those Goals? Goals provide the direction for all management decisions and actions and form the criteria against which actual accomplishments are measured. That is why they are often called the foundation of planning. Everything organizational members do should be oriented toward helping both their work units and the organization achieve the goals that have been set. Goals and objectives are very similar and are often confused with each other. The main differences between goals and objectives are in scope, specificity, and time frame. Goals tend to be broader, more general, and have a longer time frame. Objectives are narrow and more specific, with a shorter time frame (think of precise short-term targets). Stantec, the company introduced at the beginning of the chapter, lists the following business objectives as “the foundation for [their] future accomplishments”:7 1. We’ll continue to build an inspiring, inclusive work environment that attracts, supports, and develops world-class talent. 2. We will pursue and win work that transforms our communities and inspires our employees. 3. We will execute projects exceptionally for our clients. 4. We will combine what we know succeeded in the past with curiosity, creativity, and investment into what will succeed tomorrow. 5. We will embrace and enhance our collaborative business model and integrated platform for competitive and operational advantage. 6. We will make strategic acquisitions that strengthen our ability to improve the communities, sectors, and geographies we serve. In addition to these objectives, Stantec created a Diversity & Inclusion initiative (D&I) to improve the diversity of its workforce. The Canadian Institute of Diversity and Inclusion (CIDI) surveyed Canadian employers and found that 80 percent of them considered diversity a key strategic initiative; yet only 20 percent measured it in terms of return on investment (ROI). The first step toward diversity is for an organization to conduct an employee census or ask employees to self-identify based on demographic categories. Understanding demographics allows organizations to identify gaps in representation and determine inclusion issues and barriers to advancement, helping them set goals, establish appropriate programs and initiatives, and measure results, and ensuring that they are building a pipeline of the leaders of tomorrow. CIDI found that the following standard metrics were commonly used:8 • Representation of diverse/under-represented groups by job level • Recruitment, promotion, and turnover statistics by demographic group • Employee engagement scores by demographic group • Diversity-related or inclusiveness questions on employee surveys

Chapter 4  Planning and Strategic Management 109

• Human rights, harassment, or discrimination complaints • Participation in training and diversity, inclusiveness, equity, and human rights • Participation in employee resources/networking groups Traditional goal setting features goals set at the top of the organization and then broken into subgoals for each organizational level. This process works reasonably well when an organization is hierarchically structured. This traditional perspective assumes that top managers know what is best because they see “the big picture.” Thus, the goals that are established and passed down to each succeeding level serve to direct and guide, and in some ways constrain, individual employees’ work behaviours. Employees work to meet the goals that have been assigned in their areas of responsibility. As an alternative to traditional goal setting, many organizations use management by objectives (MBO), a process of setting mutually agreed-upon goals and using those goals to evaluate employee performance. Managers would jointly determine performance goals with employees, periodically review progress toward accomplishing these goals, and allocate rewards based on this progress. Rather than using goals only as controls, MBO uses them to motivate employees as well. Employees will be more committed to goals that they help set. These goals must align with the overall organizational goals set by top management. Management by objectives consists of four elements: goal specificity, participative decision making, an explicit time period, and performance feedback.9 Its appeal lies in its focus on the accomplishment of participatively set objectives as the reason for and motivation behind individuals’ work efforts. Exhibit 4-2 lists the steps in a typical MBO program. Studies of actual MBO programs confirm that they can increase employee performance and organizational productivity, provided top management involvement and commitment were present.10

traditional goal setting An approach to setting goals in which goals are set at the top of the organization and then broken into subgoals for each organizational level.

management by objectives (MBO) An approach to goal setting in which specific measurable goals are jointly set by employees and their managers, progress toward accomplishing those goals is periodically reviewed, and rewards are allocated on the basis of this progress.

CHARACTERISTICS OF WELL-DESIGNED GOALS  Goals are not all created equal.

Some goals are better than others. How can you tell the difference? “Well-designed” goals should have the following characteristics:11 • written in terms of outcomes rather than actions • measurable and quantifiable • clearly specify a time frame • challenging yet attainable • flexible • feature participation and feedback from all necessary organizational members

Exhibit 4-2  Traditional Goal Setting Versus Management by Objectives

”I want to see a significant improvement in this division’s profits.”

”Don’t worry about quality; just work fast.”

”We need to improve the company’s performance.” Top Management’s Objective Division Manager’s Objective Department Manager’s Objective Individual Employee’s Objective

”Increase profits regardless of the means.”

Set Corporate Objectives

Reward employees for achieved objectives

Jointly set employee objectives

MBO Program

Review objectives and provide feedback

Develop action plans to achieve objectives

110  Chapter 4 STEPS IN GOAL SETTING  What steps should managers follow in setting goals? The goal-setting process consists of six steps: vision and mission The purpose of the organization.

1. Review the organization’s vision and mission. The vision and mission reflect the purpose of an organization as statements of what the organization hopes to accomplish. Reviewing these statements before writing goals is important, because the goals need to reflect what is contained in the vision and mission statements. 2. Evaluate available resources. Avoid setting goals that are impossible to achieve given your available resources. Goals that are challenging and realistic considering the resources for employees to work with have a greater chance of being met. 3. Determine the goals individually or with input from others. The goals reflect desired outcomes and should be consistent with the organization’s mission and goals in other organizational areas. These goals should be measurable, specific, and include a time frame for accomplishment. 4. Ensure the goals are well-written and communicated to all who need to know. Writing down and communicating goals forces people to think them through. 5. Review results and assess whether goals are being met. If goals aren’t being met, change them as needed. 6. Link rewards to goal attainment. Linking rewards to goals answers the question “What’s in it for me?” for the employees.

What Types of Plans Do Managers Use and How Do They Develop Those Plans? Managers need plans to help them clarify and specify how goals will be met. Let’s look first at the types of plans managers use. TYPES OF PLANS  The most popular ways to describe an organization’s plans are by

their breadth (strategic vs. operational), time frame (short term vs. long term), specificity (directional vs. specific), and frequency of use (single use vs. standing). These planning classifications are not independent. Strategic plans are long term, directional, and single use, while operational plans are short term, specific, and standing. Let us examine some examples of plans at each level of management. strategic plans Plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment.

operational plans Plans that specify the details of how the overall goals are to be achieved.

long-term plans Plans with a time frame beyond one year.

short-term plans Plans with a time frame of one year or less.

specific plans Plans that are clearly defined and leave no room for interpretation.

Breadth  Strategic plans are plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment. Plans that specify the details of how the overall goals are to be achieved are called operational plans. How do the two types of plans differ? Strategic plans tend to cover a longer time frame and a broader view of the organization. Strategic plans also include the formulation of goals, whereas operational plans define ways to achieve the goals. Also, operational plans tend to cover short time periods—monthly, weekly, and day to day. Time Frame  The number of years used to define short-term and long-term plans has shortened significantly due to environmental uncertainty. Thus long-term plans are defined as those with a time frame beyond one year.12 Short-term plans cover one year or less. For example, a company may decide that it will increase sales by 10 percent over the next year. Specificity  Intuitively, it would seem that specific plans would be preferable to directional, or loosely guided, plans. Specific plans are plans that are clearly defined and leave no room for interpretation. They have clearly defined objectives. There is no ambiguity and no problem with misunderstanding. For example, a manager who seeks to increase his or her unit’s work output by 8 percent over a given twelve-month period might establish specific procedures, budget allocations, and schedules of activities to reach that goal. The drawbacks of specific plans are that they require clarity and a sense of predictability that often do not exist.

Chapter 4  Planning and Strategic Management 111

When uncertainty is high and managers must be flexible in order to respond to unexpected changes, directional plans are preferable. Directional plans are flexible plans that set out general guidelines. They provide focus but don’t lock managers into specific goals or courses of action. Instead of detailing a specific plan to cut costs by 4 percent and increase revenues by 6 percent in the next six months, managers might formulate a directional plan for improving profits by 5 to 10 percent over the next six months. The flexibility inherent in directional plans must be weighed against the loss of clarity provided by specific plans. Some plans that managers develop are ongoing, while others are used only once. A single-use plan is a one-time plan specifically designed to meet the needs of a unique situation. Budgets and projects are examples of single-use plans. For example, when Charles Schwab introduced its online discount stock-brokerage service, top-level executives used a single-use plan to guide the creation and implementation of the new service. In contrast, standing plans are ongoing and provide guidance for activities performed repeatedly. Standing plans include policies, rules, and procedures, which we defined in Chapter 3. An example of a standing plan would be the discrimination and harassment policy developed by the University of British Columbia. The policy provides guidance to university administrators, faculty, and staff as they perform their job duties.

directional plans Plans that are flexible and that set out general guidelines.

single-use plans A one-time plan specifically designed to meet the needs of a unique situation.

standing plans Ongoing plans that provide guidance for activities performed repeatedly.

DEVELOPING PLANS  Three contingency factors affect the choice of plans: (1) orga-

nizational level, (2) degree of environmental uncertainty, and (3) length of future commitments.13 For the most part, lower-level managers do operational (or tactical) planning, while upper-level managers do strategic planning. As Exhibit 4-3 illustrates, plans change depending on the level of management. The second contingency factor is environmental uncertainty. When uncertainty is high, plans should be specific but flexible. Managers must be prepared to change or amend plans as they’re implemented. For example, at Continental Airlines (now part of United Airlines), the former CEO and his management team established a specific goal of focusing on what customers wanted most—on-time flights—to help the company become more competitive in the highly uncertain airline industry. Because of that uncertainty, the management team identified a “destination, but not a flight plan,” and changed plans as necessary to achieve its goal of on-time service. The last contingency factor also is related to the time frame of plans. The commitment concept says that plans should extend far enough to meet those commitments made when the plans were developed. Planning for too long or too short a time period is inefficient

Exhibit 4-3  Types of Plans Top-Level Managers

• Strategic plans • Corporate-level/multibusiness plans • Rolling (updated regularly), single-use plans — Long-term time frame, directional, single use

Middle Managers

• Tactical plans • Business or division-level plans • Standard operating procedures — Intermediate time frame, specific, standing

Low-Level Managers

• Operational plans • Functional-level plans (HR, Marketing, etc.) • Team-based procedures — Short-term time frame, specific, multiuse

commitment concept The idea that plans should extend far enough to meet those commitments made when the plans were developed.

112  Chapter 4

And the Survey Says. . . 51% of managers say they are using more business scenarios and data-driven approaches in their planning.

60% of companies believe that their employees are not prepared for future company growth.

47% of managers surveyed say their organization’s projects always or often meet their goals.

75% of managers surveyed say their company’s planning approach isn’t working.

46% of executives at smaller companies are likely to take a ­collaborative approach to developing strategy.

51% of executives say that planning is an important skill.

29% of executives at larger companies are likely to take a collaborative approach to developing strategy.

and ineffective. We can see the importance of the commitment concept, for example, with the plans that organizations make to increase their computing capabilities. At the data centres where companies’ computers are housed, many have found that their “power-hungry computers” generate so much heat that their electric bills have skyrocketed because of the increased need for air conditioning.14 How does this illustrate the commitment concept? As organizations expand their computing technology, they’re “committed” to whatever future expenses are generated by that plan. They have to live with the plan and its consequences. PLANNING TOOLS AND TECHNIQUES  Managers use various tools and techniques to maximize the benefits of planning.15 Forecasting

Attempting to predict the future and developing plans accordingly

Contingency planning

Identifying alternative plans for outcomes that are different than expected

Scenario planning

Predicting various future outcomes and making plans for each

Benchmarking

Developing plans based on the practices of competitors

Process planning

Creating a framework for the general process necessary to reach an ultimate goal, such as a marketing campaign

FORECASTING  Forecasting is the attempt to predict future trends based on past events and management insight. Expert opinions and statistical analysis are two types of forecasting techniques.16 Canadian financial analysts regularly predict what will happen with the Canadian and world economies, and businesses use that information to help plan their strategy. CONTINGENCY PLANNING  Contingency planning features an alternative course

of action to be followed if a preferred plan fails. The process of developing these plans is influenced by changing circumstances in the environment.17 When environmental uncertainty is high, plans should be specific, but flexible. Managers must be prepared to amend plans as they are implemented. At times, managers may even have to abandon their plans.18 SCENARIO PLANNING  Scenario planning is a type of contingency planning that involves a longer time frame. Royal Dutch Shell has used scenarios since the early 1970s as part of a process for generating and evaluating its strategic options. Shell used these scenarios to develop better oil forecasts than its competitors and to predict the overcapacity issue in the tanker business earlier.19 BENCHMARKING  Benchmarking involves the search for the best practices among

competitors or noncompetitors that lead to their superior performance.20 The basic idea underlying benchmarking is that management can improve quality by analyzing and then copying the methods of leaders in various fields. A local charity organization can benefit from the experience and successful practices of other Canadian charities.

Chapter 4  Planning and Strategic Management 113

PROCESS PLANNING  Process planning is used in project management to help

select resources for use in the execution and completion of a project. Organizations use project planning when structuring a new project or strategic direction.

Organizational Strategy: Choosing a Niche 4.3 Describe the steps in strategic management. Maple Leaf Foods combines strategy and innovation to stay abreast of the trends in consumer purchasing. Each year, it introduces up to 100 new products. In 2009, Maple Leaf opened the ThinkFOOD! Centre, created to provide customers with an opportunity to collaborate with the product development team and culinary experts. By involving customers in the design of food products, Maple Leaf hopes to increase sales for its global baker and protein businesses.21 Strategic management is what managers do to develop the organization’s strategies. What are an organization’s strategies? They are the plans for how the organization will do whatever it is in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals.22 One term that is often used in conjunction with strategic management and strategies is business model, which is a strategic design for how a company intends to profit from its strategies, work processes, and work activities. A company’s business model focuses on two things: (1) whether customers will value what the company is providing and (2) whether the company can make any money doing that.23 Stantec has a focused business model that allows for managing risk while pursuing continued growth. The model is organized around geographic diversification and business operating units—to provide better support for clients, to create stronger accountability for the leadership team, and to better position the company for future growth and success while maintaining the core elements of its strategy.

Why Is Strategic Management Important? To begin to understand why organizational strategy matters, you need look no further than at what has happened in the discount retail industry in Canada. The industry’s largest current competitor—Walmart—battled with Zellers for market dominance after Walmart entered Canada in 1992. Walmart’s performance (financial and otherwise) took market share from Zellers every single year until US retailer Target purchased 220 of the Zellers store to compete head to head in Canada with Walmart. The two chains have some striking similarities: store atmosphere, markets served, and organizational purpose. Organizations vary in how well they perform because of differences in their strategies and differences in competitive abilities.24 Walmart excels at strategic management, while Target’s struggle to understand Canadian customers and supply chain management led to its exit from Canada in 2015. Why is strategic management so important? One reason is that it can make a difference in how well an organization performs. Why do some businesses succeed and others fail, even when faced with the same environmental conditions? Research has found a generally positive relationship between strategic planning and performance.25 Those companies that strategically plan appear to have better financial results than those organizations that don’t. Another reason it’s important has to do with the fact that managers in organizations of all types and sizes face continually changing situations. They cope with this uncertainty by using the strategic management process to examine relevant factors in planning future actions.

strategic management What managers do to develop the organization’s strategies.

strategies The decisions and actions that determine the long-run performance of an organization.

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

114  Chapter 4

What’s Cooking in Hospitality? The Hotel Association of Canada (HAC) represents more than 8000 hotels in Canada with revenues of more than $18 billion. For over 100 years, HAC has worked to enhance the prosperity of the industry through strong member engagement, effective advocacy, and the provision of value added programs and services.26 HAC prepared a strategic plan for 2017–2020 by initially conducting internal and external research, developing big picture strategic goals, and then developing a tactical plan to meet those goals. The four strategic goals are

• Advocacy: Deliver advocacy success on targeted issues that matter most to the Canadian hotel industry. • Member Engagement: Connect with members to deliver value and engagement through two-way exchange. • Programs: Leverage the national scale and scope of HAC to deliver programs that directly benefit members and bring additional resources to the association. • Membership: Create a simple and transparent model that grows membership and revenue. SOURCE: Hotel Association of Canada: About Us: Strategic Plan 2020. Re-

trieved from http://www.hotelassociation.ca/about/.

Finally, strategic management is important because organizations are complex and diverse and each part needs to work together to achieve the organization’s goals. Strategic management helps do this. For example, with more than 2.2 million employees worldwide working in various departments, functional areas, and stores, Walmart uses strategic management to help coordinate and focus employees’ efforts on what’s important. It’s important to note that strategic management isn’t just for business organizations. Even organizations such as government agencies, hospitals, educational institutions, and social agencies need it. For example, the skyrocketing costs of a college education, competition from for-profit companies offering alternative educational environments, state budgets being slashed because of declining revenues, and cutbacks in federal aid for students and research have led many university administrators to assess their colleges’ aspirations and identify a market niche in which they can survive and prosper.

The Strategic Management Process strategic management process A six-step process that encompasses strategic planning, implementation, and evaluation.

The strategic management process, as illustrated in Exhibit 4-4, is a six-step process that encompasses strategic planning, implementation, and evaluation. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important! Even the best strategies can fail if management does not implement or evaluate them properly.

Step 1: Identify the Organization’s Current Vision, Mission, Goals, and Strategies Together the vision and mission provide an organization’s statement of purpose. The vision answers the question, What will this business be in the future?27 The mission answers the question, What is our reason for being in business? Think of yourself. A personal vision might be who you want to be in five years, and a personal mission

Exhibit 4-4  The Strategic Management Process Internal Analysis • strengths • weaknesses

Identify the Organization's Current Vision, Mission, Goals, and Strategies

SWOT Analysis External Analysis • opportunities • threats

Formulate Strategies

Implement Strategies

Evaluate Results

Chapter 4  Planning and Strategic Management 115

Exhibit 4-5  Components of Stantec’s Mission Statement SOURCE: From 2016 Annual Report, Stantec. Copyright © 2016 by Stantec. Reprinted by permission.

Customers:

Who are the organization’s customers? Public and private clients needing engineering, consulting, and design services.

Markets:

Where does the organization compete geographically? We are focused on designing for the world around us. We operate in three main geographic regions: Canada, the United States, and International. Our aim is to leverage global expertise while focusing on our strong local presence.

Concern for survival, growth, and profitability:

Is the organization committed to growth and financial stability? Our business objective is to maintain our position as a top tier global design and delivery firm, and plan on achieving an average compound growth rate of 15 percent.

Philosophy:

What are the organization’s basic beliefs, values, and ethical priorities? We are defined by more than our services. We are defined by what we stand for, what we believe, and why we do what we do. We make a difference in the world by creating communities. This is our purpose.

Concern for public image:

How responsive is the organization to societal and environmental concerns? Our high standard of business practices is articulated in our project management frameworks, code of ethics, and policies and practices. Working with integrity is a promise we make to our clients, colleagues, and shareholders.

Products or services:

What are the organization’s major products or services? We provide services in five business operating units: Buildings, Energy and Resources, Environmental Services, Infrastructure, and Water.

Technology:

Is the organization’s technology current? We design flexible facilities and processes that respond easily to changing requirements, maximize the number of innovations produced, and minimize the time and costs to develop them.

Self-concept:

What are the organization’s major competitive advantage and core competencies? Stantec is recognized as a leader in our industry because we perform consistently for our clients and staff. Because of the diversity of our model, we can adapt to changes in market conditions and manage risk while continuing to increase our revenue and earnings.

Concern for employees:

Are employees a valuable asset of the organization? People are at the heart of everything we do; they give our work purpose. That’s why we listen to and design for the distinct needs of our clients—and those who live and work in the communities we serve. It’s why we prioritize the safety of everyone our work touches. And it’s why we define fulfilling careers for our own people, helping them set and then surpass their individual goals.

might be the specifics of how you will get there. Defining the organization’s mission forces managers to identify what it is in business to do. Exhibit 4-5 describes the components of Stantec’s mission statement and some examples of each element. It is important for managers to identify goals and strategies consistent with the vision and mission being pursued. Stantec’s vision and mission is what it calls its promise: design with community in mind. In one instance, where a pipeline crossing was required for a project in the Atlantic Ocean, Stantec created a fish ladder to preserve the environment. They do not call it a vision and mission but the strategic statements have the same purpose (see Exhibit 4-6).

Exhibit 4-6  Stantec’s Strategic Statements SOURCES: “We Design with Community in Mind,” https://www.stantec.com/en/about/company-overview, https://www.stantec.com/en/careers/purpose-values Copyright © 2019 by Stantec. Reprinted by Permission.

Purpose:

We are defined by more than our services. We are defined by what we stand for, what we believe, and why we do what we do. We make a difference in the world by creating communities. This is our purpose. When we say community, we mean everybody with a stake in the work we do—from the clients we collaborate with across many sectors, to the populations we reach, to the thousands of us working together to serve them.

Promise:

By connecting the focus of our work with our deep commitment to community and the unique insight we bring to every project, our promise lets the world know exactly what we do and what we stand for. That is why our promise is to design with community in mind.

Business Objective:

At Stantec, our business objective is to maintain our position as a top tier global design and delivery firm. Our local strength, knowledge, and relationships, coupled with our world-class expertise, have allowed us to go anywhere to meet our clients’ needs in more creative and personalized ways. With a long-term commitment to the people and places we serve, Stantec has the unique ability to connect to projects on a personal level and advance the quality of life in communities across the globe. We believe continued growth will increase shareholder value and give Stantec employees the opportunity to work with the best clients, on the best projects, and deliver exceptional service.

Values:

We put people first. We are better together. We do what is right. We are driven to achieve.

116  Chapter 4

Step 2: Do an Internal Analysis resources An organization’s assets—financial, physical, human, intangible—that are used to develop, manufacture, and deliver products or services to customers.

capabilities An organization’s skills and abilities that enable it to do the work activities needed in its business.

core competencies An organization’s major valuecreating skills, capabilities, and resources that determine its competitive weapons.

quality management A philosophy of management driven by continual improvement and responding to customer needs and expectations.

strengths Any activities the organization does well or any unique resources it has.

weaknesses Activities the organization does not do well or resources it needs but does not possess.

Now we move from looking outside the organization to looking inside. The internal analysis provides important information about an organization’s specific resources and capabilities. An organization’s resources are its assets—financial, physical, human, intangible—that are used by the organization to develop, manufacture, and deliver products or services to its customers. Its capabilities are its skills and abilities in doing the work activities needed in its business. The major value-creating capabilities and skills of the organization are known as its core competencies.28 Both resources and core competencies can determine the organization’s competitive weapons. Unilever’s core competencies had much to do with innovation and brand recognition. Supply chain management has become a core competency through increasing forecasting accuracy, and the company has earned very high rankings annually, including the number one spot in the Gartner 2018 Supply Chain Top 25.29 Companies like Unilever or Stantec, which are committed to continually improving the quality of their products and services, are attempting to use quality management. After doing the internal analysis, managers should be able to identify organizational strengths and weaknesses. Strengths are any activities the organization does well or any unique resources that it has. Weaknesses are activities the organization does not do well or resources it needs but does not possess. This step forces managers to recognize that their organizations, no matter how large or successful, are constrained by the resources and capabilities they have. Doing an internal analysis of an organization’s financial and physical assets is fairly easy because information on those areas is readily available. However, evaluating an organization’s intangible assets—things such as employees’ skills, talents, and knowledge; databases and other IT assets; organizational culture; and so forth—is a bit more challenging. Organizational culture, specifically, is one crucial part of the internal analysis that is often overlooked.30 Assessing the company’s culture is critical because strong and weak cultures have different effects on strategy, and the content of a culture has a major effect on strategies pursued. What is a strategically appropriate culture? It is one that supports the firm’s chosen strategy. Stantec’s objective is to be a top-ten global design firm. Another intangible asset that is important but difficult to assess during an internal analysis is corporate reputation. Does the fact that Montreal-based aluminum producer Rio Tinto Alcan is ranked as one of Canada’s “most admired corporations” make a difference? Does the fact that Calgary-based WestJet Airlines often makes the list of “Canada’s 10 Most Admired Corporate Cultures™” mean anything? Does the fact that Coca-Cola has the world’s most powerful global brand give it any edge? Studies of reputation on corporate performance show that it can have a positive impact.31 As one researcher stated, “[A] strong, well-managed reputation can and should be an asset for any organization.”32 One of the reasons that WestJet was attractive to Onex was its strong culture.

Step 3: Do an External Analysis

opportunities Positive trends in external environmental factors.

threats Negative trends in external environmental factors.

In Chapter 2 we described the external environment as an important constraint on a manager’s actions. Analyzing that environment is a critical step in the strategic management process. Managers in every organization need to do an external analysis. They need to know, for example, what the competition is doing, what pending legislation might affect the organization, or what the labour supply is like in locations where it operates. In analyzing the external environment, managers should examine both the specific and general environments to see what trends and changes are occurring. After analyzing the environment, managers need to assess what they have learned in terms of opportunities the organization can exploit and threats it must counteract. Opportunities are positive trends in external environmental factors; threats are negative trends. Amazon has thrived on the opportunity of online book sales. Threats to Amazon

Chapter 4  Planning and Strategic Management 117

Exhibit 4-7  SWOT Analysis Strengths

Weaknesses

• Financial condition: adequate resources, returns, revenues, profit • Operations: cost advantages, economies of scale, location/geographic coverage, good supply chain management • Product: product innovation, price/value/quality, product line breadth • Management: proven management team, history of success, succession planning • Competition: insulated from competitive pressures, market leader • Technology: proprietary technology, patents • Marketing: brand awareness and recognition, brand equity, distribution, strong advertising • Customers: attractive customer base, well thought of by buyers • Strategies: powerful strategy, key functional area strategies • Organization: strong culture, climate • History: track record of success, experience, knowledge, data • People: accreditations, qualifications, training, low turnover, high customer service, intellectual capital • Competencies/capabilities suited to industry • IT: strong processes, systems, infrastructure, communications • Alliances/joint ventures with key industry partners • Innovation: proven and unique

• Financial condition: inadequate resources, debt, declining revenues, subpar profitability • Operations: obsolete facilities, weak R&D, internal operating problems, underutilized capacity, weak dealer network • Product: too narrow a product line, cannibalization, saturation, limited features • Management: lack of depth and talent, key executive departures • Competition: losing market share, inferior intellectual capital • Technology: lack of presence in ecommerce • Marketing: weak brand image or reputation, no unique sales proposition, lack of reach • Customers: declining customer base, poorly regarded by buyers • Strategies: lacking clear strategic direction, poor track record in strategy implementation • Organization: weak culture, climate • History: still overcoming negative trends, poor triple bottom line reputation • People: high turnover, poor training, low morale, poor customer service, missing key skills or competencies • Lack of developed or proven competencies • IT: weak processes, systems, infrastructure, communications • Lack of alliances/joint ventures with key industry partners • Innovation: weak or unproven

Opportunities

Threats

• Markets: new markets or segments, vertical/horizontal integration, niche markets • Customers: serve additional customer groups, lifestyle or demand trends • Product: PL expansion (broader range of customer needs), add complementary products, diversification • Competition: complacency among rivals, rival vulnerabilities, winning market share • Market developments: faster market or industry growth • Technology: development/adaptation innovation, online sales/ ecommerce • Operational: using existing skills/know-how to enter new product lines or new businesses, production economies, supply chain integration • Integration: forward/backward • Global: new influences, export/import, lowering trade barriers • Tactics: surprise element, major contracts, alliances/joint ventures/ partnerships, acquisition of rivals • Seasonal: weather, fashion influences, trends • Marketing: research, product development

• Competition: likely entry of new competitors, existing competition, substitute products • Buyers: changing needs and preferences, growing purchasing power • Demographics: adverse changes, skills shortages • Supply: limited supply, growing bargaining power of suppliers • Economy: home and abroad, vulnerability to recession and business cycle • Political/legislative: effects from changes, restrictive trade policies, costly new regulatory requirements • Market: slower growth, decreasing demand • Environmental: seasonality, weather effects • Technology: new services, technologies, ideas • Organization: loss of key staff, insurmountable weaknesses, vital contracts and partners

include a decreasing number of people who read books and greater competition from alternative sources of entertainment, including movies, radio, and streaming video. As a result, Amazon’s book sales are being replaced by electronics, home decor, and gifts. One last thing to understand about external analysis is that the same environment can present opportunities to one organization and pose threats to another in the same industry because of their different resources and capabilities. For example, WestJet Airlines has prospered in a turbulent industry, while Air Canada has struggled. The combined external and internal analyses are called the SWOT analysis—an analysis of the organization’s strengths, weaknesses, opportunities, and threats. After completing the SWOT analysis, managers are ready to formulate strategies that take advantage of strengths and opportunities, protect the organization from threats, and correct critical weaknesses. For example, owner Leonard Lee started Ottawa-based Lee Valley Tools in 1982 to help individual woodworkers, and later gardeners, find just the right tools for their tasks. This niche strategy enabled Lee to grow Lee Valley into one of North America’s leading garden and woodworking catalogue companies. SWOT analysis is effective when the analysis helps companies make specific observations and draw conclusions, and it allows them to develop plans to act upon this information. Exhibit 4-7 shows some common areas to investigate when performing SWOT analysis.

SWOT analysis An analysis of the organization’s strengths, weaknesses, opportunities, and threats.

118  Chapter 4

Exhibit 4-8  PESTEL Analysis SOURCE: M. Carpenter and G. Sanders, Strategic Management: Concepts and Cases, 2nd Ed., © 2009, pp. 110, 118. Reprinted and electronically reproduced by

permission of Pearson Education, Inc., New York, NY.

Political

Technological

• How stable is the political environment? • What are local taxation policies, and how do these affect your business? • Is the government involved in trading agreements such as EU, USMCA, ASEAN, or others? • What are the foreign-trade regulations? • What are the social-welfare policies?

• What is the level of research funding in government and industry, and are those levels changing? • What is the government’s and industry’s level of interest and focus on technology? • How mature is the technology? • What is the status of intellectual-property issues in the local environment? • Are potentially disruptive technologies in adjacent industries creeping in at the edges of the focal industry?

Economic

Environmental

• What are current and projected interest rates? • What is the level of inflation, what is it projected to be, and how does this projection reflect the growth of your market? • What are local employment levels per capita, and how are they changing? • What are the long-term prospects for gross domestic product (GDP) per capita and so on? • What are exchange rates between critical markets and how will they affect production and distribution of your goods?

• What are local environmental issues? • Are there any pending ecological or environmental issues relevant to your industry? • How do the activities of international pressure groups (e.g., Greenpeace, Earth First, PETA) affect your business? • Are there environmental protection laws? • What are the regulations regarding waste disposal and energy consumption?

Sociocultural

Legal

• • • •

• What are the regulations regarding monopolies and private property? • Does intellectual property have legal protections? • Are there relevant consumer laws? • What is the status of employment, health and safety, and product safety laws?

What are local lifestyle trends? What are the current demographics, and how are they changing? What is the level and distribution of education and income? What are the dominant local religions, and what influence do they have on consumer attitudes and opinions? • What is the level of consumerism, and what are popular attitudes toward it? • What pending legislation affects corporate social policies (e.g., maternity/ paternity leave)? • What are the attitudes toward work and leisure?

PESTEL ANALYSIS  PESTEL is an acronym for six contextual factors that shape a company’s external environment: political, economic, sociocultural, technological, environmental, and legal. The questions in Exhibit 4-8 help determine the nature of opportunities and threats facing a company in the future. PESTEL analysis is a way for a company to align its strategy with the external environment.33

Page Light Studios/Shutterstock

Step 4: Formulate Strategies

Caesars Entertainment (formerly Harrah’s Entertainment) is fanatical about customer service, and for good reason. Company research showed that customers who were satisfied with the service they received at a Harrah’s casino increased their gaming expenditures by 10 percent, and those who were extremely satisfied increased their gaming expenditures by 24 percent. It discovered this important customer service–expenditures connection because of its incredibly sophisticated information system.

Once the SWOT analysis is complete, managers need to develop and evaluate strategic alternatives and then select strategies that either capitalize on the organization’s strengths and exploit environmental opportunities or correct the organization’s weaknesses and buffer it against threats. Strategies need to be established for the corporate, business, and functional levels of the organization, which we will describe shortly. This step is complete when managers have developed a set of strategies that give the organization a relative advantage over its rivals. Professor Henry Mintzberg of McGill Business School notes that strategies often emerge from actions that organizations take rather than simply reflect the original strategic intent of the organization.34

Chapter 4  Planning and Strategic Management 119

Step 5: Implement Strategies

Freshidea/Fotolia

After strategies are formulated, they must be implemented. No matter how effectively an organization has planned its strategies, it cannot succeed if the strategies are not implemented properly. Involving all members of the organization in strategic planning is also important.

Step 6: Evaluate Results The final step in the strategic management process is evaluating results. How effective have the strategies been? A winning strategy is one that provides competitive advantage, leads to improved performance, and fits the industry and competitive situation.35 What adjustments, if any, are necessary? Revisions become necessary for several reasons: specific company performance, changing environmental conditions, and new opportunities.36 We discuss this step in our coverage of the control process in Chapter 12.

What Strategies Do Managers Use?

Ecotrust Canada successfully implemented a turnaround strategy to improve the triple bottom line (3BL) performance of Iisaak Forest Resources, a 100-percent First Nations forest operator on the BC coast. Iisaak has outperformed its competitors while receiving the Forest Stewardship Council certification for meeting strict environmental standards.

4.4 Describe what kinds of strategies managers use. There are three main levels of organizational strategies: corporate, business, and functional. They relate to the particular level of the organization that introduces the strategy. Organizations also use social media and big data as strategic weapons. Exhibit 4-9 demonstrates the three levels of organizational strategies.

PESTEL analysis

Specifies what businesses to be in and what to do with those businesses.

A way for a company to align its strategy with the external environment by analyzing six contextual factors that shape the external environment: political, economic, sociocultural, technological, environmental, and legal.

3 MAIN CORPORATE STRATEGIES

growth strategy

1  Corporate Strategy

1. Growth Strategy: Organization expands the number of markets served or products offered, either through its current business(es) or through new business(es). WAYS to grow: • Concentration:  Growing by focusing on a primary line of business and increasing the number of products offered or markets served in this primary business.

A corporate strategy in which an organization expands the number of markets served or the products offered either through its current business(es) or through new business(es).

• Vertical integration:  Growing by gaining control of inputs or outputs or both. – Backward vertical integration—organization gains control of inputs by becoming its own supplier – Forward vertical integration—organization gains control of outputs by becoming its own distributor • Horizontal integration:  Growing by combining competitors.

Exhibit 4-9  Types of Organizational Strategy Multibusiness Corporation

Corporate

Competitive

Functional

Research and Development

Strategic Business Unit 1

Strategic Business Unit 2

Strategic Business Unit 3

Manufacturing

Marketing

Human Resources

Finance

120  Chapter 4 • Diversification:  Growing by moving into a different industry. –  Related diversification—different but related industries: strategic fit. – Unrelated diversification—different and unrelated industries: no strategic fit. 2.  Stability Strategy: Organization continues—often during periods of uncertainty—to do what it is currently doing; to maintain things as they are.

Jojje11/Fotolia

• Examples: Continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining current business operations.

stability strategy A corporate strategy in which an organization continues to do what it is currently doing.

renewal strategy A corporate strategy that addresses declining organizational performance.

The organization does not grow, but it does not fall behind, either. 3. Renewal Strategy: Organization is in trouble and needs to address declining performance. • Retrenchment strategy:  Minor performance problems—need to stabilize operations, revitalize organizational resources and capabilities, and prepare organization to compete once again. • Turnaround strategy:  More serious performance problems requiring more drastic action. In both renewal strategies, managers can (1) cut costs and (2) restructure ­organizational operations, but actions are more extensive in a turnaround strategy.

2  Competitive Strategy How an organization will compete in its business(es). • A small organization is only one line of business or a large organization that has not diversified: Competitive strategy describes how it will compete in its primary or main market. • Organizations in multiple businesses: Each business will have its own competitive strategy. strategic business units (SBUs) An organization’s single businesses that are independent and formulate their own competitive strategies.

competitive advantage What sets an organization apart; its distinctive edge.

cost leadership strategy When an organization competes on the basis of having the lowest costs in its industry.

• Those single businesses that are independent and formulate their own competitive strategies are often called strategic business units (SBUs). IMPORTANT ROLE OF COMPETITIVE ADVANTAGE:  Developing an effective

competitive strategy requires understanding competitive advantage, which is what sets an organization apart—that is, its distinctive edge, which comes from • the organization’s core competencies—doing something that others cannot do or doing it better than others can do it. • the company’s resources—having something that its competitors do not. TYPES OF COMPETITIVE STRATEGIES:  Porter’s competitive strategies framework:

1. Cost leadership strategy Having the lowest costs in its industry and aimed at a broad market • • • •

Is highly efficient Overhead is kept to a minimum Does everything it can to cut costs Product must be perceived as comparable in quality to that offered by rivals or at least acceptable to buyers

Chapter 4  Planning and Strategic Management 121

2. Differentiation strategy Offering unique products that are widely valued by customers and aimed at a broad market • Product differences: exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image

differentiation strategy When an organization competes on the basis of having unique products that are widely valued by customers.

4. Stuck in the middle What happens if an organization can’t develop a cost or differentiation ­advantage—a bad place to be

Use strategic management to get a sustainable competitive advantage.

Artursfoto/ Fotolia

3. Focus strategy A cost advantage (cost focus) or a differentiation advantage (differentiation focus) in a narrow segment or niche (which can be based on product variety, customer type, distribution channel, or geographical location) focus strategy

When an organization competes in a narrow segment or niche with either a cost focus or a differentiation focus.

3  Functional Strategy Those strategies used by an organization’s various functional departments (marketing, operations, finance/accounting, human resources, and so forth) to support the competitive strategy. Functional strategies are the strategies used by an organization’s various functional departments to support the business strategy. For organizations with traditional functional departments such as manufacturing, marketing, human resources, research and development, and finance, these strategies must support the business strategy. Exhibit 4-10 shows some functional strategies that support the business strategies of cost leadership and differentiation.

Social Media as a Strategic Weapon When Red Robin Gourmet Burgers launched its Tavern Double burger line, everything about the introduction needed to be absolutely on target. So what did company executives do? They utilized social media.37 Using an internal social network resembling Facebook, managers in the 460-restaurant chain were taught everything from the recipes to tips on efficiently making the burgers. That same internal network has been a great feedback tool. Company chefs have used tips and suggestions from customer feedback and from store managers to tweak the recipe. Successful social media strategies should (1) help people—inside and outside the organization—connect and (2) reduce costs or increase revenue possibilities or both. As managers look at how to strategically use social media, it’s important to have goals and a plan. For instance, at global banking firm Wells Fargo & Co., executives realized that social media tools could be used to support and develop their business strategy and looked for ways to do just that.38 Now it’s using ­several social media tools for a variety of specific needs that align with company goals.

Exhibit 4-10  Examples of Functional Strategies Functional Area

Cost Leadership

Differentiation

Marketing

• Finding new customers • Reducing advertising or sales budget with lower-cost alternatives

• Adapt products to meet the needs of customers • Spend money on building brand awareness and loyalty

Operations

• Just-in-time, continuous improvement; computerization • Improving efficiency of processes, equipment, and machinery

• Provide flexible shipping options, reduce shipping time • Increase quality of suppliers • Enhance existing products

Human Resources

• Lowering cost of recruitment and training • Reducing turnover, increase employee productivity

• Invest in specialty training to meet customer needs • Hire more skilled employees

122  Chapter 4

JHVEPhoto/Shutterstock

53 percent of businesses use social advertising39 It’s not just for the social connections that organizations are employing social media strategies. Many are finding that social media tools can boost productivity.40 For example, many physicians are tapping into online postings and sharing technologies as part of their daily routines. Collaborating with colleagues and experts allows them to improve the speed and efficiency of patient care. At TrunkClub, an online men’s clothes shopping service that sends trunks with new clothing items to clients who’ve requested them, the CEO uses a Recognized as an innovator in social media marketing, Canadian Blood Services software tool called Chatter to let the company’s enhances donor experience and engagement on Twitter and Facebook. CBS uses social media as a strategic weapon in achieving its goal of saving lives. personal shoppers know about hot new shipments of shoes or clothes. He says that when he “chats” that information out to the team, he immediately sees the personal shoppers putting the items into customers’ “trunks.”41 When used strategically, social media can be a powerful weapon, as can big data!

Big Data as a Strategic Weapon Big data can be an effective counterpart to the information exchange generated through social media. All the enormous amounts of data collected about customers, partners, employees, markets, and other quantifiables can be used to respond to the needs of these same stakeholders. With big data, managers can measure and know more about their businesses and “translate that knowledge into improved decision making and performance.”42 Case in point: When Walmart began looking at its enormous database, it noticed that when a hurricane was forecast, not only did sales of flashlights and batteries increase, but so did sales of Pop-Tarts. Now, when a hurricane is threatening, stores stock Pop-Tarts with other emergency storm supplies at the front entrance. This helps them better serve customers and drive sales.43 By helping a business do what it’s in business to do—compete successfully and attract and satisfy its customers in order to achieve its goals—big data is a critical strategic weapon. Once managers have the organization’s strategies in place, it’s time to set goals and develop plans to pursue those strategies.

A Question of Ethics Do you shop? Well, you might be saying to yourself, that’s kind of a stupid question . . . of course I shop. Well, here’s another question: Do you realize the extent to which retail stores are spying on you as you shop?44 Most of us “accept” the fact that when we shop online, we’re “allowing” the online retailer to install its cookies and to track our every move and click. Now, however, technology is being used more frequently in the physical retail environment. And it’s more than cameras watching us. Many retailers are using cell phone tracking technology, personalized advertising, and super spy cams. Why? To track your behaviour and to get you (and all those other shoppers) to buy more. Results from a recent

survey showed that 80 percent of consumers do not want stores to track their movements via smartphone. And 44 percent said that a tracking program would make them less likely to shop with that store.

Discussion Questions 1. What ethical dilemmas are involved with the strategy of retail consumer tracking? 2. What factors might influence a business’s decision to use this strategy? (Think in terms of the various stakeholders who might be affected by this decision.)

Chapter 4  Planning and Strategic Management 123

Competitive Strategies In any industry, Michael Porter’s five competitive forces dictate the rules of competition. Together, these forces plus the element of complementors (see Exhibit 4-11) determine industry attractiveness and profitability. Managers assess an industry’s attractiveness using these forces: • Threat of new entrants.  Factors such as economies of scale, brand loyalty, and capital requirements determine how easy or hard it is for new competitors to enter an industry. • Threat of substitutes.  Factors such as switching costs and buyer loyalty determine the degree to which customers are likely to buy a substitute product. • Bargaining power of buyers.  Factors such as number of customers in the market, customer information, and the availability of substitutes determine the amount of influence that buyers have in an industry. • Bargaining power of suppliers.  Factors such as the degree of supplier concentration and availability of substitute inputs determine the amount of power that suppliers have over firms in the industry.

Exhibit 4-11  Forces in an Industry Analysis SOURCE: M. Carpenter and G. Sanders, Strategic Management: Concepts and Cases, 2nd Ed., © 2009, pp. 110, 118. Reprinted and electronically

reproduced by permission of Pearson Education, Inc., New York, NY.

Threat of New Entrants (and Entry Barriers) • Absolute cost advantages • Proprietary learning curve • Access to inputs • Government policy • Economies of scale • Capital requirements • Brand identity • Switching costs • Access to distribution • Expected retaliation • Proprietary products

Supplier Power • Supplier concentration • Importance of volume to supplier • Differentiation of inputs • Impact of inputs on cost or differentiation • Switching costs of firms in the industry • Presence of substitute inputs • Threat of forward integration • Cost relative to total purchases in industry

• • • • • • • • • •

• • • • •

Degree of Rivalry Exit barriers Industry concentration Fixed costs/value added Industry growth Intermittent overcapacity Product differences Switching costs Brand identity Diversity of rivals Corporate stakes

Threat of Substitutes Switching costs Buyer inclination to substitute Price-performance tradeoff of substitutes Variety of substitutes Necessity of product or service

Industry value chain— from raw materials and other inputs, to focal industry, to channel, to end consumer

Buyer Power (Channel and End Consumer) • Bargaining leverage • Buyer volume • Buyer information • Brand identity • Price sensitivity • Threat of backward integration • Product differentiation • Buyer concentration vs. industry • Substitutes available • Buyers’ incentives

•N • R um • B ela be Com pl • D arr tive r of e • B iffi iers va com me • C uy cult to lue pl nto e om r p y o com ad em rs pl erc f en pl ded ent em e s g e en ptio agi men t e n ng t e xc of lu co com ntry siv m p ity ple lem m en en ts ts

124  Chapter 4

Exhibit 4-12  Critical Success Factors for Pursuing Porter’s Competitive Strategies SOURCE: Based on M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

Generic Strategy

Target

Examples

Critical Success Factors

Cost leadership

Broad (mass market)

Walmart Ikea

Large customer base, low prices Economies of scale Supply chain management expertise

Differentiation

Broad (mass market)

Nordstrom Holt Renfrew

Top quality merchandise Exceptional service Brand recognition, high advertising

Focus (differentiation)

Narrow (niche market)

Whole Foods Cinnabon

Unique, innovative Special features for smaller segments Customized products

Focus (cost)

Narrow (niche market)

Dollar store Claire’s

Low costs Inexpensive products Moderate quality

• Current-competitor rivalry.  Factors such as industry growth rate, increasing or falling demand, and product differences determine how intense the competitive rivalry will be among firms currently in the industry. • Power of complementors. A complementor is another industry whose product tends to increase the sales of a product in another industry.45 Companies in the computer and electronics industries sell products that must be used together.46 Other stakeholders, such as special interest groups, trade associations, and local communities, can also wield powerful influence and therefore impact the competitive landscape of an industry. Browse YouTube for many examples of Porter’s analysis as applied to various industries such as airlines and automobiles. Once managers have assessed the six forces and determined what threats and opportunities exist, they are ready to select an appropriate competitive strategy. According to Porter, no firm can be successful by trying to be all things to all people. He proposes that managers select a strategy that will give the organization a competitive advantage, which he says arises out of either having lower costs than all other industry competitors or by being significantly different from competitors. On that basis, managers can choose one of three strategies: cost leadership, differentiation, or focus. Which strategy managers select depends on the organization’s strengths and core competencies and its competitors’ weaknesses. (See Exhibit 4-12.)

Chapter Summary Learning Objectives Checklist 4.1 Discuss the nature and purposes of planning. Planning is the process of defining goals and assessing how those goals can best be achieved. The purpose of planning is to provide direction, reduce uncertainty, reduce overlapping and wasteful activities, and establish the goals or standards used in controlling. Without planning, managers would not know what to organize, lead, or control. Stantec is a professional consulting firm that focuses on planning, engineering, architecture, interior design, surveying, environmental sciences, and project economics. It uses a rigorous and creative planning process that balances culture, data, and financial realities.

4.2 Compare and contrast approaches to goal setting and planning. Goals are the desired outcomes for individuals, groups, or entire organizations. They provide the direction for all management decisions and form the criteria against which actual work accomplishments can be measured. Goals can be set at the top of the organization or through management by objectives (MBO), in which employees and managers jointly develop goals. Once goals have been established, managers develop plans to achieve them, either on their own or with the help of employees. Plans outline how goals are going to be met. They typically describe resource allocations, schedules, and other necessary actions to

Chapter 4  Planning and Strategic Management 125

accomplish the goals. Planning can lock people into a particular way of behaving, which might not be appropriate at a later point. Therefore, plans need to be somewhat flexible so that managers can respond to environmental changes. Stantec developed a new strategic focus on creating communities and designing with community in mind—Stantec’s new mantra. The philosophy was linked with company values, and then initiatives were developed relating to employees, clients, business processes, and overall firm performance. Stantec focused on organization-wide communication of the values that provide the foundation of its strategic plan.

4.3 Describe the steps in strategic management. The strategic management process is a six-step process that encompasses strategic planning, implementation, and evaluation. The first four steps involve planning: identifying the organization’s current mission, goals, and strategies; analyzing the internal environment; analyzing the external environment; and formulating strategies. The fifth step is implementing strategies, and the sixth step is evaluating the results. Even the best strategies can fail if management does not implement or evaluate them properly. Stantec follows a long-range, five-year strategy process that includes reviewing current strategies, plans made, and challenges in its business environment.

4.4 Describe what kinds of strategies managers use. There are three levels of organizational strategies: corporate, business, and functional. They relate to the p ­ articular level of the organization that introduces the strategy. At the corporate level, organizations can engage in growth,

stability, and renewal strategies. At the business level, strategies look at how an organization should compete in each of its businesses: through cost leadership, differentiation, or focus. At the functional level, strategies of the various functional departments support the business strategy. Stantec aligned its internal structure to mesh more closely with that of its clients and began to focus on three business operating units: buildings, energy and resources, and infrastructure. This realignment provides enhanced client support and greater leadership accountability and better positions Stantec for future growth and success while maintaining the core strategic elements.

Discussion Questions 1. Contrast formal and informal planning. 2. Describe the differences and explain the relationships between (a) strategic and operational plans, (b) short- and long-term plans, and (c) specific and directional plans. 3. Describe the six-step strategic management process. 4. What is the difference between SWOT and PESTEL analysis? 5. “Organizations that fail to plan are planning to fail.” Do you agree or disagree with this statement? Explain your position. 6. Using Michael Porter’s generic strategies (cost leadership, differentiation, and focus), describe the strategy used by each of the following companies in the automotive industry: Kia, Toyota, and Ferrari. 7. “The primary means of sustaining a competitive advantage is to adjust faster to the environment than your competitors do.” Do you agree or disagree with this statement? Explain your position.

Developing Management Skills Dilemma Think ahead to five years from now to consider what it is that you might like to be doing with your life. Develop your own vision and mission statements. Conduct a personal SWOT analysis. Establish a set of goals that will help you achieve your vision and mission. Develop a five-year plan that maps out the steps you need to take to get to where you want to be with your life at that time. Use this plan as a basis for prioritizing tasks with your time management techniques.

Becoming a Manager • Write a personal mission statement in under 200 words. • What are your strengths and weaknesses as a student? What opportunities and threats exist in your college or university environment?

• Develop some specific and challenging goals for various aspects of your life, such as academic studies, career preparation, family, and so forth. • Set some deadlines and milestones for your goals. Monitor and evaluate your performance every six to twelve months. • For goals that you have developed, write out plans for achieving those goals. • Think of a job that you would like to have five years from now. See if your goals and plans will help you to obtain this job.

126  Chapter 4

Developing Your Interpersonal Skills: Goal Setting for Your Professor ABOUT THE SKILL Management by objectives was described earlier in the chapter. Setting objectives jointly provides for greater commitment and motivation.

PRACTISING THE SKILL Have a discussion with your professor. Provide responses to the following three questions as they relate to your classroom:

1. What should the professor stop doing? 2. What should the professor start doing? 3. What should the professor continue doing? Now develop a list of three goals that would be critical to your professor ’s performance, and ensure that they meet the characteristics of well-designed goals. Now develop an action plan for your professor to achieve the goals.

Team Exercises     3BL: The Triple Bottom Line ETHICAL COMPETITIVE INTELLIGENCE Competitive intelligence is accurate information about competitors that allows managers to anticipate competitors’ actions rather than merely react to them.47 It seeks basic information about competitors: Who are they? What are they doing? How will what they’re doing affect us? Many who study competitive intelligence suggest that much of the competitor-related information managers need to make crucial strategic decisions is available and accessible to the public.48 In other words, competitive intelligence isn’t organizational espionage. Advertisements, promotional materials, press releases, reports filed with government agencies, annual reports, want ads, newspaper reports, information on the Internet, and industry studies are readily accessible sources of information. Specific information on an industry and associated organizations is increasingly available through electronic databases. Managers can literally tap into this wealth of competitive information by purchasing access to databases. Attending trade shows and debriefing your own sales staff also can be good sources of information on competitors. In addition, many organizations even regularly buy competitors’ products and ask their own employees to evaluate them to learn about new technical innovations.49 Managers do need to be careful about the way information, especially competitive intelligence, is gathered to prevent any concerns about whether it’s legal or ethical. For instance, Starwood Hotels sued Hilton Hotels, alleging that two former employees stole trade secrets and helped Hilton develop a new line of luxury, trendy hotels designed to appeal to a young demographic.50 The court filing said, “This is the clearest imaginable case of corporate espionage, theft of trade secrets, unfair competition, and computer fraud.” Competitive intelligence becomes illegal corporate spying when it involves the theft of proprietary materials or trade secrets by any means. If a firm does so unethically, the profit bottom line may create a

negative tradeoff on the people bottom line in the organization. Acting unethically, even if it generates more profit, can lead employees to believe that their interests and those of the broader community are no longer being served. Difficult decisions about competitive intelligence arise because often there’s a fine line between what’s considered legal and ethical and what’s considered legal but unethical. Although the top manager at one competitive intelligence firm contends that 99.9 percent of intelligence gathering is legal, there’s no question that some people or companies will go to any lengths—some unethical—to get information about competitors.51

THINKING CRITICALLY ABOUT ETHICAL COMPETITIVE INTELLIGENCE Which of the following situations would be examples of ethical competitive intelligence? Why or why not? • Attending a trade show with a name badge and gathering information at the competitor’s booth • Accessing annual reports and industry market surveys • Obtaining information from the competitor’s public website • Interviewing competitors’ employees to access confidential information • Hiring professional investigators to get some specific details about the competitor • Secretly monitoring statements made by competitors’ employees

Your College or University’s Vision, Mission, and Strategies You might not pay much attention to the goals and objectives of your college or university because you are focusing on your studies. But your college or university had

Chapter 4  Planning and Strategic Management 127

to carve out its niche in an effort to provide something of value to its students, and it must continue to monitor its performance. For this exercise, break up into small groups. The task of each group is to prepare responses to the following questions and present your findings to the class: 1. What is your college or university’s vision and mission? What resources does your college or university have that support its vision and mission? 2. How would you describe your college or university’s environment in terms of PESTEL? 3. What do you believe are the strengths and weaknesses of your college or university? What are its opportunities and threats? 4. Obtain the strategic plan for your college or university. Which corporate strategy is your college or university following? How does this relate to its strengths, weaknesses, opportunities, and threats? 5. Which of Porter’s generic strategies is evident at your college or university? 6. What do you believe is your college or university’s competitive advantage? What do you think your college or university should do to sustain its competitive advantage? 7. Is strategic planning as important in education as it is in business?

Hey, You’re the Boss Now! In addition to your own focus on goals, employees should also have a clear understanding of what they’re attempting to accomplish. Managers have the responsibility to help employees with this understanding as they set work goals. You can be more effective at setting goals if you use the following eight suggestions: • Identify an employee’s key job tasks.  Goal setting begins by defining what it is that you want your employees

to accomplish. The best source for this information is each employee’s job description. • Establish measurable, specific, and challenging goals for each key task.  Identify the level of performance expected of each employee. Specify the target toward which the employee is working. • Specify the deadlines for each goal.  Putting deadlines on each goal reduces ambiguity. Deadlines, however, should not be set arbitrarily. Rather, they need to be realistic given the tasks to be completed. • Allow the employee to participate actively. When employees participate in goal setting, they’re more ­ likely to accept the goals. However, it must be sincere participation. That is, employees must perceive that you are truly seeking their input, not just going through the motions. • Prioritize goals.  When you give someone more than one goal, it’s important to rank the goals in order of importance. The purpose of prioritizing is to encourage the employee to take action and expend effort on each goal in proportion to its importance. • Rate goals for difficulty and importance.  Goal setting should not encourage people to choose easy goals. Instead, goals should be rated for their difficulty and importance. When goals are rated, individuals can be given credit for trying difficult goals, even if they don’t fully achieve them. • Build in feedback mechanisms to assess goal progress. Feedback lets employees know whether their level of effort is sufficient to attain the goal. Feedback should be both self-generated and supervisor-generated. Feedback should also be frequent and recurring. • Link rewards to goal attainment.  It’s natural for employees to ask, “What’s in it for me?” Linking rewards to the achievement of goals will help answer that question.52

Business Cases SilverBirch Hotels & Resorts The name SilverBirch Hotels & Resorts may be unfamiliar, but you have likely heard of brands such as Radisson, Marriott, Hilton, Best Western, and Ramada. Vancouver-based SilverBirch is one of Canada’s leading hotel management companies, managing over twenty-five hotels and resorts across Canada—both independent hotels and hotels operating under the major franchise brands listed previously. Over the past decade, SilverBirch Hotels & Resorts has experienced success due in large part to a strong regional infrastructure, sales growth, marketing programs and

support, excellent franchise relations, and an unusual approach to branding. For consumer marketing purposes, the name GreatCanadianHotels is used instead of SilverBirch to address the lack of a franchise brand. SilverBirch entered into a partnership with Marriott International Inc. to open the first branded extended-stay hotel in the summer of 2012. The partnership gives Marriott a partner who is familiar with the Canadian market, while aligning with a strong international brand is helping SilverBirch with its strategy of acquiring and building new branded properties across the country.

128  Chapter 4 SilverBirch has also shown a strong environmental ethic since it was established in 1997. Its vision, mission, and values include “safety and respect for the environment.” The Hotel Association of Canada (HAC) administers a Green Key Eco-Rating Program, and SilverBirch was the first hotel management company in Canada to have all of its properties certified by HAC.53 In 2017, Leadon Investments (Hong Kong) purchased SilverBirch for $843 million. Determine whether the following SilverBirch decisions are strategic (S) or operational (O): ______ Partnering with Marriott International ______ Planting 1800 trees at one of its hotels to offset the greenhouse gas emissions produced by meetings and events at its property ______ Creating educational internship programs for students at culinary and hospitality training schools ______ Installing a computerized reservation system ______ Developing a new vision statement: “We excite our markets with the liveliest hotels in Canada, each with its own rich, Canadian sense of place.” ______ Holding a wine-and-food pairing fall promotion in its Saskatoon hotel ______ Selling the company to Leadon Investments

Prince Edward County Prince Edward County (PEC), a small peninsula in Lake Ontario about 125 miles east of Toronto, has become an emerging powerhouse of viticulture and gastronomy.54 With more than forty wineries, it is producing world-class pinot noir and chardonnay. Part of PEC’s appeal is that the area has a similar terroir to Burgundy, home to some of the most expensive and most sought-after pinot noirs on Earth. Like Burgundy, PEC is prized for its limestone bedrock, which lends a succulent and mineral taste to pinot noirs and chardonnays, and for its climate, where the warm summer temperatures slowly taper off into autumn, producing wines with strong acidity without being sickly sweet.55 Winemaking in PEC is costly and challenging. Because temperatures plummet to –30C in the winter, workers have to bury almost all the vines until spring to prevent them from freezing. It leaves the vines more vulnerable in the spring as the soil temperatures rise. Dehilling, the process of removing the dirt mounds, happens after the threat of frost has passed. “This is the worst place ever to grow grapes,” says Lee Baker, a winemaker at Keint-He Winery & Vineyards on Loyalist Parkway, a lakeside road deep in the county. “You’re running a higher budget than you normally would anywhere else, because your labour is so much greater.” The burial process requires wineries to hire more workers than vineyards of a similar size elsewhere. “But quality wise, it’s one of the best,” he says. “It’s not that hard to make a brilliant wine out of these grapes, as long as you get them in here and they’re sound.”56 Keint-He, named

after the Mohawks of the Bay of Quinte, was partly funded by former Bank of Montreal Vice Chairman Ron Rogers. It’s home to Prince Edward County’s oldest pinot noir ­plantings—some of them a ripe old 29 years of age.57 Keint-He has grown to keep up with demand. Over the past five years, production has risen from 800 to 5000 cases per year, and thirty-seven acres are now planted instead of twenty-three. Along with that growth comes the need for continuous improvement in viticulture practices, such as pest management, improved irrigation, and innovative vine trellis systems.

Questions 1. How is the planning process in the wine industry similar to that in other manufacturing industries? 2. What kinds of contingency plans are required in the PEC wine region? 3. What growth strategies are most suitable for the PEC wine industry?

Fast Fashion When Amancio Ortega, a former Spanish bathrobe maker, opened his first Zara clothing store, his business model was simple: sell high-fashion look-alikes to price-conscious Europeans.58 After succeeding in this, he decided to tackle the outdated clothing industry, in which it took six months from a garment’s design to consumers being able to purchase it in a store. What Ortega envisioned was “fast fashion”—getting designs to customers quickly. And that’s exactly what Zara has done, using technology and an army of designers! The company has been described as having more style than Gap, faster growth than Target, and logistical expertise rivalling Walmart’s. Zara, which is owned by the Spanish fashion retail group Inditex SA, recognizes that success in the fashion world is based on a simple rule—get trendy, desired products to market quickly. Accomplishing this, however, isn’t so simple. It involves a clear and focused understanding of fashion, technology, and their market, and the ability to adapt quickly to trends. Inditex, the world’s largest fashion retailer by sales worldwide, has eight retail brands: Zara, Zara Home, Pull and Bear, Massimo Dutti, Stradivarius, Bershka, Oysho, and Uterqüe. The company has over 5600 stores in eighty-eight countries, although Zara pulls in over two-thirds of the company’s revenues. Despite its global presence, Zara is not yet a household name in Canada, with just over thirty stores open, including a flagship store at Bloor-Yorkville in Toronto. What is Zara’s secret to excelling at fast fashion? It takes approximately two weeks to get a new design from drawing board to store floor. And stores are stocked with new designs twice a week as clothes are shipped directly to

Chapter 4  Planning and Strategic Management 129

the stores from the factory. Thus, each aspect of Zara’s business contributes to the fast turnaround. Sales managers at “the Cube”—what employees call their futuristic-looking headquarters—sit at a long row of computers and scrutinize sales at every store. They see the hits and the misses almost instantaneously. They ask the in-house designers, who work in teams, sketching out new styles and deciding which fabrics will provide the best combination of style and price, for new designs. Once a design is drawn, it’s sent electronically to Zara’s factory across the street, where a clothing sample is made. To minimize waste, ­computer programs arrange and rearrange clothing patterns on the massive fabric rolls before a laser-guided machine does the cutting. Zara produces most of its designs close to home—in Morocco, Portugal, Spain, and Turkey. Finished garments are returned to the factory within a week. Finishing touches (buttons, trim, detailing, etc.) are added, and each garment goes through a quality check. Garments that don’t pass are discarded, while those that do pass are individually pressed. Then, garment labels (indicating to which country garments will be shipped) and security tags are added. The bundled garments proceed along a moving carousel of hanging rails via a maze of tunnels to the warehouse, a four-storey, five-million-squarefoot building (about the size of ninety football fields). As the merchandise bundles move along the rails, electronic bar code tags are read by equipment that sends them to the right “staging area,” where specific merchandise is first sorted by country and then by individual store, ensuring that each store gets exactly the shipment it’s supposed to. From there, merchandise for European stores is sent to a

loading dock and packed on a truck with other shipments in order of delivery. Deliveries to other locations go by plane. Some 60 000 items each hour—more than 2.6 million items a week—move through this ultrasophisticated distribution centre. And this takes place with only a handful of workers who monitor the entire process. The company’s just-in-time production (an idea borrowed from the auto industry) gives it a competitive edge in terms of speed and flexibility.   Zara is also committed to lengthening the useful life of clothing by placing containers in stores where customers can drop off used garments. In Canada, the program partners with the Salvation Army. Zara’s Secret to FAST FASHION In the face of Zara’s success at fast fashion, its competitors are working to be faster. But CEO Pablo Isla isn’t standing still. To maintain Zara’s leading advantage, he’s introducing new methods that enable store managers to order and display merchandise faster and is adding new cargo routes for shipping goods. And the company has finally made the jump into online retailing. One analyst forecasts that the company could quadruple sales in North America, with a majority of that coming from online sales.

Questions 1. What competitive advantage do you think Zara is pursuing? 2. What strategic implications does Zara’s move into online retailing have? (Hint: Think in terms of resources and capabilities.)

Chapter 5

Felix Choo/Alamy Stock Photo

Organizational Structure and Design

Learning Objectives 5.1 Describe the six key elements in organizational structure. 5.2 Define the factors that affect organizational structure. 5.3 Describe common organizational designs. 5.4 Describe contemporary organizational design challenges. You might not have heard of Empire Company Limited, but you’ve probably shopped at one of their Sobeys, Safeway, or IGA grocery stores. Empire is a Canadian food-retailing and real estate company based in Stellarton, Nova Scotia, with more than $24 billion in annual sales and more than 120 000 employees. Sobeys has been serving Canadians for over 100 years, and one of the secrets to its competitive success is the synergy that comes from owning its own retail real estate.

130

Chapter 5  Organizational Structure and Design 131 With a lofty goal of being recognized as the best food retailer and workplace environment in Canada, Empire has moved away from a regional management structure in order to reduce complexity and eliminate duplication. The company streamlined its organizational structure to reflect its transition to an operationally focused grocery retailer with related real estate interests. Empire aggressively pursued expansion with a $6 billion purchase of Safeway but struggled to integrate it into its existing organizational structure. In May 2017, Michael Medline was brought in from Canadian Tire to be the new CEO and embark on a cost-cutting exercise. By 2018, Empire had rebounded, and Medline was named the Globe and Mail’s CEO of the year.1 For Empire to be successful, the management structure requires simplicity and clarity. What kind of organizational structure can support the operations of retail stores and real estate assets? The CEO has a great deal of flexibility in determining some parts of the structure and less flexibility in determining others. As a business with significant family ownership, Empire has been able to pursue a long-term growth strategy rather than focusing on short-term financial results. Empire continues to expand its discount FreshCo stores and by purchasing Farmboy. In this chapter, we present information about designing appropriate organizational structures. We look at the various elements of organizational structure and the factors that influence their design. We also look at some traditional and contemporary organizational designs, as well as organizational design challenges that today’s managers face. As you read through the chapter, put yourself in CEO Michael Medline’s shoes. Think about what organizational structure will best ensure Empire’s goals, and how you can continue to make Empire successful.

Key Elements in Organizational Structure 5.1 Describe the six key elements in organizational structure.

Getting work done efficiently & effectively. Organizing is all about that! Recall from Chapter 1 that we defined organizing as the function of management that determines what needs to be done, how it will be done, and who is to do it; in other words, it is the function that creates the organization’s structure. When managers develop or change the organization’s structure, they’re engaging in organizational design. This process involves making decisions about how specialized jobs should be, the rules to guide employees’ behaviours, and at what level decisions are to be made. Although organizational design decisions are typically made by top-level managers, it’s important for everyone involved to understand the process. Why? Because each of us work in some type of organizational structure, and we need to know how and why things get done. In addition, given the changing environment and the need for organizations to adapt, you should begin understanding what tomorrow’s structures may look like—those will be the settings you’ll be working in. Few topics in management have undergone as much change in the past few years as those of organizing and organizational structure. Managers are re-evaluating traditional approaches and exploring new structural designs that best support and facilitate employees doing the organization’s work—designs that can achieve efficiency but are also flexible. The basic concepts of organizational design formulated by management writers such as Henri Fayol and Max Weber offered structural principles for managers to follow. (Rewind to the History Module—Supplement 1A.) Over 90 years have passed since many of those principles were originally proposed. Given that length of time

organizing A management function that involves determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made.

organizational design The process of developing or changing an organization’s structure.

organizational structure How job tasks are formally divided, grouped, and coordinated within an organization.

Miskolin/Fotolia

132  Chapter 5

Work specialization is the division of individual tasks into separate jobs.

and all the changes that have taken place, you’d think that those principles would be mostly worthless today. Surprisingly, they’re not. They still provide valuable insights into designing effective and efficient organizations. Of course, over the years we’ve also gained a great deal of knowledge as to their limitations. In the following sections, we discuss the six basic elements of organizational structure: work specialization, departmentalization, authority and responsibility, span of control, centralization versus decentralization, and formalization.2

Work Specialization

AFP/Newscom

Adam Smith first identified division of labour and concluded that it contributed to increased employee productivity. Early in the twentieth century, Henry Ford applied this concept in an assembly line, where every Ford employee was assigned a specific, repetitive task. work specialization Today we use the term work specialization to describe the degree to which tasks The degree to which tasks in an in an organization are subdivided into separate jobs. The essence of work specializaorganization are subdivided into tion is that an entire job is not done by one individual but instead is broken down into separate jobs; also known as steps, and each step is completed by a different person. Individual employees “spedivision of labour. cialize” in doing part of an activity rather than the entire activity in order to increase work output. Work specialization allows organizations to efficiently use the diversity of skills that workers have. In most organizations, some tasks require highly developed skills; others can be performed by employees with lower skill levels. If all workers were engaged in all the steps of, say, a manufacturing process, all would need the skills necessary to perform both the most demanding and the least demanding jobs. Thus, except when performing the most highly skilled or highly sophisticated tasks, employees would be working below their skill levels. In addition, skilled workers are paid more than unskilled workers, and, because wages tend to reflect the highest level of skill, all workers would be paid at highly skilled rates to do easy tasks— an inefficient use of resources. This concept explains why you rarely find a cardiac surgeon closing up a patient after surgery. Instead, surgical residents learning the skill usually stitch and staple the patient after the surgeon has finished the surgery. Early proponents of work specialization believed that it could lead to great increases in productivity. At the beginning of the twentieth century, that generalization was reasonable. Because specialization was not widely practised, its introduction almost always generated higher productivity. But a good thing can be carried too far. At some point, the human diseconomies—boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, and high ­turnover— outweigh the economic advantages. Most managers today see work specialization as an important organizing mechaLacing is one of thirteen separate tasks involved in hand-crafting a Wilson Sporting nism but not as a source of ever-increasing Goods football. The company uses work specialization in dividing job activities as productivity. McDonald’s uses high work an organizing mechanism that helps employees boost their productivity and makes specialization to get its products made and efficient use of workers’ diverse skills.

Chapter 5  Organizational Structure and Design 133

Qstockmedia/Fotolia

delivered to customers efficiently. However, managers also have to recognize its limitations. That’s why companies like Bolton, Ontario–based Husky Injection Molding Systems and Hallmark use minimal work specialization and instead give employees a broad range of tasks to do.

Departmentalization

Exhibit 5-1  Types of Departmentalization Functional

Groups employees based on work performed (e.g., engineering, accounting, information systems, human resources)

Product

Groups employees based on major product areas in the corporation (e.g., women’s footwear, men’s footwear, and apparel and accessories)

Customer

Groups employees based on customers’ problems and needs (e.g., wholesale, retail, government)

Geographic

Groups employees based on location served (e.g., East Coast, Western Canada, Ontario and Quebec Territories)

Process

Groups employees based on the basis of work or customer flow (e.g., testing, payment)

departmentalization The basis on which jobs are grouped together.

functional departmentalization Grouping jobs by functions performed.

product departmentalization Grouping jobs by product line.

geographical departmentalization Grouping jobs on the basis of territory or geography.

process departmentalization Grouping jobs on the basis of product or customer flow.

customer departmentalization Grouping jobs on the basis of customers who have common needs or problems.

Sergey Nivens/Fotolia

Does your college or university have an office of student affairs? A financial aid or student housing department? Once jobs have been divided up through work specialization, they have to be grouped back together so that common tasks can be coordinated. The basis on which jobs are grouped together is called departmentalization. Every organization will have its own specific way of classifying and grouping work activities. Exhibit 5-1 shows the five common forms of departmentalization. Functional departmentalization groups jobs by functions performed. This approach can be used in all types of organizations, although the functions change to reflect the organization’s purpose and work. Product departmentalization groups jobs by product line. In this approach, each major product area is placed under the authority of a manager who is responsible for everything having to do with that product line. For example, Estée Lauder sells lipstick, eyeshadow, blush, and a variety of other cosmetics represented by different product lines. The company’s lines include Clinique and Origins, in addition to Canadian-created MAC Cosmetics and its own original line of Estée Lauder products, each of which operates as a distinct company. Geographical departmentalization groups jobs on the basis of territory or geography, such as the East Coast, Western Canada, or Central Ontario, or maybe by Canadian, European, Latin American, and Asian-Pacific regions. Process departmentalization groups jobs on the basis of product or customer flow. In this approach, work activities follow a natural processing flow of products or even of customers. For example, many beauty salons have separate employees for shampooing, colouring, and cutting hair, all different processes for having one’s hair styled. Finally, customer departmentalization groups jobs on the basis of customers who have common needs or problems that can best be met by having specialists for each. There are advantages to matching departmentalization to customer needs. Large organizations often combine forms of departmentalization. For example, a major Canadian photonics firm organizes each of its divisions along functional lines: its manufacturing units around processes, its sales units around seven geographic regions, and its sales regions into four customer groupings. Two popular trends in departmentalization are the use of customer departmentalization and the use of cross-functional teams. Toronto-based Dell Canada is organized around four customer-oriented business units: home and home office; small business; medium and large business; and government, education, and health care. Customer-oriented structures enable companies to better understand their customers and to respond faster to their needs.

134  Chapter 5

Dick Hemingway

Managers use cross-functional teams—teams made up of groups of individuals who are experts in various specialties and who work together—to increase knowledge and understanding for some organizational tasks. Scarborough, Ontario–based Aviva Canada, a leading property and casualty insurance group, puts together cross-functional catastrophe teams, with trained representatives from all relevant departments, to more quickly help policyholders when a crisis occurs. During the BC wildfires of summer 2003, the catastrophe team worked on both local and corporate issues, including managing information technology, internal and external communication, tracking, resourcing, and vendors. This type of organization made it easier to meet the needs of policyholders as quickly as possible.3

Chain of Command Burnaby, British Columbia–based TELUS is structured around four customer-oriented business units to improve customer response times: consumer solutions (focused on services to homes and individuals); business solutions (focused on services to small and medium-sized businesses and entrepreneurs); TELUS Québec (a TELUS company focused on services for the Quebec marketplace); and partner solutions (focused on services to wholesale customers, such as telecommunications carriers and wireless communications companies).

cross-functional teams Work teams made up of individuals who are experts in various functional specialties.

The chain of command is the continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom. It helps employees answer questions such as “Who do I go to if I have a problem?” or “Who do I report to?”

Authority comes from the position, not the person.

Authority refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it.4 To facilitate decision making and coordination, an organization’s managers are part of the chain of command and are granted a certain degree of authority to meet their responsibilities. Each management position has specific inherent rights that incumbents acquire from the position’s rank or title. Authority, therefore, is related to

chain of command The continuous line of authority that extends from the top of the organization to the lowest level and clarifies who reports to whom.

authority

H. Mark Weidman Photography/Alamy Stock Photo

The rights inherent in a managerial position to tell people what to do and to expect them to do it.

Harley-Davidson uses cross-functional teams from the conception and design of its motorcycles to their production and product launch. Harley’s teams of buyers, suppliers, marketers, operations personnel, engineers, and employees from other departments work together to provide customers with quality products.

Chapter 5  Organizational Structure and Design 135

one’s position within an organization and has nothing to do with the personal characteristics of an individual manager. When a position of authority is vacated, the person who has left the position no longer has any authority. The authority remains with the position and its new incumbent. When managers delegate authority, they must allocate commensurate responsibility. That is, when employees are given rights, they also assume a corresponding obligation to perform. And they’ll be held accountable for their performance! Allocating authority without responsibility and accountability creates opportunities for abuse. Likewise, no one should be held responsible or accountable for something over which he or she has no authority. Sobeys maintains an environmental scorecard where it tracks its performance on environmental pledges such as reducing greenhouse gas emissions by 15 percent, reducing landfill waste by 30 percent, and selling only sustainable seafood products. The unity of command principle helps preserve the concept of a continuous line of authority. It states that every employee should receive orders from only one superior. Without unity of command, conflicting demands and priorities from multiple managers can create problems. Because managers have limited time and knowledge, they may delegate some of their responsibilities to other employees. Delegation is the assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions. Delegation is an important part of a manager’s job, as it can ensure that the right people are part of the decision-making process. Hey, You’re the Boss Now—Delegating 101 gives more tips on how to do a better job of delegating. These concepts are far less important today. For example, at the Michelin plant in Tours, France, managers have replaced the top-down chain of command with “birdhouse” meetings, in which employees meet for five minutes at regular intervals throughout the day at a column on the shop floor to study simple tables and charts to identify production bottlenecks. Instead of being bosses, shop managers are enablers.5 In addition, information technology has provided employees with immediate access to information instead of waiting to hear from someone higher up in the chain of command.

Hey, You’re the Boss Now! Delegating 101 Managers get things done through other people. Because any manager’s time and knowledge is limited, effective managers need to understand how to delegate. Delegation is the assignment of authority to another person to carry out specific duties. It allows an employee to make some of the decisions. Delegation should not be confused with participation. In participative decision making, authority is shared. In delegation, employees make their own decisions. A number of actions differentiate the effective delegator from the ineffective delegator. You can be more effective at delegating if you use the following five suggestions:6 1. Clarify the assignment.  Determine what is to be delegated and to whom. You need to identify the person who is most capable of doing the task and then determine whether he or she has the time and motivation to do the task. If you have a willing and able employee, your responsibility is to provide clear information on what is being delegated, the results you expect, and any time or performance expectations you may have. Unless there is an overriding need to adhere to specific methods, you should specify only the results expected. Get agreement on what is to be done and the results expected, but let the employee decide the best way to complete the task. 2. Specify the employee’s range of discretion.  Every situation of delegation comes with constraints. Although you are delegating to an employee the authority to perform some task or tasks, you are not delegating unlimited authority. You are delegating authority to act on certain issues within certain parameters. You need to specify what those parameters are so that employees know, without any doubt, the range of their discretion.

responsibility The obligation or expectation to perform any assigned duties.

accountability The need to report and justify work to a manager’s superiors.

unity of command The management principle that states every employee should receive orders from only one superior.

delegation The assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions.

136  Chapter 5 3. Allow the employee to participate.  One of the best ways to decide how much authority will be necessary to accomplish a task is to allow the employee who will be held accountable for the task to participate in that decision. Be aware, however, that allowing employees to participate can present its own set of potential problems as a result of employees’ selfinterests and biases in evaluating their own abilities. 4. Inform others about the delegation.  Delegation should not take place behind the scenes. Not only do the manager and employee need to know specifically what has been delegated and how much authority has been given, so does anyone else, both inside and outside the organization, who is likely to be affected by the employee’s decisions and actions. Essentially, you need to communicate what has been delegated (the task and amount of authority) and to whom. 5. Establish feedback channels.  To delegate without establishing feedback controls is to invite problems. The establishment of controls to monitor the employee’s performance increases the likelihood that important problems will be identified and the task will be completed on time and to the desired specifications. Ideally, these controls should be determined at the time of the initial assignment. Agree on a specific time for the completion of the task, and then set progress dates on which the employee will report back on how well he or she is doing and on any major problems that may have arisen. These controls can be supplemented with periodic checks to ensure that authority guidelines are not being abused, organizational policies are being followed, proper procedures are being met, and so forth.

LINE AND STAFF AUTHORITY  In many organizations, a distinction can be made

line managers Managers responsible for the essential activities of the organization, including production and sales.

staff managers Managers who work in the supporting activities of the organizations (such as human resources or accounting).

between line and staff authority. Line managers are responsible for the essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command. The president, the production manager, and the sales manager are examples of line managers. Staff managers work in the supporting activities of the organizations, such as human resources or accounting. Staff managers have advisory authority and cannot issue orders to those in the chain of command (except those in their own department). The vice-president of accounting, the human resources manager, and the marketing research manager are examples of staff managers. Exhibit 5-2 illustrates line and staff authority.

Exhibit 5-2  Line versus Staff Authority Executive Director Line authority

Assistant to the Executive Director

Staff authority

Director of Human Resources

Director of Operations

Director of Purchasing

Unit 1 Manager

Other

Human Resources

Operations

Other Directors

Unit 2 Manager

Purchasing

Human Resources

Operations

Purchasing

Other

Chapter 5  Organizational Structure and Design 137

HOW DO AUTHORITY AND POWER DIFFER?  Authority and power are often considered the same thing, but they’re not. Authority is a right. Its legitimacy is based on an authority figure’s position in the organization. Authority goes with the job. Power, on the other hand, refers to an individual’s capacity to influence decisions. Authority is part of the larger concept of power. That is, the formal rights that come with an individual’s position in the organization are just one means by which an individual can affect the decision process. Exhibit 5-3 visually depicts the difference between authority and power. The twodimensional arrangement of boxes in part A portrays authority. The area in which the authority applies is defined by the horizontal dimension. Each horizontal grouping represents a functional area. The influence one holds in the organization is defined by the vertical dimension in the structure. The higher one is in the organization, the greater one’s authority. Power, on the other hand, is a three-dimensional concept (the cone in part B of Exhibit 5-3). It includes not only the functional and hierarchical dimensions but also a third dimension called centrality. Although authority is defined by one’s vertical position in the hierarchy, power is made up of both one’s vertical position and one’s distance from the organization’s power core or centre. Think of the cone in Exhibit 5-3 as an organization. The centre of the cone is the power core. The closer you are to the power core, the more influence you have on decisions. The existence of a power core is, in fact, the only difference between A and B in Exhibit 5-3. The vertical hierarchy dimension in A is merely one’s level on the outer edge of the cone. The top of the cone corresponds to the top of the hierarchy, the middle of the cone to the middle of the hierarchy, and so on. Similarly,

power An individual’s capacity to influence decisions.

Exhibit 5-3  Authority versus Power A. Authority

Chief Executive Officer

Finance

Accounting

Marketing

Research and Development

Production

B. Power

Authority level The power core

Finance Human Accounting Resources Marketing Production Function

Research and Development

Human Resources

138  Chapter 5 the functional groups in A become wedges in the cone. Each wedge represents a functional area. The cone analogy explicitly acknowledges two facts: (1) The higher one moves in an organization (an increase in authority), the closer one moves to the power core; and (2) it is not necessary to have authority in order to wield power because one can move horizontally inward toward the power core without moving up. For instance, assistants often are powerful in a company even though they have little authority. As gatekeepers for their bosses, these assistants have considerable influence over whom their bosses see and when they see them. Furthermore, because they’re regularly relied upon to pass information on to their bosses, they have some control over what their bosses hear. It’s not unusual for a $105 000-a-year middle manager to tread carefully in order to not upset the boss’s $45 000-a-year administrative assistant. Why? Because the assistant has power. This individual may be low in the authority hierarchy but close to the power core. Likewise, low-ranking employees who have relatives, friends, or associates in high places might also be close to the power core. So, too, are employees with scarce and important skills. The lowly production engineer with 20 years of experience in a company might be the only one in the firm who knows the inner workings of all the old production machinery. When pieces of this old equipment break down, only this engineer understands how to fix them. Suddenly, the engineer’s influence is much greater than it would appear from his or her level in the vertical hierarchy. What do these examples tell us about power? They indicate that power can come from different areas. French and Raven identified five sources, or bases, of power: coercive, reward, legitimate, expert, and referent.7 We discuss these concepts in Chapter 10.

Span of Control span of control The number of employees a manager can efficiently and effectively manage.

How many employees can a manager efficiently and effectively manage? This question of span of control received a great deal of attention from early management writers. Although they came to no consensus on a specific number, most favoured small spans—typically no more than six workers—in order to maintain close control.8 However, several writers did acknowledge level in the organization as a contingency variable. They argued that as a manager rises in an organization, he or she has to deal with a greater number of unstructured problems, so top managers need a smaller span than do middle managers, and middle managers require a smaller span than do supervisors. Over the past decade, however, we’ve seen some change in theories about effective spans of control.9 TODAY’S VIEW  Many organizations are increasing their spans of control. Obviously,

Exhibit 5-4 Contrasting Spans of Control Members at Each Level

Organizational Level

(Highest) Assuming Span of 4

Assuming Span of 8

1

1

1

2

4

8

3

16

64

4

64

(Lowest)

Span of 4: Employees: = 64 Managers (levels 1–3) = 21

Span of 8: Employees: = 64 Managers (levels 1–2) = 9

wider spans are more efficient in terms of cost. However, at some point, wider spans reduce effectiveness. When the span becomes too large, employee performance can suffer because managers may no longer have the time to provide the necessary leadership and support. Exhibit 5-4 illustrates the contrast between a span of control of four versus eight, leading to a need for 21 managers instead of 9. The top performing manufacturing plants have up to forty production workers per supervisor.10 In a large call centre, that number can be as high as fifty customer service representatives per supervisor. The span of control is increasingly being determined by looking at other contingency variables.

Chapter 5  Organizational Structure and Design 139

How Many People Can I Effectively and Efficiently Manage? Most effective and efficient span depends on: • Employee experience and training (more they have, larger span) • Similarity of employee tasks (more similarity, larger span) • Complexity of those tasks (more complex, smaller span) • Physical proximity of employees (closer proximity, larger span) Jennifer S. Altman/Getty Images

• Amount and type of standardized procedures (more standardized, larger span) • Sophistication of the organization’s management information system (more sophisticated, larger span) • Strength of the organization’s value system (stronger the value system, larger span) • Preferred managing style of the manager11 (personal preference of more or fewer employees to manage)

Centralization and Decentralization

Melissa Brenner, executive vice-president of digital media for the National Basketball Association, has expert power. Her expertise in using Facebook, Instagram, and other social media in innovative ways is helping the NBA achieve its goal of enhancing fans’ engagement and enjoyment of the game throughout the world.

In some organizations, top managers make all the decisions and lower-level managers and employees simply carry out their orders. At the other extreme are organizations in which decision making is pushed down to the managers who are closest to the action. The former organizations are centralized, and the latter are decentralized. Centralization describes the degree to which decision making is concentrated at a single point in the organization. If top managers make the organization’s key decisions with little or no input from below, then the organization is centralized. In contrast, the more that lower-level employees provide input or actually make decisions, the more decentralization there is. Keep in mind that the concept of centralization/ decentralization is relative, not absolute—an organization is never completely centralized or decentralized. Few organizations could function effectively if all decisions were made by only a select group of top managers (centralized); nor could they function if all decisions were delegated to employees at the lowest levels (decentralized). Nestlé uses decentralized marketing with centralized production, logistics, and supply chain management.13

centralization The degree to which decision making is concentrated at a single point in the organization.

decentralization The degree to which lower-level employees provide input or actually make decisions.

A Question of Ethics How would you like to know all the closely held company secrets of your employer?12 A small but growing number of private-sector businesses are revealing to employees details about everything from company financials to staff performance reviews and individual pay. Advocates of this approach say it’s a good way to build trust among employees and a good way to make employees aware of how their individual contributions are affecting the overall company as a whole. And it can make them more motivated in how they work. However, critics say that such open management can be expensive and time consuming. For instance, employees may need to be “taught” how to read

financial statements. And employees who have access to all the details may want to weigh in on all the decisions, slowing down the decision-making process. As work becomes collaborative and as office workers become accustomed to sharing details of each other’s lives, maybe the move toward greater workplace openness is inevitable.

Discussion Questions 1. What ethical issues might arise in an “open” company? 2. What are the implications for (a) managers and (b) employees?

140  Chapter 5

employee empowerment Giving more authority to employees to make decisions.

formalization The degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures.

TODAY’S VIEW  Most organizations start with a centralized model, in which a founder makes all the decisions. As the businesses grow and diversify, their environments become complex. These businesses need to become more flexible and responsive, resulting in decentralized decision making. In large companies especially, lower-level managers are “closer to the action” and typically have more detailed knowledge about problems and how best to solve them than do top managers. For example, the Bank of Montreal’s some 1000 branches are organized into “communities”—a group of branches within a limited geographical area. Each community is led by a community area manager, who typically works within a 20-minute drive of the other branches. This area manager can respond faster and more intelligently to problems in his or her community than could a senior executive in Toronto. Another term for increased decentralization is employee empowerment, which means giving more decision-making authority to employees. What determines whether an organization will move toward more centralization or decentralization? Companies facing dynamic environments are more likely to need to adapt quickly to change, and thus decentralize decision making. Stable environments allow for more rules and procedures, so decision making can be centralized more easily. A community college with one location is more likely to be centralized, while a college in a major metropolitan area with five campuses might treat each campus as a separate unit and decentralize decision making to support a more complex environment.

Picsfive/Fotolia

Formalization

Kingsey Falls, Quebec–based Cascades, a leading manufacturer of packaging products and tissue paper, uses decentralization effectively with more than ninety operating units located in Canada, the United States, and Europe.14 Companies are treated as separate entities, based on product, and operate like a federation of small and medium-sized businesses. Each mill is accountable for its own bottom line, and employees are motivated through profit sharing in the profits generated by their own mill. The emphasis on decentralized, entrepreneurial management has been copied by other Canadian forest products companies, such as Domtar.

Formalization refers to the degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures. If a job is highly formalized, the person doing that job has little freedom to choose what is to be done, when it is to be done, and how he or she does it. Employees can be expected to handle the same input in exactly the same way, resulting in consistent and uniform output. Organizations with high formalization have explicit job descriptions, numerous organizational rules, and clearly defined procedures covering work processes. On the other hand, where formalization is low, job behaviours are relatively unstructured, and employees have a great deal of freedom in how they do their work. The degree of formalization varies widely among organizations and even within organizations. For example, at a newspaper, news reporters often have a great deal of discretion in their jobs. They may pick their news topics, find their own stories, research them the way they want to, and write them up, usually within minimal guidelines. In contrast, employees who lay out the newspaper pages do not have that type of freedom. They have constraints—both time and space—that standardize how they do their work. TODAY’S VIEW  Although some formalization is impor-

tant and necessary for consistency and control, many of today’s organizations seem to be less reliant on strict rules and standardization to guide and regulate employee behaviour. Consider the following situation:

Chapter 5  Organizational Structure and Design 141

It is 2:37 p.m. and a customer at a watch repair store is trying to drop off a watch for same-day repair. Store policy states that items must be dropped off by 2:00 p.m. for this service. The clerk knows that rules like this are supposed to be followed. At the same time, he wants to accommodate the customer, and he knows that the watch could, in fact, be repaired that day. He decides to accept the watch and, by so doing, to violate the policy. He just hopes that his manager does not find out.15 Has this employee done something wrong? He did “break” the rule. But by breaking the rule, he actually brought in revenue and provided the customer good service—so good, in fact, that the customer may be satisfied enough to come back in the future. Because such situations where rules may be too restrictive frequently arise, many organizations allow employees some freedom to make decisions they feel are best under the circumstances. However, this freedom does not mean that all organizational rules are thrown out the window. There will be rules that are important for employees to follow, and these rules should be explained so employees understand the importance of adhering to them. But for other rules, employees may be given some leeway in application.16

What Contingency Variables Affect Structural Choice? 5.2 Define the factors affect organizational structure. Top managers typically think long and hard about what structure will work best.

IF these are the contingency factors, THEN this is the most appropriate structure.

John Cogill/AP Images

The “THEN”: Appropriate Organizational Structure

142  Chapter 5

Mechanistic or Organic17 mechanistic organization An organization that is rigid and tightly controlled.

MECHANISTIC ORGANIZATION (OR BUREAUCRACY)

• Has rigid and tightly controlled structure • Combines traditional aspects of all six elements or organizational structure: –– –– –– –– –– ––

High specialization Rigid departmentalization Clear chain of command Narrow spans of control leading to taller structure Centralization High formalization

MECHANISTIC

organic organization An organization that is highly adaptive and flexible.

ORGANIC ORGANIZATION

• Highly adaptive and flexible structure, featuring –– Collaboration (both vertical and horizontal) –– Adaptable duties –– Few rules –– Informal communication –– Decentralized decision authority –– Wider spans of control leading to flatter structures • Loose structure that allows for rapid adjustment to change18

ORGANIC

What’s Cooking in Hospitality? Corporate Travel Management Solutions (CTMS) handles travel arrangements for corporations, including twenty-five major sports clubs as clients. CTMS recently acquired a $200 million contract with a major Canadian retailer, which is quite an achievement given that CTMS’s total 2014 sales were about US$230 million in total.19 The rapid growth is due to an unusual management structure. The company is built on a flat hierarchy, meaning it has completely eliminated layers of middle managers. CTMS has 160 employees and seven offices across the globe— including a head office in Concord, Ontario—but only two levels of management, including the C-suite. And even that hierarchy is fluid, with most senior executives taking a hands-on approach in day-to-day operations.20

Avoiding layers of middle management gives the company an edge over its bigger competitors, including Amex and Carlson Wagonlit Travel. Flat hierarchies encourage employees to use their own ingenuity to solve problems; studies show employees who have creative freedom and increased decision-making power are more engaged and productive. The result? Companies that are faster, nimbler and more innovative—and with CTMS, more profitable. Without those added levels of oversight, CTMS has a simplified decision-making process. A team member will identify an issue or opportunity for improvement, put together a case and schedule a meeting or call with stakeholders to review the item. “Everyone’s input is heard and valued, helping to make the right decision in a timely manner,” says Harris.21

Chapter 5  Organizational Structure and Design 143

The “If”: Contingency Variables 1  STRATEGY—STRUCTURE

• Based on work of Alfred Chandler22 • Goals are important part of organization’s strategies; structure should facilitate goal achievement • Elaborate strategy S more complex structure • Certain structural designs work best with different organizational strategies23 –– Passionate pursuit of innovation S organic –– Passionate pursuit of cost control S mechanistic 2  SIZE—STRUCTURE

• Considerable evidence that size (number of employees) affects structure24 • Magic number seems to be 2000 employees • LARGE organizations (>2000 employees)—mechanistic • When an organization reaches this number, size is less influential; adding more employees has little impact as structure is already fairly mechanistic

ORGANIC

Adding a significant number of new employees to a smaller organization that has a more organic structure will force it to become more mechanistic

MECHANISTIC

3  TECHNOLOGY—STRUCTURE

• Technology is used—by every organization—to convert inputs into outputs. (See Exhibit 5-5.) 4  ENVIRONMENT—STRUCTURE

• Environment is a constraint on managerial discretion • Environment also has a major effect on an organization’s structure –– Stable environment: mechanistic structure –– Dynamic/uncertain environment: organic structure –– Helps explain why so many managers today have restructured their organizations to be lean, fast, and flexible25

Coloures-pic/Fotolia

• Simple strategy S simple structure

144  Chapter 5

Exhibit 5-5  Woodward’s Findings on Technology and Structure Mass Production

Process Production

Moderate vertical differentiation

High vertical differentiation

Low horizontal differentiation

High horizontal differentiation

Low horizontal differentiation

Low formalization

High formalization

Low formalization

Organic

Mechanistic

Organic

Fet/Fotolia

Talex/Fotolia

Most effective structure:

Unit Production Low vertical differentiation

Rvlsoft/Fotolia

Structural characteristics:

Here is a common myth about organizational structure:

  Bureaucracies are inefficient. MANAGEMENT MYTH DEBUNKED People commonly assume that bureaucracies—or mechanistic structures—are inefficient. Critics claim these organizations are slow and rule-bound and have too much “red tape.” The media makes you think bureaucracies are extinct—replaced by empowered teams and loosely structured and adaptive organizations. Although many organizations today do look like that, the truth is that bureaucracies are still alive and well. Most medium-sized and large organizations are structured as a bureaucracy because its traits—specialization, formal rules and regulations, clear chain of command, and departmentalization—help efficiently structure people and tasks. For full details on this management myth, check out our Bust the Myth video in Revel.

Common Organizational Designs 5.3 Describe common organizational designs. What types of organizational designs exist in small businesses or in big companies such as Ford Canada, Shopify, McCain Foods, Procter & Gamble, and eBay? When making organizational design decisions, managers can choose from traditional organizational designs and contemporary organizational designs.

Traditional Organizational Designs simple structure An organizational structure with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization.

In designing a structure to support the efficient and effective accomplishment of organizational goals, managers may choose to follow more traditional organizational designs. These designs—the simple structure, functional structure, and divisional structure—tend to be more mechanistic. Exhibit 5-6 summarizes the strengths and weaknesses of each design. SIMPLE STRUCTURE  Most organizations start as entrepreneurial ventures with

a simple structure consisting of owners and employees. A simple structure is an

Chapter 5  Organizational Structure and Design 145

Exhibit 5-6  Traditional Organization Designs Structure

Strengths

Weaknesses

Simple Structure

Fast; flexible; inexpensive to maintain; clear accountability

Not appropriate as organization grows; reliance on one person is risky

Functional Structure

Cost-saving advantages from specialization (economies of scale, minimal duplication of people and equipment), and employees are grouped with others who have similar tasks

Pursuit of functional goals can cause managers to lose sight of what is best for the overall organization; functional specialists become insulated and have little understanding of what other units are doing

Divisional Structure

Focuses on results—division managers are responsible for what happens to their products and services

Duplication of activities and resources increases costs and reduces efficiency

organizational structure with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization.26 This structure is most commonly used by small businesses in which the owner and manager are one and the same. Most organizations do not remain simple structures. As an organization grows, it generally reaches a point where it has to add employees. As the number of employees rises, the structure tends to become more specialized and formalized. Rules and regulations are introduced; work becomes specialized; departments are created; levels of management are added; and the organization becomes increasingly bureaucratic. At this point, a manager might choose to organize around a functional structure or a divisional structure. FUNCTIONAL STRUCTURE  A functional structure is an organizational structure

functional structure

that groups similar or related occupational specialties together. It is the functional approach to departmentalization applied to the entire organization. Revlon, for example, is organized around the functions of operations, finance, human resources, and product research and development.

An organizational structure that groups similar or related occupational specialties together.

DIVISIONAL STRUCTURE  The divisional structure is an organizational structure that consists of separate business units or divisions.27 In this structure, each unit or division has relatively limited autonomy, with a division manager responsible for performance who has strategic and operational authority over his or her unit. In divisional structures, however, the parent corporation typically acts as an external overseer to coordinate and control the various divisions, and it often provides support services such as financial and legal. For example, Maple Leaf Sports & Entertainment has three divisions, including several sports teams such as the Raptors (NBA), the Maple Leafs (NHL), the Toronto Argonauts (CFL), and Toronto FC (MLS).

divisional structure

Contemporary Organizational Designs Lean. Flexible. Innovative. Managers in contemporary organizations often find that traditional hierarchical designs are not appropriate for the increasingly dynamic and complex environments they face. In response to marketplace demands to be lean, flexible, and innovative— that is, more organic—managers are finding creative ways to structure and organize work and to make their organizations more responsive to the needs of customers, employees, and other organizational constituents.28 At the Canada Revenue Agency, the workforce is spread out, and employees rely on shared workspaces, mobile computing, and virtual private networks to get work done. Nevertheless, work gets done effectively and efficiently.29 Exhibit 5-7 summarizes some of the newest concepts in organizational designs.

An organizational structure that consists of separate business units or divisions.

146  Chapter 5

Exhibit 5-7  Contemporary Organizational Designs

Advantages: Employees are more involved and empowered. Reduced barriers among functional areas.

Team Structure A structure in which the entire organization is made up of work groups or teams.

Disadvantages: No clear chain of command. Pressure on teams to perform.

Advantages: Fluid and flexible design that can respond to environmental changes. Faster decision making.

Matrix-Project Structure Matrix is a structure that assigns specialists from different functional areas to work on projects who then return to their areas when the project is completed. Project is a structure in which employees continuously work on projects. As one project is completed, employees move on to the next project.

Disadvantages: Complexity of assigning people to projects. Task and personality conflicts.

Advantages: Highly flexible and responsive. Utilizes talent wherever it’s found.

Boundaryless Structure A structure not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual and network types of organizations.

Disadvantages: Lack of control. Communication difficulties.

Advantages: Sharing of knowledge throughout organization. Sustainable source of competitive advantage.

team structure An organizational structure in which the entire organization is made up of work groups or teams.

Learning Structure A structure in which employees continually acquire and share new knowledge and apply that knowledge.

Disadvantages: Reluctance on part of employees to share knowledge for fear of losing their power. Large numbers of experienced employees on the verge of retiring.

TEAM STRUCTURE  Larry Page and Sergey Brin, cofounders of Google, have created a corporate structure that “tackles most big projects in small, tightly focused teams.”30 In a team structure, the entire organization is made up of work groups, or teams, that perform the organization’s work.31 Employee empowerment is crucial in a team structure, because there is no line of managerial authority from top to bottom. Rather, employee teams are free to design work in the way they think is best. However, the teams are also held responsible for all work and performance results in their respective areas. Let us look at some examples of organizations that are organized around teams. Whole Foods Market, the largest natural-foods grocer in the United States, now has fourteen stores in Ontario and British Columbia. Each Whole Foods store

Chapter 5  Organizational Structure and Design 147

is an autonomous profit centre composed of an eight to ten self-managed teams, each with a designated team leader. The team leaders in each store are a team; store leaders in each region are a team; and the company’s regional presidents are a team.32 At the Sun Life Assurance Company of Canada (US) office in Wellesley Hills, Massachusetts, customer representatives work in teams trained to expedite all customer requests. When customers call in, they are not switched from one specialist to another but to one of the teams, that takes care of every aspect of the customer’s request. Together, team members work to make resolving insurance difficulties go much smoother. In large organizations, the team structure complements what is typically a functional or divisional structure. This structural addition enables the organization to have the efficiency of a bureaucracy while providing the flexibility that teams provide. To improve productivity at the operating level, for example, Toyota’s CAPTIN plant (based in Delta, British Columbia), Motorola, and Xerox use self-managed teams extensively.33 MATRIX AND PROJECT STRUCTURES  Other popular contemporary designs are

the matrix and project structures. The matrix structure is an organizational structure that assigns specialists from different functional departments to work on one or more projects led by project managers. Once a project is completed, the specialists return to their functional departments. Exhibit 5-8 shows an example of the matrix structure used in an aerospace firm. Along the top are the familiar organizational functions. The specific projects the firm is currently working on are listed along the left-hand side: aircraft, mission systems and avionics, engines and parts, and space technologies. Each project is managed by an individual who staffs his or her project with people from each of the functional departments. Adding this vertical dimension to the traditional horizontal functional departments in effect “weaves together” elements of functional and product departmentalization, creating a matrix arrangement. Another unique aspect of this design is that it creates a dual chain of command, which explicitly violates the classical organizing principle of unity of command. How does a matrix structure work in reality? Employees in a matrix organization have two managers—their functional department manager and their product or project manager—who share authority. The project managers have authority over the functional members who are part of their project team in areas relative to the project’s goals. However, decisions such as promotions, salary recommendations, and annual reviews remain the functional manager’s responsibility. To work effectively, project and functional managers have to communicate regularly, coordinate work demands on employees, and resolve conflicts together.

matrix structure An organizational structure that assigns specialists from different functional departments to work on one or more projects.

Exhibit 5-8  A Matrix of Organization in an Aerospace Firm Design Engineering

Manufacturing

Contract Administration

Purchasing

Accounting

Human Resources (HR)

Aircraft

Design Group

Manufacturing Group

Contract Group

Purchasing Group

Accounting Group

HR Group

Mission Systems and Avionics

Design Group

Manufacturing Group

Contract Group

Purchasing Group

Accounting Group

HR Group

Engines and Parts

Design Group

Manufacturing Group

Contract Group

Purchasing Group

Accounting Group

HR Group

Space Technologies

Design Group

Manufacturing Group

Contract Group

Purchasing Group

Accounting Group

HR Group

Echo/Getty Images

148  Chapter 5

Oticon A/S, a Danish hearing-aid manufacturer, has no departments or employee job titles. All work is project based, and project teams form, disband, and form again as the work requires. Employees “join” project teams because they bring needed skills and abilities to that project. Once the project is completed, they move on to the next one.34

project structure An organizational structure in which employees continuously work on projects.

boundaryless organization An organization that is not defined by a chain of command, places no limits on spans of control, and replaces departments with empowered teams.

virtual organization

Sergey Nivens/Fotolia

An organization that has elements of a traditional organization but also relies on recent developments in information technology to get work done.

Although the matrix structure continues to be an effective organizational structure choice for some organizations, many are using a project structure, in which employees continuously work on projects. Unlike the matrix structure, a project structure has no formal departments that employees return to at the completion of a project. Instead, employees take their specific skills, abilities, and experiences to other projects. All work in project-structured organizations is performed by teams of employees who become part of a project team because they have the appropriate work skills and abilities. Project structures tend to be fluid and flexible organizational designs. This type of structure has no departmentalization or rigid organizational hierarchy to slow down decision making or taking action. Managers act as facilitators, mentors, and coaches. They “serve” the project teams by eliminating or minimizing organizational obstacles and by ensuring that the teams have the resources they need to effectively and efficiently complete their work.

BOUNDARYLESS ORGANIZATIONS  Another approach to contemporary organizational design is the boundaryless organization, an organization whose design is not determined by a predefined structure. Instead the organization seeks to eliminate the chain of command, places no limits on spans of control, and replaces departments with empowered teams.35 The term boundaryless organization was coined by Jack Welch, former chair of General Electric (GE), who wanted to eliminate vertical and horizontal boundaries within GE and break down external barriers between the company and its customers and suppliers. This idea may sound odd, but many successful organizations are finding they can operate more effectively in today’s environment by remaining flexible and unstructured: The ideal structure for them is not having a rigid, predefined structure. What do we mean by “boundaries”? A typical organization has internal boundaries—horizontal boundaries imposed by work specialization and departmentalization, and vertical boundaries created by separating employees into organizational levels and hierarchies. The organization also has external boundaries, which separate the organization from its customers, suppliers, and other stakeholders. To minimize or eliminate these boundaries, managers might use virtual or network organizational structures. How does a boundaryless organization operate in practice? General Electric is made up of a number of companies, including GE Money, which provides financial services to consumers and retailers; GE Water & Process Technologies, which produces water treatment, wastewater treatment, and process systems products; GE Energy, which supplies technology to the energy industry; and NBC Universal Studios, a leading media and entertainment company. Anyone working in any division of GE can learn about opportunities available in the other business units and how to move into those units, if so desired. Mobility is one way that a boundaryless organization functions for its employees. Outside the company, the boundaryless structure allows GE customers to ask factories to increase inventory when the customer needs more product. Thus, the customer makes a decision about inventory that was once made inside the organization. GE also encourages customers and suppliers to evaluate its service levels, giving direct and immediate feedback to employees. VIRTUAL ORGANIZATIONS  A virtual organization has elements of a tradi-

tional organization but also relies on recent developments in information technology to get work done.36 Thus, the organization could consist of a small core of full-time employees plus outside specialists hired on a temporary basis to work on

NETWORK ORGANIZATIONS  Another structural option for managers wanting to minimize or eliminate organizational boundaries is the network organization, which is a small core organization that outsources major business functions.41 This approach allows organizations to concentrate on what they do best and to contract out other activities to companies that specialize in those activities. Many large organizations use the network structure to outsource manufacturing. While many companies use outsourcing, not all are successful at it. Managers should be aware of some of the problems involved in outsourcing, such as the following:

• choosing the wrong activities to outsource • choosing the wrong vendor • writing a poor contract • failing to consider personnel issues • losing control over the activity • ignoring the hidden costs • failing to develop an exit strategy (for either moving to another vendor or deciding to bring the activity back in-house)

Vichie81/Fotolia

opportunities that arise.37 The virtual organization could also be composed of employees who work from their own home offices—connected by technology but perhaps occasionally getting together face to face. An example of a virtual organization is Strawberry Frog, an international advertising agency based in Amsterdam. The small administrative staff accesses a network of more than 100 people around the globe to complete advertising projects. By relying on this global web of freelancers, the company enjoys a network of talent without the overhead and structural complexity of a more traditional organization. The inspiration for virtual organizations comes from the film industry. If you look at the film industry, people are essentially “free agents” who move from project to project applying their skills—directing, talent New Westminster, British Columbia–based iGEN Knowledge Solutions uses its virtual search, costuming, makeup, set design—as needed. Some organizations are now testing out a new form of virtuality, form to bring technical solutions to its business clients. iGEN associates work from home offices using the virtual online world Second Life to create a different type of connected by wireless technologies to solve client organization. Vancouver-based Davis LLP is the first Canadian law firm problems collaboratively. This structure allows to have a presence in Second Life.38 Lawyer Dani Lemon, whose online faster idea implementation, product development, avatar (the digital version of a real person) is Lemon Darcy, said that “the and service delivery. The company finds it easy online world gives [Davis LLP] an opportunity to interact with clients to set up operations in different regions of the country without large overhead costs because of and meet new ones who are comfortable in that setting.” its virtual structure. Lemon believes that being part of Second Life will bring new clients to Davis and give the company an opportunity to communicate in new ways. Several of her colleagues have joined her in this virtual office, including Sarah Dale-Harris (BarristerSolicitor Underwood), Pablo Guzman (PabloGuzman Little), Chris Bennett (IPand Teichmann), David Spratley (DaveS Blackadder), and Chris network organization Metcalfe (IP Maximus). A small core organization that Davis LLP’s Second City office has a boardroom off the lobby that can be used outsources major business for online conferences, a room containing recruiting information from Davis, and functions. a library that will house online legal information. “I think it will be an evolving process,” Lemon said of the online office. “We will use it as a networking tool and as a way to meet clients.”39 The law firm plans to hold online events in Second Life, conduct seminars, and give talks that might be of value to potential clients.

Syda Productions/Fotolia

Chapter 5  Organizational Structure and Design 149

Companies such as Cisco Systems, Nike, Ericsson, Reebok, and Mitel have found that they can do business worth hundreds of millions of dollars without owning manufacturing facilities. San Jose, California–based Cisco Systems is essentially a research and development company that uses outside suppliers and independent manufacturers to assemble the Internet routers its engineers design. Similarly, Beaverton, Oregon–based Nike is a product development and marketing company that contracts with outside organizations to manufacture its athletic footwear. Ottawa-based Mitel Networks designs computer equipment but outsources manufacturing and repair to BreconRidge, another Ottawa high tech firm.40

150  Chapter 5 A review of ninety-one outsourcing activities found that the two most likely reasons for an outsourcing venture failure were writing a poor contract and losing control of the activity.42 Canadian managers say they are reluctant to outsource.43 The PricewaterhouseCoopers (PwC) 2011 Business Insights survey44 showed outsourcing as the lowest priority in terms of improving the competitiveness of Canadian businesses, while innovation and reducing costs were perceived as more important than outsourcing for dealing with volatility. In some cases, companies formerly used as outsourcers are now direct competitors due to globalization.

Contemporary Organizational Design Challenges 5.4 Describe contemporary organizational design challenges.

Changing the way work is done As managers look for organizational designs that will best support and facilitate employees doing their work efficiently and effectively in today’s dynamic environment, certain challenges arise with which they must contend. These challenges include designing office space, keeping employees connected, building a learning organization, managing global structural issues, and using flexible work arrangements.

Designing Office Space Office space has always been a battle between freeing employees to work and maximizing space to minimize costs. (See Exhibit 5-9.) In the early 1900s, Frederick Taylor suggested that properly organized offices would boost productivity. In 1964, Herman Miller designed the Action Office, with clusters of barrier-free offices. Openness and proximity were meant to break down barriers and encourage “meaningful traffic.” When the furniture was reduced in size and interlocked a few years later, the Action Office really took off.45 The cube farm was the next phase, as furniture firms were imitating Miller’s design and using cheaper materials to make mass cubicles. Today’s office spaces are collaborative, accommodating virtual workers with group spaces to engineer interaction and foster creativity. International design firm Gensler conducted a study in 2013 that found workers spent about one-quarter of their workday collaborating and more than half in deep focus. That means employers need to provide office environments that facilitate interaction while allowing freedom from interruption.46

Exhibit 5-9  Comparison of the Major Office Styles SOURCE: Based on S. Brearton, “Circles and Squares,” Canadian Business, November 2014, pp. 57–63.

Office Style

Space/Cost

What They Got Right

What They Got Wrong

The Action Office (1960s–70s)

Average space per employee 500 sq ft $22/sq ft (Toronto)

• Flexibility allowed employers to choose elements • Well-designed desk spaces gave better access to tools and resources

• High-quality components were very expensive • Open environment was noisy and distracting

The Cube Farm (1980s–90s)

Average space per employee 144 sq ft $40/sq ft (Toronto)

• Cubes offered some privacy and the ability to personalize • Businesses found cubicles flexible and affordable

• Quarters became cramped • Bad air and artificial light left workers unmotivated and anxious to leave • It led to “Prairie-dogging,” or the tendency of workers to pop their heads up to communicate with others

The Collaborative Office (present)

Average space per employee 176 sq ft $68/sq ft (Toronto)

• Open designs encourage interaction • Workers can adapt to the environment that is best for them • Smaller footprint equals lower costs

• Open-concept offices distract from the ability to be deep in focus • There is less efficiency in shared spaces

Chapter 5  Organizational Structure and Design 151

And the Survey Says...47 8% of companies surveyed have more than 40 percent of their employees working virtually. 44% of employees say their top gripe about working from home is not having face-to-face interaction. 29% of employees are called “any time, anywhere.” 20%of employees have “nonstandard” jobs (work fewer than 35

hours a week, independent contractors, day labourers, etc.). 12% of respondents to a global workforce survey said that telecommuting was extremely important to them. 81% of employers offer some form of flexible work arrangements. 37% of employees work from multiple locations. 53%of employees use multiple devices for work.

Keeping Employees Connected Many organizational design concepts were developed during the twentieth century, when work tasks were fairly predictable and constant, most jobs were full-time and continued indefinitely, and work was done at an employer’s place of business under a manager’s supervision.48 However, many organizations today are not like that, as you saw in our preceding discussion on virtual and network organizations. A major structural design challenge for managers is finding a way to keep widely dispersed and mobile employees connected to the organization. We cover information on motivating these employees in Chapter 9.

Building a Learning Organization Doing business in an intensely competitive global environment, managers at British retailer Tesco realize how important it is for stores to operate smoothly behind the scenes. At Tesco they do so through the use of a proven tool—a set of software applications called Tesco in a Box, which promotes consistency in operations and

Technology and the Manager’s Job49

The Changing World of Work It’s fair to say that the world of work will never be like it was 10 years ago.50 IT has opened up new possibilities for employees to do their work in locations as remote as Iqaluit or in the middle of downtown Vancouver. Although organizations have always had employees who travelled to distant corporate locations to take care of business, these employees no longer have to find the nearest pay phone or wait to get back to “the office” to see what problems have cropped up. Instead, mobile computing and communication have given organizations and employees ways to stay connected, be more productive, and be more environmentally friendly. Let’s look at some of the technologies that are changing the way work is done. • Handheld devices with e-mail, calendars, and contacts can be used anywhere there’s a wireless network. And these devices can be used to log into corporate databases and company intranets. • Employees can video conference using broadband networks and webcams. • Many companies are giving employees key fobs with constantly changing encryption codes that allow them to log onto the corporate network to access e-mail and company data from any computer hooked up to the Internet.

• Cell phones switch seamlessly between cellular networks and corporate Wi-Fi connections. The biggest issue in doing work anywhere, anytime is security. Companies must protect their important and sensitive information. However, software and other disabling devices have minimized security issues considerably. Even insurance providers are more comfortable giving their mobile employees access to information. For instance, Health Net Inc. gave BlackBerrys to many of its managers so they can tap into customer records from anywhere. One tech company CEO said that all types of organizations should start thinking about identifying and creating innovative apps that their workers could use in doing their jobs more efficiently and effectively and get those to them.

Discussion Questions 1. What benefits do you see with being able to do work anywhere, anytime? (Think in terms of benefits for an organization and for its human resources.) 2. What other issues, besides security, do you see with being able to do work anywhere, anytime? (Again, think about this for an organization and for its employees.)

152  Chapter 5

Exhibit 5-10  Characteristics of a Learning Organization SOURCES: Based on P. M. Senge, The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990); and R. M. Hodgetts, F. Luthans, and S. M. Lee, “New Paradigm Organizations: From Total Quality to Learning to World Class,” Organizational Dynamics, Winter 1994, pp. 4–19.

Organizational Design • Boundaryless • Teams • Empowerment

Organizational Culture • Strong Mutual Relationships • Sense of Community • Caring • Trust

THE LEARNING ORGANIZATION

Information Sharing • Open • Timely • Accurate

Leadership • Shared Vision • Collaboration

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

acts as a way to share innovations. Tesco is an example of a learning organization, an organization that has developed the capacity to constantly learn, adapt, and change.51 In a learning organization, employees continually acquire and share new knowledge and apply that knowledge in making decisions or doing their work. Some organizational theorists even go so far as to say that an organization’s ability to learn and to apply that learning may be the only sustainable source of competitive advantage.52 What structural characteristics does a learning organization need? First, members of a learning organization must be able to share information and collaborate on work activities throughout the entire organization—across different functional specialties and even at different organizational levels. This sharing and collaboration requires that structural and physical barriers be minimal. In such a boundaryless environment, employees can work together and collaborate in doing the organization’s work the best way they can and learn from each other. Second, because of the need to collaborate, teams tend to be an important feature of a learning organization’s structural design. Employees work in teams empowered to make decisions about doing whatever work needs to be done and to resolve issues. What would a learning organization look like? As you can see in Exhibit 5-10, the important characteristics of a learning organization revolve around (1) organizational design, (2) information sharing, (3) leadership, and (4) culture. 1. What types of organizational design elements would be necessary for learning to take place? In a learning organization, it’s critical for members to share information and collaborate on work activities throughout the entire organization—across different functional specialties and even at different organizational levels—through minimizing or eliminating the existing structural and physical boundaries. In this type of boundaryless environment, employees are free to work together and collaborate in doing the organization’s work the best way they can and to learn from each other. Because of this need to collaborate, teams also tend to be an important feature of a learning organization’s structural design. Employees work in teams on whatever activities need to be done, and these employee teams are empowered to make decisions

Chapter 5  Organizational Structure and Design 153

about doing their work or resolving issues. Empowered employees and teams have little need for “bosses” who direct and control. Instead, managers serve as facilitators, supporters, and advocates for employee teams. 2. Learning can’t take place without information. For a learning organization to “learn,” information must be shared among members; that is, organizational employees must engage in knowledge management by sharing information openly, in a timely manner, and as accurately as possible. Because few structural and physical barriers exist in a learning organization, the environment is conducive to open communication and extensive information sharing. 3. Leadership plays an important role as an organization moves toward becoming a learning organization. What should leaders do in a learning organization? One of their most important functions is facilitating the creation of a shared vision for the organization’s future and then keeping organizational members working toward that vision. In addition, leaders should support and encourage the collaborative environment that’s critical to learning. Without strong and committed leadership throughout the organization, it would be extremely difficult to be a learning organization. 4. The organization’s culture is important to being a learning organization. In a learning culture, everyone agrees on a shared vision and everyone recognizes the inherent interrelationships among the organization’s processes, activities, functions, and external environment. It also fosters a strong sense of community, caring for each other, and trust. In a learning organization, employees feel free to communicate openly, share, experiment, and learn without fear of criticism or punishment.

Integrating Sustainability into the Organizational Structure 3BL: THE TRIPLE BOTTOM LINE  Sustainability. Social responsibility.

The environment. These concepts are buzzwords for regulators and stakeholders who put pressure on organizations to deal with 3BL issues, urging companies to determine how best to incorporate 3BL as part of their organizational structure.53 Organizations are concerned both with structure—where will 3BL decisionmaking authority reside?—and with the processes and flow of information across the organization. What kind of internal structure and support would magnify their 3BL efforts? Organizations typically feature one of three 3BL structures.54 The first is the traditional model, in which 3BL is an initiative or a few activities. Minimal resources are allocated to 3BL, and they may be spread across many departments or business units. The second is the federated model, where the organization has likely created a 3BL business unit and engaged an executive such as a chief sustainability officer or a chief responsibility officer. This unit is able to liaise with other business units and starts to align 3BL priorities with business strategy. The last model is an embedded structure, where 3BL is no longer a separate initiative but integrated into the company’s business model, structure, and culture. Companies at this point view 3BL as a major source of competitive advantage. THINKING STRATEGICALLY ABOUT 3BL  Some best practices for ensuring 3BL

success in an organization include the following: • Tie responsibility with senior executives.  You need more than “support” from the CEO—the CEO needs to drive the bus and set up a cross-functional 3BL committee with employee participation.

154  Chapter 5 • Establish regular target setting and reporting.  The focus on accountability builds traction within an organization. • Use employees, partners, and collaborators to leverage 3BL capabilities.  Achieve greater outcomes by working collaboratively with everyone in your sphere of influence. • Recruit 3BL change agents.  These champions of change will help embed a culture of concern for people, profit, and the planet.

Managing Global Structural Issues Are there global differences in organizational structures? Are Australian organizations structured like those in Canada? Are German organizations structured like those in France or Mexico? Given the global nature of today’s business environment, managers need to be familiar with the issues surrounding structural differences. Researchers have concluded that the structures and strategies of organizations worldwide are similar, “while the behaviour within them is maintaining its cultural uniqueness.”55 What does this mean for designing effective and efficient structures? When designing or changing structure, managers may need to think about the cultural implications of certain design elements. One study showed that formalization—rules and bureaucratic mechanisms—may be more important in less economically developed countries and less important in more economically developed countries, where employees may have higher levels of professional education and skills.56 Other structural design elements may be affected by cultural differences as well, such as chain of command and span of control.

Designing Efficient and Effective Flexible Work Arrangements

Dpa Picture Alliance/Alamy Stock Photo

Accenture consultant Keyur Patel’s job arrangement is becoming the norm, rather than the exception.57 During a recent consulting assignment, he had three clocks on his desk: one set to Manila time (where his software programmers were), one to Bangalore (where another programming support team worked), and the third for San Francisco, where he was spending four days a week helping a major retailer implement IT systems to track and improve sales. And his cell phone kept track of the time in Atlanta, his home, where he headed on Thursday evenings. For this new breed of professionals, life is a blend of home and office, work and leisure. Thanks to technology, work can now be done anywhere, any time. As organizations adapt their structural designs to these new realities, we see more of them adopting flexible working arrangements. Such arrangements not only exploit the

Airbnb, the global travel rental firm, uses telecommuters and a contingency workforce of part-time, temporary, and freelance workers. Flexible work arrangements, including those for employees at Airbnb’s office in Toronto, enable the company to connect people in more than 34 000 cities and 190 countries either online or from a mobile phone or tablet.

Chapter 5  Organizational Structure and Design 155

power of technology but also give organizations the flexibility to deploy employees when and where needed. In this section, we’re going to take a look at some different types of flexible work arrangements, including telecommuting; compressed workweeks, flextime, and job sharing; and contingent workforce. As with the other structural options we’ve looked at, managers must evaluate these in light of the implications for decision making, communication, authority relationships, work task accomplishment, and so forth. WHAT’S INVOLVED IN TELECOMMUTING?  Information technology

has made telecommuting possible, and external environmental changes have made it necessary for many organizations. Telecommuting is a work arrangement in which employees work at home and are linked to the workplace by computer. Needless to say, not every job is a candidate for telecommuting. But many are. Working from home used to be considered a “cushy perk” for a few lucky employees, and such an arrangement wasn’t allowed very often. Now, many businesses view telecommuting as a business necessity. For instance, at SCAN Health Plan, the company’s chief financial officer said that getting more employees to telecommute provided the company a way to grow without having to incur any additional fixed costs such as office buildings, equipment, or parking lots.58 In addition, some companies view the arrangement as a way to combat high gas prices and to attract talented employees who want more freedom and control over their work. Despite its apparent appeal, many managers are reluctant to have their employees become “laptop hobos.”59 They argue that employees might waste time surfing the Internet or playing online games instead of working, ignore clients, and desperately miss the camaraderie and social exchanges of the workplace. In addition, managers worry about how they’ll “manage” these employees. How do you interact with an employee and gain his or her trust when they’re not physically present? And what if their work performance isn’t up to par? How do you make suggestions for improvement? Another significant challenge is making sure that company information is kept safe and secure when employees are working from home. Employees often express the same concerns about working remotely, especially when it comes to the isolation of not being “at work.” At Accenture, where employees are scattered around the world, the chief human resources officer says that it isn’t easy to maintain that esprit de corps.60 However, the company put in place a number of programs and processes to create that sense of belonging for its workforce including providing Web conferencing tools, assigning each employee to a career counsellor, and holding quarterly community events at its offices. In addition, the telecommuter employee may find that the line between work and home becomes even more blurred, which can be stressful.61 These are important organizing issues and ones that managers and organizations must address when moving toward having employees telecommute. HOW CAN ORGANIZATIONS USE COMPRESSED WORKWEEKS, FLEXTIME, AND JOB SHARING?  During the most recent economic crisis in the United Kingdom,

accounting firm KPMG needed to reduce costs and decided to use flexible work options as a way of doing so.62 The company’s program, called Flexible Futures, offered employees four options to choose from: a four-day workweek with a 20 percent salary reduction; a two- to twelve-week sabbatical at 30 percent of pay; both options; or continue with their regular schedule. Some 85 percent of the UK employees agreed to the reduced-work-week plan. “Since so many people agreed to the flexible work plans, KPMG was able to cap the salary cut at about 10 percent for the year in most cases.” The best thing, though, was that as a result of the plan, KPMG didn’t have to do large-scale employee layoffs.

telecommuting A work arrangement in which employees work at home and are linked to the workplace by computer.

156  Chapter 5

compressed workweek A workweek where employees work longer hours per day but fewer days per week

flextime A work scheduling system in which employees are required to work a specific number of hours per week but can vary when they work those hours within certain limits.

job sharing When two or more people split a full-time job.

As this example shows, organizations sometimes find they need to restructure work using other forms of flexible work arrangements. (1) One approach is a compressed workweek in which employees work longer hours per day but fewer days per week. The most common arrangement is four 10-hour days (a 4–40 program). (2) Another alternative is flextime (also known as flexible work hours), which is a scheduling system in which employees are required to work a specific number of hours a week but are free to vary those hours within certain limits. In a flextime schedule, most companies designate certain common core hours when all employees are required to be on the job, but starting, ending, and lunch-hour times are flexible. 3. Another type of job scheduling is called job sharing—the practice of having two or more people split a full-time job. Organizations might offer job sharing to professionals who want to work but don’t want the demands and hassles of a full-time position. For instance, at Ernst & Young, employees in many of the company’s locations can choose from a variety of flexible work arrangements, including job sharing. Many companies use job sharing during economic downturns to avoid employee layoffs.63 WHAT IS A CONTINGENT WORKFORCE?  “When Julia Lee first heard of

Tongal, she thought it was a scam. Tongal pays people—anyone with a good idea, really—to create online videos for companies such as Mattel, Allstate, and Popchips.”64 Tongal divides projects into stages and pays cash for the top five ideas. On Lee’s first submission—which took only three hours of work—she got $1000. On another, she earned $4000. In a year’s time, she’s earned some $6000 for about 100 hours of work. Tongal isn’t the only business doing this. The idea of breaking up a job into small pieces and using the Internet to find workers to do those tasks was pioneered by LiveOps and followed by Amazon.com’s Mechanical Turk and many others.

Switch on. Switch off.

contingent workers Temporary, freelance, or contract workers whose employment is contingent upon demand for their services.

“Companies want a workforce they can switch on and off as needed.”65 Although this quote may shock you, the truth is that the labor force already has begun shifting away from traditional full-time jobs toward contingent workers—temporary, freelance, or contract workers whose employment is contingent upon demand for their services. In today’s economy, many organizations have responded by converting full-time permanent jobs into contingent jobs. It’s predicted that by the end of the next decade the number of contingent employees will have grown to about 40 percent of the workforce. (It’s at 30 percent today.)66 In fact, one compensation and benefits expert says that “a growing number of workers will need to structure their careers around this model.”67 That’s likely to include you! What are the implications for managers and organizations? Since contingent employees are not “employees” in the traditional sense of the word, managing them has its own set of challenges and expectations. Managers must recognize that because contingent workers lack the stability and security of permanent employees, they may not identify with the organization or be as committed or motivated. Managers may need to treat contingent workers differently in terms of practices and policies. However, with good communication and leadership, an organization’s contingent employees can be just as valuable a resource to an organization as permanent employees are. Today’s managers must recognize that it will be their responsibility to motivate their entire workforce, full-time and contingent, and to build their commitment to doing good work!68 No matter what structural design managers choose for their organizations, the design should help employees do their work in the best, most efficient and effective way they can. The structure needs to help, not hinder, organizational members as they carry out the organization’s work. After all, the structure is simply a means to an end.

Chapter 5  Organizational Structure and Design 157

Chapter Summary Learning Objectives Checklist 5.1 Describe the six key elements in organizational structure. Organizational structure is the formal arrangement of jobs within an organization. Organizational structures are determined by six key elements: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. Decisions made about these elements define how work is organized; how many employees managers supervise; where in the organization decisions are made; and whether employees follow standardized operating procedures or have greater flexibility in how they do their work. For Empire Company Limited, separating the operation of the grocery retail and related real estate because of the work specialization involved makes sense. For example, Sobeys executives would not necessarily make good decisions about which Shell stations to acquire.

5.2

Define the factors that affect organizational structure.

No one organizational structure is best. The appropriate structure depends on the organization’s strategy (innovation, cost minimization, imitation), its size, the technology it uses (unit production, mass production, or process production), and the degree of environmental uncertainty the organization faces. For Empire, organizing its grocery businesses by brand makes sense—Sobeys, Safeway, and IGA are different “brands” with different types of customers. Each brand has a similar organizational structure, as size, technology, and environmental uncertainty would not differ in any meaningful way among the brands.

5.3 Describe common organizational designs. The traditional structures of organizations are simple, functional, and divisional. Contemporary organizational designs include team structure, matrix and project structures, and boundaryless organizations. Empire moved from a regional management structure to one that resembles a traditional divisional structure for its two businesses. Other structures might be considered to operate its grocery business, such as a project structure or

a boundaryless organization, because retail stores can be managed in a variety of ways.

5.4 Describe contemporary organizational design challenges. One design challenge lies in keeping employees connected, which can be accomplished through using information technology. Another challenge is understanding the global differences that affect organizational structure. Although structures and strategies of organizations worldwide are similar, the behaviour within them differs, which can influence certain design elements. Another challenge is designing a structure around the mindset of being a learning organization. Finally, managers are looking for organizational designs with efficient and effective flexible work arrangements. They’re using options such as telecommuting, compressed workweeks, flextime, job sharing, and contingent workers. Empire Company Limited is continually streamlining its organizational structure to further reflect its transition to an operationally focused grocery retailer with related real estate interests.

Discussion Questions 1. Describe what is meant by the term organizational design. 2. What is the difference between a mechanistic and an organic organization? 3. Describe the characteristics of a learning organization. What are its advantages? 4. Which do you think is more efficient: a wide or a narrow span of control? What is an example of a company that would benefit from a narrow span of control? A wide span of control? 5. Do you think the concept of organizational structure, as described in this chapter, is appropriate for charitable organizations? If yes, which organizational design do you believe to be most appropriate? If no, why not? Explain your position. 6. Why should structure follow strategy instead of the reverse? 7. What functions could your college or university outsource? Why?

Developing Management Skills Dilemma Choose an organization for which you have worked. How did the structure of your job and the organization affect

your job satisfaction? Did the tasks within your job make sense? In what ways could they be better organized? What structural changes would you make to this organization? Would you consider making this a taller or flatter

158  Chapter 5 organization? (That is, would you increase or decrease the span of control?) How would the changes you have proposed improve response to customers and your job satisfaction?

Becoming a Manager • If you belong to a student organization or are employed, notice how various activities and events are organized through the use of work specialization, chain of command, authority, responsibility, and so forth. • As you read current business periodicals, note what types of organizational structures businesses use and whether or not they are effective. • Talk to managers about how they organize work and what they have found to be effective. • Look for examples of organizational charts (visual representations of organizations’ structures) and use them to try to determine what structural design the organization is using.

Diversity Matters Most companies recognize the benefits of employing a diverse workforce. Along with its many advantages,

diversity also presents challenges for managers. Managers must dedicate focus to creating a cohesive work environment. Organizational leaders can ensure that workplace diversity is successful by enacting effective policies, communicating the organization’s diversity vision, and providing employees with diversity training. Many organizations are moving toward a full-time diversity champion role. Often that role is housed within HR, which can lead to misalignment with the organization’s structure and operations. Diversity planning should align with an organization’s vision and strategy. To do so, the diversity role should reside outside a functional area like marketing or HR. The goal of diversity awareness is to create a workplace where employees appreciate differences in race, gender, religion, cultural values, and thinking styles. As an example, diversity can help teams in the workplace develop a wider variety of problem-solving strategies and approaches. Diversity training is often necessary to reduce employee conflict. Companies can use evaluations to measure the effectiveness of its diversity workforce through employee turnover and employee satisfaction with their job and the work environment. Using formal evaluation allows companies to reward individuals and teams that follow company diversity policies and guidelines.

Team Exercises Be the Consultant: The Nova Scotia Association of Social Workers The Nova Scotia Association of Social Workers (NSASW) has contracted your management consulting firm to conduct an operational structure review.69 The size of social worker governance councils varies across Canada, with larger associations like NSASW having professional staff to carry out association activities. The NSASW has a governance council of thirty, as well as a board of examiners to provide oversight for the association. The council is the governance body for the association and is responsible to follow the association bylaws and the Social Workers Act of Nova Scotia. The board is responsible for registration and renewal of provincial social workers, regulation of the members’ practice to protect the public, and dealing with discipline and complaints. The council and the board have a difficult relationship, and staff roles, responsibilities, and reporting relationships are not clearly defined. The executive director complains about being stressed and overworked and is not conducting performance evaluations. The membership has increased dramatically, putting a burden on the association’s financial resources, staff, and volunteers.

Your analysis leads you to discover that council meetings regularly run late and not all of the agenda items are accomplished. Consensus is almost impossible to reach, and decision making is ineffective at times. The board plays a valuable role in assuring that public and professional interests are safeguarded, but no formal communication mechanism between the board and the council has been established. You provided an interim report with many recommendations. Specifically, the board has brought you in to discuss three of your recommendations: 1. Reduction of the governance council size to fifteen members 2. Creation of a liaison committee to work with both the council and the board to develop a stronger working and reporting relationship 3. Formal approval of staff position descriptions by council, with the executive director responsible for their implementation, to facilitate the association’s performance management system What information will you provide to the council to support your recommendations?

Chapter 5  Organizational Structure and Design 159

Business Cases Pfizer: A New Kind of Structure Admit it.70 Sometimes the projects you are working on (school, work, or both) can get pretty boring and monotonous. Do you ever dream about having a magic button you could push to get someone else to do the boring, time-consuming stuff for you? At Pfizer, such a button is a reality for a large number of employees.71

Wouldn’t you like a Magic Button you could push to get someone else to do all your tedious and boring work? As a global pharmaceutical company, Pfizer is continually looking for ways to be more efficient and effective. The company’s head of pfizerWorks (aka Office of the Future), Jordan Cohen, found that the “Harvard MBA staff we hired to develop strategies and innovate were instead Googling and making PowerPoints.” Indeed, internal studies conducted to find out just how much time its valuable talent was spending on menial tasks was startling. The average Pfizer employee was spending 20 to 40 percent of his or her time on support work (creating documents, typing notes, doing research, manipulating data, scheduling meetings) and only 60 to 80 percent on knowledge work (strategy, innovation, networking, collaborating, critical thinking). The problem was not just at lower levels. Even the highest-level employees were affected. So Cohen began looking for solutions. The solution he chose turned out to be the numerous knowledge-process outsourcing companies based in India. Initial tests of outsourcing support tasks did not go well. However, Cohen continued to tweak the process until everything worked. Now Pfizer employees can click the OOF (Office of the Future) button in Microsoft Outlook, and they are connected to an outsourcing company where a single worker in India receives the request and assigns it to a team. The team leader calls the employee to clarify the request. The team leader then emails back a cost estimate for the requested work. At this point, the Pfizer employee can say yes or no. Cohen says that the benefits of OOF have been unexpected. Time spent on data analysis has been cut—sometimes in half. The financial benefits are also impressive. Pfizer employees love it. “It’s kind of amazing,” Cohen says, “I wonder what they used to do.”

Questions 1. Describe and evaluate what Pfizer is doing. 2. What structural implications—good and bad—does this approach have? (Think in terms of the six organizational design elements.)

3. Do you think this arrangement would work for other types of organizations? Why or why not? 4. What role do you think organizational structure plays in an organization’s efficiency and effectiveness? Explain.

Levitt-Safety Limited Levitt-Safety Limited is Canada’s largest specialist supplier of safety equipment and services.72 Like many Canadian companies, it looked to emerging foreign markets for growth opportunities. However, globalization and outsourcing are no longer a one-way street. Foreign competitors are eyeing the Canadian market, because barriers to entry, such as the North American regulatory and approval bodies, are easier to navigate in Canada. To be successful in the Canadian marketplace, foreign companies need to spend a lot of time and money to build up their brands. Or they could form an alliance with a company like LevittSafety to piggyback on a brand that is already established and well known after 80 years of business. Increased competition has led to downward pressure on profit margins. To counter this, CEO Bruce Levitt created an intermediary company to import product and resell it to Levitt-Safety’s distribution business. The company sales teams now have a much better understanding of inventory carrying costs, stock-outs, dead stock, and other often hidden costs. Levitt-Safety also has a separate manufacturing business, NL Technologies, run by Heidi Levitt, which has become a world leader in the manufacturing and design of mining technology. Levitt-Safety has created an effective organizational structure, with an intermediary and a separately managed company. Levitt-Safety is looking at adding another brand that it can sell to others in the industry.

Questions 1. Should Bruce Levitt set up another company or, instead, set up an alliance with a foreign company that would sell its products under the Levitt-Safety name? 2. How has Levitt-Safety remained a family business for over 80 years?

You Work Where? Yahoo!, a pioneer in Web search and navigation, struggles to remain relevant in the face of competition from the likes of Google, Facebook, and Twitter. It missed the two biggest Internet trends—social networking and mobile. However, in July 2012, after the company did its own search, it snagged a gem as the company’s new CEO—Marissa Mayer, one of the top executives at Google. Mayer had been one of the few

160  Chapter 5 public faces of Google and was responsible for the look and feel of Google’s most popular products. Guiding Yahoo! as it tries to regain its former prominence is proving to be the challenge that experts predicted, but they’re also saying that if anyone could take on the challenge of making Yahoo! an innovator once again, Mayer is the person.

Where IS work done most efficiently and effectively? Two of her initial decisions included free food at the office and new smartphones for every employee, something that Google does. However, in February 2013, Mayer launched an employee initiative that has generated lots of discussion—positive and negative. She decided that as of June 2013, Yahoo! employees who worked remotely had to come back to the office. The memo from the vicepresident of people and development (code for head of human resources) clarified that the new initiative was a response to productivity issues that often can arise when employees work from home. With a new boss and a renewed commitment to making Yahoo! a strong company in a challenging industry, employees were expected to be physically present in the workplace, hopefully leading to developing a strong common bond and greater productivity. The announcement affects not only those who worked from home full-time—mainly customer service reps—but also those employees who had arranged to work from home one or two days a week. Yahoo! isn’t the only company asking remote workers to return. Bank of America, which had a popular remote work program, decided late in 2012 that employees in certain roles had to come back to the office. Before Mayer became CEO at Yahoo!, it was a wonder anything ever got done there. What she found wasn’t even remotely like the way employees functioned at Google. At Yahoo! few people were physically at work in the office cubicles throughout the building. Few cars or bikes or other vehicles could be found in the facility’s parking lots. Even more disturbing, some of the employees who were

physically there at work did as little work as needed and then took off early. She also discovered that other employees who worked from home did little but collect a paycheck or maybe work on a sideline business they had started. Even at the office, one former manager described morale as being as low as it could be because employees thought the company was failing. These were some of the reasons that Mayer abolished Yahoo!’s work-from-home policy. If Yahoo! was to again become the nimble company it had once been, a new culture of innovation, communication, and collaboration was needed. And that meant employees had to be at work—physically at work together. Restoring Yahoo!’s “cool”—from its products to its deteriorating morale and culture—would be difficult if the organization’s people weren’t there. That’s why Mayer’s decision at Yahoo! created such an uproar. Yahoo!’s only official statement on the new policy said, “This isn’t a broad industry view on working from home. This is about what is right for Yahoo!, right now.” Where work is done most efficiently and effectively— office, home, combination—is an important workplace issue. The three main managerial concerns are productivity, innovation, and collaboration. Do flexible arrangements lead to greater productivity or inhibit innovation and collaboration? Another concern is that employees, especially younger ones, expect to be able to work remotely. Yes, the trend has been toward greater workplace flexibility, but does that flexibility lead to a bloated, lazy, and unproductive remote workforce? These are the challenges of designing work structures.

Discussion Questions 1. Evaluate Yahoo!’s new work initiative. Did it have to be an “all or nothing” proposition? Discuss. 2. What can managers and organizations do to help employees who work from home be efficient and effective? 3. Is being able to work remotely important to you? Why or why not?

Chapter 6

Tasos Katopodis/Stringer/Getty Images

Human Resource Management

Learning Objectives 6.1 Describe the human resource management process and the factors

that influence it. 6.2 Explain how organizations plan for their human resource needs. 6.3 Describe how organizations identify and select competent

employees. 6.4 Explain how organizations retain employees and provide them

with necessary knowledge, skills, and abilities. 6.5 Describe how total rewards work. 6.6 Discuss contemporary human resource management issues. Facing a shortage of skilled labourers, Mandy Rennehan (above, left) embraced a different approach to hiring. “She crumpled it.” This is how Kat Bailey, a current employee at FreshCo Retail Maintenance, describes CEO Mandy Rennehan’s reaction to receiving her résumé in her initial job interview. The dramatic CV-discard wasn’t indicative of Bailey’s admitted lack of trades experience, or Rennehan’s lack of interest in Bailey—quite the contrary, actually. “A lot of companies wouldn’t look at me because I didn’t have an extensive background,” Bailey says. “Mandy just said, ‘I want to know who you are. Tell me.’”1 Rennehan started her business in 1995 at the age of 20. A self-taught expert in construction, she saw a gap in the retail construction and maintenance industry in Yarmouth, N.S. She

161

162  Chapter 6 named the business FreshCo. Freshco seemed a natural name for a young female making inroads in a male-dominated industry.2 She was frustrated when Empire (Chapter 5 vignette) named their discount supermarket chain FreshCo; but, undeterred, she launched a national campaign called “FRESHCO, not the grocery store.” She launched a new website with animated videos, as well as a new logo for billboards and company vehicles. A hammer and nail were chosen for the “F” so that customers would know immediately that this wasn’t a grocery chain.3 Rennehan’s emphasis on soft skills such as authenticity and emotional intelligence has won big-name retail clients across Canada and down the Eastern American seaboard—Apple, Banana Republic, Nike, and Sephora, to name a few. It has more than 200 trade partners, between $20 million and $50 million in annual revenue, and a five-year growth rate of 224% (enough to earn the business the No. 299 spot on the 2018 Canadian Business ranking of Canada’s 500 FastestGrowing Companies). Rennehan’s self-described “band of misfits” is leading players in the retail construction industry.4 Most of Rennehan’s 350 “misfits” are women, bucking the trend of low female representation in the skilled trade sector. She puts a premium on employee well-being. The office boasts standing desks and Ping-Pong tables for recreation. New hires receive personalized caricatures, nicknames, and a mentor. Employees are also encouraged to engage in philanthropic projects.5 With FreshCo, Rennehan as an entrepreneur is responsible for all areas of human resource management (HRM), including planning her future workforce needs, hiring the right individuals to fit her company culture, training and compensating them effectively, and managing the ongoing relationships between management and employees.

Here is a common myth about HR:

 Managers don’t need to know about human resources because that’s the job of the HR department. MANAGEMENT MYTH DEBUNKED Human resources (HR) activities like selection and performance appraisal are frequently assumed to be the responsibility of only those who work in an organization’s HR department. The truth is that all managers will have some responsibilities for staffing, appraising, and training people in their work unit. An HR department provides much-needed advice, suggestions, and support activities, but managers are involved with human resource decisions in their work units.6 For full details on this management myth, check out our Bust the Myth video in Revel.

The Human Resource Management Process 6.1 Describe the human resource management process and the factors that influence it.

HRM = Right People, Right Place, Right Time The quality of an organization is to a large degree determined by the quality of the people it employs. Success for most organizations depends on finding the employees with the skills to successfully perform the tasks required to attain the company’s strategic goals. All managers must engage in some human resource management activities— even in large ones that have a separate HRM department. Managers interview job candidates, orient new employees, and evaluate their employees’ work performance. Because human resources also involve appropriate ways of treating co-workers, even nonmanagers must be aware of basic HR principles and practices.

Chapter 6  Human Resource Management 163

Can HRM be an important strategic tool? Can it help establish an organization’s sustainable competitive advantage? The answer to these questions seems to be yes. Various studies have concluded that an organization’s human resources can be a significant source of competitive advantage.7 That conclusion is true for organizations around the world, not just for Canadian firms. The Human Capital Index, a comprehensive global study of more than 2000 firms conducted by consulting firm Watson Wyatt Worldwide, concluded that people-oriented HR gives an organization an edge by creating superior shareholder value.8 Human resource professionals are actively involved in strategy formulation and implementation. Thus, human resource practices must support the organization’s distinctive competencies, its competitive advantage (e.g., superior customer service, innovation, efficient production), and the long-term objectives of the organization (such as growth or market share). Getting that done is what human resource management (HRM) is all about. The six important HRM activities (the yellow boxes) are shown in Exhibit 6-1. The circle around those boxes shows environmental factors that impact HRM, such

human resource management (HRM) The management function concerned with getting, training, motivating, and keeping competent employees.

Exhibit 6-1  The Human Resource Management Process ic conditions Econom

Identification and selection of competent employees

Adapted and competent employees with up-to-date skills, knowledge, and abilities

Total rewards

Recruitment and selection

Orientation

Te

ch

no

log

y

tio

n

Competent and highperforming employees who are capable of sustaining high performance over the long term

Strategic human resource planning

issues rket ma ur bo La

Organiz atio nal cul tur e

Health and safety

Training and development Go

rn ve

m

en

e tl

gi

sl

a

164  Chapter 6 as organizational culture, economic conditions, labour-market issues, government legislation, and technology.

Environmental Factors Affecting HRM The external environmental factors that most directly influence the HRM process are economic conditions, labour market issues, government legislation, and technology. The key internal factor shaping an organization’s ability to meet its strategic objectives is the organizational culture. ORGANIZATIONAL CULTURE  Culture consists of the organization’s set of beliefs,

organizational culture A system of shared values, norms, and beliefs held by organizational members that determines, in large degree, how employees act.

values, and norms.9 A positive organizational culture provides many benefits to an organization, including loyalty, commitment, direction, productivity, and retention. While she works in what she terms an “unglamorous business,” Mandy Rennehan has taken it upon herself to create a culture within her workplace where employees want to thrive. That ranges from spending money to modernize the working environment to writing staff a cheque to create their own wellness plan, whether that means buying orthotics or going away for a week of sunshine in Cuba.10 StarTech of London, Ontario, has created an entrepreneurial culture by involving employees and ensuring that they enjoy what they do. “We bring in all employees to get their final input before finalizing our strategic plan,” says cofounder Paul Seed.11 ECONOMIC CONDITIONS  Canada’s labour market features 19 million people, of

whom 14 million are employed full-time and 3.3 million part-time, and 1.3 million are unemployed.12 Another 9.5 million are not in the labour force. The ability of employers to recruit is dependent on local (and national) unemployment rates, competition in regional and local labour markets, and industry-specific labour market conditions. For example, hospitals across the country are facing a shortage of nurses, so provinces compete with each other, and recruitment, training, and retention strategies in this sector become more important. When the unemployment rate is high, employers have more potential employees to choose from. LABOUR-MARKET ISSUES  According to the Canadian Chamber of Commerce, the

number one concern of its members is “finding the right people to do the job,” which has led to a skills shortage “crisis.”13 The Government of Canada is revamping its Skilled Worker Program to help fill vacancies in skilled trades.14 The Canadian population is aging. In 2018, the median age in Canada was 42 years, up from 26 years in 1971. Seniors make up the fastest-growing age group, with close to 5 million Canadians aged 65 and older, a number expected to double by 2036. Over the next 10 years, one in four Canadian workers will be above 55 years old. The percentage of the population in this age group is growing rapidly due to the aging of the Baby Boom generation, high life expectancy, and a decreased fertility rate.15 Canada also admits more immigrants per capita than any other country. According to the last census, the proportion of the population born outside the country was 22 percent in 2018.16 These factors combine to provide challenges and opportunities for HR managers. GOVERNMENT LEGISLATION  The federal government has greatly expanded its influence over HRM by enacting a number of laws and regulations, including employment standards legislation, the Charter of Rights and Freedoms, and the Canadian Human Rights Act. The provincial governments also have their own labour legislation that governs the workplace, meaning that employment law in Canada involves 14 different jurisdictions.17 The intent of the Canada Labour Code, Occupational Health and Safety Act, employment standards legislation, Charter of Rights and Freedoms, and Canadian

Chapter 6  Human Resource Management 165

Levels of Canadian legislation that affect Canadian employers • Canadian Charter of Rights and Freedoms—basic rights guaranteed to all persons residing in Canada • Human rights legislation—protection from discrimination in employment relationships and the delivery of goods and services • Employment standards legislation—establishes minimum terms and conditions of the employment relationship within each jurisdiction (e.g., minimum wages, hours of work, maternity leave) • Ordinary laws—protection under context- or content-specific laws affecting workplaces (such as Occupational Health and Safety Act) • Collective bargaining agreement—a legally binding agreement establishing minimum terms and conditions of employment affecting unionized positions • Employment contract—a contract between an individual employee and their employer regarding specified employment conditions in specified roles18

Human Rights Act is to ensure that all employees have a safe work environment, that they are not asked to work too many hours, that they have reasonable opportunities to be considered for jobs, and that pay for jobs is not discriminatory. Because an increasing number of workplace lawsuits are targeting supervisors, as well as their organizations, managers need to be aware of what they can and cannot do by law.19 TECHNOLOGY  Some companies use a Human Resources Information System

(HRIS) to capture and manage employee data. An HRIS can help reduce administrative costs, provide information more quickly, ensure legal compliance, provide for better talent management and enhanced decision making, and streamline the entire people management function. By decreasing transactional activities, technology allows HR practitioners to increase their client and customer focus,

A Question of Ethics Here’s a challenging HR issue for managers: a business model that relies heavily on the appearance of employees and balancing the rights of those employees. Hooters, the restaurant chain that hires attractive waitresses who are expected to wear (and look good) in tight tops and short shorts, uses that business model. However, when one of its waitresses in a St. Peters, Missouri, location had brain surgery to remove a tumour, her manager initially said the young woman could wear a “chemo cap” to cover her scar and her lack of hair.20 However, a regional manager later said that was not sufficient and a wig was necessary. The employee told both her manager and the regional manager that she did not have a wig and could not afford to buy one because of the expense. The employee was able to borrow one and tried to wear it at work. However, it was too painful and kept her wound from healing, and she chose not to continue wearing it. Her manager then significantly reduced her hours,

forcing her to quit because she could not earn sufficient income. The waitress filed a federal discrimination lawsuit against the restaurant chain in federal court saying she was forced out of her job for refusing to wear a wig. Hooters denies the allegations. (Update: The young woman, who had worked at Hooters for almost eight years to pay for nursing school, is now a registered nurse. No information could be found on whether the case was settled.)

Discussion Questions 1. How might this issue—balancing the rights of employees against a business model that’s based on employee appearances—affect HR processes such as recruitment, selection, and performance management? 2. What possible HR ethical issue(s) do you see in this story?

166  Chapter 6

Graphicwithart/Shutterstock

solving problems and meeting their needs faster than was ever dreamed of previously. Other technology applications for HRM include bring your own device (BYOD), wearable technology, applicant tracking, performance management, ­e-learning, online selection testing, computer monitoring, software-as-a-service (SaaS), and cloud computing.21 Mobile and self-service applications will lead to a ­consumer-driven user experience23 that emphasizes efficiency and ease of use. Watson Wyatt consultants have identified other trends in technology, including the following:24

A Russian startup is using artificial intelligence software for recruitment and selection with its 300 plus clients, including IKEA and PepsiCo. Robot Vera cuts the time and cost of recruitment by a third. The software can interview hundreds of applicants simultaneously via video or voice calls, narrowing the field to the most suitable 10 percent of candidates. Human recruiters still vet the candidates cleared by Vera.22

• optimization of existing HR technology and systems • enhanced focus on workforce analytics • increased focus on reducing costs • heightened data privacy issues

Planning Human Resource Needs 6.2 Explain how organizations plan for their human resource needs. Every organization needs people to do whatever work is necessary for doing what the organization is in business to do. How do organizations get those people? And more importantly, what can they do to ensure they get competent, talented people? This first phase of the HRM process involves three tasks: (1) forecasting labour supply, (2) forecasting demand, and (3) planning HR programs to balance supply and demand.

Supply and Demand aren’t just for economics—they’re also important to HRM! Canada will experience a shortage of one million skilled workers over the next 20 years, according to the Conference Board of Canada.25 The Canadian Restaurant and Foodservices Association states that 36 percent of Canadian restaurants report that a shortage of skilled labour is having a negative effect on their business, while the Forest Products Association of Canada calls the 60 000 employees at all skill levels needed in the forest products sector by the end of the decade an ongoing challenge. The predicted shortage in the IT sector is more than 100 000 workers by 2016.26 Aware of these predictions, managers in all industries and sectors are developing plans to ensure that they will have enough qualified people to fulfill their human resource needs.

(1)  How Does an Organization Do a Current HR Assessment? human resource inventory A report listing important information about employees such as name, education, training, skills, languages spoken, and so forth.

Managers begin by reviewing the current human resource status. This review is typically done by generating a human resource inventory. It’s not difficult to generate an inventory in most organizations since the information for it is derived from forms completed by employees. Such inventories might list the name, education, training, prior employment, languages spoken, capabilities, and specialized skills of each employee in the organization. This inventory allows managers to assess what talents and skills are currently available in the organization. This would also be where an organization assesses the availability of internal candidates, known as succession planning.

Chapter 6  Human Resource Management 167

Another part of the current assessment is job analysis. Whereas the human resources inventory is concerned with telling management what individual employees can do, job analysis is more fundamental. It’s typically a lengthy process, one that analyzes workflows and identifies skills and behaviours that are necessary to perform jobs. For instance, what does an international reporter who works for the National Post do? What minimal knowledge, skills, and abilities are necessary for the adequate performance of this job? How do the job requirements for an international reporter compare with those for a domestic reporter or for a newspaper editor? Job analysis can answer these questions. Ultimately, the purpose of job analysis is to determine the kinds of skills, knowledge, and attitudes needed to successfully perform each job. This information is then used to develop or revise job descriptions and job specifications. A job description is a written statement that describes the job—what a job holder does, how it’s done, and why it’s done. It typically portrays job content, environment, and conditions of employment. The job specification states the minimum qualifications that a person must possess to perform a given job successfully. It focuses on the person and identifies the knowledge, skills, and attitudes needed to do the job effectively. The job description and job specification are important documents when managers begin recruiting and selecting. For instance, the job description can be used to describe the job to potential candidates. The job specification keeps the manager’s attention on the list of qualifications necessary for an incumbent to perform a job and assists in determining whether candidates are qualified. Furthermore, hiring individuals on the basis of the information contained in these two documents helps ensure that the hiring process does not discriminate. Here is an example of a job description used by many employers on Monster for their online recruitment of customer service representatives:

Description: Customer Service Representative Customer Service Representative Job Purpose: Serves customers by providing product and service information, resolving product and service problems, upselling products to customers. Customer Service Representative Job Duties: • Manages large amounts of incoming calls. • Generates sales leads by answering product and service questions; suggesting information about other products and services. • Provides accurate, valid, and complete information by using the right methods and tools. • Handles complaints, provides appropriate solutions and alternatives within the time limits, and follows up to ensure resolution. • Maintains financial accounts by processing customer adjustments. • Recommends potential products or services to management by collecting customer information and analyzing customer needs. • Keeps records of customer interactions, processes customer accounts, and files documents. • Meets personal/team sales targets and call handling quotas. Skills/Qualifications: • Proven customer-support experience. • Product knowledge. • Familiarity with customer relationship management (CRM) systems and practices. • Problem solving. • Excellent communication, presentation, and documentation skills. • Resolving conflict. • Ability to multi-task, prioritize, and manage time effectively.

job analysis An assessment that defines jobs and the behaviours necessary to perform them.

job description A written statement of what a jobholder does, how the job is done, and why the job is done.

job specification A statement of the minimum qualifications that a person must possess to perform a given job successfully.

168  Chapter 6 Organizations must also forecast the supply of external candidates by assessing general economic conditions, labour-market conditions, and occupational market conditions.

(2)  How Are Future Employee Needs Determined? Future human resource needs are determined by the organization’s strategic goals and direction. Demand for human resources (employees) is a result of demand for the organization’s products or services. On the basis of an estimate of total revenue, managers can attempt to establish the number and mix of people needed to reach that revenue. In some cases, however, the situation may be reversed. When particular skills are necessary and in scarce supply, the availability of needed human resources determines revenues. For example, managers of an upscale chain of assisted-living retirement facilities who find themselves with abundant business opportunities are limited in their ability to grow revenues by whether they can hire a qualified nursing staff to fully meet the needs of the residents. In most cases, however, the overall organizational goals and the resulting revenue forecast provide the major input in determining the organization’s HR requirements.

(3)  Balancing Supply and Demand After assessing both current capabilities and future needs, managers can estimate talent shortages—both in number and in kind—and highlight areas in which the organization is overstaffed. They can then develop a plan that matches these estimates with forecasts of future labour supply. Employment planning not only guides current staffing needs but also projects future employee needs and availability. A labour shortage exists when the supply of employees cannot meet the organization’s demand. Short-term solutions include scheduling overtime hours, hiring temporary workers, subcontracting work, or even convincing employees to delay retirement. A labour surplus exists when the internal supply of employees exceeds the organization’s demand. Exhibit 6-2 explores some of the options available to an organization.

Exhibit 6-2  Solutions for a Labour Surplus Option

Description

Firing

Permanent involuntary termination

Layoffs

Temporary involuntary termination; may last only a few days or extend to years

Attrition

Not filling openings created by voluntary resignations or normal retirements

Transfers

Moving employees either laterally or downward; usually does not reduce costs but can reduce supply–demand imbalances within organizations

Reduced workweeks

Having employees work fewer hours per week, share jobs, or perform their jobs on a part-time basis

Early retirements

Providing incentives to older and more senior employees for retiring before their normal retirement dates

Job sharing

Having employees share one full-time position

Chapter 6  Human Resource Management 169

Moodboard/Alamy Stock Photo

The planned elimination of jobs in an organization is also known as downsizing. Because downsizing typically involves shrinking the organization’s workforce, it’s an important issue in HRM. When an organization has too many employees—which may happen when it’s faced with an economic crisis, declining market share, overly aggressive growth, or when it’s been poorly managed—one option for improving profits is to eliminate excess workers. Over the past few years, many well-known companies have gone through several rounds of downsizing—Sobeys, Bell Media, McDonald’s, Volkswagen, Microsoft, Bombardier, and GM Oshawa, among others. How can managers best manage a downsized workforce? After downsizing, disruptions in the workplace and in employ- HTML500 was an event hosted by 50 employers in Vancouees’ personal lives are to be expected. Stress, frustration, anxiety, and ver, including TELUS and Hootsuite. These employers took an unusual approach to remedying the skill gap by providanger are typical reactions. And it may surprise you to learn that ing a free one-day learn-to-code event. both victims and survivors experience those feelings.27 Many organizations have helped layoff victims by offering a variety of job-help services, psychologi- downsizing cal counselling, support groups, severance pay, extended health insurance benefits, and The planned elimination of jobs in detailed communications. Although some individuals react negatively to being laid off an organization. (the worst cases involve individuals returning to their former organization and committing a violent act), offers of assistance reveal that an organization does care about its former employees. While those being laid off get to start over with a clean slate and a clear conscience, survivors don’t. Unfortunately, the “survivors” who retain their jobs and have the task of keeping the organization going or even of revitalizing it seldom receive attention. One negative consequence appears to be what is being called layoff-survivor sickness, a layoff-survivor sickness set of attitudes, perceptions, and behaviours of employees who survive involuntary staff A set of attitudes, perceptions, reductions.28 Symptoms include job insecurity, perceptions of unfairness, guilt, depression, and behaviours of employees who stress from increased workload, fear of change, loss of loyalty and commitment, reduced survive layoffs. effort, and an unwillingness to do anything beyond the required minimum. To show concern for job survivors, managers may want to provide opportunities for employees to talk to counsellors about their guilt, anger, and anxiety.29 Group discussions can be a way for the survivors to vent their feelings. Some organizations have used downsizing as the spark to implement increased employee participation programs such as empowerment and self-managed work teams. In short, to keep morale and productivity high, managers should make every attempt to ensure that those individuals still working in the organization know that they’re valuable and much-needed resources. With all of this information, managers are ready to proceed to the next step in the HRM process.

Tips for Managing Downsizing30 • Communicate openly and honestly: – Inform those being let go as soon as possible. – Tell surviving employees the new goals and expectations. – Explain impact of layoffs. • Follow any legislation regulating severance pay or benefits. • Provide support/counselling for surviving employees. • Reassign roles according to individuals’ talents and backgrounds. • Focus on boosting morale: – Offer individualized reassurance. – Continue to communicate, especially one on one. – Remain involved and available.

170  Chapter 6

Exhibit 6-3  Recruiting Sources SOURCE: S. P. Robbins and M. Coulter, Mary, Management, 13th Ed., © 2016, p. 346. Reprinted and electronically

reproduced by permission of Pearson Education, Inc., New York, NY.

Source

Advantages

Disadvantages

Internet

Reaches large numbers of people; can get immediate feedback

Generates many unqualified candidates

Employee referrals

Knowledge about the organization provided by current employee; can generate strong candidates because a good referral reflects on the recommender

May not increase the diversity and mix of employees

Company website

Wide distribution; can be targeted to specific groups

Generates many unqualified candidates

College recruiting

Large centralized body of candidates

Limited to entry-level positions

Professional recruiting organizations

Good knowledge of industry challenges and requirements

Little commitment to specific organization

Recruiting 6.3 Describe how organizations identify and select competent employees.

recruitment The process of locating, identifying, and attracting capable applicants.

Once managers know their current staffing levels—understaffed or overstaffed—they can begin to do something about it. If vacancies exist, they can use the information gathered through job analysis to guide them in recruitment—that is, the process of locating, identifying, and attracting capable applicants.

Needed! Outstanding Job Applicants! Now. . .how do we get those?

StunningArt/Shutterstock

Where Does a Manager Recruit Applicants? The Internet has become a popular approach for recruiting job applicants, although there are other sources to find them. Exhibit 6-3 offers some guidance. The source that’s used should reflect the local labour market, the type or level of position, and the size of the organization. Which recruiting sources tend to produce superior applicants? Most studies have found that employee referrals generally produce the best applicants.31 Why? First, applicants referred by current employees are prescreened by those employees. Because the recommenders know both the job and the person being recommended, they tend to refer well-qualified applicants.32 Second, because current employees often feel that their reputation in the organization is at stake with a referral, they tend to make referrals only when they are reasonably confident that the referral won’t make them look bad. However, managers shouldn’t always opt for the employee-referred applicant; such referrals may not increase the diversity and mix of employees.

As an advocate of women in the building trades, FreshCo CEO Mandy Rennehan is forming an alliance with Conestoga College in Kitchener, Ontario, and she spoke to members of its Women in Trades program recently. She received a number of emails from attendees that evening, thanking her for her time and for providing inspiration in their own careers. She says the majority of people she interviews are looking for a workplace where they are able to learn and where people respect their opinions.

Selection Once the recruiting effort has developed a pool of applicants, the next step in the HRM process is to determine who is best qualified for the job. In

Chapter 6  Human Resource Management 171

Successful Unsuccessful

Later Job Performance

essence, then, the selection process is a prediction exercise: It seeks Exhibit 6-4  Selection Decision Outcomes to predict which applicants will be “successful” if hired; that is, who will perform well on the criteria the organization uses to evaluate its employees. In filling a network administrator position, for example, Reject Correct the selection process should be able to predict which applicants will error decision be capable of properly installing, debugging, managing, and updating the organization’s computer network. For a position as a sales representative, it should predict which applicants will be successful at Correct Accept generating high sales volumes. Consider, for a moment, that any selecdecision error tion decision can result in four possible outcomes. As shown in Exhibit 6-4, two outcomes would indicate correct decisions, and two would indicate errors. Accept Reject A decision is correct when (1) the applicant who was predicted to be Selection Decision successful (was accepted) later proved to be successful on the job or (2) the applicant who was predicted to be unsuccessful (was rejected) would not have selection process been able to do the job if hired. In the former case, we have successfully accepted; The process of screening job in the latter case, we have successfully rejected. Problems occur, however, when applicants to ensure that the most we reject applicants who, if hired, would have performed successfully on the job appropriate candidates are hired. (called reject errors) or accept those who subsequently perform poorly (accept errors). These problems are, unfortunately, far from insignificant. A generation ago, reject errors only meant increased selection costs because more applicants would have to be screened. Today, selection techniques that result in reject errors can open the organization to charges of employment discrimination, especially if applicants from protected groups are disproportionately rejected. Accept errors, on the other hand, have obvious costs to the organization, including the cost of training the employee, the costs generated or profits forgone because of the employee’s incompetence, and the cost of severance and the subsequent costs of additional recruiting and selection screening. The major intent of any selection activity is to reduce the probability of making reject errors or accept errors while increasing the probability of making correct decisions. How? By using selection procedures that are both reliable and valid. WHAT IS RELIABILITY?  Reliability addresses whether a selection device measures the same characteristic consistently. For example, if a test is reliable, any individual’s score should remain fairly stable over time, assuming that the characteristics it’s measuring are also stable. The importance of reliability should be self-evident. No selection device can be effective if it’s low in reliability. Using such a device would be the equivalent of weighing yourself every day on an erratic scale. If the scale is unreliable—randomly fluctuating, say, 5 to 7 kilograms every time you step on it—the results will not mean much. To be effective predictors, selection devices must possess an acceptable level of consistency. WHAT IS VALIDITY?  Any selection device that a manager uses—such as appli-

cation forms, tests, interviews, or physical examinations—must also demonstrate validity. Validity is based on a proven relationship between the selection device used and some relevant measure. For example, we mentioned earlier a firefighter applicant who was wheelchair bound. Because of the physical requirements of a firefighter ’s job, someone confined to a wheelchair would be unable to pass the physical endurance tests. In that case, denying employment could be considered valid, but requiring the same physical endurance tests for the dispatching job would not be job related. Federal law prohibits managers from using any selection device that cannot be shown to be directly related to successful job performance. That constraint goes for entrance tests, too; managers must be able to demonstrate that, once on the job, individuals with high scores on such a test outperform individuals with low scores. Consequently, the burden is on the

reliability The ability of a selection device to measure the same thing consistently.

validity The proven relationship that exists between the selection device and some relevant job criterion.

172  Chapter 6 organization to verify that any selection device it uses to differentiate applicants is related to job performance.

How Effective Are Tests and Interviews as Selection Devices?

performance-simulation tests Selection devices based on actual job behaviours

Managers can use a number of selection devices to reduce accept and reject errors. The best-known devices include written and performance-simulation tests and interviews. Let’s briefly review each device, giving particular attention to its validity in predicting job performance. Typical written tests include tests of intelligence, aptitude, ability, and interest. Such tests have long been used as selection devices, although their popularity has run in cycles. Written tests were widely used after World War II, but, beginning in the late 1960s, they fell out of favour. They were frequently characterized as discriminatory, and many organizations could not validate that their written tests were job related. Today, written tests have made a comeback, although most of them are now Internet based.33 Experts estimate that online personality tests are used by employers to assess personality, skills, cognitive abilities, and other traits of some 60 to 70 percent of prospective employees.34 Managers are increasingly aware that poor hiring decisions are costly and that properly designed tests can reduce the likelihood of making such decisions. In addition, the cost of developing and validating a set of written tests for a specific job has declined significantly. Research shows that tests of intellectual ability, spatial and mechanical ability, perceptual accuracy, and motor ability are moderately valid predictors for many semiskilled and unskilled operative jobs in an industrial organization.35 However, an enduring criticism of written tests is that intelligence and other tested characteristics can be somewhat removed from the actual performance of the job itself.36 For example, a high score on an intelligence test is not necessarily a good indicator that the applicant will perform well as a computer programmer. This criticism has led to an increased use of performancesimulation tests. What better way to find out whether an applicant for a technical writing position at Apple can write technical manuals than to ask him or her to do it? That’s why there’s an increasing interest in performance-simulation tests. Undoubtedly, the enthusiasm for these tests lies in the fact that they’re based on job analysis data and, therefore, should more easily meet the requirement of job relatedness than do written tests. Performancesimulation tests are made up of actual job behaviours rather than substitutes. The bestknown performance-simulation tests are work sampling (a miniature replica of the job) and assessment centres (simulating real problems one may face on the job). The former is suited to persons applying for routine jobs, the latter to managerial personnel. The advantage of performance simulation over traditional testing methods should be obvious. Because its content is essentially identical to job content, performance simulation should be a better predictor of short-term job performance and should minimize potential employment discrimination allegations. Additionally, because of the nature of their content and the methods used to determine content, well-constructed performance-simulation tests are valid predictors. The interview, along with the application form, is an almost universal selection device. Few of us have ever got a job without undergoing one or more interviews. The irony of this is that the value of an interview as a selection device has been the subject of considerable debate.37 Interviews can be reliable and valid selection tools, but too often they’re not. To be effective predictors, interviews need to be • structured, • well organized, and have • interviewers asking relevant questions.38

Chapter 6  Human Resource Management 173

Bluebay2014/Fotolia

But those conditions don’t characterize many interviews. The typical interview in which applicants are asked a varying set of essentially random questions in an informal setting often provides little in the way of valuable information. All kinds of potential biases can creep into interviews if they’re not well structured and standardized. What does research tell us about interviewing? • Prior knowledge about the applicant biases the interviewer’s evaluation. • The interviewer tends to hold a stereotype of what represents a good applicant. • The interviewer tends to favour applicants who share his or her own attitudes.

Choosing the right person for the organization can be very difficult when there are many suitable candidates

• The order in which applicants are interviewed will influence evaluations. • The order in which information is elicited during the interview will influence evaluations. • Negative information is given unduly high weight. • The interviewer may make a decision concerning the applicant’s suitability within the first four or five minutes of the interview. • The interviewer may forget much of the interview’s content within minutes after its conclusion. • The interview is most valid in determining an applicant’s intelligence, level of motivation, and interpersonal skills. • Structured and well-organized interviews are more reliable than unstructured and unorganized ones.39 One last popular modification to interviews has been the behavioural, or situation, interview.40 In this type of interview, applicants are observed not only for what they say but also how they behave. Applicants are presented with situations—often complex problems involving role playing—and are asked to “deal” with the situation. This type of interview provides an opportunity for interviewers to see how a potential employee will behave and how he or she will react under stress. Proponents of behavioural interviewing indicate that such a process is much more indicative of an applicant’s performance than simply having the individual tell the interviewer what he or she has done. In fact, research in this area indicates that behavioural interviews are nearly eight times more effective for predicting successful job performance.41

Tips for Managers

Behavioural and Situational Questions Situational interview questions feature some kind of scenario; the interviewer explains the scenario and then asks, “What would you do?” These questions test your judgment, knowledge, and/or ability. Behavioural interview questions ask applicants how they handled job or life situations in the past. The idea is that past behaviour is the best predictor of future performance in similar situations. These types of questions have much higher validity in predicting future job performance.42 • Describe a time when you had to deal with a difficult customer. • Tell me about a time that you had to meet two conflicting deadlines. • Give me an example of a time when you had to conform to a policy with which you did not agree.

174  Chapter 6

Hey, You’re the Boss Now! The interview is used almost universally as part of the employee selection process. Not many of us have ever been hired without having gone through one or more interviews. Interviews can be valid and reliable selection tools, but they need to be structured and well organized. You can be an effective interviewer by using the following eight suggestions for interviewing job candidates:43 1. Review the job description and job specifications. Be sure that prior to the interview you have reviewed pertinent information about the job. Why? Because this will provide you with valuable information with which to assess the job candidate. Furthermore, knowing the relevant job requirements will help eliminate interview bias. 2. Prepare a structured set of situational and behavioural questions that you want to ask all job applicants. By having a set of prepared questions, you are able to better compare all candidates’ answers against a common base. Use a standardized evaluation form. 3. Before meeting a candidate, review his or her application form and résumé. By doing this preparation, you will be able to create a complete picture of the candidate in terms of what is represented on the résumé or application and what the job requires. You can also begin to identify areas to explore during the interview: Areas that are not clearly defined on the résumé or application but are essential to the job can become a focal point in your discussion with the candidate. 4. Open the interview by putting the applicant at ease and providing a brief preview of the topics to be discussed. Interviews are stressful for job candidates. If you indicate upfront that you want a successful outcome for both of you and engage in a bit of small talk at the beginning, you can give the candidate time to adjust to the interview setting. By providing a preview of topics to come, you are giving the candidate an agenda, which helps the candidate begin to frame what he or she will say in response to your questions. 5. Ask your questions and listen carefully to the candidate’s answers. Select follow-up questions that flow naturally from the answers given. Focus on the candidate’s responses as they relate to information you need to ensure that the person meets your job requirements. If you are still uncertain, use a follow-up question to probe further for information. 6. Give the candidate a chance to ask questions. Typically, at the start of the interview, you would let candidates know there will be an opportunity to ask questions at the end, or, if you prefer, throughout the interview. 7. Close the interview by telling the applicant what is going to happen next. Applicants are anxious about the status of your hiring decision. Be upfront with candidates regarding others who will be interviewed and the remaining steps in the hiring process. Let the person know your time frame for making a decision. In addition, tell the applicant how you will notify him or her about your decision. 8. Write your evaluation of the applicant while the interview is still fresh in your mind. Do not wait until the end of the day, after interviewing several people, to write your analysis of each candidate. Memory can (and often will) fail you! The sooner after an interview you write down your impressions, the better chance you have of accurately noting what occurred in the interview and your perceptions of the candidate.

How Can You “Close the Deal”? Interviewers who treat the recruiting and hiring of employees as if the applicants must be sold on the job and exposed only to an organization’s positive characteristics are likely to have a workforce that is dissatisfied and prone to high turnover.44 During the hiring process, every job applicant develops a set of expectations about the company and about the job for which he or she is interviewing. When the information an applicant receives is excessively inflated, a number of things happen that have potentially negative effects on the company: (1) Mismatched applicants are less

Chapter 6  Human Resource Management 175

likely to withdraw from the search process. (2) Inflated information builds unrealistic expectations so new employees are likely to become quickly dissatisfied and to resign prematurely. (3) New hires are prone to become disillusioned and less committed to the organization when they face the unexpected harsh realities of the job. (4) In many cases, these individuals feel that they were misled during the hiring process and may become problem employees. To increase job satisfaction among employees and reduce turnover, managers should consider a realistic job preview (RJP).45 An RJP includes both positive and negative information about the job and the company. For example, in addition to the positive comments typically expressed in the interview, the applicant is told of the less attractive aspects of the job. For instance, he or she might be told that there are limited opportunities to talk to co-workers during work hours, that chances of being promoted are slim, or that work hours fluctuate so erratically that employees may be required to work during what are usually off hours (nights and weekends). Research indicates that applicants who have been given a realistic job preview hold lower and more realistic job expectations for the jobs they will be performing and are better able to cope with the frustrating elements of the job than are applicants who have been given only inflated information. The result is fewer unexpected resignations by new employees. For managers, realistic job previews offer a major insight into the HRM process. Presenting only positive job aspects to an applicant may initially entice him or her to join the organization, but it may be a decision that both parties quickly regret.

It’s just as important to retain good people as it is to hire them in the first place.

Orientation and Training 6.4 Explain how organizations retain employees and provide them with necessary knowledge, skills, and abilities. If we’ve done our recruiting and selecting properly, we’ve hired competent individuals who can perform successfully on the job. But successful performance requires more than possessing certain skills! New hires must be acclimated to the organization’s culture and be trained and given the knowledge to do the job in a manner consistent with the organization’s goals. To achieve this, HRM uses orientation and training. Thirty-year-old Roxann Linton is enthusiastic about her career at Scotiabank.46 “Working with an international and diverse organization like Scotiabank, there are so many opportunities,” says Linton. The young woman was chosen for Leading Edge, Scotiabank’s fast-track leadership program. In the application process, she had to prepare a challenging business case analysis, go through psychometric testing, and be interviewed twice by a total of eight executives. The Leading Edge program prepares employees for senior management positions by rotating them through a series of assignments. Linton worked for about five years in the bank’s internal audit department in Kingston, Jamaica. She then transferred to Halifax and worked in commercial banking. During the first 15 months of the Leading Edge program, Linton managed more than 100 people in the electronic banking contact centre. Her next assignment was as director of special projects at Scotia Cassels Investment Counsel, part of the bank’s wealth management division. She launched a new corporate bond fund during her first three months in that assignment. She will have one more 12- to 18-month assignment in another part of the bank, and then she can start applying for vice-president positions.

realistic job preview (RJP) A preview of a job that includes both positive and negative information about the job and the company.

176  Chapter 6

How Are New Hires Introduced to the Organization? orientation The introduction of a new employee to his or her job and to the organization.

Once a job candidate has been selected, he or she needs to be introduced to the job and organization. This introduction is called orientation.47 Many organizations now call this process onboarding. The major goals of orientation are to • reduce the initial anxiety all new employees feel as they begin a new job; • familiarize new employees with the job, the work unit, and the organization as a whole; and • facilitate the outsider–insider transition. Job orientation (1) expands on the information the employee obtained during the recruitment and selection stages, (2) clarifies the new employee’s specific duties and responsibilities as well as how his or her performance will be evaluated, and (3) corrects any unrealistic expectations new employees might hold about the job. Work unit orientation (1) familiarizes an employee with the goals of the work unit, (2) clarifies how his or her job contributes to the unit’s goals, and (3) provides an introduction to his or her co-workers. Organization orientation (1) informs the new employee about the organization’s goals, history, philosophy, procedures, and rules; (2) clarifies relevant HR policies such as work hours, pay procedures, overtime requirements, and benefits; and (3) may include a tour of the organization’s physical facilities. Managers have an obligation to make the integration of a new employee into the organization as smooth and anxiety-free as possible. Successful orientation, whether formal or informal • results in an outsider–insider transition that makes the new member feel comfortable and fairly well-adjusted. • lowers the likelihood of poor work performance. • reduces the probability of a surprise resignation by the new employee only a week or two into the job.48

Technology and the Manager’s Job

Social HR

STEFANY LUNA DE LINZY/Shutterstock

HR has gone social.49 Mobile devices are increasingly being used to provide training in bite-sized lessons using videos and games. For instance, the 75 000-plus associates of realty company Keller Williams use their smartphones and tablets to view two- to three-minute video lessons on sales and customer

service. There are a few tech-forward marketing firms that are using tweets rather than the conventional résumé/job interview process. These “Twitterviews” are used in talent selection. One individual said, “The Web is your résumé. Social networks are your mass references.” Many other firms are using social media platforms to expand their recruiting reach. Not only are social media tools being used by corporations to recruit applicants, they’re being used to allow employees to collaborate by sharing files, images, videos, and other documents.

Discussion Questions 1. Does the use of technology like this make HR—which is supposed to be a “people-oriented” profession—less so? Why or why not? 2. You want a job after graduating from university. Knowing that you’re likely to encounter online recruitment and selection procedures, how can you best prepare for making yourself stand out in the process?

Chapter 6  Human Resource Management 177

Training On the whole, planes don’t cause airline accidents, people do. Most collisions, crashes, and other airline mishaps—nearly three-quarters of them—result from errors by the pilot or air traffic controller, or from inadequate maintenance. Weather and structural failures typically account for the remaining accidents.50 We cite these statistics to illustrate the importance of training in the airline industry. Such maintenance and human errors could be prevented or significantly reduced by better employee training, as shown by the unbelievably amazing “landing” of US Airways Flight 1549 in the Hudson River in January 2009 with no loss of life. Pilot Captain Chesley “Sully” Sullenberger attributed the positive outcome to the extensive and intensive training that all pilots and flight crews undergo.51 Employee training is a learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job. Thus, training involves changing skills, knowledge, attitudes, or behaviour.52 This change may involve what employees know, how they work, or their attitudes toward their jobs, co-workers, managers, and the organization. It’s been estimated, for instance, that firms spend billions each year on formal courses and training programs to develop workers’ skills.53 Canadian companies spend far less than American firms on training and development—about $852 per employee compared with $1273 by the Americans.54 Managers, of course, are responsible for deciding when employees are in need of training and what form that training should take. Determining training needs typically involves answering several questions. If some of these questions sound familiar, you’ve been paying close attention. It’s precisely the type of analysis that takes place when managers develop an organizational structure to achieve their strategic goals—only now the focus is on the people.55

WHEN is training needed? The questions in Exhibit 6-5 suggest the kinds of signals that can warn a manager when training may be necessary. The more obvious ones are related directly to productivity.

Exhibit 6-5  Determining Whether Training Is Needed What deficiencies, if any, do job holders have in terms of skills, knowledge, or abilities required to exhibit the essential and necessary job behaviours?

What behaviours are necessary for each job holder to complete his or her job duties?

Is there a need for training?

What are the organization's strategic goals?

What tasks must be completed to achieve organizational goals?

employee training A learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job.

Fred Blocher/Kansas City Star/Tribune News Service/Getty Images

178  Chapter 6 Indications that job performance is declining include decreases in production numbers, lower quality, more accidents, and higher scrap or rejection rates. Any of these outcomes might suggest that worker skills need to be fine-tuned. Of course, we’re assuming that an employee’s performance decline is in no way related to lack of effort. Managers, too, must also recognize that training may be required because the workplace is constantly evolving. Changes imposed on employees as a result of job redesign or a technological breakthrough also require training. HOW ARE EMPLOYEES TRAINED?  Most training takes place on the job. Why? It’s simple and it usually costs less. However, on-the-job training can disrupt the workEmployees at Villa Venture senior living community participate in a perception explace and result in an increase in errors while ercise during the Virtual Dementia Tour, a training tool that helps them understand learning takes place. Also, some skill training Alzheimer’s disease and other forms of dementia. The tour is a learning experience is too complex to learn on the job and must designed to improve employees’ ability to care for victims of dementia. take place outside the work setting. Many different types of training methods are available. For the most part, we can classify them as traditional and technology based. (See Exhibit 6-6 below to learn more about training methods.) For many organizations, employee interpersonal skills training—communication, conflict resolution, team building, customer service, and so forth—is a high priority. Shannon Washbrook, director of training and development for Vancouver-based Boston Pizza International, says, “Our people know the Boston Pizza concept; they have all the hard skills. It’s the soft skills they lack.” To address that gap, Washbrook launched Boston Pizza College, a training initiative that uses hands-on, scenario-based learning about many interpersonal skills topics.56 HOW CAN MANAGERS ENSURE THAT TRAINING IS WORKING?  It’s easy to

generate a new training program, but if training efforts aren’t evaluated, it may be a waste of resources. It would be nice if all companies could boast the returns on

Exhibit 6-6  Traditional and Technology-Based Training Methods Traditional Training Methods • On-the-job—Employees learn how to do tasks simply by performing them, usually after an initial introduction to the task. • Job rotation—Employees work at different jobs in a particular area, getting exposure to a variety of tasks. • Mentoring and coaching—Employees work with an experienced worker who provides information, support, and encouragement; also called apprenticeships in certain industries. • Experiential exercises—Employees participate in role playing, simulations, or other face-to-face types of training. • Workbooks/manuals—Employees refer to training workbooks and manuals for information. • Classroom lectures—Employees attend lectures designed to convey specific information.

Technology-Based Training Methods • CD-ROM/DVD/video tapes/audio tapes/podcasts—Employees listen to or watch selected media that convey information or demonstrate certain techniques. • Video conferencing/teleconferencing/satellite TV—Employees listen or participate as information is conveyed or techniques demonstrated. • E-learning—Employees participate in Internet-based learning, including simulations or other interactive modules. • Mobile learning—Employees participate in learning activities delivered via mobile devices.

Chapter 6  Human Resource Management 179

What’s Cooking in Hospitality? As a Canadian owned and managed company with revenues over $15 million demonstrating strategy, capability, and commitment to achieve sustainable growth, Genesis Hospitality Management of Brandon, Manitoba, was recognized as one of Canada’s best managed companies in 2018. In addition to expanding into Western Canada, it now offers property management services.59

The award is for more than just financial success—it was recognized for talent management practices. The company’s culture, value, and mission align to provide guests with high-quality standards through well-trained and motivated employees.

investments in training that Neil Huffman Auto Group executives do; they claim they receive $230 in increased productivity for every dollar spent on training.57 But to make such a claim, training must be properly evaluated. How can training programs be evaluated? Usually several managers, representatives from HRM, and a group of workers who have recently completed a training program are asked for their opinions. If the comments are generally positive, the program may get a favourable evaluation and it’s continued until someone decides, for whatever reason, that it should be eliminated or replaced. Such reactions from participants or managers, while easy to acquire, are the least valid. Their opinions are heavily influenced by factors that may have little to do with the training’s effectiveness, such as difficulty, entertainment value, or the personality characteristics of the instructor. However, trainees’ reactions to the training may, in fact, provide feedback on how worthwhile the participants viewed the training to be. Beyond general reactions, however, training must also be evaluated in terms of how much the participants learned; how well they are using their new skills on the job (did their behaviour change?); and whether the training program achieved its desired results (reduced turnover, increased customer service, etc.).58

Total Rewards: Five Key Components 6.5 Describe how total rewards work. Total Rewards • strategic compensation • benefits • work–life balance • performance management • career development The five components combine into one reward strategy that is integrated and results in happy, committed, and productive employees.60 The total rewards model does not exist in a vacuum—rewards must be linked very closely with the organization’s strategy.

1  Strategic Compensation Most of us expect to receive appropriate compensation from our employers. Therefore, developing an effective and appropriate compensation system is an important part of the HRM process.61 Why? Because it helps attract and retain competent and

180  Chapter 6

skill-based pay A pay system that rewards employees for the job skills and competencies they can demonstrate.

variable pay A pay system in which an individual’s compensation is contingent on performance.

talented individuals who help the organization accomplish its mission and goals. Compensation is typically the largest expense for an employer, so it becomes critical for compensation strategy to be directly linked with organizational strategy. An organization’s compensation system has been shown to have an impact on its strategic performance and value creation.62 Managers must develop a compensation system that reflects the changing nature of work and the workplace to keep people motivated. Organizational compensation can include many different types of rewards and benefits, such as base wages and salaries, wage and salary add-ons, incentive payments, as well as other benefits and services such as vacation time, extended health care, training allowances, and pensions. Benefits often amount to one-third or more of an individual’s base salary and should be viewed by the employee as part of the total compensation package. How do managers determine who gets paid $11 an hour and who gets $350 000 a year? Several factors influence the differences in compensation and benefit packages for different employees. Exhibit 6-7 summarizes these factors, which are both jobbased and business- or industry-based. Many organizations use an alternative approach to determining compensation called skill-based pay. In a skill-based pay system, an employee’s job title does not define his or her pay category; skills do.63 Research shows that these types of pay systems seem to be more successful in manufacturing organizations than in service organizations or organizations pursuing technical innovations.64 Skill-based pay systems seem to mesh nicely with the changing nature of jobs and today’s work environment. On the other hand, many organizations are using variable pay systems, in which an individual’s compensation is contingent on performance—81 percent of Canadian and Taiwanese organizations use variable pay plans, and 78 percent of US organizations do.65 Although many factors influence the design of an organization’s compensation system, flexibility is a key consideration. The traditional approach to paying

Exhibit 6-7  Factors That Influence Compensation and Benefits SOURCE: Based on A. Murray, “Mom, Apple Pie, and Small Business,” Wall Street Journal, August 15, 1994, p. A1.

How long has the employee been with the company and how has he or she performed?

How large is the company?

How profitable is the company?

Size of Company Company Profitability

Kind of Job Performed

Level of Compensation and Benefits

Geographical Location Where is the organization located?

Does the job require high levels of skills?

Employee’s Tenure and Performance

Management Philosophy

What is management’s philosophy toward pay?

What industry is the job in?

Kind of Business Unionization

Labour or Capital Intensive

Is the business unionized?

Is the business labour or capital intensive?

Chapter 6  Human Resource Management 181

2 Benefits

John M Lund Photography Inc/DigitalVision/ Getty Images

people reflected a time of job stability, when an employee’s pay was largely determined by seniority and job level. Given the dynamic environments that many organizations face, in which the skills that are absolutely critical to organizational success can change in a matter of months, the trend is to make pay systems more flexible and to reduce the number of pay levels. However, whatever approach managers take, they must establish a fair, equitable, and motivating compensation system that allows the organization to recruit and keep a productive workforce.

Canada’s top 100 highest-paid CEOs make 171 times the earnings of an average Canadian wage—a jump from 105 times in 1998. That works out to $7.96 million for the CEOs and $46 634 for the average Canadian. Did greed and executive compensation cause the 2009 financial crisis?

Benefits are programs and services meant to supplement the cash component of compensation. Some benefits, such as employment insurance, workers’ compensation, and the Canada Pension Plan, are mandatory. Other benefits a company may offer include time off with pay, savings and retirement programs, and supplementary health and life insurance. Employee services are divided between personal services such as counselling and employee assistance programs (EAPs), and job-related services such as child care, food services, and family-friendly benefits, which are discussed in more detail as part of work–life balance.66

Professors Linda Duxbury of the Sprott School of Business at Carleton University and Chris Higgins of the University of Western Ontario are the leading Canadian researchers on the issue of work–life balance. Their research shows that employees are working long hours and are also increasingly being asked to work a number of unpaid hours a week. This workload affects employees’ abilities to manage their family lives. In response, most major organizations have taken actions to make their workplaces more family-friendly by offering family-friendly benefits, which include a wide range of family-friendly benefits work and family programs to help employees.67 Benefits that accommodate Work–life conflicts are as relevant to male employees with children and employees’ needs for work–life female employees without children as they are to female employees with chil- balance. dren. Heavy workloads and increased travel demands, for example, are making it increasingly hard for many employees, male and female, to meet both work and personal responsibilities. A Fortune survey found that 84 percent of male executives surveyed said that “they’d like job options that let them realize their professional aspirations while having more time for things outside work.” Also, 87 percent of these executives believed that any company that restructured top-level management jobs in ways that would both increase productivity and make more time available for life outside the office would have a competitive advantage in attracting talented employees.68 Younger employees, particularly, put a higher priority on family and a lower priority on jobs and are looking for organizations that give them more work flexibility.69 Today’s progressive workplace is becoming more accommodating of the varied needs of a diverse workforce. It ­provides Employee services were traditionally a small part of total a wide range of scheduling options and benefits that give rewards but have increased with the aging workforce and employees more flexibility at work and allow employees to lower job security.

Alexmillos/Fotolia

3  Work–Life Balance

Kemaltaner/Fotolia

182  Chapter 6 better balance or integrate their work and personal lives. Large groups of women and minority employees remain unemployed or underemployed because of family responsibilities and bias in the workplace.70 What can managers do? Total rewards necessitate looking at the whole picture, and work–life balance must fit within the compensation and benefit strategy. Research has shown a significant, positive relationship between work–family initiatives and an organization’s stock price.71 Managers need to understand that people do differ in their preferences for work–family life scheduling options and benefits.72 Some people prefer organizational initiatives that better segment work from their personal lives. Others prefer programs that facilitate integration. Flextime schedules segment because they allow employees to schedule work hours that are less likely to conflict with personal responsibilities. On the other Companies have introduced programs such as on-site hand, on-site child care integrates by blurring the boundaries child care, summer day camps, flextime, job sharing, between work and family responsibilities. People who prefer leaves for school functions, telecommuting, and part-time segmentation are more likely to be satisfied and committed to employment. their jobs when offered options such as flextime, job sharing, and part-time hours. People who prefer integration are more likely to respond positively to options such as on-site child care, gym facilities, and company-sponsored family picnics.

4  Performance and Recognition Managers need to know whether their employees are performing their jobs efficiently and effectively or whether improvement is needed. Employees are often compensated based on those evaluations, through pay-for-performance strategies and through recognition. The goal of recognition is to reinforce positive behaviours either formally or informally. It can reinforce performance improvement and meet intrinsic needs for appreciation, positive communication, and feedback.73 performance management system A process of establishing performance standards and evaluating performance in order to arrive at objective human resource decisions and to provide documentation in support of those decisions.

PERFORMANCE MANAGEMENT SYSTEM  Evaluating employee performance is

part of a performance management system, which is a process of establishing performance standards and appraising employee performance in order to arrive at objective human resource decisions and to provide documentation in support of those decisions. Performance appraisal is a critical part of a performance management system. Some companies invest far more effort in it than others. Performance appraisal is not easy to do, and many managers do it poorly. Both managers and employees often dread the appraisal process. A survey found that 41 percent of employees report having had a least one incident of being demotivated after feedback from their managers.74 Performance appraisal can also be subject to politics, APPRAISAL METHODS Managers can choose from six major performance appraisal methods. The advantages and disadvantages of each of these methods are shown in Exhibit 6-8. Not all organizations conduct performance evaluations; in particular, smaller organizations often do not. Consequently, it can be useful as an employee to ask your manager for an annual appraisal, if you do not routinely receive one. The feedback will allow you to determine your goals for the following year and identify anything for which you need improvement or training.

DOC RABE Media/Fotolia

PERFORMANCE

Despite these organizational efforts, work–life programs have room for improvement. Workplace surveys still show high levels of employee stress stemming from work–life conflicts.

Chapter 6  Human Resource Management 183

critical incidents

Exhibit 6-8  Specific Performance Appraisal Methods Method

Advantage

Disadvantage

(a) Written essay—descriptions of employee’s strengths and weaknesses

Simple to use

More a measure of evaluator’s writing ability than of employee’s actual performance

A performance appraisal method in which the evaluator focuses on the critical or key behaviours that separate effective from ineffective job performance.

(b) Critical incidents—examples of critical behaviours that were especially effective or ineffective

Rich examples; behaviourally based

Time-consuming; lack quantification

adjective rating scales

(c) Adjective rating scales— lists descriptive performance factors (work quantity and quality, knowledge, cooperation, loyalty, attendance, honesty, initiative, and so forth) with numerical ratings

Provide quantitative data; less time-consuming than others

Do not provide depth of job behaviour assessed

(d) BARS—rating scale + examples of actual job behaviours

Focus on specific and measurable job behaviours

Time-consuming; difficult to develop measures

(e) MBO—evaluation of accomplishment of specific goals

Focuses on end goals; results oriented

Time-consuming

(f) 360-degree appraisal— feedback from full circle of those who interact with employee

More thorough

Time-consuming

(g) Multiperson—evaluation comparison of work group

Compares employees with one another

Unwieldy with large number of employees

A performance appraisal method in which the evaluator rates an employee on a set of performance factors.

behaviourally anchored rating scales (BARS)

(a) through (f) (see Exhibit 7-8) are ways to evaluate employee performance against a set of established standards or absolute criteria. (g) (see Exhibit 7-8) is a way to compare one person’s performance with that of one or more individuals and is a relative, not absolute, measuring device.

What to do S

Reassign individual to better-matched job

Inadequate training

S

Provide training

Lack of desire to do job (discipline problem)

S

Try employee counselling, a process designed to help employees overcome performance-related problems; attempt to uncover why employee has lost his/her desire or ability to work productively and find ways to fix the problem; or take disciplinary/punitive action (verbal and written warnings, suspension, and even termination).

The term career has several meanings. In popular usage, it can mean advancement (“She is on a management career track”), a profession (“He has chosen a career in accounting”), or a lifelong sequence of jobs (“His career has included 12 jobs in 6 organizations”). For our purposes, we define a career as the sequence of positions held by a person during his or her lifetime.75 Using this definition, we all have, or will have, a career. Moreover, the concept is as relevant to unskilled labourers as it is to software designers or physicians. One of the first career decisions you have to make is career choice. The optimum career choice is one that offers the best match between what you want out of life and your interests, abilities, and market opportunities. Good career choice outcomes should result in a series of positions that give you an opportunity to be a good performer, make you want to maintain

An approach to goal setting in which specific measurable goals are jointly set by employees and their managers, progress toward accomplishing those goals is periodically reviewed, and rewards are allocated on the basis of this progress.

A performance appraisal method that uses feedback from supervisors, employees, co-workers, and customers in conjunction with another appraisal method.

multiperson comparisons A performance appraisal method in which one individual’s performance is compared with that of others.

Bahrialtay/Fotolia

Job mismatch (hiring error)

5  Career Development

management by objectives (MBO)

360-degree appraisal

When Employee’s Performance Is Not Up to Par... Why?

A performance appraisal method in which the evaluator rates an employee on examples of actual job behaviours.

A key concept in total rewards is that you are responsible for your own career! Organizations can assist with coaching, mentoring, networking opportunities, and training and development, but you have to take charge and find your dream job.

184  Chapter 6

Exhibit 6-9  What Do College and University Grads Want from Their Jobs?

discipline Actions taken by a manager to enforce an organization’s standards and regulations.

employee counselling A process designed to help employees overcome performancerelated problems.

career The sequence of positions held by a person during his or her lifetime.

Top Factors for Canadian Students

Top Factors for US Students

Top Factors for UK Students

• Opportunities for advancement in position • Good people to work with • Good people to report to • Work–life balance • Initial salary

• • • •

• International career opportunities • Flexible working hours • Variety of assignments • Paid overtime

Work–life balance Annual base salary Job stability and security Recognition for a job done well • Increasingly challenging tasks • Rotational programs

your commitment to your career, lead to highly satisfying work, and give you the proper balance between work and personal life. A good career match, then, is one in which you are able to develop a positive self-concept, to do work that you think is important, and to lead the kind of life you desire.76 Exhibit 6-9 describes the factors Canadian, American, and UK college and university students look for in a job. How would you rank these items?

Contemporary Human Resource Management Issues 6.6 Discuss contemporary human resource management issues. HR issues that face today’s managers include workforce diversity, sexual harassment, bullying, occupational health and safety, and employee wellness.

How Can Workforce Diversity Be Managed? Workforce diversity also affects such basic HRM activities as recruitment, selection, and orientation.77 Improving workforce diversity requires managers to widen their recruiting net. For example, the popular practice of relying on current employee referrals as a source of new job applicants tends to produce candidates who have similar characteristics to those of present employees. So managers have to look for applicants in places where they haven’t typically looked before. To increase diversity, managers are increasingly turning to nontraditional recruitment sources such as women’s job networks, over-50 clubs, urban job banks, disabled people’s training centres, ethnic newspapers, and LGBTQ rights organizations. This type of outreach should enable an organization to broaden its pool of applicants. Once a diverse set of applicants exists, efforts must be made to ensure that the selection process does not discriminate. Moreover, applicants need to be made comfortable with the organization’s culture and be made aware of management’s desire to accommodate their needs. For instance, at TGI Friday’s, company managers work diligently to accommodate differences and create workplace choices for a diverse workforce; so, too, do companies such as Mastercard and Procter & Gamble.78 Finally, orientation is often difficult for women and minorities. Many organizations, such as Lotus Development and Hewlett-Packard, provide special workshops to raise diversity consciousness among current employees as well as programs for new employees that focus on diversity issues. The thrust of these efforts is to increase individual understanding of the differences each of us brings to the workplace. A number of companies also have special mentoring programs to deal with the reality that lower-level female and minority managers have few role models with whom to identify.79

Chapter 6  Human Resource Management 185

Diversity Matters Royal Bank received a lot of criticism when it was discovered that it had outsourced IT jobs to a foreign company and then brought in temporary foreign workers to help move the jobs offshore. It turns out RBC is not the only one using the federal Temporary Foreign Worker Program, which admitted 213 516 temporary foreign workers in 2012. That number was three times higher than a decade earlier.80 The federal government views the temporary work program as a key weapon in its fight against the growing skills gap in Canada. Canada’s immigration policy has been focused on bringing in people with specific occupational skills, such as petroleum engineers for the Alberta oil patch. They are looking at an “expression of interest” model that would allow employers and governments to pick from an online pool of applicants based on local labour-market needs. Critics contend that Canada’s relatively high unemployment rate indicates we have a problem with workers who do not want to work in available jobs, due to everything from pay to health and safety. Canadian employers are slow to recognize foreign credentials, so immigrants who are twice as likely to be university grads are almost three times more likely to be working in low-skilled jobs.81 Other complaints centre on the budget cuts that have gutted programs that were set up to support immigrants settling into Canadian life. One of the keys to surviving the skills gap is to make sure immigrants thrive in higher-skilled jobs. Employers need to emphasize the benefits of diversity in orientation and training programs and ensure that immigrants are accepted in the workplace.

What Is Sexual Harassment? Organizational performance can be reduced by several issues that can exist in the workplace, including sexual harassment.82

Sexual harassment is a serious issue. This is true in both public- and private-sector organizations. It’s estimated that sexual harassment is the single largest financial risk facing companies today—and can result in decreases (sometimes greater than 30 percent) in a company’s stock price.83 At Mitsubishi, for example, the company paid out more than $34 million to 300 women for the rampant sexual harassment to which they were exposed.84 The Human Rights Tribunal of Ontario awarded damages of $75 000 to a 15-yearold former intern who worked at a tattoo parlour.85 The teenager made a complaint under chapter H.19 of the Human Rights Code, which pertains to discrimination in employment because of sex, sexual harassment, sexual solicitation or advances, gender identity, and age. The damages were sought as compensation for “injury to dignity, feelings and self-respect,” according to the tribunal’s record.86 But it’s more than just jury awards. Sexual harassment results in millions lost in absenteeism, low productivity, and turnover.87 Sexual harassment, furthermore, is not just a North American phenomenon. It’s a global issue. For instance, nearly 10 percent of workers responding to a global survey reported that they had been harassed sexually or physically at work. The survey covered countries such as India, China, Saudi Arabia, Sweden, France, Belgium, Germany, Great Britain, and Poland, among others.88 Even though discussions of sexual harassment cases often focus on the large awards granted by a court, employers face other concerns. Sexual harassment creates an unpleasant work environment for organization members and undermines their ability to perform their jobs. But just what is sexual harassment? Sexual harassment is offensive or humiliating behaviour that is related to a person’s sex, as well as behaviour of a sexual nature that creates an intimidating, unwelcome, hostile, or offensive work environment or that could reasonably be thought to put sexual conditions on a person’s job or employment opportunities.89

sexual harassment Any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment.

186  Chapter 6 It can occur between members of the opposite or of the same sex—between employees of the organization or between employee and nonemployee.90 Most of the challenges associated with sexual harassment involve determining what constitutes this illegal behaviour.91 Harassment does not have to be of a sexual nature and can include offensive remarks about a person’s sex. Simple teasing, offhand comments, or isolated incidents that are not serious are not prohibited by the law unless it becomes so frequent or so severe that it creates a hostile or offensive work environment or it results in an adverse employment decision (such as being demoted or fired).92 For many organizations, it’s the offensive or hostile environment issue that’s problematic.93 Managers need to know what constitutes such an environment. How do you determine whether something is offensive? For instance, do off-colour jokes in the office create a hostile environment? How about classical artwork that shows nude men or women? The answer is it very well could! It depends on the people in the organization and the environment in which they work. The key is knowing what makes fellow employees uncomfortable—and if we don’t know, we should ask!94 Also, managers must understand that the victim doesn’t necessarily have to be the person harassed but could be anyone affected by the offensive conduct.95 Organizational success will, in part, reflect how sensitive each employee is toward another in the company. At DuPont, for example, the corporate culture and diversity programs are designed to eliminate sexual harassment through awareness and respect for all individuals.96 It means understanding one another and, most importantly, respecting others’ rights. Similar programs exist at General Mills and Levi-Strauss, among other companies. If sexual harassment carries with it potential costs to the organization, what can a company do to protect itself? The courts want to know two things: (1) Did the organization know about, or should it have known about, the alleged behaviour? and (2) What did managers do to stop it?97 With the number and dollar amounts of the awards today, it’s even more important for organizations and managers to educate all employees on sexual harassment matters and to have mechanisms available to monitor employees. In addition, organizations need to ensure that no retaliatory actions— such as cutting back hours, assigning back-to-back work shifts without a rest break, etc.—are taken against a person who has filed harassment charges. Finally, in a sexual harassment matter, managers must remember that the harasser may have rights, too.98 No action should be taken against someone until a thorough investigation has been conducted. Furthermore, the results of the investigation should be reviewed by an independent and objective individual before any action against the alleged harasser is taken. Even then, the harasser should be given an opportunity to respond to the allegation and have a disciplinary hearing if desired. Additionally, an avenue for appeal should also exist for the alleged harasser—an appeal heard by someone at a higher level of management who is not associated with the case.

Bullying Bullying is usually seen as acts or verbal comments that could “mentally” hurt or isolate a person in the workplace. Sometimes bullying can involve negative physical contact as well. Bullying usually involves repeated incidents or a pattern of behaviour that is intended to intimidate, offend, degrade, or humiliate a particular person or group of people. It has also been described as the assertion of power through aggression.99 Some examples include • spreading malicious rumours, gossip, or innuendo • excluding or isolating someone socially • intimidating or belittling a person • constantly changing work guidelines or imposing impossible deadlines • intruding on a person’s privacy by pestering, spying or stalking

Chapter 6  Human Resource Management 187

• yelling or using profanity • tampering with a person’s personal belongings or work equipment100 Bullying is a serious workplace issue, but at times it may be hard to know if it is happening. For example, constructive feedback is not usually considered bullying as it intends to assist the employee with their work. As described by WorkSafeBC, bullying and harassing behaviour does not include • expressing differences of opinion • offering constructive feedback, guidance, or advice about work-related behaviour • reasonable action taken by an employer or supervisor relating to the management and direction of workers or the place of employment (e.g., managing a worker’s performance, taking reasonable disciplinary actions, assigning work)101

Occupational Health and Safety Every province and territory has occupational health and safety legislation, which is based on joint responsibility of workers and employers.102 Both sides are meant to take reasonable care and precaution. Employers can prevent workplace accidents by reducing unsafe conditions in the workplace and unsafe acts by employees. Health and safety is also concerned with issues such as alcohol and substance abuse, stress, and repetitive strain injuries. FreshCo’s employees were the first in Canada to use a construction exoskeleton, a quasi-cyborg-like form of wearable equipment that allows users to lift 360 lb. on the job with relative ease. Rennehan says the exoskeleton cuts time costs on projects by 27%, reduces injury rates, and makes trade work accessible to workers of differing body size and strength.103

Employee Wellness Like health and safety, employee wellness is an area that falls under the overall healthy workplace desired by employers and employees. Exhibit 6-10 lists some of the more common corporate wellness initiatives.

Exhibit 6-10  Corporate Wellness Initiatives SOURCE: Based on Sunlife 2011 National Wellness Survey, http://www.sunlife.ca/static/canada/Sponsor/About%20 Group%20Benefits/Group%20benefits%20products%20and%20services/Sun%20Life%20Wellness%20Institute/ Articles%20and%20Insights/BNWS%202011%20ENG.pdf.

Corporate Wellness Initiatives Employee Assistance Programs (EAPs) Flu Shot Program

72.0% 70.0% 64.0%

First Aid/ CPR

58.0%

Ergonomics 40.0%

Nutrition Education Health Awareness Education

36.0%

Smoking Cessation

36.0%

Fitness Subsidy

35.0% 33.0%

Wellness Website

31.0%

Stress Management Programs 0

20

40

60

80

188  Chapter 6

Chapter Summary Summary of Learning Objectives 6.1 Describe the human resource management process and the factors that influence it. The human resource management (HRM) process consists of several key areas: environmental factors that impact HRM, such as organizational culture, economic conditions, labour-market issues, and technology; human resource requirements and performance and reward factors, such as HR planning, recruitment, selection, training, and total rewards;104 and healthy workplace factors, including health and safety, harassment, and bullying. Canada’s workforce is aging, and its demographics are changing, leading to projected employee skill shortages.

6.2 Explain how organizations plan for their human resource needs. Human resource managers do a human resource inventory to discover what skills and capabilities current employees have. They map that inventory against what might be needed in the future, based on the organization’s mission, goals, and strategies. Based on the outcome of that supply/demand process, the organization has equilibrium, a labour shortage, or a labour surplus. Organizations need to identify and assess the strengths and limitations of their employees.

the new employee to his or her job, and also to the organization. As job demands change, employees may need to have their skills updated through training programs. Companies use a variety of training methods, from onthe-job training to classroom work to technology-based training. A mentor/buddy system allows new hires to ask existing employees various questions concerning behaviour in meetings, use of office materials, or even daily breaks.

6.5 Describe how total rewards work. Total rewards contains five components: strategic compensation, benefits, work–life balance, performance management, and career development. These elements combine into one reward strategy that is integrated and results in happy, committed, and productive employees.

6.6 Discuss contemporary human resource management issues. Workforce diversity must be managed through HRM activities, including recruitment, selection, and orientation. Healthy workplaces feature plans in place to prevent sexual harassment and bullying. Finally, organizations are looking for ways to ensure the health and safety of their employees.

6.3 Describe how organizations identify and select competent employees. Organizations first need to make sure they have enough of the right people internally and externally to accomplish the organization’s goals. When selecting new employees, organizations need to determine whether potential employees will be successful once they are on the job. To do this, managers use application forms, written tests, performance-simulation tests, interviews, background investigations, and, in some cases, physical examinations to screen employees. Managers also need to make sure that they do not engage in discrimination in the hiring process. Organizations can develop more inclusive recruitment practices by advertising in various ethnic media sources and providing job descriptions without jargon or technical language.

6.4 Explain how organizations retain employees and provide them with necessary knowledge, skills, and abilities. Organizations, particularly larger ones, have orientation programs for new employees. The orientation introduces

Discussion Questions 1. Describe the environmental factors that most directly influence the human resource management process. 2. What are the two types of interview questions that employers should use? 3. How are orientation and employee training alike? How are they different? 4. Describe three performance appraisal methods as well as the advantages and disadvantages of each. 5. How do recruitment, selection, orientation, and training directly affect workforce diversity? 6. Do you think there are moral limits on how far a prospective employer should delve into an applicant’s life by means of interviews, tests, and background investigations? Explain your position. 7. Should managers offer flextime and other work–life balance initiatives? What special human resource management issues do these initiatives raise? 8. What are total rewards? How do the various components of total rewards lead to effective human resource management?

Chapter 6  Human Resource Management 189

Developing Management Skills Dilemma Your instructor has asked class members to form teams to work on a major class project. You have worked on teams before and have not always been pleased with the results. This time you are determined to have a good team experience. You have reason to believe that effective performance management might make a difference. You also know that evaluating performance and giving feedback are important. You have heard that organizations are using competencies as the basis for managing performance. A competency is a combination of knowledge, skills, and abilities (KSAs) used to improve performance. For example, negotiation or effective communications are competencies that are desirable in a group context. With all of this in mind, write up a list of competencies that you would expect to find in strong team members.

Becoming a Manager • Using the Internet, research different companies that interest you, and check out what required competencies they list in their job descriptions. • If you are working, note what types of competencies you see in your managers. What do they do that seems to be effective? Ineffective? What can you learn from this?

Developing Your Diagnostic and Analytical Skills: Dealing with a Difficult Person Document your answers to the following questions about someone with whom you are not getting along. Implement your written action plan for how you will adapt your behaviour to influence this negative relationship. 1. Your typical approach has not been successful. Describe your approach. 2. What, in your opinion, is this person’s personality and behavioural style? 3. How does this person react to your style? 4. What way(s) could you modify your behaviour to improve your relationship with this person? 5. Outline a specific action plan for your next meeting with this person.

Developing Your Interpersonal Skills: Providing Good Feedback PROVIDING GOOD FEEDBACK Everyone needs feedback! If you want people to do their best, they need to know what they’re doing well and what they can do better. That’s why providing feedback is such an important skill to have. But being effective at giving feedback is tricky! That’s why we often see managers either (a) not wanting to give feedback or (b) giving feedback in such a way that it doesn’t result in anything positive.

SKILL BASICS You can feel more comfortable with and be more effective at providing feedback if you use the following specific suggestions: 1. Be straightforward by focusing on specific behaviours. Feedback should be specific rather than general. Avoid such statements as “You have a bad attitude” or “I’m really impressed with the good job you did.” They’re vague and although they provide information, they don’t tell the recipient enough to correct the “bad attitude” or on what basis you concluded that a “good job” had been done so the person knows what behaviours to repeat or to avoid. 2. Be realistic.  Focus your feedback on what can be changed. When people get comments on things over which they have no control, it can be frustrating. 3. Keep feedback impersonal.  Feedback, particularly the negative kind, should be descriptive rather than judgmental or evaluative. No matter how upset you are, keep the feedback focused on job-related behaviours and never criticize someone personally because of an inappropriate action. 4. Keep feedback goal oriented.  Feedback should not be given primarily to “blow off steam” or “unload” on another person. If you have to say something negative, make sure it’s directed toward the recipient’s goals. Ask yourself whom the feedback is supposed to help. If the answer is you, bite your tongue and hold the comment. Such feedback undermines your credibility and lessens the meaning and influence of future feedback. 5. Know when to give feedback—make it well timed.  Feedback is most meaningful to a recipient when there’s a very short interval between his or her behaviour and the receipt of feedback about that behaviour.

190  Chapter 6 Moreover, if you’re particularly concerned with changing behaviour, delays in providing feedback on the undesirable actions lessen the likelihood that the feedback will be effective in bringing about the desired change. Of course, making feedback prompt merely for the sake of promptness can backfire if you have insufficient information, if you’re angry, or if you’re otherwise emotionally upset. In such instances, “well timed” could mean “somewhat delayed.” 6. Ensure understanding.  Make sure your feedback is concise and complete so that the recipient clearly and fully understands the communication. It may help to have the recipient rephrase the content of your feedback to find out whether it fully captured the meaning you intended. 7. Watch your body language, tone of voice, and facial expressions.  Your body language and tone of voice can speak louder than words. Think about what you want to communicate and make sure your body language supports that message. Based on A. Tugend, “You’ve Been Doing a Fantastic Job. Just One Thing. . .,” New York Times Online, April 5, 2013; C. R. Mill “Feedback: The Art of Giving and Receiving Help,” in L. Porter and C. R. Mill (eds.), The Reading Book for Human Relations Training (Bethel, ME: NTL Institute for Applied Behavioural Science, 1976), 18–19; and S. Bishop, The Complete Feedback Skills Training Book (Aldershot, UK: Gower Publishing, 2000). 

3BL: The Triple Bottom Line Human resource management is part of the solution when it comes to the triple bottom line. Consider the following benefits that accrue in the three main areas of 3BL:

PEOPLE Immigrants provide innovation, creativity, and high levels of skills and education.

PROFIT Inclusive workplaces feature higher job satisfaction and lower recruiting and turnover costs.

PLANET A broader labour supply pool provides long-term sustainability and avoids the necessity of meeting labour shortages with higher compensation and benefit packages.

THINKING STRATEGICALLY ABOUT 3BL The New Brunswick government has invested more than $5 million in its Indigenous population. In January 2010, it invested $1 million for Indigenous students to complete postsecondary education.105 This investment was followed in October 2011 by $4 million for an employment training program in information and communications technology.106 These strategic initiatives are meant to address a labour shortage and increase Indigenous participation in the workforce. What other strategies could the government use to enhance employment opportunities for Indigenous peoples?

Team Exercises Networking: The 30-Second Commercial Networking is a skill that can be very valuable for students to use for job hunting and making contacts. Think of it as building relationships with a variety of people whom you may be able to help or receive help from in the future. Before attending a networking event, you should learn to develop your “30-second commercial.”107 This tool is like an elevator pitch, which is a quick summary of you, an organization, or even a product or service. The name suggests that it should be possible to deliver the summary in the time span of an elevator ride. Venture capitalists on shows like CBC’s Dragon’s Den108 often judge the quality of an idea by the quality of its elevator pitch and will ask entrepreneurs for their elevator pitches in order to quickly weed out bad ideas and weak teams. Your 30-second commercial can be used in many situations, such as job interviewing and even dating!

When you meet a potential contact, you should state your purpose early in the conversation. Your initial discussion should be brief and to the point. You are meeting this person because they are in the field or industry you want to explore, so your goal is not to get a job but to obtain information from them about the industry. Here are two templates that you can use to build a 30-second commercial. You have five minutes to create your commercial. Divide into pairs, greet each other with a firm, professional handshake, and take turns saying your commercial. Circulate among other students and practise your commercial. Obtain written feedback from one classmate.

OPTION A • Your name • Your current status (student, program, school) • Your major accomplishments (academic or work, list three and results)

Chapter 6  Human Resource Management 191

• What you want to do next (seek information on this industry, learn more about role X, learn more about the organization, etc.)

OPTION B • I’m (name). I’m a (_____ year student) with (university, college, school). Most recently, I worked at (company) as a (job title), where I (list a few duties). Whether at school or in the workplace, I bring three key strengths to the table: (_____, _____, _____). At this time, I am seeking (information, background, details, etc.) in this field as I am considering a career in this industry. Continue to polish and develop your personal 30-second commercial—you never know when it may come in handy. For more information, see Julia McKinnell, “The Introvert’s Guide to Networking,” Maclean’s, August 26, 2010, and Derek Sankey, “Don’t Overlook ‘Face Time’ in Job Search,” Ottawa Citizen, November 16, 2011.

Be the Consultant You have been hired by a company to give some guidance on its job interview questions. A lawyer told managers of the company that several of their questions do not meet Canadian legislation requirements and provided them with sample revised questions. Turn the remainder of the bad questions into good interview questions.

No

Instead

What is your age?

Are you of legal working age?

Do you have kids?

Are there any restrictions on your ability to travel as necessary?

Are you a Canadian citizen?

Are you legally entitled to work in Canada?

What are your strengths and weaknesses? Tell me about yourself. Why should I hire you for this job? What interests you about our company? Do you ever abuse alcohol or drugs? If you were a Game of Thrones character who would you be? Do you get along well with people?

Earlier in the chapter the Tips for Managers looked at behavioural and situational questions. Turn these closed-ended questions that can be answered with a simple yes into more suitable behavioural and situational questions. Questions Are you good at handling stress? Do you work well in teams? Are you an ethical person?

Business Cases Wellington West Bay Street is the centre of Canada’s financial district, but a Winnipeg-based brokerage firm proved that having its headquarters in Toronto was not a requirement for success. Wellington West started as a small investment boutique, formed a financial services division and an energy and mining investment division, and grew to become one of Canada’s sparkling success stories. Few companies have been named to both the 50 Best Managed Companies in Canada and the 50 Best Employers in Canada, but Wellington West did it numerous times.109 Wellington West derived its competitive advantage from three areas: a client-centric approach, its unique organizational culture, and employee ownership.110 The company’s culture allowed it to draw employees seeking an alternative to large Canadian banks, opting instead for a large firm that operates like a boutique.111 Wellington West became a firm that was built both for and by financial advisers. Another major core principle was employee ownership. More than 90 percent of the 650 employees

became shareholders.112 Founder and CEO Charlie Spiring summed it up as follows: “Ownership is a powerful thing. No one washes a rental car.” The growth that Wellington West achieved was astounding. In 1994, the company had one office, had revenue of $2.5 million, and managed $250 million worth of assets. By 2008, Wellington West had 51 offices and $133 million in revenue, and was managing over $10 billion worth of client assets.113 The success started from the top, and CEO Spiring was named to Canada’s Top 40 Under 40 and won an Entrepreneur of the Year award from Ernst & Young. Ultimately, Wellington West’s success led to it being a popular target for acquisition. National Bank acquired the energy and investment mining arm of Wellington West for $333 million in order to pursue a leadership position in investment banking for mid-cap energy and mining companies in Canada. National Bank Financial co-CEO said, “What we’re really going after is Wellington West’s client relationship and their research coverage.”114 Manulife Financial then purchased Wellington West Financial Services. “This transaction allows us to build on our position as

192  Chapter 6 one of Canada’s premier investment firms and reflects our commitment to independent financial advice in Canada,” said Rick Annaert, chief executive of Manulife Securities. “There is a natural cultural fit between our two firms.”115 What should National Bank and Manulife do to maintain Wellington West’s strong corporate culture that has traditionally been somewhat “anti-bank”?

Dealing with Romance in the Workplace The discussion about romance in the workplace is different now in light of the #MeToo movement and the related sexual harassment claims. A bigger issue will be consensual relationships versus coerced activity. Previously, allegations of harassment were met with skepticism; this is no longer the case.116 For many employees, their social networks are intertwined with their workplace. They meet many of their friends at work and, in some cases, those relationships become something more. The law concerning workplace relationships continues to evolve, as do societal norms. Any relationship, whether physical or a close friendship, leads to issues that employers and employees need to be aware of. For transparency and everyone’s protection, clear policies need to be established and communicated; employee training should occur; and allegations or suspicions of harassment must be taken seriously. “Workplace culture needs to be carefully construed to promote respect and equality among colleagues,” said Lew Bayer, a civility expert in Winnipeg. “When developed properly, trust is established naturally. Safe social environments, such as an employee lunchroom, are also created where innocuous comments are not perceived as sexist,” she said.118 Some relationships will always be a problem due to conflict of interest and imbalance of power. Any relationship between supervisor and subordinate leads to actual or perceived favouritism and poor morale. It might even lead

to performance issues between the two employees in the relationship. Even if the relationship started consensually, it can turn into harassment. Nina Cole, an organizational behaviour expert from Ryerson University, conducted a study investigating coworker perceptions about office romance. “The latest generation to enter the workforce is quite matter of fact about this sort of thing,” she indicates. “They don’t think it’s a big deal at all.”119 Studies have shown some perks associated with office romances: more engaged and happier employees as well as a corporate culture that attracts and retains staff. Other benefits include higher job satisfaction and fewer sick days. Happy couples working together are more likely to stay later, be more creative, and have less personality conflicts with other members of the team.120 Powerful results.

Questions 1. Should employers ban relationships in the workplace? 2. A positive of the #MeToo movement is that people are less afraid to come forward with concerns about harassment. What other positive and negative implications are there?

Spotting Talent Attracting and selecting the right talent is critical to a company’s success. For tech companies, the process is even more critical because it’s the knowledge, skills, and abilities of their employees that determines these companies’ efficiency, innovation, and, ultimately, financial achievements.121 So, how do companies like Google and Facebook, and even IBM and Microsoft, attract the talent they need? As you’ll see, these companies use some unique approaches.

Beware the PURPLE SQUIRREL! Modis, a global provider of IT staffing and recruiting, has an interesting philosophy about searching for talented tech types. As pressure has mounted on businesses to find

And the Survey Says...117 • 57% of those surveyed have participated in some kind of office romance: – 16% led to long-term relationships – 14% led to ongoing but casual relationships • 59% of men have had an office romance, compared to 54% of women. • 30% of respondents said they have a platonic office spouse.

• 34% of respondents think social media platforms have made it easier to have an office romance. • 22% of respondents report using social media to send flirtatious or romantic messages to a co-worker. • 26% of all of those surveyed say love and let love—all office romances are okay.

Chapter 6  Human Resource Management 193

qualified employees, the search for the “perfect” candidate has become increasingly competitive. This company calls its search for the perfect candidate “the quest for the ‘purple squirrel.’” Sometimes you just have to realize that, like the purple squirrel, the “perfect” candidate isn’t available or doesn’t exist. But that doesn’t mean you don’t try to find the best available talent. How do some of the big tech names spot talent? For “mature” tech companies like IBM, Microsoft, and Hewlett-Packard (HP), the challenge can be especially difficult since they don’t have the allure of startups or the younger, “sexier” tech companies. So these businesses have to really step up their game. Take IBM, for instance. After its Watson computer beat two former Jeopardy champions in a televised match, the company hauled the machine to Carnegie Mellon, a top school, where students got a chance to challenge the computer. IBM’s goal: lure some of those students to consider a career at IBM. HP is using the pizza party/tech talk approach at various schools, trying to lure younger students before other tech companies and startups snatch them away. Microsoft, which was once one of those startups, has sent alumni back to schools to promote why Microsoft is a great place to take their talents. And it also hosts game nights, final-exam study parties, app-building sessions, and other events to try to lure students. For companies like Facebook and Google, the search for talent is still challenging because of the increasing demand for and limited supply of potential employees. So even these companies have to be creative in spotting talent. Google, for instance, found that it had been looking at résumés too narrowly by focusing (as expected) on education, GPA, and even SAT scores, trying to find those candidates with the

highest IQs. But it found that some of those so-called geniuses weren’t as effective on the job as expected. So, it started looking at résumés differently. Rather than looking at résumés starting at the top and reading to the bottom, it began to look from the bottom-up, trying to find some rare, special attribute that set an applicant apart as a unique talent. Facebook found that old-fashioned hiring channels weren’t getting the talent it needed fast enough. So it tried online puzzles and programming challenges to attract and spot talent. It was an easy, fast, and cheap approach to get submissions from potential candidates. Despite these unique approaches, it’s also true that younger tech companies, like these and many others, have a built-in appeal for candidates primarily because they’re what’s “in” and what’s “hot” right now. Also, in many of the younger tech companies, there’s no entrenched bureaucracy or cultural restrictions. If an employee wants to come to work in cargo shorts, T-shirts, and flip-flops, they do. In fact, what attracts many talented employees to companies like these is the fact that they can set their own hours, bring their pets to work, have access to free food and drinks, and a variety of other perks.

Discussion Questions 1. What does this case imply about the supply and demand for employees, and what implications does that have for businesses? 2. What’s the meaning behind the search for the “purple squirrel” in relation to spotting talent? Is this relevant to non-tech companies as well? Discuss. 3. What do you think of the recruiting approaches that Google and Facebook have tried?

Chapter 7

Courtesy of Article

Managing Innovation and Change

Learning Objectives 7.1 Define organizational change, and compare and contrast views on

the change process. 7.2 Explain how to manage resistance to change. 7.3 Describe what managers need to know about employee stress. 7.4 Discuss techniques for stimulating innovation. There were four engineers with an understanding of how to innovate an entire procurement process, from logistics and sales to warehousing and delivery. All they lacked was the product. They turned to an industry with commissioned salespeople, huge markups, expensive showrooms, and slow delivery times. Article was founded in Vancouver in 2011 with a direct-to-consumer sales model for furniture.1 In 2016, the company’s annual revenue hit $50 million and doubled to $100 million in 2017, landing it firmly in the number one spot on the Canadian Business 2018 Growth 500 list of Canada’s Fastest-Growing Companies based on 56 581% five-year revenue growth.2 You may ask what is so innovative about selling furniture online, given IKEA and Amazon’s ­success doing it for years. Article saves costs the way Amazon does, which can be passed on to customers. But they compete on design more than price. The in-house design team works with world-class manufacturers to build an extensive catalogue that includes a range of mid-century, Scandinavian, Industrial and Boho modern designs. They make modifications for style and quality, and every design is unique to Article.3 The lack of bricks and mortar means Article can pass on savings of around 40 to 60 percent, according to Jay Rhind, e-commerce expert and partner in VFF, a Vancouver-based early-stage venture capital fund.4 “It’s totally vertically integrated,” says Rhind, “which means they control both the quality of the product and how they are able to pass along cost-savings to consumers.” This all positions Article to keep pace with consumers’ habits for social media sharing and online shopping, while also allowing the business to scale at an incredible pace.5

194

Chapter 7  Managing Innovation and Change 195 The company now boasts over 200 employees working out of an expansive 115 000-squarefoot space just outside downtown Vancouver. Their HQ doubles as a photo studio, with a team of pros taking high-quality photos of each piece of furniture, often with “Particles” (what employees call themselves) modelling in a range of real-life lighting conditions.6 These photos are used on their site and in social media. Customers share reviews and stories about their purchases, allowing curious shoppers to experience how other purchasers have enjoyed Article’s furniture, customer service, and delivery process.7 Future changes for Article will more likely focus on continuous improvement rather than “big splashes.” Change needs to be sustainable for it to stick. What should Article do to maintain its innovative approach?

Gary Whitton/Fotolia

What Is Change and How Do Managers Deal with It? 7.1 Define organizational change, and compare and contrast views on the change process.

If it weren’t for change, a manager’s job would be relatively easy.

While other potash producers are suffering profit losses of up to 50 percent, Canada’s Allana Potash opened a new mine in Ethiopia. It is using solution mining to be effective in the country’s scorching temperatures, typically above 45 degrees Celsius. This innovative technique is cheaper than open pit or shaft mining.8

Change makes a manager’s job more challenging. Without it, managing would be relatively easy. Planning would be easier because tomorrow would be no different from today. The issue of organization design would be solved because the environment would be free from uncertainty and there would be no need to adapt. Similarly, decision making would be dramatically simplified because the outcome of each alternative could be predicted with near pinpoint accuracy. It would also simplify the manager’s job if competitors never introduced new products or services, if customers didn’t make new demands, if government regulations were never modified, if technology never advanced, or if employees’ needs always remained the same. But that’s not the way it is. Change is an organizational reality. Most managers, at one point or another, will have to change some things in their workplace. We call these changes organizational change, which is any alteration or adaptation of an organization’s structure, technology, or people. See Exhibit 7-1 to learn more about the categories of organizational change.

organizational change Any alteration of people, structure, or technology in an organization.

Why Do Organizations Need to Change? In Chapter 2 we pointed out that both external and internal forces constrain managers. These same forces also bring about the need for change. Let’s briefly review these factors. Exhibit 7-1  Categories of Organizational Change WHAT EXTERNAL FORCES CREATE A NEED TO CHANGE? 

The external forces that create the need for organizational change come from various sources. In recent years, competition in the marketplace has affected firms like Tim Hortons. Chipotle’s entry into the Canadian market will have a major impact on existing competitors, such as Tim Hortons and McDonald’s, who must consider change as a way of adapting to new competition. Government laws and regulations are also an impetus for change. For example, the Canadian Generally Accepted Accounting Principles (GAAP) have been replaced by the International Financial Reporting Standards (IFRS). This change requires Canadian publicly accountable companies to change the way they disclose financial information and enact corporate governance to allow for greater transparency in financial reporting.

Structure

Work specialization, departmentalization, chain of command, span of control, centralization, formalization, job redesign, or actual structural design

Technology

Work processes, methods, and equipment

People

Attitudes, expectations, perceptions, and behaviour

196  Chapter 7 Technology also creates the need for organizational change. The Internet has changed pretty much everything—the way we get information, how we buy products, and how we get our work done. Technological advancements have created significant economies of scale for many organizations. For example, technological improvements in diagnostic equipment have created significant economies of scale for hospitals. Assembly-line technology in other industries is changing dramatically as organizations replace human labour with robots. In the greeting card industry, e-mail and the Internet have changed the way people exchange greeting cards. The move from locally installed to Web-based software and computing will create a major shift for companies. The cloud will provide lower costs, higher efficiency, and greater innovation, but it may also increase security concerns.9Also, the fluctuation in labour markets forces managers to initiate changes. For example, the shortage of registered nurses in Canada has led many hospital administrators to redesign nursing jobs and to alter their rewards and benefits packages for nurses, as well as join to forces with local colleges and universities to address the nursing shortage. As the news headlines remind us, economic changes affect almost all organizations. For example, global recessionary pressures force organizations to become more cost-efficient. But even in a strong economy, uncertainties about interest rates, federal budget deficits, and currency exchange rates create conditions that may force organizations to change. WHAT INTERNAL FORCES CREATE A NEED TO CHANGE?  Internal forces can also

create the need for organizational change. These internal forces tend to originate primarily from the internal operations of the organization or from the impact of external changes. (It’s also important to recognize that such changes are a normal part of the organizational life cycle.)10 When managers redefine or modify an organization’s strategy, that action often introduces a host of changes. For example, Nokia bringing in new equipment is an internal force for change. Because of this action, employees may face job redesign, undergo training to operate the new equipment, or be required to establish new interaction patterns within their work groups. Another internal force for change is that the composition of an organization’s workforce changes in terms of age, education, gender, nationality, and so forth. A stable organization in which managers have been in their positions for years might need to restructure jobs in order to retain more ambitious employees by affording them some upward mobility. The compensation and benefits systems might also need to be reworked to reflect the needs of a diverse workforce and market forces in which certain skills are in short supply. Employee attitudes, such as increased job dissatisfaction, may lead to increased absenteeism, resignations, and even strikes. Such events will, in turn, often lead to changes in organizational policies and practices.

Who Initiates Organizational Change? Organizational changes need a catalyst. change agent Someone who acts as a catalyst and assumes the responsibility for managing the change process.

People who act as catalysts and assume the responsibility for managing the change process are called change agents.11 WHO can be a change agent? • Any manager can. We assume organizational change is initiated and carried out by a manager within the organization. • OR any nonmanager—for example, an internal staff specialist or an outside consultant whose expertise is in change implementation—can. For major system-wide changes, an organization will often hire outside consultants for advice and assistance. Because these consultants come from the outside, they offer an objective perspective that insiders usually lack. However, the problem is that

Chapter 7  Managing Innovation and Change 197

outside consultants may not understand the organization’s history, culture, operating procedures, and personnel. They’re also prone to initiating more drastic changes than insiders—which can be either a benefit or a disadvantage—because they don’t have to live with the repercussions after the change is implemented. In contrast, internal managers who act as change agents may be more thoughtful (and possibly more cautious) because they must live with the consequences of their actions.

How Does Organizational Change Happen? We often use two metaphors in describing the change process.12 These two metaphors represent distinctly different approaches to understanding and responding to change. Let’s take a closer look at each one. 1. WHAT IS THE “CALM WATERS” METAPHOR?  The “calm waters” metaphor

calm waters metaphor

envisions the organization as a large ship crossing a calm sea. The ship’s captain and crew know exactly where they’re going because they’ve made the trip many times before. Change appears as the occasional storm, a brief distraction in an otherwise calm and predictable trip. Until recently, the “calm waters” metaphor dominated the thinking of practising managers and academics. The prevailing model for handling change in such circumstances is best illustrated in Kurt Lewin’s three-step description of the change process.13 (See Exhibit 7-2.) According to Lewin, successful change requires unfreezing the status quo, changing to a new state, and freezing the new change to make it permanent. The status quo can be considered an equilibrium state. Unfreezing is necessary to move from this equilibrium. It can be achieved in one of three ways:

A description of organizational change that likens that change to a large ship making a predictable trip across a calm sea and experiencing an occasional storm.

• Increase the driving forces, which direct behaviour away from the status quo. • Decrease the restraining forces, which hinder movement from the existing equilibrium. • Do both. Once the situation has been “unfrozen,” the change itself can be implemented. However, just introducing change doesn’t mean it’s going to take hold. The new situation needs to be “frozen” so that it can be sustained over time. Unless this last step is done, the change is likely to be short-lived, with employees reverting to the previous equilibrium state. The objective, then, is to freeze at the new equilibrium state and stabilize the new situation by balancing the driving and restraining forces. Note how Lewin’s three-step process treats change as a break in the organization’s equilibrium state.14 The status quo has been disturbed, and change is necessary to establish a new equilibrium state. Although this view might have been appropriate to the relatively calm environment faced by most organizations during the twentieth century, it’s increasingly obsolete as a description of the kinds of “seas” that current managers have to navigate.

Exhibit 7-2  The Three-Step Change Process Unfreezing

Refreezing

Changing

198  Chapter 7

Courtesy of Ian Anderson

2. WHAT IS THE “WHITE-WATER RAPIDS” METAPHOR?  As former chair of Nielsen Media Research (the company best known for its TV ratings, which are frequently used to determine how much advertisers will pay for TV commercials), Susan Whiting had to tackle significant industry changes. Video-on-demand services, streaming technologies, smartphones, tablet computers, and other changing technologies have made data collection much more challenging for the media research business. Here’s what she had to say about the business environment: “If you look at a typical week I have, it’s a combination of trying to lead a company in change in an industry in change.”15 That’s a pretty accurate description of what change is like in our second change ­metaphor—white-water Author Ian Anderson, pictured second from the left, experirapids. It’s also consistent with a world that’s increasingly domiences the metaphor first-hand in Costa Rica. nated by information, ideas, and knowledge. white-water rapids metaphor In the “white-water rapids” metaphor, the organization is seen as a small raft A description of organizational navigating a raging river with uninterrupted white-water rapids. Aboard the raft are change that likens that change to a half a dozen people who have never worked together before, who are totally unfamilsmall raft navigating a raging river. iar with the river, who are unsure of their eventual destination, and who, as if things weren’t bad enough, are travelling at night. In the white-water rapids metaphor, change is the status quo and managing change is a continual process. To get a feeling of what managing change might be like in a white-water rapids environment, consider attending a college that had the following rules: Courses vary in length. When you sign up, you don’t know how long a course will run; it might go for 2 weeks or 30 weeks. Furthermore, the instructor can end a course at any time with no prior warning. If that isn’t challenging enough, the length of the class changes each time it meets: Sometimes the class lasts 20 minutes; other times it runs for 3 hours. And the time of the next class meeting is set by the instructor during this class. There’s one more thing. All exams are unannounced, so you have to be ready for a test at any time. To succeed in this type of environment, you’d have to respond quickly to changing conditions. Students who were overly structured or uncomfortable with change wouldn’t succeed. Growing numbers of managers are coming to accept that their jobs are very much like what students would face in such a college or university. The stability and predictability of the calm waters metaphor do not exist. Disruptions in the status quo are not occasional and temporary, and they are not followed by a return to calm waters. Many managers never get out of the rapids. They face constant change, bordering on chaos. DOES EVERY MANAGER FACE A WORLD OF CONSTANT AND CHAOTIC CHANGE?  Well, not every manager, but it is becoming more the norm. Like Susan

Whiting just described, they face constant forces in the environment (external and internal) that bring about the need for planned organizational change.

How Do Organizations Implement Planned Changes? Most organizational changes don’t happen by chance.

organizational development (OD) Techniques or programs meant to change people and the nature and quality of interpersonal work relationships.

Most organizational changes don’t happen by chance. Often managers make a concerted effort to alter some aspect of the organization. Whatever happens— especially in terms of structure or technology—ultimately affects the organization’s people. Efforts to assist organizational members with a planned change are referred to as organizational development (OD). In facilitating long-term, organization-wide changes, managers use OD to constructively change the attitudes and values of organization members so they can more readily adapt to and be more effective in achieving the new directions of the

Chapter 7  Managing Innovation and Change 199

organization.16 When OD efforts are planned, organization leaders are, in essence, attempting to change the organization’s culture.17 However, a fundamental issue of OD is its reliance on employee participation to foster an environment in which open communication and trust exist.18 Persons involved in OD efforts acknowledge that change can create stress for employees. Therefore, OD attempts to involve organizational members in changes that will affect their jobs and seeks their input about how the change is affecting them (just as Lewin suggested). Any organizational activity that assists with implementing planned change can be viewed as an OD technique. The more popular OD efforts in organizations rely heavily on group interactions and cooperation and include the following: 1. Survey feedback.  Employees are asked their attitudes about and perceptions of the change they’re encountering. Employees are generally asked to respond to a set of specific questions regarding how they view such organizational aspects as decision making, leadership, communication effectiveness, and satisfaction with their jobs, co-workers, and management.19 The data that a change agent obtains are used to clarify problems that employees may be facing. As a result of this information, the change agent takes some action to remedy the problems. 2. Process consultation.  Outside consultants help managers perceive, understand, and act on organizational processes they’re facing.20 These elements might include, for example, workflow, informal relationships among unit members, and formal communications channels. Consultants give managers insight into what is going on. It’s important to recognize that consultants are not there to solve these problems. Rather, they act as coaches to help managers diagnose the interpersonal processes that need improvement. If managers, with the consultants’ help, cannot solve the problem, the consultants will often help managers find experts who can. 3. Team-building.  In organizations made up of individuals working together to achieve goals, OD helps them become a team. How? By helping them set goals, develop positive interpersonal relationships, and clarify the roles and responsibilities of each team member. It’s not always necessary to address each area because the group may be in agreement and understand what’s expected. The primary focus of team-building is to increase members’ trust and openness toward one another.21 4. Intergroup development.  Different groups focus on becoming more cohesive. That is, intergroup development attempts to change attitudes, stereotypes, and perceptions that one group may have toward another group. The goal? Better coordination among the various groups.

How Do Managers Manage Resistance to Change? 7.2 Explain how to manage resistance to change. We know that it’s better for us to eat healthy and to be physically active, yet few of us actually follow that advice consistently and continually. We resist making lifestyle changes. Volkswagen Sweden and ad agency DDB Stockholm did an experiment to see if they could get people to change their behaviour and take the healthier option of using the stairs instead of riding an escalator.22 How? They put a working piano keyboard on stairs in a Stockholm subway station (you can see a video of it on YouTube) to see if commuters would use it. The experiment was a resounding success as stair traffic rose 66 percent. The lesson: People can change if you make the change appealing! Managers should be motivated to initiate change because they’re concerned with improving their organization’s effectiveness. But change isn’t easy in any organization.

200  Chapter 7 It can be disruptive and scary. And people and organizations can build up inertia and not want to change.

People resist change even if it might be beneficial! Let’s look at why people in organizations resist change and what can be done to lessen that resistance.

Why Do People Resist Organizational Change? It’s often said that most people hate any change that doesn’t jingle in their pockets. Resistance to change is well documented.23 Why do people resist organizational change? The main reasons include the following:24 1. Uncertainty.  Change replaces the known with uncertainty, and we don’t like uncertainty. No matter how much you may dislike attending college or university (or certain classes), at least you know what’s expected of you. When you leave college for the world of full-time employment, you’ll trade the known for the unknown. Employees in organizations are faced with similar uncertainty. For example, when quality control methods based on statistical models are introduced into manufacturing plants, many quality control inspectors have to learn the new methods. Some may fear that they’ll be unable to do so and may develop a negative attitude toward the change or behave poorly if required to use them. 2. Habit.  We do things out of habit. Every day when you go to school or work you probably get there the same way, if you’re like most people. Life is complex enough—we don’t want to have to consider the full range of options for the hundreds of decisions we make every day. To cope with this complexity, we rely on habits or programmed responses. But when confronted with change, our tendency to respond in our accustomed ways becomes a source of resistance. 3. Concern over Personal Loss.  We fear losing something already possessed. Change threatens the investment you’ve already made in the status quo. The more that people have invested in the current system, the more they resist change. Why? They fear losing status, money, authority, friendships, personal convenience, or other economic benefits that they value. This helps explain why older workers tend to resist change more than younger workers, since they generally have more invested in the current system and more to lose by changing. 4. Change Is Not in the Organization’s Best Interests.  We believe that the change is incompatible with the goals and interests of the organization. For instance, an employee who believes that a proposed new job procedure will reduce product quality can be expected to resist the change. Actually, this type of resistance can be beneficial to the organization if expressed in a positive way.

And the Survey Says...25 27% of businesses say the biggest hurdle to change is empowering others to act on the change. 46% of individuals say they would give up some of their salary for more personal time. 50% or more of employee resistance to change could have been avoided with effective change management.

77% of managers say they work 41 to 60 hours a week. 31% of managers believe that innovation happens by accident at their companies. 25% of employees say their companies encourage innovation as a mandate.

Chapter 7  Managing Innovation and Change 201

Exhibit 7-3  Techniques for Reducing Resistance to Change Technique

When Used

Advantage

Disadvantage

Education and communication

When resistance is due to misinformation

Clear up misunderstandings

May not work when mutual trust and credibility are lacking

Participation

When resisters have the expertise to make a contribution

Increase involvement and acceptance

Time-consuming; has potential for a poor solution

Facilitation and support

When resisters are fearful and anxiety-ridden

Can facilitate needed adjustments

Expensive; no guarantee of success

Negotiation

When resistance comes from a ­powerful group

Can “buy” commitment

Potentially high cost; opens doors for others to apply pressure too

Manipulation and co-optation

When a powerful group’s endorsement is needed

Inexpensive, easy way to gain support

Can backfire, causing change agent to lose credibility

Coercion

When a powerful group’s endorsement is needed

Inexpensive, easy way to gain support

May be illegal; may undermine change agent’s credibility

What Are Some Techniques for Reducing Resistance to Organizational Change? The actions a manager chooses depend on the type and source of the resistance. In general, resistance is likely to be lower if managers involve people in the change, offer training where needed, and are open to revisions once the change has been implemented. For more suggestions on reducing resistance, see Developing Your Interpersonal Skills—Managing Resistance to Change at the end of the chapter. When managers see resistance to change as dysfunctional, what can they do? Several strategies have been suggested in dealing with resistance to change. These approaches include education and communication, participation, facilitation and support, negotiation, manipulation and co-optation, and coercion. These tactics are summarized in the Interactive below and described in Exhibit 7-3. Managers should view these techniques as tools and use the most appropriate one depending on the type and source of the resistance.

Common Approaches to Organizational Change Change occurs daily in organizations. There are many common approaches to organizational change, but action research and appreciative inquiry are two of the leading approaches.26 ACTION RESEARCH  Kurt Lewin’s action research approach has a problem-solving view that change is based on changing employee attitudes and behaviours along with collecting data to diagnose the organizational problems in more detail. This approach relies on Lewin’s earlier discussion about unfreezing the status quo, changing to a new state, and refreezing to make the change permanent. Typically an outside consultant is the original change agent. Employees are highly involved in data collection and analysis, and the nature and timing of the change are determined. Once the change is introduced, organizational and team systems are then redesigned to support the refreezing process. Action research is highly participative and employees work with the consultant to understand the changes required and build commitment.27 Exhibit 7-4 illustrates the action research approach. APPRECIATIVE INQUIRY  Appreciative inquiry (AI) is a more positive approach than action research. AI begins by investigating what the organization is doing well. Searching for the organization’s strengths can help create a vision of what it could become. Like parents who focus on highlighting the positive aspects of a child’s behaviour instead of the negative, AI uncovers successful events and teams within an organization and uses that knowledge as a guidepost for the change effort.28 Canadian Tire carried out a successful

202  Chapter 7

Exhibit 7-4  The Action Research Process DIAGNOSE NEED FOR CHANGE

INTRODUCE INTERVENTION

EVALUATE CHANGE

Preliminary diagnosis

Learning process

Behaviour changes

Data gathering

Action planning

Measurement

Feedback of results

Action steps

Systems redesigned

UNFREEZING

CHANGING

REFREEZING

major AI effort, which solicited feedback from employees across the country to come up with six key values that defined “The Canadian Tire Way.” Employees used AI to visualize a positive future for Canadian Tire.29 The four stages of AI are illustrated in Exhibit 7-5.

Making Change Happen Successfully Even with the involvement of all levels of managers in change efforts, change processes do not always work the way they should. In fact, a global study of organizational change concludes, that “[h]undreds of managers from scores of Canadian, US, and European companies [are] satisfied with their operating prowess . . . [but] dissatisfied with their ability to implement change.”30 One of the reasons change fails is that managers do not really know how to introduce change in organizations. Professor John Kotter of Harvard Business School identifies a number of places where managers make mistakes when leading change. These mistakes are illustrated in Exhibit 7-6. We should also note that recent research emphasizes the need in change processes to manage the “hard stuff” as well as the “soft,” or people, issues in order to be successful.31 How can managers make change happen successfully? Managers can increase the likelihood of making change happen successfully in three ways. First, they should focus on making the organization ready for change. Exhibit 7-7 summarizes the characteristics of organizations that are ready for change. Second, managers need to understand their own role in the change process. Managers facilitate change by creating a simple, compelling statement of the need for change; communicating constantly and honestly throughout the process; getting as much employee participation as possible; respecting employees’ apprehension about the change but encouraging them to be flexible; removing those who resist but only after all possible attempts have been made to get their commitment to the change;

Exhibit 7-5  The “Four-D” Model of Appreciative Inquiry 1. Discovery

2. Dreaming

3. Designing

4. Delivering

Identifying the best of “what is”

Envisioning “what might be”

Engaging in dialogue about “what should be”

Developing objectives about “what will be”

Chapter 7  Managing Innovation and Change 203

Exhibit 7-6  Mistakes Managers Make When Leading Change Unfreezing

• Being unaware of the gap between what employees know and what they actually do • Not creating awareness of the need to change • Not recognizing the hidden conflicts working against change

Changing

• Lacking a vision to create the desire for change • Under-communicating and not empowering employees to change • Unaware of the knowledge and ability required to change and training employees

Refreezing

• Stopping the change effort too quickly • Starting another change effort before the first is finished • Not adapting the culture to support the change • Lack of reinforcement through rewards and recognition

aiming for short-term change successes because large-scale change can take a long time; and setting a positive example.32 Third, managers need to encourage employees to be change agents—to look for those day-to-day improvements and changes that individuals and teams can make. When employees are involved in the change process, they are more likely to support the changes required. Employees also have the front-line knowledge that is crucial to providing key ideas. For example, a recent study of organizational change found that 77 percent of changes at the work-group level were reactions to a specific, current problem or to a suggestion from someone outside the work group; and 68 percent of those changes occurred in the course of employees’ day-to-day work.33

Communicating Effectively When Undergoing Change One study examined employee communications programs in 10 leading companies that had successfully undertaken major restructuring programs.34 Eight factors were found to be related to the effectiveness of employee communications in these companies during times of change: (1) CEOs were committed to communication. (2) Management matched their actions to their words.

Exhibit 7-7 Characteristics of Change Capable Organizations SOURCE: Based on P. A. McLagan, “The Change Capable Organization,” Training & Development, January 2003, pp. 50–58.

• Link the present and the future.  Think of work as more than an extension of the past; think about future opportunities and issues, and factor them into today’s decisions. • Make learning a way of life.  Change-friendly organizations excel at knowledge sharing and management. • Actively support and encourage day-to-day improvements and changes.  Successful change can come from the small changes as well as the big ones. • Ensure diverse teams.  Diversity ensures that things won’t be done the way they are always done. • Encourage mavericks.  Since their ideas and approaches are outside the mainstream, mavericks can help bring about radical change. • Shelter breakthroughs.  Change-friendly organizations have found ways to protect those breakthrough ideas. • Integrate technology.  Use technology to implement changes. • Build and deepen trust.  People are more likely to support changes when the organization’s culture is trusting and managers have credibility and integrity.

204  Chapter 7 (3) Two-way communication between managers and employees was encouraged. (4) The organization emphasized face-to-face communication. (5) Managers shared responsibility for employee communication. (6) Positive ways were found to deal with bad news. (7) Messages were shaped for their intended audience. (8) Communication was treated as an ongoing process. Because the companies studied came from a variety of industries and organizational settings, the authors propose that these eight factors should apply to many types of organizations. Perhaps the most important lesson from this research is that employees facing change need to be told what is happening and why, in very direct language, in order to reduce their fears. Good communication makes the process of change go more smoothly.

What Reaction Do Employees Have to Organizational Change? 7.3 Describe what managers need to know about employee stress.

Change often creates stress for employees! WHAT IS STRESS?

• Stress—response to anxiety over intense demands, constraints, or opportunities.35 • Not always bad; can be positive, especially when there’s potential gain. • Functional stress—allows a person to perform at his or her highest level at crucial times. • Often associated with constraints (an obstacle that prevents you from doing what you desire), demands (the loss of something desired), and opportunities (the possibility of something new, something never done). Examples: Taking a test or having your annual work performance review. karoshi

Yuri Arcurs/Alamy Stock Photo

A Japanese term that refers to a sudden death caused by overworking.

• Although conditions may be right for stress to surface that doesn’t mean it will.

For potential stress to become actual stress •

there is uncertainty over the outcome

•

the outcome is important

WHAT ARE THE SYMPTOMS OF STRESS?  Too much stress can also have tragic consequences. In Japan, there’s a stress phenomenon called karoshi (pronounced kah-roe-she), which is translated as death from overwork. Article (the company introduced at the beginning of the chapter) provides healthy snacks as a way of keeping employees happy and less stressed. If that’s not enough, Article sits within walking distance of some of Vancouver’s best breweries, including Strange Fellows, Luppolo, and Off the Rail. Food trucks like Meet2Eat and Betty Baguette also often roll by the office to make desk-side deliveries.36

Chapter 7  Managing Innovation and Change 205

Exhibit 7-8  Symptoms of Stress Physical Psychological Changes in metabolism, increased heart and breathing rates, raised blood pressure, headaches, and potential of heart attacks.

SYMPTOMS OF STRESS

Job-related dissatisfaction, tension, anxiety, irritability, boredom, and procrastination.

Behavioural Changes in productivity, absenteeism, job turnover, changes in eating habits, increased smoking or consumption of alcohol, rapid speech, fidgeting, and sleep disorders.

Here is a common myth about stress:

 There’s nothing managers can do to reduce the stress inherent in today’s jobs. MANAGEMENT MYTH DEBUNKED It’s an unusual employee today who isn’t dealing with stress. Cutbacks, increased workloads, open workspace designs, work/life conflicts, and 24/7 communication access are just a few of the things that have increased job stress. However, organizations are not ignoring this problem. Smart managers are redesigning jobs, realigning schedules, and introducing employee assistance programs to help employees cope with the increasing stresses in their work and in balancing their work and personal lives. For full details on this management myth, check out our Bust the Myth video in Revel.

What Causes Stress? Stressors JOB-RELATED FACTORS:

• Examples: Pressures to avoid errors or complete tasks in a limited time period; changes in the way reports are filed; a demanding supervisor; unpleasant co-workers 1. Task demands:  Stress due to an employee’s job—job design (autonomy, task variety, degree of automation); working conditions (temperature, noise, etc.); physical work layout (overcrowded or in visible location with constant interruptions; work quotas, especially when excessive;37 high level of task interdependence with others. (FYI: Autonomy lessens stress.) 2. Role demands:  Stress due to employee’s particular role. • Role conflicts: expectations that may be hard to reconcile or satisfy. • Role overload: created when employee is expected to do more than time permits. • Role ambiguity: created when role expectations are not clearly understood —employee not sure what he or she is to do. 3. Interpersonal demands:  Stress due to other employees—little or no social support from colleagues; poor interpersonal relationships. 4. Organization structure:  Stress due to excessive rules; no opportunity to participate in decisions that affect an employee.

role conflicts Work expectations that are hard to satisfy.

role overload Having more work to accomplish than time permits.

role ambiguity When role expectations are not clearly understood.

206  Chapter 7

Beyond Fotomedia GmbH/Alamy Stock Photo

5. Organizational leadership:  Stress due to managers’ supervisory style in a culture of tension, fear, anxiety, unrealistic pressures to perform in the short run, excessively tight controls, and routine firing of employees who don’t measure up. PERSONAL FACTORS:  Life demands, constraints, opportunities of any kind

1. Family issues, personal economic problems, and so forth. • Can’t just ignore! Managers need to be understanding of these personal factors.38 2. Employees’ personalities—Type A or Type B. • Type A personality—chronic sense of time urgency, excessive competitive drive, and difficulty accepting and enjoying leisure time; more likely to show symptoms of stress.

Type A personality People who have a chronic sense of urgency and an excessive competitive drive.

Type B personality People who are relaxed and easygoing and accept change easily.

• Type B personality—little to no sense of time urgency or impatience. • Stress comes from the hostility and anger associated with Type A behaviour. Surprisingly, Type Bs are just as susceptible.

How Can Stress Be Reduced? 1. General guidelines:

stress

• Not all stress is dysfunctional.

Response to anxiety over intense demands, constraints, or opportunities.

• Stress can never be totally eliminated!

stressors Factors that cause stress.

• Reduce dysfunctional stress by controlling job-related factors and offering help for personal stress. 2. Job-related factors: • Employee selection—provide a realistic job preview and make sure an employee’s abilities match the job requirements. • On the job—improve organizational communications to minimize ambiguity; use a performance planning program such as management by objectives to clarify job responsibilities, provide clear performance goals, and reduce ambiguity through feedback; redesign job, if possible, especially if stress can be traced to boredom (increase challenge) or to work overload (reduce the workload); allow employees to participate in decisions and to gain social support, which also lessen stress.40 3. Personal factors: • Not easy for manager to control directly • Ethical considerations

A Question of Ethics One in five companies offers some form of stress management program.39 Although such programs are available, many employees may choose not to participate. They may be reluctant to ask for help, especially if a major source of that stress is job insecurity. After all, there’s still a stigma associated with stress. Employees don’t want to be perceived as being unable to handle the demands of their job. Although they may need stress

management now more than ever, few employees want to admit that they’re stressed.

Discussion Questions 1. What can be done about this paradox? 2. Do organizations even have an ethical responsibility to help employees deal with stress?

Chapter 7  Managing Innovation and Change 207

Does a manager have the right to intrude—even subtly—in an employee’s personal life? • If the manager believes it’s ethical and the employee is receptive, consider employee assistance and wellness programs,41 which are designed to assist employees in areas where they might be having difficulties (financial planning, legal matters, health, fitness, or stress).42 –– Employee assistance programs (EAPs)43—the rationale is to get a productive employee back on the job as quickly as possible.

employee assistance programs (EAPs)

–– Wellness programs—the rationale is to keep employees healthy.

Programs offered by organizations to help employees overcome personal and health-related problems.

How Can Managers Encourage Innovation in an Organization?

wellness programs Programs offered by organizations to help employees prevent health problems.

7.4 Discuss techniques for stimulating innovation.

“Innovation is the key to continued success.” “We innovate today to secure the future.” These two quotes (the first by Ajay Banga, the CEO of Mastercard, and the second by Sophie Vandebroek, chief technology officer of Xerox Innovation Group) reflect how important innovation is to organizations.44 Success in business today demands innovation. In the dynamic, chaotic world of global competition, organizations must create new products and services and adopt state-of-the-art technology if they’re going to compete successfully.45 What companies come to mind when you think of successful innovators? Maybe Apple with all its cool work and entertainment gadgets. Maybe Facebook for its one billionplus users. Maybe Nissan for creating the Leaf, the first mass-market all-electric car. Or even maybe Foursquare, a startup that revved up the social-local-mobile trend by having users “check in” at locations, unlocking quirky badges and special offers from merchants.46 What’s the secret to the success of these innovator champions? What can other managers do to make their organizations more innovative? In the

What’s Cooking in Hospitality? Airbnb’s meteoric rise shows there’s high demand for home sharing. What about people who want the reliability that a hotel can provide, while offering the “like a local” feel that homestays can bring? That’s the thinking behind Sonder, a Montreal company that combines the two travel experiences.47 Sonder manages apartments in trendy neighbourhoods throughout major cities, now up to 3000 units in four countries. With a team of 400, occupancy of over 80 percent, and annual revenues north of US$100 million, the company still has aggressive expansion plans (192 countries!) and is developing an app for customers.

With rooms that are three or four times the size of a hotel room, they are perfect for travellers for longer stays who enjoy the hotel-like amenities such as toiletries, a cleaning service, and a 24/7 concierge.48 “Hotels are disappointing. . . . [W]e want to create an experience that’s jaw-dropping,” says cofounder Francis Davidson. The focus is on little touches to make a difference—music playing when you open the door, a welcome message, fresh flowers. The unit itself probably looks like it’s straight out of a magazine. And all with similar options to a hotel without the price tag. Their goal according to Davidson is “to reinvent the hospitality industry.”49

208  Chapter 7 following sections, we’ll try to answer those questions as we discuss the factors behind innovation.

How Are Creativity and Innovation Related? creativity

• Creativity refers to the ability to combine ideas in a unique way or to make unusual associations between ideas.50 A creative organization develops unique ways of working or novel solutions to problems. For instance, at Mattel, company officials introduced “Project Platypus,” a special group that brings people from all disciplines—engineering, marketing, design, and sales—and tries to get them to “think outside the box” in order to “understand the sociology and psychology behind children’s play patterns.” To help make this kind of thinking happen, team members embarked on such activities as imagination exercises, group crying, and stuffed-bunny throwing. What does throwing stuffed bunnies have to do with creativity? It’s part of a juggling lesson where team members tried to learn to juggle two balls and a stuffed bunny. Most people can easily learn to juggle two balls but can’t let go of that third object. Creativity, like juggling, is learning to let go—that is, to “throw the bunny.”51 Creativity by itself isn’t enough, though.

The ability to produce novel and useful ideas.

• The outcomes of the creative process need to be turned into useful products or work methods, which is defined as innovation. Thus, the innovative organization is characterized by its ability to channel creativity into useful outcomes. When managers talk about changing an organization to make it more creative, they usually mean they want to stimulate and nurture innovation.

innovation The process of taking a creative idea and turning it into a useful product, service, or method of operation.

What’s Involved in Innovation?

K.C. Alfred/U-T San Diego/ZUMAPRESS/Alamy Stock Photo

Some people believe that creativity is inborn; others believe that with training, anyone can be creative. The latter group views creativity as a fourfold process.52

Entrepreneur Nick Woodman channelled his creativity into a useful product. As founder of GoPro, Inc., Woodman designed a compact wearable camera that surfers, skydivers, and other sports enthusiasts can use to take high-quality photographs and videos. Woodman is shown here taking a photo of students with his wrist-strap GoPro during a college alumni event.

1. Perception involves the way you see things. Being creative means seeing things from a unique perspective. One person may see solutions to a problem that others cannot or will not see at all. The movement from perception to reality, however, doesn’t occur instantaneously. 2. Instead, ideas go through a process of incubation. Sometimes employees need to sit on their ideas, which doesn’t mean sitting and doing nothing. Rather, during this incubation period, employees should collect massive amounts of data that are stored, retrieved, studied, reshaped, and finally moulded into something new. During this period, it’s common for years to pass. Think for a moment about a time you struggled for an answer on a test. Although you tried hard to jog your memory, nothing worked. Then suddenly, like a flash of light, the answer popped into your head. You found it! 3. Inspiration in the creative process is similar. Inspiration is the moment when all your efforts successfully come together. Although inspiration leads to euphoria, the creative work isn’t complete. It requires an innovative effort. 4. Innovation involves taking that inspiration and turning it into a useful product, service, or way of doing things. Thomas Edison is often credited with saying that “Creativity is 1 percent inspiration and 99 percent perspiration.” That 99 percent, or the innovation, involves testing, evaluating, and retesting what the inspiration found. It’s usually at this stage that an individual involves others more in what he or she has been working on. Such involvement is critical because even the greatest invention may be delayed, or lost, if an individual cannot effectively deal with others in communicating and achieving what the creative idea is supposed to do.

Hey, You’re the Boss Now! Innovation requires a team approach, and what is needed to stimulate innovation is beyond possible for only one person to achieve. As a new supervisor, you need to find roles for your team members. Idea champions

Innovation rarely happens without someone to initiate and advocate for the idea. Anyone in the organization can be an idea champion.

Constructive co-workers

They rally behind ideas but also constructively identify or refine the problem. They may also bring other unique problems to the group for input and reflection.

Coaches

Managers must encourage innovative behaviours, and they must allocate time and budget to ideas. They may also need to be a coach and facilitator.

For one of your thornier organizational problems, try this team brainstorming technique to stimulate innovation: 1. Whoever is having the problem states to the group his or her view of the problem. 2. The group brainstorms potential definitions or alternative statements of the problem, being careful to identify symptoms separately from the problem. 3. The problem owner selects a few of these new problem statements for further review. 4. One or more of those reviewed problem definitions are brought back to the group, which then brainstorms potential solutions. 5. The problem owner selects one or more of the solutions for further analysis or research. 6. The problem owner may decide to use the group again for further development of the solutions. You may also need to break down certain common roadblocks in organizations that stifle creativity and innovation:53 • people afraid of making mistakes • lack of resources for projects • no time to be innovative • lack of expertise or staff without the required skills • lack of a shared vision of the benefits of innovation

McCarony/Fotolia

Chapter 7  Managing Innovation and Change 209

3M’s “15 dream time” policy was responsible for the creation of the Post-it. Google allows employees to spend 20 percent of their time on side projects that are not part of their job description. How could your organization create a program to develop and pilot test innovative ideas?

210  Chapter 7

Technology and the Manager’s Job

Helping Innovation Flourish When employees are busy doing their regular job tasks, how can innovation ever flourish? When job performance is evaluated by what you get done, how you get it done, and when you get it done, how can innovation ever happen? This has been a real challenge facing organizations wanting to be more innovative. One solution has been to give employees mandated time to experiment with their own ideas on company-related projects.55 For instance, Google has its “20% Time” initiative, which encourages employees to spend 20 percent of their time at work on projects not related to their job descriptions. Other ­companies—Facebook, Apple, LinkedIn, 3M, Hewlett-Packard, among ­others—have similar initiatives. Hmmm...so having essentially one day a week to work on company-related ideas you have almost seems too good to be true. But, more importantly, does it really spark innovation? Well, it can. At Google, it led to the autocomplete system, Google News, Gmail, and Adsense. However, such “company” initiatives do face tremendous obstacles, despite how good they sound on paper. These challenges include the following: • Strict employee monitoring in terms of time and resources leads to a reluctance to use this time as most employees have enough to do just keeping up with their regular tasks.

• When bonuses/incentives are based on goals achieved, employees soon figure out what to spend their time on. • What happens to the ideas that employees do have? • Unsupportive managers and co-workers may view this as a “goof-around-for-free-day.” • Corporate bureaucracy may put up obstacles. So, how can companies make it work? Suggestions include the following: Top managers need to support the initiatives/projects and make that support known; managers need to support employees who have that personal passion and drive, that creative spark—clear a path for them to pursue their ideas; perhaps allow employees more of an incentive to innovate (rights to design, etc.); and last, but not least, don’t institutionalize it. Creativity and innovation, by their very nature, involve risk and reward. Give creative individuals the space to try and to fail and to try and to fail as needed.

Discussion Questions 1. What benefits do you see with such mandated experiment time for (a) organizations? (b) individuals? 2. What obstacles do these initiatives face, and how can managers overcome those obstacles?

How Can a Manager Foster Innovation? The systems model (inputs S transformation process S outputs) can help us understand how organizations become more innovative.54 If an organization wants innovative products and work methods (outputs), it has to take its inputs and transform them into those outputs. Those inputs include creative people and groups within the organization. But as we said earlier, having creative people isn’t enough. The transformation process requires having the right environment to turn those inputs into innovative products or work methods. This “right” environment—that is, an environment that stimulates innovation—includes three variables: the organization’s structure, culture, and human resource practices. (See Exhibit 7-9.) HOW DO STRUCTURAL VARIABLES AFFECT INNOVATION?  Research into the

effect of structural variables on innovation shows five things:56

1. An organic-type structure positively influences innovation. Because this structure is low in formalization, centralization, and work specialization, it facilitates the flexibility and sharing of ideas that are critical to innovation. “An open concept layout encourages collaboration among teams,” Maureen Welton, Article’s VP of creative and design explains. “We also specifically decided to situate communal spaces along the perimeter of the office for groups and guests to enjoy plenty of natural light and great Vancouver views. We’re happy to come to work every day and feel great in this inspirational space.”57

2. The availability of plentiful resources provides a key building block for innovation. With an abundance of resources, managers can afford to purchase innovations, can afford the cost of instituting innovations, and can absorb failures. 3. Frequent communication between organizational units helps break down barriers to innovation.58 Cross-functional teams, task forces, and other such organizational designs facilitate interaction across departmental lines and are widely used in innovative organizations.

Chapter 7  Managing Innovation and Change 211

Exhibit 7-9  Innovation Variables Structural Variables • Organic structures • Abundant resources • High interunit communication • Minimal time pressure • Work and nonwork support

STIMULATE INNOVATION

Human Resource Variables • High commitment to training and development • High job security • Creative people

Cultural Variables • • • • • • • •

Acceptance of ambiguity Tolerance of the impractical Low external controls Tolerance of risks Tolerance of conflict Focus on ends Open-system focus Positive feedback

4. Extreme time pressures on creative activities are minimized despite the demands of white-water-rapids-type environments. Although time pressures may spur people to work harder and may make them feel more creative, studies show that it actually causes them to be less creative.59 5. When an organization’s structure explicitly supports creativity, employees’ creative performance can be enhanced. Beneficial kinds of support include encouragement, open communication, readiness to listen, and useful feedback.60 HOW DOES AN ORGANIZATION’S CULTURE AFFECT INNOVATION?  Innovative

organizations tend to have similar cultures.61 They encourage experimentation, reward successes, and celebrate mistakes. An innovative organization is likely to have the following characteristics: • Accepts ambiguity.  Too much emphasis on objectivity and specificity constrains creativity. • Tolerates the impractical.  Individuals who offer impractical, even foolish, answers to what-if questions are not stifled. What at first seems impractical might lead to innovative solutions. Markus Moellenberg/Corbis

• Keeps external controls minimal.  Rules, regulations, policies, and similar organizational controls are kept to a minimum. • Tolerates risk.  Employees are encouraged to experiment without fear of consequences should they fail. Mistakes are treated as learning opportunities. • Tolerates conflict.  Diversity of opinions is encouraged. Harmony and agreement between individuals or units are not assumed to be evidence of high performance. • Focuses on ends rather than means.  Goals are made clear, and individuals are encouraged to consider alternative routes toward meeting the goals. Focusing on ends suggests that there might be several right answers to any given problem.

Bulletproof vests are bulky and unstylish. Toronto tailor Garrison Bespoke created a custom three-piece bulletproof suit used by executives in the mining, oil, and finance industries. The suits cost $20 000 and use carbon nanotubes, which look and feel like cotton but behave like steel.

212  Chapter 7

Tips for Managers

Creating a More Innovative Work Environment • Communicate openly about the problems facing the organization. • Use a blog or e-mail suggestion box, and reward the top suggestions. • Provide training to supervisors to listen without judgment. • Visibly reward innovative behaviours. • Provide protective mechanisms for employees who make mistakes to reduce fear of punishment or embarrassment.

• Uses an open-system focus.  Managers closely monitor the environment and respond to changes as they occur. For example, at Starbucks, product development depends on “inspiration field trips to view customers and trends.” Visiting local Starbucks and other restaurants in other countries helps get a better sense of local cultures, behaviours, and fashions, which leads to different ideas and different ways to think about things. • Provides positive feedback.  Managers provide positive feedback, encouragement, and support so employees feel that their creative ideas receive attention. WHAT HUMAN RESOURCE VARIABLES AFFECT INNOVATION?  Innovative orga-

idea champions Individuals who actively and enthusiastically support new ideas, build support for them, overcome resistance to them, and ensure that innovations are implemented.

nizations (1) actively promote the training and development of their members so their knowledge remains current, (2) offer their employees high job security to reduce the fear of getting fired for making mistakes, and (3) encourage individuals to become idea champions, actively and enthusiastically supporting new ideas, building support, overcoming resistance, and ensuring that innovations are implemented. Research finds that idea champions have common personality characteristics: extremely high self-confidence, persistence, energy, and a tendency toward risk taking. They also display characteristics associated with dynamic leadership. They inspire and energize others with their vision of the potential of an innovation and through their strong personal conviction in their mission. They are also good at gaining the commitment of others to support their mission. In addition, idea champions have jobs that provide considerable decision-making discretion. This autonomy helps them introduce and implement innovations in organizations.62

How Does Design Thinking Influence Innovation? We introduced you to the concept of design thinking in a previous chapter. Well, undoubtedly, there is a strong connection between design thinking and innovation. “Design thinking can do for innovation what TQM did for quality.”63 Just as total quality management provides a process for improving quality throughout an organization, design thinking can provide a process for coming up with things that do not exist. When a business approaches innovation with a design thinking mentality, the emphasis is on getting a deeper understanding of what customers need and want. It entails knowing customers as real people with real problems—not just as sales targets or demographic statistics. But it also entails being able to convert those customer insights into real and usable products. For instance, at Intuit, the company behind TurboTax software, founder Scott Cook felt “the company wasn’t innovating fast enough.”64 So he decided to apply design thinking. He called the initiative “Design for Delight,” and it involved customer field

Chapter 7  Managing Innovation and Change 213

research to understand their “pain points”—that is, what most frustrated them as they worked in the office and at home. Then, Intuit staffers brainstormed (they nicknamed it “painstorm”) a “variety of solutions to address the problems, and experiment with customers to find the best ones.” For example, one pain point uncovered by the Intuit team was how customers could take pictures of tax forms to reduce typing errors. Some younger customers, used to taking photos with their smartphones, were frustrated that they could not just complete their taxes on their mobiles. To address this, Intuit developed a mobile app called SnapTax, which the company says has been downloaded more than a million times since it was introduced in 2010. That is how design thinking works in innovation. Clayton Christensen, a Harvard Business School professor, first coined the theory disruptive innovation, in which successful businesses become fixated on honing existing products, leaving them vulnerable to upstart companies with cheaper, technologically advanced products. Disruptive companies exploit technology in radically different ways, such as Netflix when it started streaming on-demand video. Article’s main disruption to the furniture industry is speed. Industry standards are delivery within 12 to 16 weeks. In 2017, the company says it delivered 80 percent of orders in under two weeks and 30 percent within one week. Hall says the target is much quicker than that, with next-day and same-day delivery in major markets. It’s all made possible by the strategic location of Article’s warehouses—more of which are in the works—and by a hyper-efficient, data-driven logistics chain. “Getting furniture in the hands of customers faster, while providing a consistent brand experience, is key to future success and where we continue to invest our efforts,” Baig says.65

Chapter Summary Learning Objectives Checklist 7.1 Define organizational change, and compare and contrast views on the change process. Organizational change is any alteration of an organization’s people, structure, or technology. The “calm waters” metaphor of change suggests that change is an occasional disruption in the normal flow of events and can be planned and managed as it happens, using Lewin’s three-step change process (unfreezing, changing, and freezing). The “white-water rapids” view of change suggests that change is ongoing, and managing it is a continual process.

7.2 Explain how to manage resistance to change. People resist change because of uncertainty, habit, concern about personal loss, and the belief that a change is not in the organization’s best interests. Techniques for managing resistance to change include education and communication (educating employees about and communicating to them the need for the change), participation (allowing employees to participate in the change process), facilitation and support (giving employees the support they need to implement the change), negotiation (exchanging something of value to reduce resistance), manipulation and co-optation (using negative actions to influence), selecting people who

are open to and accept change, and coercion (using direct threats or force).

7.3 Describe what managers need to know about employee stress. Stress is the adverse reaction people have to excessive pressure placed on them from extraordinary demands, constraints, or opportunities. The symptoms of stress can be physical, psychological, or behavioural. Stress can be caused by personal factors and by job-related factors. To help employees deal with stress, managers can address job-related factors by making sure an employee’s abilities match the job requirements, improving organizational communications, using a performance planning program, or redesigning jobs. Addressing personal stress factors is trickier, but managers could offer employee counselling, time-management programs, and wellness programs.

7.4 Discuss techniques for stimulating innovation. Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas. Innovation is turning the outcomes of the creative process into useful products or work methods. An innovative environment encompasses structural, cultural, and human resource variables.

214  Chapter 7 Important structural variables include an organic-type structure, abundant resources, frequent communication between organizational units, minimal time pressure, and support. Important cultural variables include accepting ambiguity, tolerating the impractical, keeping external controls minimal, tolerating risk, tolerating conflict, focusing on ends not means, using an open-system focus, and providing positive feedback. Important human resource variables include high commitment to training and development, high job security, and encouraging individuals to be idea champions. Design thinking can also play a role in innovation. It provides a process for coming up with products that don’t exist.

Discussion Questions 1. Discuss the external and internal forces for change. 2. Why is handling change an integral part of every manager’s job? 3. Describe two approaches to managing organizational change. 4. Explain why people resist change and how resistance might be managed. 5. Who are change agents? Do you think that a low-level employee could act as a change agent? Explain. 6. How would an organization decide between action research and appreciative inquiry? Explain briefly how each brings about organizational change.

Developing Management Skills Dilemma Think of something you would like to change in your personal life. It could be your study habits, your fitness and nutrition, the way you interact with others, or anything else of interest to you. What values and assumptions have encouraged the behaviour that currently exists (the one you want to change)? What driving and restraining forces can you address in order to make the desired change? Here are some tips for making a change in your life: • Accept the change instead of resisting it, and find the potential benefits and new opportunities the change may bring.

whenever driving forces are greater than restraining forces, the status quo will change.

ABOUT THE SKILL Driving forces are both attitudes to change and the emotions surrounding those attitudes. Developing your emotional intelligence will help you understand the forces operating within you and others.

STEPS IN DEVELOPING THE SKILL The following steps can be used as a guide to following Lewin’s force field analysis:

• Familiarize yourself with the new aspects as quickly as possible, but be patient, and recognize that you cannot master everything at once.

1. Clarify your vision of the change you want to see.  Write down the goal you have for a particular situation (school success, health and nutrition, career development, etc.). The vision of the desired future will help you clarify the goal.

• Be organized. Make a list of what needs to be done to make the change happen, and focus on one change at a time.

2. List the driving forces.  Record the forces that are favourable to the change you would like to achieve. List them in the first column of a four-column chart.

• Ask “How?” rather than “Why?” “How can I use the support of others to facilitate the transition?” Change can be intimidating, but asking the right questions can make you more comfortable with what is going on around you.

3. List the restraining forces.  Record the forces that oppose your change or might limit your effectiveness. List these in the third column.

• Gain back control. Change can take control away from you, so stare down your challenges.

Developing Your Interpersonal Skills: Managing Resistance to Change Kurt Lewin’s force field analysis model was discussed earlier in the chapter. This exercise will help you apply the model to a real-life situation.66 Lewin suggests that

4. Rate the driving and restraining forces.  In column two, rate each driving force from 1 (weak) to 5 (strong); in column four rate each restraining force from 1 (weak) to 5 (strong). 5. Develop a strategy.  Decide which of the forces could be influenced most easily. Come up with a strategy to strengthen the driving forces or weaken the restraining forces. Note that reducing the impact of restraining forces is often easier. If you look at your ratings, can you figure out a way to raise the scores of the driving forces or reduce the scores of the restraining forces?

Chapter 7  Managing Innovation and Change 215

6. Develop your action plan.  What steps can you take that will have the greatest impact? Identify the resources you will need and come up with a basic implementation plan.

PRACTISING THE SKILL You are the regional manager of two successful restaurants that employ bartenders and servers. One of the restaurants is downtown, and the other is in a highly populated suburb. Each team of bartenders and servers does the same job except that servers in the downtown restaurant earn less pay and have no duties behind the bar, while servers in the suburban restaurant often fill in behind the bar. In your professional reading, you have come across the concept of cross-training restaurant staff and giving them more varied responsibilities, which in turn has been shown to improve customer satisfaction while lowering costs. You call the two team leaders, Sue and Scott, into your office to explain that you want the bartending teams to move to this approach. To your surprise, both team leaders are opposed to the idea. Sue says she and the other downtown bartenders feel they are needed in the main bar, where they fill the most vital role in the restaurant. They have developed special talents in mixology and pouring, and they often work in difficult and stressful circumstances with a much younger clientele. The downtown bartenders think the suburban bartenders have relatively easy jobs for the pay they receive, since they also spend time serving customers in the restaurant. Scott, the leader of the suburban bartenders, tells you his group believes the downtown bartenders lack the special training and extra experience required to work with the senior IT executives who frequent their restaurant, as well as the special skills needed to serve and tend bar. The bartenders claim they have heavier responsibilities and do more exacting work, because they have responsibilities as servers as well. What should you do about your idea to introduce more cross-training for the restaurant teams?

Developing Your Interpersonal Skills: Stress Management It’s no secret that employees, in general, are more stressed out today than in previous generations. Heavier workloads, longer hours, continual reorganizations, technology that breaks down traditional barriers between work and personal life, and reduced job security are among factors that have increased employee stress. This stress can lead to lower productivity, increased absenteeism, reduced job satisfaction, and higher quit rates. When stress is excessive, managers need to know how to reduce it.

ABOUT THE SKILL Eliminating all stress at work isn’t going to happen, and it shouldn’t. Stress is an unavoidable consequence of life. It also has a positive side—when it focuses concentration and creativity. But when it brings about anger, frustration, fear, sleeplessness, and the like, it needs to be addressed. Many organizations have introduced stress-reduction interventions for employees. These include improved employee selection and placement, helping employees set realistic goals, training in time management, redesign of jobs, increased involvement of employees in decisions that affect them, expanded social support networks, improved organizational communications, and organizationally supported wellness programs. But what can you do, on your own, to reduce stress if your employer doesn’t provide such programs or if you need to take additional action?

STEPS IN DEVELOPING THE SKILL The following suggested:

individual

interventions

have

been

• Implement time-management techniques. Every person can improve his or her use of time. Time is a unique resource in that, if it’s wasted, it can never be replaced. While people talk about saving time, it can never actually be saved. And if it’s lost, it can’t be retrieved. The good news is that it’s a resource we all have in equal amounts. Everyone gets the same 24 hours a day, 7 days a week to use. When tasks seem to exceed the hours you have available, stress often results. But effective management of time can reduce stress. Time-management training can, for example, teach you how to prioritize tasks by importance and urgency, schedule activities according to those priorities, avoid confusing actions with accomplishments, and understand your productivity cycle so you can handle the most demanding tasks during the high part of your cycle when you are most alert and productive. • Create personal goals.  Goal setting is designed to help you better prioritize your activities and better manage how you direct your efforts. Goals become, in effect, a personal planning tool. For instance, setting long-term goals provides general direction; while short-term goals—such as weekly or daily “to do” lists—reduce the likelihood that important activities will be overlooked and help you to maximize the use of your time. • Use physical exercise.  A large body of evidence indicates that noncompetitive physical exercise can help you to release tension that builds up in stressful situations. These activities include aerobics, walking, jogging, swimming, and riding a bicycle. Physical exercise increases heart capacity, lowers the at-rest heart rate, provides a mental diversion from work pressures, and offers a means to “let off steam.”

216  Chapter 7 • Practice relaxation training.  You can teach yourself to reduce tension through meditation, deep-breathing exercises, and guided imaging. They work by taking your mind off the sources of stress, achieving a state of deep relaxation, and releasing body tension. • Expand your social support network. Having friends, family, or work colleagues to talk to provides an outlet when stress levels become excessive. Expanding your social support network, therefore, can be a means for tension reduction. It provides you with someone to hear your problems and to offer a more objective perspective on the situation.67

Diversity Matters Intuitively, most managers accept that organizations benefit from a diverse workforce, and new research has shown that diversity unlocks innovation and drives market growth.68 The research examined two types of diversity: inherent and acquired. Inherent diversity involves traits you are born with, such as gender, ethnicity, and sexual orientation. Acquired diversity deals more with traits gained from experience, such as working in another company or with a diverse client base. When both types of diversity are present, it is referred to as 2-D diversity.

Companies with 2-D diversity out-innovate and outperform others in terms of higher market share and capitalizing on new markets. The research results showed that 2-D diversity stimulates innovation by creating an “outside the box” idea-generating environment, as inherently diverse contributors understand the unmet needs in under-leveraged markets.69 Companies whose employee populations match their client populations in inherent diversity develop much deeper understandings of those clients. Inherent diversity is the first step, but leaders also need acquired diversity to shape a culture that is open to innovation and change. Here are six actions that were found to unlock innovation in individuals and organizations:70 • ensuring that everyone is heard • creating a safe environment for creativity and unique ideas • giving team members decision-making authority • sharing credit for success • giving actionable feedback • implementing ideas and suggestions from the team

Team Exercises 3BL: The Triple Bottom Line  OW CAN COMPANIES MAKE THE CHANGE H TOWARD SUSTAINABILITY? Moving toward the triple bottom line requires vision from the outset. Businesses move to sustainability in an attempt to improve economic performance, enhance corporate image, reduce the environmental impact of their actions, and attract and retain top employees. External forces for change certainly can have a strong influence on the move to sustainability, but companies need to be able to drive this process even when the external forces are not apparent. An important first step is to decide how much of the organization should be involved in 3BL. Sustainability can be implemented in all facets of the organization, but often the best place to start is with its products and services.71 Westport Innovations of Vancouver, for example, develops environmental technologies and services that enable vehicles to operate on clean-burning alternative fuels.72 Companies need to look at their products to see if they can be made from nontoxic, renewable materials, or even if there is another use for their product. Nike Grind73 uses recycled shoes to make sport surfaces such as playgrounds. Other areas where companies can consider sustainability include processes, the business model, and the supplier value chain.74

Functional areas of a company can implement sustainability in processes and practices. The facilities team of Ottawa’s Algonquin College designed the largest Leadership in Environmental and Energy Design (LEED) platinum-certified building in Canada as part of the new Centre for Construction Excellence.75 Human resource departments can build their 3BL presence through recruitment and training. Finance departments can provide more detailed reporting of sustainability initiatives. The last piece of the puzzle is having the right change leadership in place. Earlier in the chapter change agents were discussed. Change agents responsible for 3BL would be charged with facilitating training and education, gathering 3BL resources, linking employees to experts, coordinating meetings, and problem-solving 3BL issues.

THINKING PRACTICALLY ABOUT 3BL How can companies demonstrate leadership to the industry concerning the need for 3BL? Walmart Canada held a Green Business Summit in Vancouver in 2010. The Summit demonstrated to the attendees that all businesses could work together to accelerate change toward triple bottom line goals. The outcome was ShareGreen.ca, an open website where companies

Chapter 7  Managing Innovation and Change 217

and individuals can share case studies of green business practices with a positive impact on return on investment (ROI).76

Be the Consultant: The Celestial Aerospace Company OBJECTIVES • to illustrate how forces for change and stability must be managed in organizations • to illustrate the effects of alternative change techniques on the relative strength of forces for change and forces for stability

THE SITUATION The marketing division of the Celestial Aerospace Company (CAP) has gone through two major reorganizations in the past seven years. Initially, the structure changed from a functional to a matrix form, which did not satisfy some functional managers; nor did it lead to organizational improvements. The managers complained that the structure confused the authority and responsibility relationships. In reaction to these complaints, senior management returned to the functional form, which maintained market and project teams managed by project managers with a few general staff personnel. No functional specialists were assigned to these groups. After the change, problems began to surface. Project managers complained they

could not obtain the necessary assistance from functional staff. It not only took more time to obtain assistance but also created problems in establishing stable relationships with functional staff members. Because these problems affected customer service, project managers demanded a change in the organizational structure. Faced with these complaints and demands from project managers, senior management is pondering yet another reorganization for the division. They have requested an outside consultant (you) to help them in their reorganization plan—one that will provide some stability to the structure, address their issues, and help the organization achieve its strategic goals.

PROCEDURE 1. Divide into groups of five to seven, and take the role of consultants. 2. Each group should identify the forces necessitating the change and the resistance to that change in the company. 3. Each group should develop a set of strategies for dealing with the resistance to change and for implementing those strategies. 4. Reassemble the class, and hear each group’s recommendations and explanations. 5. After each group has presented, the other consulting groups should pose probing questions about the presenting group’s recommendations.

Business Cases Prairie General Hospital When you think about the significant changes that have occurred in people’s lives over the past five decades, clearly the advances in medical science would be at the top of such a list. Diseases have been eradicated, and medical procedures and devices have helped save thousands of lives. But do not be too quick to conclude that the health care industry is a model of innovation and efficiency.77 Hospitals, in general, have one of the most archaic and costly operating systems of any group of large organizations. Nearly 95 percent of all hospitals currently use procedures and record-keeping systems that were implemented more than 50 years ago. Many doctors and technicians prefer to function the way they have always done. Individuals in this industry have been highly reluctant to accept and use new technologies. Doctors and hospital administrators at Prairie General Hospital, however, refuse to be part of “the old guard.” Consider the following incident that happened in the

emergency room at Prairie General. A woman brought her middle-aged husband to the emergency room (ER). The patient, who was very overweight, was complaining of shortness of breath and dizziness. Although the patient claimed he was fine, his wife made him go to the hospital. Immediately the staff at Prairie General went to work. While nurses hooked the patient up to heart monitoring equipment and checked his vital signs, a resident wheeled over an emergency room cart, which contained a laptop computer. Logging in the patient’s identification number, the ER doctor noticed that the patient had had an electrocardiogram (EKG) in the past year. By reviewing the past EKG records and comparing them with current heart monitoring results, the doctor determined the patient was in the middle of a heart attack. Within 10 minutes of seeing the patient, doctors had determined that he was suffering from a blocked artery. Clot-busting drugs were swiftly administered, and the patient was immediately taken to the cardiac lab, where an emergency angioplasty was performed to open up the clogged artery. Within a day, the patient was back on his

218  Chapter 7 feet and ready to go home. In most other hospitals, the patient might not have been so lucky! Prairie General is unusual in the health care industry. This hospital is investing money in technology that enables it to provide better service at a lower cost. Through its system, called CareWeb, more than 1 million patient records are available. Each of these records contains all previous medical orders, such as lab test results and prescriptions, for every patient. When a patient comes to the hospital, that individual’s health history is easily retrievable and can be used to assist in the current diagnosis. What has been the effect of this technology change on Prairie General? The system is saving the hospital more than $1 million each year. It has reduced errors in patient care by more than 90 percent and reduced prescription errors and potential adverse drug interactions by more than 50 percent. Patient charts are now available in moments rather than hours or days. Patients are discharged more than 30 minutes faster than they were before CareWeb was implemented. Cost savings, time savings, increased patient care, and saved lives—all these benefits make you wonder why every hospital is not making such changes!

Discussion Questions 1. Describe the types of changes that have occurred at Prairie General in terms of structure, technology, and people. Cite examples. 2. Why do you think the medical profession resists changing to systems such as CareWeb? Explain. 3. Assume you were going to make a presentation to a group of hospital staff (doctors and administrators) on why they should invest in technology such as CareWeb. How would you attempt to overcome their resistance to change and their attitude about continuing to do what they have always done? Discuss.

The Next Big Thing It all started with a simple plan to make a superior T-shirt. As special teams captain during the mid-1990s for the University of Maryland football team, Kevin Plank hated having to repeatedly change the cotton T-shirt he wore under his jersey as it became wet and heavy during the course of a game.78 He knew there had to be a better alternative and set out to make it. After a year of fabric and product testing, Plank introduced the first Under Armour compression product—a synthetic shirt worn like a second skin under a uniform or jersey. And it was an immediate hit! The silky fabric was light and made athletes feel faster and fresher, giving them, according to Plank, an important psychological edge. Today, Under Armour continues to passionately strive to make all athletes better by relentlessly pursuing innovation and design. A telling sign of the company’s

philosophy is found over the door of its product design studios: “We have not yet built our defining product.”

Protecting Our House THROUGH INNOVATION Today, Under Armour (UA) is a $3.08 billion company, placing it as a realistic competitor to Nike and their $27 billion. The company sells products from shirts, shorts, and footwear to underwear, wearable fitness technology, and hats. In addition, more than 100 universities wear UA uniforms. The company’s logo—an interlocking U and A—is becoming almost as recognizable as the Nike swoosh. Starting out, Plank sold his shirts using the only advantage he had—his athletic connections. Drawing on his own personal team experiences, “he knew at least 40 NFL players well enough to call and offer them the shirt.” He was soon joined by another Maryland player, Kip Fulks, who played lacrosse. Fulks used the same relationship-based “six-degrees strategy” in the lacrosse world. (Today Fulks is the company’s president of footwear and innovation.) Believe it or not, the strategy worked. UA sales quickly gained momentum. However, selling products to teams and schools would take a business only so far. That’s when Plank began to look at the mass market. In 2000, he made his first deal with a big-box store, Galyan’s (which was eventually bought by Dick’s Sporting Goods). In Canada, Under Armour sells primarily through outlet stores and retailers like SportChek and Play it Again Sports. Today, over 66 percent of UA’s sales come from wholesaling to retailers such as Dick’s and the Sports Authority. But they haven’t forgotten where they started, either. The company has allschool deals with eight Division 1 schools. Although that doesn’t seem like a lot of revenue, such deals do “deliver brand visibility....” Despite their marketing successes, innovation continues to be the name of the game at UA. How important is innovation to the company’s heart and soul? Consider what you have to do to enter its new products lab. “Place your hands inside a state-of-the-art scanner that reads— and calculates—the exact pattern of the veins on the back. If it recognizes the pattern—which it does for only 20 out of 5000 employees—you’re in. If it doesn’t, the vault-like door won’t budge.” In the unmarked lab at the company’s headquarters campus in Baltimore, products being developed include a shirt that can monitor an athlete’s heart rate, a running shoe designed like your spine, and a sweatshirt that repels water almost as well as a duck. There’s also work being done on a shirt that may help air condition your body by reading your vital signs. So what’s next for Under Armour? With a motto that refers to protecting this house, innovation will continue to be important. Building a business beyond what it’s known for—that is, what athletes wear next to their skin—is going

Chapter 7  Managing Innovation and Change 219

to be challenging. However, Plank is completely devoted to Under Armour’s focus on finding ways to use technology in all the company’s products to make athletes better. He says, “There’s not a product we can’t build.”

Discussion Questions 1. What do you think of UA’s approach to innovation? Would you expect to see this type of innovation in an athletic wear company? Explain. 2. What do you think UA’s culture might be like in regard to innovation? (HINT: Refer to the list “How Do Structural Variables Affect Innovation?” on page 210.) 3. How might design thinking help UA improve its innovation efforts? 4. What’s your interpretation of the company’s philosophy posted prominently over the door of its design studio? What does it say about innovation? What could other companies learn from the way UA innovates?

Innovation in Wastewater Island Water Technologies (IWT) of Charlottetown, PEI had a lot to celebrate in 2019. Fresh off being named one of Canada’s Top 20 innovative Canadian technology companies through the Canadian Innovation Exchange, IWT also received $500 000 in investment funding from Natural Products Canada.79 IWT integrates engineering and nature to provide effective, money-saving wastewater solutions in municipal, industrial, and remote settings. Their innovative microbe-leveraging water purification technology meets

the increasing need and demand for sustainable, reliable, and cost-effective solutions for wastewater treatment and water purification.80 As a Canadian sustainability leader, IWT designs, creates, and delivers world-class decentralized wastewater treatment solutions that are self-powered, 75 percent more energy efficient than comparable systems, autonomous, and effective in remote and hostile regions. Their plants have been deployed by the Canadian military in Afghanistan and to support humanitarian aid across the Sahara Desert.81 A two-year project with the Canadian Armed Forces saw the successful deployment of a solar-powered modular wastewater treatment system. “The wastewater was treated 100 percent using solar systems,” said Patrick Kiely, co-founder and CEO.82 “When they send a team into Haiti or any other area of the world that’s in some sort of distress, they need to bring people with them and they don’t want to be contaminating water supplies when they’re there,” he said. “So, they need to bring in logistical equipment, accommodations, energy solutions and water and wastewater solutions. There really wasn’t a product on the market where they could treat wastewater in an energy efficient or low-footprint way.”83

Discussion Questions 1. What other applications are there for this wastewater technology? 2. What are the biggest challenges with exporting IWT’s products? 3. What do SMEs like IWT need to know about exporting?

Chapter 8

Dennizn/Shutterstock

Understanding Groups and Teams

Learning Objectives 8.1 Define groups and describe the stages of group development. 8.2 Describe the major concepts of group behaviour. 8.3 Explain how groups become effective teams. 8.4 Discuss contemporary issues in managing teams. Forty years ago, Sir Richard Branson launched Virgin Records. He launched Virgin Atlantic when he and 50 other passengers were stranded in Puerto Rico because American Airlines cancelled a flight. He chartered a 50-person plane and charged every passenger $39. Today Virgin Galactic is offering suborbital flights for $200 000. “First we’re taking people to suborbital travel, then orbital,” says Branson. “One day, maybe even hotels in space—who’s to know? Whatever happens, it’s going to be ridiculously exciting. It’s the start of a whole new era.”1 The Virgin Group has expanded worldwide and includes Virgin Mobile Canada. To build an empire and become a billionaire, Branson has always demonstrated a strong entrepreneurial flare and an unwavering belief in the value of employees and teams. Virgin adopts flexible working hours and other supportive policies, which encourage collaboration and team spirit. Virgin has always been a bit anti-establishment. Branson encourages that with a program called “Refresh,” a series of mandatory day-long training and team-building exercises for all employees, regardless of rank and position. At one February session, employees learned about body language from a police detective, learned how to imitate IndyCar pit crew tire changes, and used silent tag-team relays to prepare their lunches.2 Branson believes a leader needs to have good interpersonal skills to bring out the best in his or her team. “You need to be good at praising, and you need to be great at building a team and not

220

Chapter 8  Understanding Groups and Teams 221 trying to do everything yourself,” says Branson. He suggests not taking all the credit and also “taking the knocks when things go wrong.”3 All Virgin employees are empowered and open to new ideas. According to Branson, “You’ve got to have a yes mentality. You’ve got to be willing to take risks and allow people to fall flat on their face on occasion.” Branson suggests that supporting employees who have taken risks and failed encourages them to take risks and succeed.4 “Managers should never rule by fear,” says Branson. He believes that enthusiasm, genuine openness, and camaraderie with your people work better.5 Branson even created a contest called “Pitch to Rich” in which he encourages Canadians to submit a short elevator pitch for a mobile-related business idea.6 What makes a team different from any group of people? Sir Richard Branson’s philosophy has not changed from when he started his first venture, Student magazine. “Do something you enjoy and your enthusiasm will rub off on others, ensuring a committed and spirited team,” said Branson. “I have felt that one of my most important jobs is to attract and motivate great people who genuinely feel their job is more important than just money.”7 Like the challenges Sir Richard Branson faced, how can business owners create effective ­employee teams? These are a few of the types of questions we answer in this chapter. First, however, let us begin by developing our understanding of group/team behaviour.

Here is a common myth about teams:

 Teams almost always outperform employees working ­individually. MANAGEMENT MYTH DEBUNKED Based on news reports, you’d think that every organization has restructured itself around teams. And it’s widely believed that team-based organizations will always outperform more traditional organizations structured around individual efforts. As you’ll see in this chapter, teams can be very effective devices for accomplishing tasks. But not always! For tasks that demand highly creative thinking, individuals often outperform teams. Additionally, teams can dilute responsibility, which can lead to taking outsized risks and allowing contributors to hide behind the work of others. For full details on this management myth, check out our Bust the Myth video in Revel.

What Is a Group and What Stages of Development Do Groups Go Through? 8.1 Define groups and describe the stages of group development. Because most organizational work is done by individuals who are part of a work team or group, managers need to understand team/group behaviour. The behaviour of a team is not simply the sum total of the behaviours of all the individuals in the team. Why? Because individuals act differently in teams than they do when they are alone. Therefore, if we want to understand organizational behaviour more fully, we need to study teams. Though teams and groups can differ depending on their purpose, we use “groups” and “teams” interchangeably in our theoretical discussions below (conforming to how scholars have written their research) because we are discussing teams or groups in the workplace. Interchanging these terms simply underscores that the processes for groups and teams are similar, although formal work teams/ groups involve more synergy.

What Is a Group? A group is defined as two or more interacting and interdependent individuals who come together to achieve specific goals. Formal groups are work groups that are defined by the organization’s structure and have designated work assignments and

group Two or more interacting and interdependent individuals who come together to achieve specific goals.

222  Chapter 8

Exhibit 8-1  Examples of Groups in Organizations SOURCE: Based on S. A. Kirkpatrick and E. A. Locke, “Leadership: Do Traits Really Matter?” Academy of

Management Executive, May 1991, pp. 48–60; and T. A. Judge, J. E. Bono, R. Iiies, and M. Werner, “Personality and Leadership: A Qualitative and Quantitative Review,” Journal of Applied Psychology, Aug 2002, pp. 765–780 6Ce Exh 8-2, p. 235; originally 10e p. 37. 2 CONTACT: Rozella Cribbs-Grant.

Group Type

Description

Example

Cross-functional teams

Employees who are experts in various functions; task interdependence is limited as each member works with other employees in different departments.

Calgary-based Canadian Pacific Railway (CPR) uses cross-functional teams to figure out ways to cut costs. All the functional areas affected by the cost cutting are represented.

Problem-solving teams

Employees from the same department or functional area who are trying to improve work activities or solve specific problems.

The RCMP uses a drug task force separate from its main policing operations to address issues related to the manufacture, sale, and use of illegal drugs.

Self-managed teams

Employees with high autonomy who are responsible for an entire work process or segment. Unlike a problem-solving team, the team is also responsible for managing itself.

Muskoseepi Park in Grand Prairie, Alberta, is operated by a self-managed team whose members are accountable to each other and do not have direct daily supervision.

Advisory teams

Teams that provide feedback and recommendations to organizational decision makers.

Nova Scotia Business Inc. uses an advisory team to keep on top of community issues throughout the province.

Virtual teams

Teams that use information technologies to link physically dispersed members.

Microsoft’s staff in Richmond, British Columbia, are part of a virtual team with members in Redmond, Washington, and other global centres.

specific tasks directed at accomplishing organizational goals. Exhibit 8-1 provides some examples. Informal groups are social groups. These groups occur naturally in the workplace and tend to form around friendships and common interests. For example, five employees from different departments who regularly eat lunch together are an informal group.

Are Work Groups and Work Teams the Same? work team Two or more interacting and interdependent individuals whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills.

synergy Combined efforts that are greater than the sum of individual efforts.

At this point, you may be asking yourself: Are teams and groups the same thing? No. In this section, we clarify the difference between a work group and a work team.10 Most of you are probably familiar with teams, especially if you’ve watched or participated in organized sports events. Work teams do differ from work groups and have their own unique traits. Work groups interact primarily to share information and to make decisions to help each member do his or her job more efficiently and effectively. There’s no need or opportunity for work groups to engage in collective work that requires joint effort. On the other hand, work teams are groups whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills. Exhibit 8-2 summarizes the traits found in groups versus teams.

What’s Cooking in Hospitality? Trucorp Investments of Truro, NS, recently was named one of Canada’s best managed companies, an awards program from Deloitte that recognizes Canadian privately owned and managed companies that demonstrate exceptional business

performance.8 Their focus on teams saw them create an advisory committee featuring franchise owners—providing valuable input from individual franchisees. Trucorp employs over 300 Atlantic Canadians and over 2500 in total through its franchises.9

Chapter 8  Understanding Groups and Teams 223

Exhibit 8-2  Groups Versus Teams Works Team

Work Groups

Goal

Collective Performance

Share Information

Synergy

Positive

Neutral (sometimes negative)

Accountability

Individual & Mutual

Individual

Skills

Complementary

Random and Varied

These descriptions should help clarify why so many organizations have restructured work processes around teams. Managers are looking for that positive synergy that will help the organization improve its performance.11 The extensive use of teams creates the potential for an organization to generate greater outputs with no increase in (or even fewer) inputs. Circle teams at Ames Tile & Stone of New Westminster, BC, highlight the company’s commitment to collaboration and inclusion. Their teams are ad hoc, crossdiscipline teams that successfully address specific business issues and challenges.12 Recognize, however, that such increases are simply “potential.” Nothing inherently magical in the creation of work teams guarantees that this positive synergy and its accompanying productivity will occur. Accordingly, merely calling a group a team doesn’t automatically increase its performance.13 As we show later in this chapter, successful or high-performing work teams have certain common characteristics. If managers hope to gain increases in organizational performance, they will need to ensure that the teams possess those characteristics.

Stages of Group Development Group development is a dynamic process. Most teams and groups are in a continual state of change, although there is a general pattern that describes how most of them develop. Professor Bruce Tuckman of Ohio State University developed a five-stage model of small group development.14 As shown in Exhibit 8-3, these five stages are forming, storming, norming, performing, and adjourning. Stage I, forming, has two aspects. First, people join the team either because of a work assignment or for some other benefit desired (such as status, self-esteem, affiliation, power, or security). Once the team’s membership is in place, the second part of the forming stage begins: the task of defining the team’s purpose, structure, and leadership. This phase is characterized by a great deal of uncertainty. Members are “testing the waters” to determine what types of behaviour are acceptable. This stage is complete when members begin to think of themselves as part of a team. Stage II, storming, is one of intragroup conflict. Members accept the existence of the team but resist the control that the team imposes on individuality. Further, there is conflict over who will control the team. When this stage is complete, there will be a relatively clear hierarchy of leadership within the team and agreement on the team’s direction. Conflict helps the team clarify roles and leads to some level of belonging for team members, although teams with major problems can sometimes get stuck in this stage. Stage III is one in which close relationships develop and the team demonstrates cohesiveness. There is now a strong sense of team identity and camaraderie. This norming stage is complete when the team structure solidifies and the team has assimilated a common set of expectations of what defines correct member behaviour. Members are involved and begin to support each other. Stage IV is performing. The team structure at this point is fully functional and accepted by team members. Team energy has moved from getting to know and understand each other to performing the task at hand. Team purpose and roles are clear, and achievement leads to pride and high productivity.

forming The first stage of team development, in which people join the group and then define the team’s purpose, structure, and leadership.

storming The second stage of team development, which is characterized by intragroup conflict.

norming The third stage of team development, which is characterized by close relationships and cohesiveness.

performing The fourth stage of team development, in which the team structure is fully functional and accepted by team members.

224  Chapter 8

Exhibit 8-3  Stages of Group Development

Stage III Norming

adjourning The final stage of team development for temporary teams, in which members are concerned with wrapping up activities rather than task performance.

Stage I Forming

Stage II Storming

Stage IV Performing

Stage V Adjourning

Performing is the last stage in the development of permanent work teams. Temporary teams—such as project teams, task forces, and similar groups that have a limited task to perform—have a fifth stage, adjourning. In this stage, the team prepares to disband. High levels of task performance are no longer the team’s top priority. Instead, attention is directed at wrapping up activities, perhaps with some sort of ceremony to help members seek closure. Responses of team members vary at this stage. Some are upbeat, basking in the team’s accomplishments. Others may be saddened by the loss of camaraderie and friendships gained during the work team’s life. Many of you have probably experienced each of these stages in working on a class team project. Team members are selected and then meet for the first time. There is a “feeling out” period to assess what the team is going to do and how it is going to do it. This phase is usually rapidly followed by a battle for control: Who is going to be in charge? Once this issue is resolved and a “hierarchy” is agreed on, the team identifies specific aspects of the task, who is going to do them, and dates by which the assigned work needs to be completed. General expectations are established and agreed on by all members. These decisions form the foundation for what you hope will be a coordinated team effort culminating in a project well done. Once the team project is completed and turned in, the team breaks up. Of course, some teams do not get far beyond the first or second stage; these teams typically have serious interpersonal conflicts, turn in disappointing work, and get lower grades. So, does a group become more effective as it progresses through the first four stages? Some researchers say yes, but it’s not that simple.15 That assumption may be generally true, but what makes a group effective is a complex issue. Here’s why:

iQoncept/Fotolia

• Under some conditions, high levels of conflict are conducive to high levels of group performance; that is, there might be situations in which groups in the storming stage outperform those in the norming or performing stages.

Team players stick together.

• Groups don’t always proceed sequentially from one stage to the next. Sometimes, groups are storming and performing at the same time. Groups even occasionally regress to previous stages. • Don’t assume all groups precisely follow this process or that performing is always the most preferable stage.

Chapter 8  Understanding Groups and Teams 225

A Question of Ethics When co-workers work closely on a team project, is there such a thing as TMI (too much information)?16 At one company, a team that had just finished a major project went out to lunch to celebrate. During lunch, one colleague mentioned that he was training for a 20-kilometre bike race. In addition to a discussion of his new helmet and Lycra shorts, the person also described shaving his whole body to reduce aerodynamic drag. Afterwards, another team member said that she didn’t want to hear that type of information from someone who was a colleague not a friend and wasn’t sure why this individual even wanted to share such information with the rest of the work team.

At other companies, managers often hear awkward and questionable comments from their younger Gen Y employees about activities like too much partying after work or on the weekend or that they’re looking for another job at another company.

Discussion Questions 1. What benefits/drawbacks arise from sharing information like this? 2. What are the ethical implications of sharing such personal information in the workplace?

Think of this group stages model as a general framework that underscores the  fact that groups are dynamic entities and managers need to know the stage a group  is  in. Why? So they can understand the problems and issues that are most likely to surface.

Key Aspects of Group Behaviour 8.2 Describe the major concepts of group behaviour. What else do you need to know about groups? Let’s look at some important aspects of group behaviour.

1 Roles

Kwest/Shutterstock

Behaviour patterns expected of someone who occupies a given position in a social unit. We adjust our roles to the group we belong to at the time. Employees attempt to determine what behaviours are expected of them by reading their job descriptions, getting suggestions from their bosses, and watching what their co-workers do. Role conflict happens when an employee has conflicting role expectations. Dr. Meredith Belbin suggests that understanding your role within a particular team helps you enhance your strengths and address your weaknesses as a team member. This creates a stronger team with better individual contributors. Exhibit 8-4 lists the nine roles that Dr. Belbin summarized. It is beneficial to ensure that the group is balanced in terms of these roles.

role Behaviour patterns expected of someone who occupies a given position in a social unit.

226  Chapter 8

Exhibit 8-4  Belbin’s Team Roles Action-Oriented Roles

Shaper Implementer Completer Finisher

People-Oriented Roles

Coordinator Team Worker Resource Investigator

Thought-Oriented Roles

Plant Monitor-Evaluator Specialist

Drives the team to improve Dynamic, loves pressure Adept at putting ideas into action Practical, reliable, organized Ensures timely completion Painstakingly thorough, efficient Acts as a chair of the team Clarifies goals, delegates clearly Encourages cooperation Perceptive, diplomatic, great listener Explores opportunities Outgoing, enthusiastic, networker Generates ideas and approaches Creative, adept at problem solving Sees all the options Assesses accurately and strategically Provides specialized skills Single-minded, self-starting

2a Norms • effort and performance –– probably the most widespread norm –– can be extremely powerful in affecting an individual employee’s performance • dress codes (what is acceptable to wear to work)

2b Conformity Adjusting one’s behaviour to align with a group’s norms • We all want to be accepted by groups to which we belong, which makes us susceptible to conformity pressures. The tendency is for individual members to go along with the pack. To diminish the negative aspects of conformity, managers should create a climate of openness in which employees are free to discuss problems without fear of retaliation.

Kjpargeter/Shutterstock

Standards or expectations that are accepted and shared by a group’s members.

Acceptable standards shared by a group’s members. Each group has its own unique set of norms. Most organizations have common norms that typically focus on

Mogen Creative/ Shutterstock

norms

Chapter 8  Understanding Groups and Teams 227

3  Status Systems A prestige grading, position, or rank within a group and an important factor in understanding behaviour. • Human groupings have always had status hierarchies. • A disparity between what individuals perceive their status to be and what others perceive it to be is a significant motivator with behavioural consequences. • Anything can have status value if others in the group admire it.

Vbar/Shutterstock

• Group members have no problem placing people into status categories, and they usually agree about who’s high, low, and in the middle. • It’s important for people to believe there’s congruency (equity between perceived ranking of an individual and the status symbols he or she has) in an organization’s status system to prevent disruptions to general outlooks such as “This is what I expect.”.

4  Group Size The size of a group affects that group’s behaviour, but the effect depends on what criteria you are looking at. Small groups (five to seven members) are better at • completing tasks faster • figuring out what to do • getting a job done

Lantapix/Shutterstock

Large groups (12 or more members) are better at • problem solving • finding facts • gaining diverse input

Lantapix/Shutterstock

DRAWBACKS OF LARGE GROUPS:  Individual productivity of each group member

declines as the group expands, which is known as social loafing17—reducing effort because dispersion of responsibility encourages individuals to slack off. When a group’s results cannot be attributed to any single person, individuals may be tempted to become “free riders” and coast on the group’s efforts because they think their contributions cannot be measured.

5  Group Cohesiveness The degree to which members are attracted to one another and share the group’s goals. • Groups that experience a lot of internal disagreement and lack of cooperation are less effective than are groups in which individuals generally agree, cooperate, and like each other.

social loafing The tendency of individuals to expend less effort when working collectively than when working individually.

228  Chapter 8

Exhibit 8-5  Group Cohesiveness and Productivity Cohesiveness

Alignment of Group and Organizational Goals

High

Low

High

Strong increase in productivity

Moderate increase in productivity

Low

Decrease in productivity

No significant effect on productivity

• The more that members are attracted to one another and the more that a group’s goals align with each individual’s goals, the greater the group’s cohesiveness. • Highly cohesive groups are more effective than are those with less cohesiveness. However, the relationship between cohesiveness and effectiveness is more complex.18 A key moderating variable is the degree to which the group’s attitude aligns with its formal goals or those of the larger organization.19 See Exhibit 8-5, which tells us the following: • T  he more cohesive a group, the more its members will follow its goals. If these goals are favourable, a cohesive group is more productive than a less cohesive group. • If cohesiveness is high and attitudes are unfavourable, productivity decreases. • If cohesiveness is low and goals are supported, productivity increases, but not as much as when both cohesiveness and support are high. • When cohesiveness is low and goals are not supported, cohesiveness has no significant effect on productivity.

Turning Groups into Effective Teams 8.3 Explain how groups become effective teams. Richard Branson recognized that the large number of employees in the Virgin Group— about 50 000—was an asset and not an obstacle. Virgin’s approach means focusing on the employees first. “Your employees are your best asset,” explains Branson. “Happy employees make for happy customers.”20 So far, we have made a strong case for the value and growing popularity of work teams, but not every employee is inherently a team player. Some people prefer to be recognized for their individual achievements. In some organizations, too, work environments are such that only the strong survive. Creating teams in such an environment may meet some resistance. Countries differ in terms of the degree to which individuals are encouraged by societal institutions to be integrated into groups. Teams fit well in countries that score high on collectivism, where working together is encouraged. But what if an organization wants to introduce teams into an individualistic society like that of Canada? The job becomes more difficult. The challenge is to create effective teams. Effective teams have a number of characteristics, which we review below. For more insights into creating effective teams, see Developing Your Interpersonal Skills: Creating Effective Teams at the end of the chapter.

Chapter 8  Understanding Groups and Teams 229

And the Survey Says...21 25% of managers feel it is most challenging to deal with issues between team co-workers.

83% of respondents identified teams as a key ingredient to organizational success.

22% of managers feel it is most challenging to motivate team members.

40% of senior executives said that meeting deadlines was the most important characteristic of a good team player.

70% of employees say that the biggest benefit of workplace friendships is that they create a more supportive workplace.

37% of workers feel more productive in a small group.

85% of Fortune 1000 companies used team- or group-based pay to some degree.

69% of workers said their teams were not given enough ­resources.

Characteristics of Effective Teams Much research has been done on what it is that makes a team effective.22 Out of these efforts, we now have a fairly focused model identifying those characteristics.23 Exhibit 8-6 summarizes what we currently know about what makes a team effective. As we look at this model, keep in mind two things. Teams differ in form and structure. This model attempts to generalize across all teams, so you should only use it as a guide.24 The model assumes that managers have already determined that teamwork is preferable to individual work. Creating “effective” teams in situations in which individuals can do the job better would be wasted effort.

Exhibit 8-6  Team Effectiveness Model SOURCE: Stephen P. Robbins and Timothy A. Judge, Organizational Behavior, 14th edition, © 2011, p. 319.

Reprinted and electronically reproduced by permission of Pearson Education, Inc., New York, NY.

Context • Adequate resources • Leadership and structure • Climate of trust • Performance evaluation and reward systems Composition • Abilities of members • Personality • Allocating roles • Diversity • Size of teams • Member flexibility • Member preferences Work design • Autonomy • Skill variety • Task identity • Task significance Process • Common purpose • Specific goals • Team efficacy • Conflict levels • Social loafing

Team Effectiveness

230  Chapter 8 One thing we need to clarify before looking at the model is what we mean by team effectiveness. Typically, it includes objective measures of a team’s productivity, managers’ ratings of the team’s performance, and aggregate measures of member satisfaction. As you can see from the model, the four key components of effective teams include the context, the team’s composition, work design, and process variables.

What Contextual Factors Lead to Team Effectiveness? Four contextual factors appear to be most significantly related to team performance. These factors include adequate resources, leadership and structure, a climate of trust, and performance evaluation and reward systems. As part of the larger organization system, a team relies on resources outside the group to sustain it. If it doesn’t have adequate resources, the team’s ability to perform its job effectively is reduced. This factor appears to be so important to team performance that one research study concluded that effective work groups must have support from the organization.25 Resources can include timely information, proper equipment, encouragement, adequate staffing, and administrative assistance. If a team can’t agree on who is to do what or ensure that all members contribute equally in sharing the workload, it won’t function properly. Agreeing on the specifics of work and how all the team members’ individual skills fit together requires team leadership and structure. This aspect can come from the organization or from the team itself. Even in self-managed teams, a manager’s job is to be more of a coach by supporting the team’s efforts and managing outside (rather than inside) the team. Members of effective teams trust each other. And they also trust their leaders.26 Why is trust important? It facilitates cooperation, reduces the need to monitor each other’s behaviour, and bonds members around the belief that others on the team won’t take advantage of them. Trusting the team leader is also important because it means the team is willing to accept and commit to the leader’s goals and decisions. The final contextual factor of an effective team is a performance evaluation and reward system. Team members have to be accountable both individually and jointly. So, in addition to evaluating and rewarding employees for their individual contributions, managers should consider group-based appraisals, profit-sharing, and other approaches that reinforce team effort and commitment.

Technology and the Manager’s Job

Keeping Connected: IT and Teams Thirty percent of managers say their work teams are “digitally fluent” and communicate very well using new electronic channels.27 Work teams need information to do their work. With work teams often being not just steps away but continents away from each other, it’s important to have a way for team members to communicate and collaborate. That’s where IT comes in. Technology has enabled greater online communication and collaboration within teams of all types.28 The idea of technologically aided collaboration actually originated with online search engines. The Internet itself was initially intended as a way for groups of scientists and researchers to share information. Then, as more and more information was put “on the Web,” users relied on a variety of search engines to help them find that information. Now we see many examples of collaborative technologies, such as wiki pages, blogs, and even multiplayer virtual reality games.

Today, online collaborative tools have given work teams more efficient and effective ways to get work done. For instance, engineers at Toyota use collaborative communication tools to share process improvements and innovations. These communication tools allow employees to collectively share common knowledge and innovate faster. Managers everywhere should look to the power of IT to help work teams improve the way work gets done.

Discussion Questions 1. What challenges do managers face in managing teams that must rely on IT to communicate? 2. Using Exhibit 8-6, discuss how the four major components of team effectiveness would affect and be affected by a team’s use of IT.

Chapter 8  Understanding Groups and Teams 231

What Team Composition Factors Lead to Effectiveness? Several team composition factors are important to a team’s effectiveness. They include team member abilities, personality, role allocation, diversity, size of teams, member flexibility, and member preferences. Part of a team’s performance depends on its members’ knowledge, skills, and abilities.29 Research has shown that to perform effectively, a team needs three different types of skills. First, it needs people with technical expertise. Next, it needs members with problem-solving and decision-making skills. Finally, a team needs people with interpersonal skills. A team can’t achieve its performance potential if it doesn’t have or can’t develop all these skills. And the right mix of these skills is also critical. Too much of one at the expense of another will lead to lower team performance. However, a team doesn’t necessarily need all these skills immediately. It’s not uncommon for team members to take responsibility for learning the skills in which the group is deficient. That way a team can achieve its full potential. Personality significantly influences individual behaviour. It’s also true for team behaviour. Research has shown that three of the Big Five dimensions are relevant to team effectiveness.30 For instance, high levels of both conscientiousness and openness to experience tend to lead to higher team performance. Agreeableness also appears to matter. And teams that had one or more highly disagreeable members performed poorly. Maybe you’ve had that not-so-good experience in group projects that you’ve been part of.

Diversity Matters Understanding and managing teams composed of people who are similar can be difficult. Managing teams with diverse members can be even more of a challenge. However, the benefits to be gained from the diverse perspectives, skills, and abilities may offset the extra effort.32 How can you meet the challenge of coordinating a diverse work team? It is important to stress four critical interpersonal behaviours: understanding, empathy, tolerance, and communication. You know that people are not the same, yet they need to be treated fairly and equitably. Differences (cultural, physical, or other) can cause people to behave in different ways. Team leaders need to understand and accept these differences. Each team member should be encouraged to do the same. Empathy is closely related to understanding. As a team leader, you should try to understand others’ perspectives. Tolerance is another important interpersonal behaviour in managing diverse teams. Even though you understand that people are different and you empathize with them, accepting different perspectives or behaviours is not easy. But it is important to be tolerant in dealing with diverse ages, gender, and cultural backgrounds—to allow team members the freedom to be themselves. Part of being tolerant is being open-minded about different values, attitudes, and behaviours. Finally, open communication is vital in managing a diverse team. Diversity problems may intensify if people are afraid or unwilling to openly discuss issues that concern them. Communication within a diverse team needs to be two-way. If a person wants to know whether a certain behaviour is offensive to someone else, it is best to ask. Likewise, a person who is offended by someone else’s behaviour should explain his or her concerns and ask that person to stop. As long as these communication exchanges are handled in a nonthreatening, low-key, and friendly manner, they generally will have positive outcomes. Finally, it helps to have an atmosphere within the team that supports and celebrates diversity. Put yourself in the place of an Asian woman who has joined a team of Caucasian and Hispanic men. How can you be made to feel more welcome and comfortable with the team? As the Asian woman, what could you do to help the team get along well together and also help your transition to the team?

232  Chapter 8

Damian Dovarganes/Associated Press

On many teams, individuals may play multiple roles. It’s important for managers to understand the individual strengths a person will bring to a team and to select team members with those strengths in mind to ensure that these roles are filled. Team diversity is another factor that can influence team effectiveness. Although many of us hold the optimistic view that diversity is desirable, research seems to show the opposite. One review found that “[s]tudies on diversity in teams from the last 50 years have shown that surface-level social-category differences such as race/ ethnicity, gender, and age tend to . . . have negative effects” on the performance of teams.31 Some evidence does show that the disruptive effects of diversity decline over time, but evidence does not confirm that diverse teams perform better eventually. What size should a work team be in order to be effective? At Amazon, work teams have considerable autonomy to innovate and to investigate ideas. Jeff Bezos, founder and CEO, uses a “two-pizza” philosophy; that is, a team should be small enough that it can be fed with two pizzas. This “two-pizza” philosophy usually limits groups to five to seven people, depending, of course, on team member appetites!33 Generally speaking, the most effective teams have five to nine members. And experts suggest using the smallest number of people who can do the task. Team member preferences need to be considered. Why? Some people just prefer not to work on teams. Given the option, many employees will opt not to be part of a team. When people who would prefer to work alone are forced on a team, it creates a direct threat to the team’s morale and to individual member satisfaction.34

How Does Work Design Affect Team Effectiveness? Effective teams need to work together and take collective responsibility for completing tasks. An effective team must be more than a “team in name only.”35 Important work design elements include autonomy, using a variety of skills, being able to complete a whole and identifiable task or product, and working on a task or project that has a significant impact on others. The Microsoft Surface design team had the necessary technical and interpersonal skills to Research indicates that these characterperform effectively in creating the company’s new tablet computer. Shown here demonstrating the product’s innovative design are, from left, team members Steven Sinofsky and Mike istics enhance team member motivation Angiulo and team leader Panos Panay. and increase team effectiveness.36

What Team Processes Are Related to Team Effectiveness? Five team process variables have been shown to be related to team effectiveness. These include a common purpose, specific team goals, team efficacy, managed conflict, and minimal social loafing. An effective team has a common plan and purpose. This common purpose provides direction, momentum, and commitment for team members.37 Members of successful teams put a lot of time and effort into discussing, shaping, and agreeing on a purpose that belongs to them both individually and as a team. Teams also need specific goals. Such goals facilitate clear communication and help teams maintain their focus on getting results. Team efficacy emerges when teams believe in themselves and believe they can succeed.38 Effective teams have confidence ion themselves and in their members.

Chapter 8  Understanding Groups and Teams 233

Of team managers, 63.5 percent say they are somewhat ­effective at resolving conflict.39 Effective teams need some conflict. Conflict on a team isn’t necessarily bad and can actually improve team effectiveness.40 But it has to be the right kind of conflict. Relationship conflicts—those based on interpersonal incompatibilities, tension, and autonomy toward others—are almost always dysfunctional. However, task ­conflicts— those based on disagreements about task content—can be beneficial because they may stimulate discussion, promote critical assessment of problems and options, and can lead to better team decisions. When group conflict becomes dysfunctional, what can managers do? Exhibit 8-7 describes five conflict resolution options: avoiding, accommodating, forcing, compromising, and collaborating.41 Keep in mind that no one option is ideal for every situation. Which approach to use depends on the manager’s desire to be more or less cooperative and more or less assertive. Finally, effective teams work to minimize the tendency for social loafing, which we discussed earlier in this chapter. Successful teams make members individually and jointly accountable for the team’s purpose, goals, and approach.42 For managers, the implications of social loafing are significant. When managers use collective work situations to enhance morale and teamwork, they must also have a way to identify individual efforts. If this is not done, they must weigh the potential losses in productivity from using groups against any possible gains in employee satisfaction.43

How Can a Manager Shape Team Behaviour? A manager can do several things to shape a team’s behaviour, including proper selection, employee training, and rewarding the appropriate team behaviours. Let’s look at each.

Exhibit 8-7  Conflict Resolution Techniques SOURCE: Based on K. W. Thomas, “Conflict and Negotiation Processes in Organizations” in Handbook of Industrial

Forcing

Unassertive

Collaborating Best used • To merge different perspectives • To gain commitment through a consensus • To mend a relationship

Best used • In emergencies • On important but unpopular issues • On vital issues when you know you are right

Assertiveness

Assertive

and Organizational Psychology, vol. 3, 2nd ed., ed. M. D. Dunnette and L. M. Hough (Palo Alto, CA: Consulting Psychologists Press, 1992), p. 668; and C. K. W. De Dreu, A. Evers, B. Beersma, E. S. Kluwer, and A. Nauta, “A Theory-Based Measure of Conflict Management Strategies in the Workplace,” Journal of Organizational Behaviour 22, no 6 (September 2001), pp. 645–668.

Compromising

Best used • When opponents are committed to mutually exclusive goals • To achieve temporary settlements to complex issues • To arrive at expedient solutions under time pressure

Best used • When an issue is trivial • When your concerns will not be met • To let people cool down and regain perspective

Best used • When you find you are wrong • To show your reasonableness • When issues are more important to others than yourself

Avoiding Uncooperative

Accommodating Cooperativeness

Cooperative

conflict Perceived differences that result in some form of interference or opposition.

relationship conflict Conflict based on interpersonal relationships.

task conflict Conflict over content and goals of the work.

234  Chapter 8

Hey, You’re the Boss Now! As a new manager in an organization, it is quite likely you will be part of a team or even managing a team. One of the key challenges that prevent successful team collaboration and performance is social loafing, which causes members of a team working together to exert less effort than they would if they worked alone. To avoid this tendency, here are some team considerations that must be addressed prior to embarking on a collaborative project: • Is a team needed?  That should always be the first question. Perhaps it’s time to break up an existing work team. • Identifiability.  Individuals can hide in a crowd. Make individual contributions identifiable to the team frequently. Divide the tasks so that each person has his or her own individual deliverables that are easy to measure and evaluate. • Diversity.  Do not always pick the “star players” or “big thinkers,” as they may battle for leadership. You need varying skills and abilities in a team. Studies have shown that people tend to work harder if they expect some of their colleagues to perform poorly. • Shared goals.  Team loyalty is higher if the team truly desires the goal. The members of the team will care more about the team’s success rather than their own individual success. • Group size.  Keep group size to a minimum so that it is easier to account for everyone’s work. The larger the group, the more each individual can hide behind its size.

group cohesiveness The degree to which group members are attracted to each other and share the group’s goals.

• Group cohesiveness.  The members of your group should like each other and want to work together to pursue the same goals. That doesn’t mean they are friends, as sometimes friends on a team can be a problem. They need to have a feeling of unity so that they do not want to slack off and let down the rest of the group.

SELECTION  Some individuals already possess the interpersonal skills to be effective

team players. When hiring team members, managers should check whether applicants have the technical skills required to successfully perform the job and whether they can fulfill team roles. As we have mentioned before, some applicants have been socialized around individual contributions and, consequently, lack team skills, which could also be true for some current employees being moved into teams due to organizational restructuring. When faced with this situation, a manager can do several things. First, and most obvious, if a candidate’s team skills are woefully lacking, do not hire that candidate. If successful performance requires interaction, rejecting such a candidate is appropriate. On the other hand, a good candidate with only some basic team skills can be hired on a probationary basis and required to undergo training to shape him or her into a team player. If the skills are not learned or practised, the individual may have to be let go for failing to master the skills necessary for performing successfully on the job.

Fifty-seven percent of team leaders said if someone on their team hated their job, they would encourage them to find another job. Only 7 percent said they would change their role to make them happy.44 TRAINING  Performing well in a team involves a set of behaviours, which can be

learned. Even a large portion of people who were raised on the importance of individual accomplishment can be trained to become team players. Training specialists

can conduct exercises so employees can experience what teamwork is all about. The workshops usually cover such topics as team problem solving, communication, negotiation, conflict resolution, and coaching skills. It is not unusual, too, for these employees to be exposed to the five stages of team development that we discussed earlier.45 At Verizon Communications, for example, trainers focus on how a team goes through various stages before it gels. Employees are reminded of the importance of patience, because teams take longer to do some things—such as make decisions—than do employees acting alone.46 REWARDS  The organization’s reward sys-

ZUMA Press, Inc/Alamy Stock Photo

Chapter 8  Understanding Groups and Teams 235

tem needs to encourage cooperative efforts rather than competitive ones. For example, The Container Store manager Jaimie Moeller (left) leads a team huddle with Lockheed Martin Aeronautics Company has employees before they begin their work day. Because employees work as a team in organized its 20 000-plus employees into serving customers, managers begin shaping team behaviour when interviewing job teams. Rewards are structured to return a candidates and hiring only a small percentage of applicants who are enthusiastic about percentage increase in the bottom line to the working in a team-oriented environment. team members on the basis of achievements of the team’s performance goals. Promotions, pay raises, and other forms of recognition should be given to employees who are effective collaborative team members. Taking this approach does not mean that individual contribution is ignored but rather that it is balanced with selfless contributions to the team. Examples of behaviours that should be rewarded include training new colleagues, sharing information with teammates, helping resolve team conflicts, and mastering new skills in which the team is deficient.47 Finally, managers cannot forget the inherent rewards that employees can receive from teamwork. Work teams provide camaraderie. It is exciting and satisfying to be an integral part of a successful team. The opportunity to engage in personal development and to help teammates grow can be a very satisfying and rewarding experience for employees.48

Current Challenges in Managing Teams 8.4 Discuss contemporary issues in managing teams. Few trends have influenced how work gets done in organizations as much as the use of work teams. The shift from working alone to working on teams requires employees to cooperate with others, share information, confront differences, and sublimate personal interests for the greater good of the team. Managers can build effective teams by understanding what influences performance and satisfaction. However, managers also face some current challenges in managing teams, including those associated with managing global teams and with understanding when teams aren’t the answer.

What’s Involved with Managing Global Teams? Two characteristics of today’s organizations are obvious: they’re global and work is increasingly done by teams. Because of those reasons, any manager is likely to have to manage a global team. What do we know about managing global teams? We know there are both drawbacks and benefits in using global teams. What are some of the

236  Chapter 8

Exhibit 8-8  Global Teams Drawbacks

Benefits

Disliking team members

Greater diversity of ideas

Mistrusting team members

Limited groupthink

Stereotyping

Increased attention on understanding others’ ideas, perspectives, etc.

Communication problems Stress and tension

challenges associated with managing global teams? Exhibit 8-8 summarizes the benefits and drawbacks of global teams.

How Do Team Composition Factors Affect Managing a Global Team? In global organizations, understanding the relationship between group performance and group member resources is more challenging because of the unique cultural characteristics represented by members of a global team. In addition to recognizing team members’ abilities, skills, knowledge, and personality, managers need to be familiar with and clearly understand the cultural characteristics of the groups and the group members they manage.49 For example, is the global team from a culture in which uncertainty avoidance is high? If so, members will not be comfortable dealing with unpredictable and ambiguous tasks. Also, as managers work with global teams, they need to be aware of the potential for stereotyping, which has been shown to be a problem.50

Mosa’ab Elshamy/AP Images

How Does Team Structure Affect Managing a Global Team? Some of the structural areas where we see differences in managing global teams include conformity, status, social loafing, and Cohesiveness. Research suggests that conformity to social norms tends to be higher in collectivist cultures than in individualistic cultures.51 However, groupthink tends to be less of a problem in global teams because members are less likely to feel pressured to conform to the ideas, conclusions, and decisions of the group.52 Also, the importance of status varies among cultures. The French, for example, are extremely status conscious. Also, countries differ on the criteria that confer status. Status for Latin Americans and Asians tends to come from family position and formal roles held in organizations. In contrast, although status is important in countries such as Canada and Australia, it tends to be less “in your face” and is usually based on accomJambu Palaniappan is a regional general manager in Eastern Europe, the Middle East, plishments rather than on titles and family and Africa for Uber, a car service that is rapidly expanding throughout the world. history. Managers should be sure to underIn managing the market strategy, operations, and expansion teams that launch the stand who and what holds status when interservice in different countries, he is challenged by the unique cultural characteristics of acting with people from a culture different team members.

Chapter 8  Understanding Groups and Teams 237

from their own. A Canadian manager who does not understand that office size is not a measure of a Japanese executive’s position or who fails to grasp the importance the British place on family genealogy and social class is likely to unintentionally offend others and lessen his or her interpersonal effectiveness. Social loafing has a Western bias and is most prevalent in individualistic cultures, such as Canada and the United States, which are dominated by self-interest. It is not consistent with collectivistic societies, in which individuals are motivated by in-group goals. In studies comparing employees from the United States with employees from the People’s Republic of China and Israel (both collectivistic societies), the Chinese and Israelis did not tend to engage in social loafing. In fact, they actually performed better in a group than when working alone.53 Cohesiveness is another group structural element with which managers may face special challenges. In a cohesive group, members are unified and “act as one.” There is a great deal of camaraderie, and group identity is high. In global teams, however, cohesiveness is often more difficult to achieve because of higher levels of mistrust, miscommunication, and stress.54

How Do Team Processes Affect Managing a Global Team?

Jilliansuzanne/Fotolia

The processes that global teams use to do their work can be particularly challenging for managers. Communication problems often arise because not all team members may be fluent in the team’s working language. This language barrier can lead to inaccuracies, misunderstandings, and inefficiencies.55 However, research has also shown that a multicultural global team is better able to make use of the diversity of ideas represented if a wide range of information is used.56 Managing conflict in global teams, especially when those teams are virtual teams, is not easy. Conflict in multicultural teams can interfere with how information is used by the team. However, research shows that in collectivistic cultures, a collaborative conflict management style can be most effective.57

Beware! Teams Are Not Always the Answer Despite considerable success in the use of teams, they are not necessarily appropriate in all situations. Teamwork takes more time and often more resources than individual work; it has increased communication demands and the number of conflicts to be managed and meetings to be run. In the rush to enjoy the benefits of teams, some managers have introduced them into situations in which the work is better done by individuals. A study by Statistics Canada found that the introduction of teamwork lowered job turnover in the service industries, for both high- and low-skilled employees. However, manufacturing companies experienced higher job turnover if they introduced teamwork and formal teamwork training, compared with not doing so (15.8 percent versus 10.7 percent).58 Exhibit 8-9 helps answer the question of whether the work of your group would be better done in teams or individually. Researchers have outlined the conditions under which organizations would find teams more useful: “when work processes cut across functional lines; when speed is important (and complex relationships are involved); when the organization mirrors a complex, differentiated, and rapidly changing market environment; when innovation and learning have priority; when the tasks that have to be done require online integration of highly interdependent performers.”59

The Chinese have what is called social striving, where individual performance is improved by staying focused as a team.

238  Chapter 8

JL-Pfeifer/Shutterstock

Exhibit 8-9  Deciding When to Use Teams

Use teams if . . . • employees buy in on purpose • job can’t be completed unless people work together • rewards can be provided for team performance • ample resources and support are available • teams have clear authority over how work gets done • strong, unambiguous management support

Andrey_Popov/Shutterstock

Don’t use teams if . . . • individuals would prefer working alone • the job tasks are independent or too interdependent • rewards are more suited to individual effort and performance • required resources are not available • autocratic management • rigid hierarchical organizational structure

Chapter Summary Learning Objectives Checklist 8.1 Define groups and describe the stages of group development. The five stages are forming, storming, norming, performing, and adjourning. These stages describe how teams evolve over time, although teams do not necessarily go through these stages in a completely linear fashion. Some researchers argue that the effectiveness of work teams increases at advanced stages, but the reality is not that simple. The assumption may be generally true, but what makes a team effective is a complex issue. Instead, think of this model as a general framework of how teams ­develop. Virgin Group uses formal recognition programs to recognize team success, helping teams bond by identifying star contributors, highlighting teams in company newsletters, and hosting parties for employees. It has created a team environment in which employees from different Virgin companies collaborate to work on projects and share updates and tips.

8.2 Describe the major concepts of group behaviour. A role refers to a set of behaviour patterns expected of someone occupying a given position in a social unit. At any given time, employees adjust their role behaviours to the group of which they are a part. Norms are standards shared by group members. They informally convey to employees which behaviours are acceptable and which are unacceptable. Status is another factor to know because it can be a significant motivator and it needs to be congruent. Also, group size affects group behaviour in a number of ways. Smaller groups are generally faster at completing tasks than are larger ones. However, larger groups are frequently better at fact finding because of their diversified input. As a result, larger groups are generally better at problem solving. Finally, group cohesiveness is important because of its impact on a group’s effectiveness at achieving its goals. Branson believes in leading by listening—Virgin conducts regular satisfaction surveys along with frequent informal employee meetings to ensure effective, two-way

Chapter 8  Understanding Groups and Teams 239

communication with employees. Employees are able to speak freely with a high level of trust. This practice has led to employees working together to provide both positive and constructive feedback.

8.3 Explain how groups become effective teams. Effective teams have common characteristics. They have adequate resources, effective leadership, a climate of trust, and a performance evaluation and reward system that reflects team contributions. These teams have individuals with technical expertise as well as problem-solving, decision-making, and interpersonal skills and the right ­ traits, especially conscientiousness and openness to new experiences. Effective teams also tend to be small, preferably of diverse backgrounds. They have members who fill role demands and who prefer to be part of a team. And the work that members do provides freedom and autonomy, the opportunity to use different skills and talents, the ability to complete a whole and identifiable task or product, and work that has a substantial impact on others. Finally, effective teams have members who believe in the team’s capabilities and are committed to a common plan and purpose, specific team goals, a manageable level of conflict, and a minimal degree of social loafing. Virgin also uses company awards to motivate employees to pull together. When the London office was going through a big move, it was a hectic several months with long days and long nights preparing for the move. After the move, Branson threw a pirate-themed party to thank the group for all the hard work. They ended up on the front page of the newspaper, and the event did wonders for reviving the team spirit.

8.4 Discuss contemporary issues in managing teams. Managers face a variety of challenges in managing global teams. The cultural differences of the team members may lead to more conflict, at least initially. In addition, there may be an increase in communication difficulties. Another challenge that managers face is to consider whether a team is really necessary to get the work done. Virgin Group manages companies all over the world, with approximately 71 000 employees. Virgin Mobile Canada employees need to communicate with employees in other countries and utilize virtual teams for marketing and pricing decisions.

Discussion Questions 1. Contrast (1) self-managed and cross-functional teams with and (2) virtual and face-to-face teams. 2. What problems might surface in teams during each of the five stages of team development? 3. Do you believe mutual trust is important in developing high-performing work teams? Why? 4. Why might a manager want to stimulate conflict in a group or team? How could conflict be stimulated? 5. All work teams are work groups, but not all work groups are work teams. Do you agree or disagree with this statement? Discuss. 6. Would you prefer to work alone or as part of a team? Why? Support your response with data from your self-assessments. 7. Describe a situation in which individuals, acting independently, outperform teams in an organization.

Developing Management Skills Dilemma One of your instructors has just informed your class that you will be working on a new major assignment worth 30 percent of your course mark. The assignment is to be done in teams of seven. Realistically you will need to function as a virtual team, because each of you has a different work and class schedule so that there is almost no time when more than three people could meet face to face. As you know, virtual teams have benefits, but they can also face problems. How will you build group cohesiveness in this team? What norms might help the team function, and how should the norms be decided? What will you do to prevent social loafing? How to manage a virtual team: • What do we need to operate as an effective virtual team? • What should our team start doing?

• What should our team stop doing? • How should our team monitor our progress? • What are our virtual team meeting protocols? • What are our technology protocols? • What are our roles, expectations, goals, and behaviour standards? • How should our group manage conflict?

Developing Your Interpersonal Skills: Creating Effective Teams ABOUT THE SKILL A team is different from a group because its members are committed to a common purpose, have a set of specific performance goals, and hold themselves mutually accountable

240  Chapter 8 for the team’s results. Teams can produce outputs that are greater than the sum of the individual contributions of its members. The primary force that makes a work group an effective team—that is, a real high-performing team—is its emphasis on performance.

STEPS IN DEVELOPING THE SKILL Managers and team leaders have a significant impact on a team’s effectiveness. You can be more successful at creating an effective team if you use the following nine suggestions:60 1. Establish a common purpose.  An effective team needs a common purpose to which all members aspire. This purpose is a vision and is broader than any specific goals. The common purpose provides direction, momentum, and commitment for team members. 2. Assess team strengths and weaknesses.  Team members will have different strengths and weaknesses. Knowing these strengths and weaknesses can help the team leader build on the strengths and compensate for the weaknesses. 3. Develop specific individual goals.  Specific individual goals help lead team members to achieve higher performance. In addition, specific goals facilitate clear communication and help maintain the focus on getting results. 4. Get agreement on a common approach for achieving goals.  Goals are the ends a team strives to attain. Defining and agreeing on a common approach ensures the team’s unity regarding the means for achieving those ends. 5. Encourage acceptance of responsibility for both individual and team performance.  Successful teams make members individually and jointly accountable for the team’s purpose, goals, and approach. Members understand what they are individually responsible for and what they are jointly responsible for. 6. Build mutual trust among members.  When there is trust, team members believe in the integrity, character, and ability of each other. When trust is lacking, members are unable to depend on each other. Teams that lack trust tend to be short-lived. 7. Maintain an appropriate mix of team member skills and personalities.  Team members come to the team with different skills and personalities. To perform

effectively, teams need three types of skills. First, teams need people with technical expertise. Next, they need people with problem-solving and decisionmaking skills to identify problems, generate alternatives, evaluate those alternatives, and make competent choices. Finally, teams need people with good interpersonal skills. 8. Provide needed training and resources.  Team leaders need to make sure that their teams have both the training and the resources they need to accomplish their goals. 9. Create opportunities for small achievements. Building an effective team takes time. Team members have to learn to think and work as a team. New teams cannot be expected to hit home runs every time they come to bat, especially at the beginning. Instead, team members should be encouraged to try for small achievements first.

PRACTISING THE SKILL You are the leader of a five-member project team that has been assigned the task of moving your engineering firm into the new booming area of high-speed rail construction. You and your team members have been researching the field, identifying specific business opportunities, negotiating alliances with equipment vendors, and evaluating highspeed rail experts and consultants from around the world. Throughout the process, Tonya, a highly qualified and respected engineer, has challenged everything you say during team meetings and in the workplace. For example, at a meeting two weeks ago, you presented the team with a list of 10 possible high-speed rail projects that had been identified by the team and started evaluating your organization’s ability to compete for them. Tonya contradicted virtually all your comments, questioned your statistics, and was quite pessimistic about the possibility of contracts. After this latest display of displeasure, two other group members, Liam and Ahmed, came to you and complained that Tonya’s actions were damaging the team’s effectiveness. You originally put Tonya on the team for her unique expertise and insight. What should you say to Tonya, and how can you help get the team on the right track to reach its full potential?

Team Exercises 3BL: The Triple Bottom Line Richard Branson, founder of the Virgin Group of companies, decided that an entrepreneurial approach to sustainability would be most effective if based on a team model. Branson established a charitable foundation and sought involvement from everyone working with the Virgin Group. Rather than simply write cheques to

charities, Virgin employees wanted to be a true partner to charitable organizations and leverage internal operations for sustainability. Virgin Unite was launched as an integral part of the Virgin Group rather than a charitable arm. Employees wanted it to be a way of connecting people and entrepreneurial ideas to make sustainability happen. Virgin Unite

Chapter 8  Understanding Groups and Teams 241

provides the means for the groups to connect with each other. Virgin employees join with leaders and workers at existing businesses who are concerned with making profit while helping people and the planet.61

THINKING STRATEGICALLY ABOUT 3BL The focus on entrepreneurial sustainability is a new way of doing business, in which people are willing to say “screw business as usual” and look beyond financial profit as the only driving force for companies like Virgin. How would you apply entrepreneurial sustainability to a large

Canadian company like Tim Hortons? What nonprofit associations could it partner with to become more sustainable?

Be the Consultant: Chairing Effective Meetings A team meeting can be of vital importance to the success of your academic projects. Conducting effective meetings as an effective chairperson takes diligence and practice. Here are some tips.

1. Prepare for the meeting.

• • • •

Plan the meeting carefully: Who, what, when, where, why, and how many? Distribute the agenda and any relevant materials before the meeting. Begin the meeting with the agenda, and get all participants to agree on the items/expectations. Review action items from previous meetings.

2. Ensure that the chair is prepared.

• Vary the chairs of meetings to involve members more effectively. • Discussions and behaviours become predictable with one chair—mix it up for creativity and participation.

3. Maintain the focus.

• Encourage problem solving, and explore various alternatives. • Encourage conflict of ideas, not personalities. • Do not allow any member to manipulate the agenda.

4. Establish ground rules.

• Encourage participation by all—draw out the quiet ones and quiet the talkative ones. • Stay on track and maintain momentum. • Allow people to fill different roles (harmonizers, gatekeepers, compromisers).

5. Maximize the chair’s role.

• • • •

6. Ensure effective decision making.

• Groups typically vote or reach consensus; consensus is more difficult and time consuming but provides the best decision making. • Summarize agreements. • Even if individuals do not agree 100 percent with the decision, they are more likely to support it (or less likely to oppose it) when their opinions have been heard. • Identify additional data needed to make decisions.

7. Clarify deliverables and next steps.

• • • • •

Start on time, and set clear time limits. Use a note-taker and timekeeper as required. The leader stimulates and controls the discussion, keeps the meeting on task, and summarizes all the points discussed. Get feedback during the meeting to optimize meeting processes and norms.

Evaluate the meeting. End the meeting by clarifying what happens next. What actions need to follow, who is responsible, and by when? Schedule the next meeting before you leave. Follow up on action items after the meeting.

Business Cases Whole Foods Canada Walk into any one of the 14 Canadian Whole Foods Markets and you will see eye-popping displays of fresh and healthy food. What you may not see is the continuous innovation happening, thanks to effective leadership and empowered employees working in teams. Every store features about a dozen self-directed teams who make decisions about their work units with very little management control. Each team in all 14 stores meets continuously, with each store meeting monthly as a team as well. Even with the takeover by Amazon, Canadian stores are still running smoothly and not facing the supply chain management problems in the US.62 Team meetings are an opportunity for team members to communicate openly, solve problems, and share

information. They are the backbone of the stores’ operation, leading to company innovations and improvements. This promotes team accountability and reinforces the company’s values. Teams compete in many ways: against their own goals for sales, growth, and productivity; against other teams in their store and also their region.63 Whole Foods has an open-book management philosophy, right down to a radical open-salary policy. All teams can view every team’s performance, as well as submit peer reviews and benchmark each other. Even with competition, the teams still manage to collaborate by sharing knowledge and best practices so that all teams get better.64 Whole Foods teams approve new hires for full-time jobs. New recruits generally go through a temporary employment of about 30 days, after which team members vote

242  Chapter 8 on whether they should stay. Employees take this seriously since they receive monthly bonuses based on team performance. If the teams find ways to lower costs, they share in the savings generated.65 Team self-responsibility leads to employee empowerment. Whole Foods employees do not need to be supervised in order to ensure job performance. That trust leads to higher performance than could be achieved otherwise. Whole Foods views control as a way of creating the conditions that allow for self-direction. With shared values, team members develop a greater sense of responsibility from each other.66 Whole Foods is passionate about helping people eat well and live longer. The company wants to teach customers that healthy eating makes a difference, as does sustainable supply and caring for the planet. That message would not get through without employees who believe in it and are ambassadors of the brand. Since the employees are passionate about their jobs and believe in the company’s purpose and core values, they serve customers with the same passion.67 Teams are responsible for developing new ideas by analyzing customer feedback. This way innovation happens as a democratic process within the team, through small working improvements seeking to provide more customer value. It is not about a single genius coming up with brilliant ideas. Whole Foods believes that if an individual comes up with an idea and shares it with other members of his or her team, the team collaborates and improves upon the idea.68

Discussion Questions 1. Is sharing information worth the risk of revealing important information to competitors? 2. What would each of these self-directed teams need to be successful? 3. How would the way store managers manage be different in this team-based organization as opposed to other supermarkets?

Toyota Canada The Toyota Production System (TPS) has been copied by rivals and other organizations in various industries. Leanmanufacturing experts have extolled the virtues of TPS so often that it is referred to in textbooks around the world. But for Toyota it is successful because of the company’s belief in employee collaboration and teamwork. Although many companies proudly proclaim their team culture, at Toyota the endorsement seems well deserved and sincere. Teamwork is one of Toyota’s core values, along with trust, continuous improvement, long-term thinking, standardization, innovation, and problem solving. In addition, four management principles (the 4P model) guide employees: problem solving, people and partners, process, and philosophy. The idea behind these principles is “Good thinking means good product.” Another interesting detail about

Toyota is its belief that efficiency alone cannot guarantee success. The company recognizes that teams of employees are more than several pairs of hands but represent chie— the wisdom of experience. So . . . how does Toyota’s culture reflect its emphasis on teamwork? First, individualism—a prominent value in Western culture—is de-emphasized. Instead, Toyota emphasizes systems in which people and processes and products are seen as intertwined value streams. As we noted earlier, employees are trained to be problem solvers with an important responsibility to make the production system leaner and better. Next, Toyota’s hiring process “weeds out” those who are not oriented to teamwork. Job applicants must not only be competent and possess technical skills but must exhibit strong teamwork capabilities, such as the ability to trust their team, comfort in solving problems collaboratively, and motivation to achieve collective outcomes. Next—and this should not come as a surprise—Toyota structures its work around teams. Every Toyota employee knows the Thomas Merill adage, “All of us are smarter than any of us.” Teams are used not only in production but at every level and in every function. “Toyota University” illustrates its view on continual education. Job rotation is commonly used to build individual competencies that benefit the whole team. Finally, Toyota considers employee teams to be the power centre of the organization. The leader serves the team—not the other way around. When asked whether he would feature himself in an advertisement, the former CEO of Toyota said, “No. We want to show everybody in the company. The heroes. Not one single person.”69At Toyota Canada, employees have long resisted attempts to unionize because they are happy. Unifor, Canada’s largest private sector union, tried unsuccessfully to unionize Toyota in 2014 and 2016, but Toyota’s focus on employees meant it was unable to get sufficient support from employees. That could certainly change in the future.

Discussion Questions 1. Do you think Toyota has succeeded because of its team-oriented culture, or do you think it could have succeeded without it? 2. How does Toyota emphasize teamwork throughout the organization? 3. How would the way managers manage be different in this team-based organization?

The Go Game—Team Building Team building is often viewed taking a few days away from the office in a place like Mont Tremblant or Banff, or a nature retreat with trust falls, circle sharing, and more. The goal is to build team engagement and connection, but most team building falls short of that goal. Often companies try to measure the ROI (return on investment), which is the wrong message for team building.

Chapter 8  Understanding Groups and Teams 243

TEAM BUILDING for better outcomes The Go Game has a different approach to team building, and counts industry giants like Facebook and Google as clients. The Go Game has offices around the world, including Montreal and Toronto. Now, after 10 years and 10 000 games, the company is a leader in team building. They use large-scale interactive game projects based on mobile technology and augmented reality.70 In Canada, workforce diversity is a major component, so they design games that demonstrate the importance of diversity and inclusion when building strong teams.71 Their games run the gamut from scavenger hunts to game shows, from disaster preparedness to mindfulness games. Companies are leveraging “applied play” as a tool for personal and professional development.72 This applied play helps employees reframe problems, find new solutions, and try out new strategies.

The Go Game endeavours to help organizations achieve a corporate culture of support, engagement, and innovation. Previous clients have seen improvements in group morale, team productivity, conflict resolution skills, decision making, and accountability. Having fun as a team reduces stress and shows the advantages of cooperation over competition. It can also break down some unhealthy habits such as resistance to change, expose negative team dynamics and behaviours, and even reduce turnover.

Discussion Questions 1. What are companies like Uber and Facebook choosing to do for team building? 2. What are some of the best ways to engage employees and build company culture? 3. Do millennials respond to team building differently than older generations?

Chapter 9

Sensory GroundFX, GestureTek Health

Motivating and Rewarding Employees

Learning Objectives 9.1 Define and explain motivation. 9.2 Compare and contrast early theories of motivation. 9.3 Compare and contrast contemporary theories of motivation. 9.4 Discuss current issues in motivating employees.

GestureTek Health of Toronto uses gamification to help increase patient motivation while doing therapy. Its virtual reality exercise programs are fun for the patient and help stretch their physical and cognitive capabilities. Dean Kopfensteiner is using a new technology called the Cube (pictured above) to help him walk. The Cube consists of a computer and a projector that shines images on the floor and uses motion sensors to create different interaction effects. Dean, 6, has cerebral palsy, and the innovative technology makes his therapy more engaging. “Just the motivation of it is great. He can perform an action and actually see a change in what the computer displays. The quality of his walking, as well as his walking endurance, has improved,” Sullivan said of Dean’s progress as a result of the device.1 The Cube contains more than 70 games, including Shrek, Kung Fu Panda, and air hockey. In some games, smoke billows or water ripples with each step, revealing a secret image or creating an exciting visual. Patients like Dean spend more time hard at work in therapy because they are having fun. “They have more motivation to walk or do what they’re doing,” says Sullivan. “Most can go longer when they’re more engaged.”2

244

Chapter 9  Motivating and Rewarding Employees 245

Motivation 9.1 Define and explain motivation. All managers need to be able to motivate their employees, and that requires an understanding of what motivation is. Many people incorrectly view motivation as a personal trait—a trait that some people have and others do not. Our knowledge of motivation tells us that we cannot label people that way. What we do know is that motivation is the result of the interaction between a person and a situation. Certainly, individuals differ in motivational drive but, overall, motivation varies from situation to situation. For example, your level of motivation probably differs among the various courses you take each term. Several CEOs were attending a meeting where the topic was “What do employees want?”3 Each CEO took turns describing the benefits they provided and how they gave out free M&Ms every Wednesday or offered their employees stock options or free parking spaces. However, the meeting’s main speaker made the point that “employees don’t want M&Ms; they want to love what they do.” Half expecting his audience to laugh, the speaker was pleasantly surprised as the CEOs stood up one by one to agree. They all recognized that “the value in their companies comes from the employees who are motivated to be there.”4 These CEOs understand how important employee motivation is. Like them, all managers need to be able to motivate their employees, which requires understanding what motivation is. Motivation refers to the process by which a person’s efforts are energized, directed, and sustained toward attaining a goal.5 This definition has three key elements: energy, direction, and persistence. The (1) energy element is a measure of intensity or drive. A motivated person puts forth effort and works hard. However, the quality of the effort must be considered as well as its intensity. High levels of effort don’t necessarily lead to favourable job performance unless the effort is channelled in (2) a direction that benefits the organization. Effort that’s directed toward, and consistent with, organizational goals is the kind of effort we want from employees. Finally, motivation includes (3) a persistence dimension. We want employees to persist in putting forth effort to achieve those goals and satisfy a need. A need is an internal state that makes certain outcomes appear attractive. An unsatisfied need creates tension, which an individual reduces by exerting effort. Because we are interested in work behaviour, this tension-reduction effort must be directed toward organizational goals. Therefore, inherent in our definition of motivation is the requirement that the individual’s needs be compatible with the organization’s goals. When the two do not match, individuals may expend high levels of effort that run counter to the interests of the organization. Incidentally, this situation is not all that unusual. Some employees regularly spend a lot of time talking with friends at work to satisfy their social need. They exert a great deal of effort, but little, if any, is being directed toward work. Finding ways to motivate employees to achieve high levels of performance is an important organizational problem, and managers keep looking for a solution. A 2018 Gallup poll showed that 67 percent of workers were sometimes, often, or always burned out at work.6 Various studies also reported that more than 50 percent of North American workers were disengaged.7 This level of disengagement has been described by researchers: “These employees are essentially ‘checked out.’ They’re sleepwalking through their workday, putting time, but not energy or passion, into their work.”8 It’s no wonder, then, that both managers and academics want to understand and explain employee motivation.

motivation An individual’s willingness to exert high levels of effort to reach organizational goals, conditioned by the degree to which that effort satisfies some individual need.

need An internal state that makes certain outcomes appear attractive.

246  Chapter 9 Here is a common myth about money and motivation:

  Motivation is all about “Show me the money.” MANAGEMENT MYTH DEBUNKED Maybe the greatest fallacy about motivation is that everyone is motivated by money. Many ineffective or inexperienced managers naively believe that money is a prime motivator. Then they proceed to ignore the many other actions and rewards they control that are as important as money, if not more so. As you’ll see, one size doesn’t fit all, and the secret to being an effective motivator is understanding each individual’s unique needs. For full details on this management myth, check out our Bust the Myth video in Revel.

Maslow’s theory proposing a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization; as each need becomes satisfied, the next need becomes dominant.

Theory X The assumption that employees have little ambition, dislike work, want to avoid responsibility, and must be closely controlled to perform effectively.

Theory Y The assumption that employees can exercise self-direction, accept and seek out responsibility, and consider work a natural activity.

9.2 Compare and contrast early theories of motivation. Know these early theories because they (1) represent the foundation from which contemporary theories grew and (2) are still used by practising managers to explain employee motivation.

Maslow’s Hierarchy of Needs Theory Abraham Maslow—a psychologist—proposed that within every person is a hierarchy of five needs: self-actualization, esteem, social, safety, and physiological. (See Exhibit 9-1.) Each level must be substantially satisfied before the next need becomes dominant. An individual moves up the hierarchy from one level to the next. Lower-order needs are satisfied predominantly externally; higher-order needs are satisfied internally. HOW IS MASLOW’S HIERARCHY USED TO MOTIVATE EMPLOYEES?  Managers will do things to satisfy employees’ needs. Remember: Once a need is substantially satisfied, it no longer motivates. This theory is widely popular among practising managers because it is easy to understand and intuitive.9 However, there is no empirical support provided for the theory; other studies could not validate it.10

McGregor’s Theory X and Theory Y Based on two assumptions about human nature:11 • Theory X: A negative view of people that assumes workers have little ambition, dislike work, want to avoid responsibility, and need to be closely controlled to work effectively. • Theory Y: A positive view that assumes employees enjoy work, seek out and accept responsibility, and exercise self-direction.

Marek/Fotolia

hierarchy of needs theory

Early Theories of Motivation (1950s and 1960s)

Chapter 9  Motivating and Rewarding Employees 247

Exhibit 9-1  Maslow’s Hierarchy of Needs SOURCE: A. H. Maslow, R. D. Frager, and J. Fadiman, Motivation and Personality, 3rd ed., ©1987. Reprinted and Electronically

reproduced by permission of Pearson Education, Inc., New York, NY.

Growth, achieving potential, selffulfillment; “be all you can be”

Selfactualization Esteem

Affection, belongingness, acceptance, friendship

Social

Safety Food, drink, shelter, sex, sleep, other physical requirements

Internal (self-respect, autonomy, achievement) and external (status, recognition, attention)

Security and protection from harm; assurance that physical needs will continue to be met

Physiological

To maximize employee motivation, use Theory Y practices—allow employees to participate in decisions, create responsible and challenging jobs, and encourage good group relations. However, there is no evidence to confirm either set of assumptions or that being a Theory Y manager is the only way to motivate employees.

two-factor theory Herzberg’s theory that intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are related to job dissatisfaction.

Herzberg’s Two-Factor Theory Frederick Herzberg’s two-factor theory (also called motivation-hygiene theory)— intrinsic factors are related to job satisfaction, while extrinsic factors are associated with job dissatisfaction.12

• Criticized for being too simplistic • Has influenced today’s approach to job design RESEARCH FOCUS:  When people felt exceptionally good (satisfied—see left-hand side of Exhibit 9-2) or bad (dissatisfied—see right-hand side of exhibit) about their jobs. Replies showed these were two different factors:

Andersphoto/Fotolia

• Popular theory from the 1960s to the early 1980s

• When people felt good about their work, they tended to cite intrinsic factors arising from the job content (the job itself), such as achievement, recognition, and responsibility.

Replies also provided a new view of satisfaction versus dissatisfaction. (See Exhibit 9-3.) Herzberg concluded that the traditional view—the opposite of satisfaction is ­dissatisfaction—was wrong. He believed that the factors that led to job satisfaction were separate and distinct from those that led to job satisfaction. Removing dissatisfying characteristics from a job did not necessarily make

Olly/Fotolia

• When they were dissatisfied, they tended to cite extrinsic factors arising from the job context, such as company policy and administration, supervision, ­ interpersonal relationships, and working conditions.

248  Chapter 9

Exhibit 9-2  Herzberg’s Two-Factor Theory HYGIENE FACTORS

MOTIVATORS

Supervision Company policy Relationship with supervisor Working conditions Salary Relationship with peers Personal life Relationship with employees Status Security

Achievement Recognition Work itself Responsibility Advancement Growth

Neutral

Extremely Satisfied

hygiene factors Factors that eliminate job dissatisfaction but do not motivate.

motivators Factors that increase job satisfaction and motivation.

three-needs theory McClelland’s theory that the needs for achievement, power, and affiliation are major motives in work.

need for achievement (nAch) The drive to excel, to achieve in relation to a set of standards, and to strive to succeed.

need for power (nPow) The need to make others behave in a way that they would not have behaved otherwise.

Extremely Dissatisfied

that job more satisfying (or motivating); it simply made people “less” dissatisfied. He proposed a dual continuum: The opposite of “satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is “no dissatisfaction.” MOTIVATING EMPLOYEES

1. When hygiene factors are adequate, people will not be dissatisfied, but they will not be motivated, either. 2. To motivate people, use the motivators.

McClelland’s Three-Needs Theory David McClelland and his associates proposed the three-needs theory, which says three acquired (not innate) needs are the major motives in work, including13 1. need for achievement (nAch), which is the drive to succeed and excel in relation to a set of standards 2. need for power (nPow), which is the need to make others behave in a way that they would not have behaved otherwise 3. need for affiliation (nAff), which is the desire for friendly and close interpersonal relationships

need for affiliation (nAff) The desire for friendly and close interpersonal relationships.

Exhibit 9-3  Contrasting Views of Satisfaction and Dissatisfaction SOURCE: S. P. Robbins and M. Coulter, Management, 13th ed., © 2016, p. 465. Reprinted and electronically

reproduced by permission of Pearson Education, Inc., New York, NY.

TRADITIONAL VIEW Satisfied

Motivators Satisfaction

Dissatisfied

HERZBERG’S VIEW No Satisfaction

No Dissatisfaction

Hygiene Factors Dissatisfaction

Chapter 9  Motivating and Rewarding Employees 249

nAch has been researched the most. • People with a high nAch are striving for personal achievement rather than for the trappings and rewards of success. • They have a desire to do something better or more efficiently than it has been done before.14 • They prefer (1) jobs that offer personal responsibility for finding solutions to problems, (2) receiving rapid and unambiguous feedback on their performance in order to tell whether they are improving, and (3) moderately challenging goals. • High achievers avoid what they perceive to be very easy or very difficult tasks. • A high nAch does not necessarily lead to being a good manager, especially in large organizations. Why? Because high achievers focus on their own accomplishments, while good managers emphasize helping others accomplish their goals.15 • Employees can be trained to stimulate their nAch by being in situations where they have personal responsibility, feedback, and moderate risks.16

Contemporary Theories of Motivation 9.3 Compare and contrast contemporary theories of motivation. One of the challenges of motivating employees is linking productivity to rewards. Companies like GestureTek have to link productivity to rewards to ensure that employees feel motivated. The theories we discuss in this section represent contemporary explanations of employee motivation. Although they may not be as well-known as some of the older theories we just discussed, they do have reasonable degrees of valid research support.17 What are some contemporary theories of motivation? We look at goal-setting theory, job design, four-drive theory, equity theory, and expectancy theory.

Goal-Setting Theory Before a big assignment or major class project presentation, has a teacher ever encouraged you to “just do your best”? What does that vague statement, “Do your best” mean? Would your performance on a class project have been higher had that teacher said you needed to score a 93 percent to keep your A in the class? Research on goalsetting theory addresses these issues, and the findings, as you’ll see, are impressive in terms of the effect that goal specificity, challenge, and feedback have on performance.18 Substantial research support has been established for goal-setting theory, which says that specific goals increase performance and that difficult goals, when accepted, result in higher performance than do easy goals. What does goal-setting theory tell us? (a) Working toward a goal is a major source of job motivation. Studies on goal setting have demonstrated that specific and challenging goals are superior motivating forces.19 Such goals produce a higher output than does the generalized goal of “Do your best.” The specificity of the goal itself acts as an internal stimulus. (b) Will employees try harder if they have the opportunity to participate in the setting of goals? Not always. In some cases, participatively set goals elicit superior performance; in other cases, individuals perform best when their manager assigns goals. However, participation is probably preferable to assigning goals when employees might resist accepting difficult challenges.20 (c) We know that people will do better if they get feedback on how well they’re progressing toward their goals because feedback helps identify discrepancies between what they have done and what they want to do. But all feedback is not equally effective. Self-generated feedback—where an employee monitors his or her own progress—has been shown to be a more powerful motivator than feedback coming from someone else.21

goal-setting theory The proposition that specific goals increase performance and that difficult goals, when accepted, result in higher performance than do easy goals.

250  Chapter 9

Ken Wolter/Shutterstock

Three other contingencies besides feedback influence the goal performance relationship: goal commitment, adequate self-efficacy, and national culture.

Cisco Systems Canada is a computer and equipment manufacturer with 1741 employees. It offers an international Early-in-Career exchange, pairing participants with others for a one-week exchange to a Cisco host country.

(1) First, goal-setting theory assumes that an individual is committed to the goal. Commitment is most likely when goals are made public, when the individual has an internal locus of control, and when the goals are self-set rather than assigned.22 (2) Next, self-efficacy refers to an individual’s belief that he or she is capable of performing a task.23 The higher your self-efficacy, the more confidence you have in your ability to succeed in a task. So, in difficult situations, we find that people with low self-efficacy are likely to reduce their effort or give up altogether, whereas those with high self-efficacy will try harder to master the challenge. 24 In addition, individuals with high self-efficacy seem to respond to negative feedback with increased effort and motivation, whereas those with low self-efficacy are likely to reduce their effort when given negative feedback.25 (3) Finally, the value of goal-setting theory depends on the national culture. It is well adapted to Canada because its main ideas align reasonably well with the culture. It assumes that subordinates will be reasonably independent (not a high score on power distance), that people will seek challenging goals (low in uncertainty avoidance), and that performance is considered important by both managers and subordinates (high in assertiveness). Do not expect goal setting to lead to higher employee performance in countries where the cultural characteristics differ. Exhibit 9-4 summarizes the relationships among goals, motivation, and performance. Our overall conclusion: The intention to work toward hard and specific goals is a powerful motivating force. Under the proper conditions, it can lead to higher performance. However, there is no evidence that such goals are associated with increased job satisfaction.26

How Does Job Design Influence Motivation? Yes—you can design jobs that motivate! Because managers want to motivate individuals on the job, we need to look at ways to design motivating jobs. If you look closely at what an organization is and how it

Exhibit 9-4  Goal-Setting Theory • Goals are public • Individual has internal locus of control • Self-set goals Self-Efficacy Committed to Achieving Goals

Motivation (intention to work toward goal)

Accepted • Specific • Difficult Participation in Setting

National Culture

Self-Generated Feedback on Progress

Higher Performance Plus Goal Achievement

Chapter 9  Motivating and Rewarding Employees 251

works, you’ll find that it’s composed of thousands of tasks. These tasks are, in turn, aggregated into jobs. We use the term job design to refer to the way tasks are combined to form complete jobs. The jobs that people perform in an organization should not evolve by chance. Managers should design jobs deliberately and thoughtfully to reflect the demands of the changing environment, the organization’s technology, and employees’ skills, abilities, and preferences.27 When jobs are designed like that, employees are motivated to work hard. What are the ways that managers can design motivating jobs? We can answer that with the job characteristics model (JCM), developed by J. Richard Hackman and Greg R. Oldham.28 According to Hackman and Oldham, any job can be described in terms of the following five core job dimensions: 1. Skill variety.  The degree to which the job requires a variety of activities so the worker can use a number of different skills and talents 2. Task identity.  The degree to which the job requires completion of a whole and identifiable piece of work 3. Task significance.  The degree to which the job affects the lives or work of other people 4. Autonomy.  The degree to which the job provides freedom, independence, and discretion to the individual in scheduling the work and in determining the procedures to be used in carrying it out 5. Feedback.  The degree to which carrying out the work activities required by the job results in the individual’s obtaining direct and clear information about the effectiveness of his or her performance

job design The way tasks are combined to form complete jobs.

job characteristics model (JCM) A framework for analyzing and designing jobs that identifies five primary core job dimensions, their interrelationships, and their impact on outcomes.

Ulrich Baumgarten/Getty Images

Exhibit 9-5 presents the model. Notice how the first three dimensions—skill variety, task identity, and task significance—combine to create meaningful work. What we mean job enrichment is that if these three characteristics exist in a job, we can predict that the person will view his or her The vertical expansion of a job by job as being important, valuable, and worthwhile. Notice, too, that jobs that possess autonomy adding planning and evaluation give the job incumbent a feeling of personal responsibility for the results and that, if a job responsibilities. provides feedback, the employee will know how effectively he or she is performing. From a motivational point of view, the JCM suggests that internal rewards are obtained when an employee learns (knowledge of results through feedback) that he or she personally (experienced responsibility through autonomy of work) has performed well on a task that he or she cares about (experienced meaningfulness through skill variety, task identity, and/or task significance). The more these three conditions characterize a job, the greater the employee’s motivation, performance, and satisfaction and the lower his or her absenteeism and the likelihood of resigning. As the model shows, the links between the job dimensions and the outcomes are moderated by the strength of the individual’s growth need (the person’s desire for selfesteem and self-actualization). Individuals are more likely to experience the critical psychological states and respond positively when their jobs include the core dimensions than are individuals with a low growth need. This distinction may explain the mixed results with job enrichment (vertical expansion of a job by adding planning and evaluation responsibiliThe job of this pediatric nurse caring for newborn babies at a children’s hospital in ties): Individuals with low growth need don’t Germany scores high on task significance as she uses her specialized knowledge and tend to achieve high performance or satisfac- skills in caring for the newborns. Task significance contributes to the meaningfulness of tion by having their jobs enriched. her job and high internal work motivation.

252  Chapter 9

Exhibit 9-5  Job Characteristics Model SOURCE: Reprinted by permission from Hackman, Judith D. (w/o) Hackman, J. Richard.

Core Job Dimensions

Critical Psychological States

Personal and Work Outcomes

Skill variety Task identity Task significance

Experienced meaningfulness of the work

High internal work motivation

Autonomy

Experienced responsibility for outcomes of the work

Knowledge of the actual results of the work activities

Feedback

High-quality work performance High satisfaction with the work Low absenteeism and turnover

Employee growth-need strength

Exhibit 9-6  Guidelines for Job Redesign SOURCE: Reprinted by permission from Judith D. Hackman (w/o) J. Richard Hackman.

Suggested Action

Core Job Dimension

Combine tasks

Skill variety

Form natural work units

Task identity

Establish client relationships

Task significance

Expand jobs vertically Open feedback channels

drive to acquire The drive to seek, take control of, and retain objects and personal experiences.

four-drive theory The theory that behaviour is influenced by our innate drives to acquire, bond, learn, and defend.

drive to bond The drive to form social relationships with others.

The JCM provides significant guidance to managers for job design for both individuals and teams.29 The suggestions shown in Exhibit 9-6, which are based on the JCM, specify the types of changes in jobs that are most likely to improve each of the five core job dimensions.

Four-Drive Theory

Four-drive theory is a holistic theory developed by Harvard Business School professors Paul Autonomy Lawrence and Nitin Nohria. It describes motivation in four categories: the drives to acquire, to Feedback bond, to learn, and to defend.30 These drives interact with each other in varying degrees, depending on the individual and his or her external circumstances. For hospital patients like Dean Kopfensteiner in the opening vignette, the drives are focused primarily on his rehabilitation. The first three drives are considered “proactive” in the sense that we are always trying to fulfill them, independent of each other. The domination of one drive over the others can lead to a lack of balance in an employee’s personal and work life. Exhibit 9-7 presents the four-drive theory. The drive to acquire is the competitive drive for material goods, status, accomplishments, and power. This drive can lead to both greater performance and negative competition, so organizations can use the drive to bond to help minimize unhealthy competition. The drive to bond is the social side of the equation, whereby we try to bond with others and engage in mutually beneficial relationships. These individual relationships can grow to include cooperation and collaboration with groups and teams in the workplace, especially when supported with team-based rewards and challenging goals.

Chapter 9  Motivating and Rewarding Employees 253

Exhibit 9-7  Four-Drive Theory of Motivation SOURCE: Based on Organizational Behaviour, 9th ed., McGraw Hill.

Environmental Factors Drive to acquire

Social norms

Past experience

Drive to bond Motivation

Behaviour

Goal

Drive to learn

Drive to defend

Mental models

Personal values

Personal Factors

The drive to learn is the drive to satiate curiosity and understand ourselves and the world around us. This drive is part of our need for growth and self-­actualization discussed earlier. A work environment that allows for exploration can provide higher satisfaction, and learning new skills can be of greater importance than pay to some employees. The drive to defend is all about self-protection. You may have faced the “fight-orflight” response when defending yourself from danger but perhaps also in relationships or dealing with your belief systems. This drive is the only reactive one and is typically triggered by threats. Communication can be used to correct employee misinformation that might cause unintentional threats in the workplace. Most companies focus on the drive to acquire through pay and incentives but often do not consider the impact of the other drives on employee engagement and motivation. Recognizing that employees want to bond, organizations could plan effective team-building activities that are more than just lip service and give the team a few hours of fun. We discussed the importance of efficiency and effectiveness in Chapter 1. However, organizations focused exclusively on efficiency through automation and standardization may be jeopardizing the drive to learn. They should instead spend more time on improving effectiveness and on how they structure their jobs and projects. A strong vision and corporate culture can provide employees with higher motivation that connects with their drive to defend. Exhibit 9-8 illustrates some of the organizational implications of four-drive theory. The four-drive theory is based on substantive research on emotions and neural processes.31 However, it does not sufficiently explain learned needs, and some critics argue that other drives could be included.

drive to learn The drive to satisfy our curiosity and understand ourselves and the world around us.

drive to defend The drive to protect ourselves both physically and socially.

Equity Theory The term equity is related to the concept of fairness and equal treatment compared with others who behave in similar ways. Considerable evidence demonstrates that employees compare their job inputs and outcomes relative to others’ and that inequities influence the degree of effort employees exert.32 Equity theory, developed by workplace and behavioural psychologist John Stacey Adams, proposes that employees perceive what they get from a job situation

equity theory The theory that an employee compares his or her job’s input– output ratio with that of relevant others and then responds to correct any inequity.

254  Chapter 9

Exhibit 9-8  Organizational Implications of Four-Drive Theory

referents Those things individuals compare themselves against in order to assess equity.

Drive to acquire

• • • • •

Are rewards tied to performance in your organization? Is your pay competitive internally and externally? Are performance expectations clearly defined? Do you know what constitutes high performance in your firm? Is recognition appropriately provided for your performance?

Drive to bond

• • • •

Does your firm’s culture encourage sharing of best practices? Does your firm provide support networks and opportunities for networking? Do you feel strongly that you are a part of the team? How does management show that it cares about you on a personal level?

Drive to learn

• • • • •

Does your work interest you? Can you learn new things at work? Are your assignments varied and challenging? How does your firm support your personal growth and learning? Are you enhancing your knowledge, skills, and abilities as part of your work?

Drive to defend

• • • • •

Is your firm’s performance management system open, transparent, and fair? Is your workplace free of hostility and intimidation? Do your managers treat people with respect? Do you support your company’s vision and culture? Is your workplace communication open—are you able to speak up?

(outcomes) in relation to what they put into it (inputs) and then compare their input– outcome ratio with the input–outcome ratio of relevant others. (See Exhibit 9-9.) If employees perceive their ratio as equal to that of relevant others, a state of equity exists. In other words, they perceive that their situation is fair—that justice prevails. However, if the ratio is perceived as unequal, inequity exists, and they view themselves as under- or over-rewarded. Not all inequity (or equity) is real. It is the individual’s perception that determines the equity of the situation. What will employees do when they perceive an inequity? Equity theory proposes that employees might (1) distort either their own or others’ inputs or outcomes, (2) behave in some way to induce others to change their inputs or outcomes, (3) behave in some way to change their own inputs or outcomes, (4) choose a different comparison person, or (5) quit their jobs. These types of employee reactions have generally proved to be accurate.33 A review of the research consistently confirms the equity thesis: Whenever employees perceive inequity, they will act to correct the situation.34 The result might be lower or higher productivity, improved or reduced quality of output, increased absenteeism, or voluntary resignation. The referent against which individuals compare themselves is an important variable in equity theory.35 Three referent categories have been defined: other, system, and self. The other category includes other individuals with similar jobs in the same organization but also includes friends, neighbours, or professional associates. On the basis of what they hear at work or read about in newspapers or trade journals, employees compare their pay with that of others. The system category includes organizational pay policies and procedures and the administration of the system. Whatever precedents

Exhibit 9-9  Equity Theory *Person A is the employee, and Person B is a relevant other or referent.

Perceived Ratio Comparison*

Employee’s Assessment

Outcomes A Outcomes B 6 Inputs A Inputs B

Inequity (underrewarded)

Outcomes A Outcomes B = Inputs A Inputs B

Equity

Outcomes A Outcomes B 7 Inputs A Inputs B

Inequity (overrewarded)

Chapter 9  Motivating and Rewarding Employees 255

have been established by the organization regarding pay allocation are major elements of this category. The self category refers to the input–outcome ratio that is unique to the individual. It reflects personal experiences and contacts and is influenced by criteria such as previous jobs or family commitments. The choice of a particular set of referents is related to the information available about the referents as well as to their perceived relevance. At Surrey, British Columbia–based Back in Motion Rehab, management decided that the highest-paid director’s base salary should be less than two times the salary of the average staff member.36 Because this policy uses the average staff member’s pay as a referent, it sends the message that the output of the average staff member is truly valued. Originally, equity theory focused on distributive justice, which is the perceived fairness of the amount and allocation of rewards among individuals. More recent research has focused on looking at issues of procedural justice, which is the perceived fairness of the process used to determine the distribution of rewards. This research shows that distributive justice has a greater influence on employee satisfaction than procedural justice, while procedural justice tends to affect an employee’s organizational commitment, trust in his or her boss, and intention to stay or quit.37 What are the implications for managers? They should consider openly sharing information on how allocation decisions are made, follow consistent and unbiased procedures, and engage in similar practices to increase the perception of procedural justice. Employees who have an increased perception of procedural justice are likely to view their bosses and the organization as positive, even if they are dissatisfied with pay, promotions, and other personal outcomes.

Expectancy Theory The most comprehensive and widely accepted explanation of employee motivation to date is the expectancy theory, developed by Victor Vroom, professor at the Yale School of Management.41 Although the theory has its critics,42 most research evidence ­supports it.43

Diversity Matters In today’s global business environment, managers cannot automatically assume that motivational programs that work in one location are going to work in others. Let us look at several theories to see if there is any cross-cultural transferability. Maslow’s hierarchy of needs proposes that people start at the physiological level and then move progressively up the hierarchy in order. This hierarchy, if it has any application at all, aligns with Canadian culture. In countries such as Japan, Greece, and Mexico, where uncertaintyavoidance characteristics are strong (that is, individuals prefer structured situations), security needs would be on the top of the needs hierarchy. Countries that score high on quality-of-life characteristics (that is, individuals value relationships and are concerned with the welfare of others)—Denmark, Sweden, Norway, the Netherlands, and Finland—would have social needs on top.38 We would predict, for example, that group work will motivate employees more when a country’s culture scores high on quality-of-life characteristics. Equity theory has a relatively strong following in Canada. Given that Canadian-style reward systems are based on the assumption that employees are highly sensitive to equity in reward allocations, the theory’s popularity is not surprising. In Canada, equity is meant to closely tie pay to performance. However, recent evidence suggests that in collectivist cultures (where individuals expect that others will look after and protect them), especially in the former socialist countries of Central and Eastern Europe, employees expect rewards to reflect their individual needs as well as their performance.39 Moreover, consistent with a legacy of communism and centrally planned economies, employees exhibit a greater “entitlement” attitude—that is, they expect outcomes to be greater than their inputs.40 These findings suggest that Canadian-style pay practices may need modification, especially in Russia and other former communist countries, in order to be perceived as fair by employees.

distributive justice Perceived fairness of the amount and allocation of rewards among individuals.

procedural justice Perceived fairness of the process used to determine the distribution of rewards.

256  Chapter 9

Exhibit 9-10  Simplified Expectancy Model Individual effort

expectancy theory The theory that an individual tends to act in a certain way based on the expectation that the action will be followed by a given outcome and on the attractiveness of that outcome to the individual.

Individual performance

A

B

Organizational rewards

C

A

= Effort–performance linkage (expectancy)

B

= Performance–reward linkage (instrumentality)

C

= Attractiveness (valence)

Individual goals

Expectancy theory states that an individual tends to act in a certain way based on the expectation that the action will be followed by a given outcome and on the attractiveness of that outcome to the individual. It includes three variables or relationships. (See Exhibit 9-10.) • Expectancy, or effort–performance linkage.  The probability perceived by the individual that exerting a given amount of effort will lead to a certain level of performance. • Instrumentality, or performance–reward linkage.  The degree to which the individual believes that performing at a particular level is instrumental in attaining the desired outcome. • Valence, or attractiveness of reward.  The importance that the individual places on the potential outcome or reward that can be achieved on the job. Valence considers both the goals and needs of the individual. This explanation of motivation might sound complex, but it really is not. It can be summed up in these questions: How hard do I have to work to achieve a certain level of performance, and can I actually achieve that level? What reward will I get for working at that level of performance? How attractive is the reward to me, and does it help me achieve my goals? Whether you are motivated to put forth effort (that is, to work) at any given time depends on your particular goals and your perception of whether a certain level of performance is necessary to attain those goals. The key to expectancy theory is an understanding that an individual’s goal and the links between effort and performance, between performance and rewards, and finally between rewards and individual goal satisfaction are related. Expectancy theory recognizes that there is no universal principle for explaining what motivates individuals and thus stresses that managers need to understand why employees view certain outcomes as attractive or unattractive. After all, we want to reward individuals with those things they value as positive. Expectancy theory also emphasizes expected behaviours. Do employees know what is expected of them and how they will be evaluated? Finally, the theory is concerned with perceptions; reality is irrelevant. An individual’s own perceptions of performance, reward, and goal outcomes, not the outcomes themselves, will determine his or her motivation (level of effort). Exhibit 9-11 suggests how managers might increase employee motivation using expectancy theory.

Exhibit 9-11  Steps to Increasing Motivation Using Expectancy Theory Improving Expectancy Improve the ability of the individual to perform • Make sure employees have the necessary skills for the task. • Provide training. • Assign reasonable tasks and goals.

Improving Instrumentality Increase the individual’s belief that performance will lead to reward • Observe and recognize performance. • Deliver rewards as promised. • Indicate to employees how previous good performance led to greater rewards.

Improving Valence Make sure that the reward is meaningful to the individual • Ask employees what rewards they value. • Give rewards that are valued.

Chapter 9  Motivating and Rewarding Employees 257

Integrating Contemporary Theories of Motivation We have presented five contemporary motivation theories. You might be tempted to view them independently, but doing so would be a mistake. Many of the ideas underlying the theories are complementary, and you will better understand how to motivate people if you see how the theories fit together.44 Four-drive theory suggests that jobs and workplaces should provide an opportunity to fulfill the drives to acquire, bond, learn, and defend. The drives should be kept in balance so that employees are not overly influenced by any one drive. Expectancy theory predicts that an employee will exert a high level of effort if he or she perceives that there is a strong relationship between effort and performance, performance and rewards, and rewards and satisfaction of personal goals. Each of these relationships is, in turn, influenced by certain factors. The level of individual performance is determined not only by the level of individual effort but also by the individual’s ability to perform and by whether the organization has a fair and objective performance evaluation system. The performance–reward relationship will be strong if the individual perceives that it is performance (rather than seniority, personal favourites, or some other criterion) that will be rewarded. The final link in expectancy theory is the rewards–goal relationship. Needs theories come into play at this point. Motivation is high to the degree that the rewards an individual receives for his or her high performance satisfy the dominant needs consistent with his or her individual goals. Rewards also play a key part in equity theory. Individuals will compare the rewards (outcomes) they have received from the inputs or efforts they made with the input–­ outcome ratio of relevant others. Any inequities may influence the effort expended. Finally, the JCM is also integrated. Task characteristics (job design) influence job motivation at two places. First, jobs that are designed around the five job dimensions are likely to lead to higher actual job performance because the individual’s motivation will be stimulated by the job itself—that is, they will increase the linkage between effort and performance. Second, jobs that are designed around the five job dimensions also increase an employee’s control over key elements in his or her work. Therefore, jobs that offer autonomy, feedback, and similar task characteristics help to satisfy the individual goals of employees who desire greater control over their work.

Current Issues in Motivation 9.4 Discuss current issues in motivating employees. One of the challenges managers face is how to motivate many different employee groups: students, new graduates, mothers returning to the workplace, and ethnic minorities, for example. Some companies find that older female employees want flexible hours and stimulating work but are not looking to be promoted. Young college graduates working in head office, on the other hand, want a challenging, well-paid career and time to pursue personal interests and family life. Many employees want managers who help them.45 The diagram on the following page illustrates the link between employee engagement and key business outcomes such as absenteeism, turnover, productivity, and profitability. So far, we have covered a lot of the theoretical bases of employee motivation. Understanding and predicting employee motivation continues to be one of the most popular areas in management research. However, even current studies of employee motivation are influenced by several significant workplace issues—issues such as motivating employees when the economy is struggling, motivating unique groups of workers, designing effective rewards programs, and improving work–life balance. Let us take a closer look at each of these issues.

258  Chapter 9

Employee Engagement Affects Key Business Outcomes

241%

22%

Profitability

241%

228%

237%

21% 10% Customer

Quality (Defects)

Safety Incidents

Patient Safety Incidents

225%

Shrinkage

Low-Turnover Organizations

High-Turnover Organizations

30 20 10 0 210 220 230 240 250 260 270 280

Absenteeism

Turnover

Productivity

Work units in the quartile in employee engagement outperform bottom-quartile units by 10 percent on customer ratings, 21 percent in productivity, and 22 percent in profitability. Work units in the top quartile also saw significantly lower absenteeism (37 percent), turnover (25 percent in high-turnover organizations, 65 percent in low-turnover organizations), and shrinkage (28 percent) and fewer safety incidents (48 percent), patient safety incidents (41 percent), and quality defects (41 percent).

248% 265%

SOURCE: Copyright © 2013 Gallup, Inc. All rights reserved. The content is used with permission; however, Gallup retains all rights

of republication. Retrieved from http://www.gallup.com/businessjournal/163130/employee-engagement-drives-growth.aspx

Motivating Employees When the Economy Stinks Zappos, the quirky Las Vegas–based online shoe retailer (now a part of Amazon.com), has always had a reputation for being a fun place to work.46 However, during the economic recession, it, like many companies, had to cut staff—124 employees in total. CEO Tony Hsieh wanted to get out the news fast to lessen the stress for his employees. So he announced the layoff in an e-mail, on his blog, and on his Twitter account. Although some might think these are terrible ways to communicate that kind of news, most employees thanked him for being so open and so honest. The company also took good care of those being laid off. Laid-off employees with less than two years of service were paid through the end of the year. Longer-tenured employees got four weeks’ severance pay for every year of service. All got six months of continued paid health coverage and, at the request of the employees, got to keep their 40 percent merchandise discount through the Christmas season. Zappos had always been a model of how to nurture employees in good times; now it showed how to treat employees in bad times. Economic recessions can be difficult for many organizations, especially when it comes to their employees. Layoffs, tight budgets, minimal or no pay raises, benefit cuts, no bonuses, long hours doing the work of those who had been laid off—this can be the reality that many employees face. As conditions deteriorate, employee confidence, optimism, and job engagement plummet as well. As you can imagine, it isn’t an easy thing for managers to keep employees motivated under such challenging circumstances. In an uncertain economy, managers have to be creative in keeping their employees’ efforts energized, directed, and sustained toward achieving goals. They are forced to look at ways to motivate employees that don’t involve money or that are relatively inexpensive.47 So they use actions such as holding meetings with employees to keep the lines of communication open and to get their input on issues; establishing a common goal, such as maintaining excellent customer service, to keep everyone focused; creating a community feel so employees can see that managers care about

Chapter 9  Motivating and Rewarding Employees 259

A Question of Ethics A scary thing is happening. Workers facing extraordinary work demands are turning to ADHD (attention deficit hyperactivity disorder) drugs to boost their energy. These pills are amphetamine-based stimulants that give users a boost of ­ energy. Although some students may use these when studying for exams or putting the final touches on a research paper/ presentation, experts now say that stimulant abuse is moving into the workplace. Many young workers using the drugs to increase their productivity say that “these drugs are used not to

get high, but hired.” Such seemingly harmless abuse can lead to serious consequences.48

Discussion Questions 1. What do you think? Is this a problem of/for employee motivation? Explain. 2. Why is this a potential ethical issue? How might managers address this?

them and their work; and giving employees opportunities to continue to learn and grow. And, of course, an encouraging word always goes a long way, as well.

Motivating Unique Groups of Workers (1) MOTIVATING A DIVERSE WORKFORCE  To maximize motivation in today’s

workforce, managers need to think in terms of flexibility. For example, studies tell us that men place more importance on having autonomy in their jobs than do women. In contrast, the opportunity to learn, convenient and flexible work hours, and good interpersonal relations are more important to women.49 Baby Boomers may need more flextime as they manage the needs of their children and their aging parents. GenXers want employers to add to their experience so they can develop portable skills. Meanwhile, Gen-Yers want more opportunities and the ability to work in teams.50 Managers need to recognize that what motivates a single mother with two dependent children who is working full-time to support her family may be very different from what motivates a single part-time employee or an older employee who is working only to supplement his or her retirement income. A wide array of rewards is needed to motivate employees with such diverse needs. There are also cross-cultural differences in motivation, which we discussed in Diversity Matters earlier in the chapter. Along with differences, there will be many cross-cultural consistencies in terms of what motivates employees. For example, the desire for interesting work seems important to almost all employees, regardless of their national culture. In a study of seven countries, employees in Belgium, Britain, Israel, and the United States ranked “interesting work” number one among 11 work goals, and this factor was ranked either second or third in Japan, the Netherlands, and Germany.51 Similarly, in a study comparing job-preference outcomes among graduate students in Canada, the United States, Australia, and Singapore, growth, achievement, and responsibility were rated the top three and had identical rankings.52 Both of these studies suggest some universality to the importance of intrinsic factors identified by Herzberg in his motivation-hygiene theory. Another recent study examining workplace motivation trends in Japan also seems to indicate that Herzberg’s model is applicable to Japanese employees.53 MOTIVATING PROFESSIONAL AND TECHNICAL EMPLOYEES  In contrast to a

generation ago, the typical employee today is more likely to be a highly trained professional with a postsecondary degree than a blue-collar factory worker. What special concerns should managers be aware of when trying to motivate a team of engineers at London, Ontario–based EllisDon, software designers at Vancouver-based Electronic Arts, or a group of consultants at Dublin-based Accenture?

260  Chapter 9 Professionals are typically different from nonprofessionals.54 They have a strong and long-term commitment to their field of expertise. Their loyalty is more often to their profession than to their employer. To keep current in their field, they need to regularly update their knowledge, and because of their commitment to their profession they rarely define their work week as 8:00 a.m. to 5:00 p.m., five days a week. What motivates professionals? Money and promotions typically are low on their priority list. Why? They tend to be well paid and enjoy what they do. In contrast, job challenge tends to be ranked high. They like to tackle problems and find solutions. Their chief reward in their jobs is the work itself. Professionals also value support. They want others to think that what they are working on is important.55 That may be true for all employees, but professionals tend to be focused on their work as their central life interest, whereas nonprofessionals typically have other interests outside work that can compensate for needs not met on the job. The preceding points imply that managers should provide professional and technical employees with new assignments and challenging projects. Give them autonomy to follow their interests and allow them to structure their work in ways they find productive. Reward them with educational opportunities—training, workshops, conferences—that allow them to keep current in their field and to network with their peers. Also reward them with recognition. Managers should ask questions and engage in other actions that demonstrate to their professional and technical employees that they are sincerely interested in what their employees are doing.

Oliveromg/Shutterstock

MOTIVATING CONTINGENT WORKERS  As many full-time jobs have been elimi-

nated through downsizing and other organizational restructurings, the number of openings for part-time, contract, and other forms of temporary work have increased. Contingent workers do not have the security or stability that permanent employees have, and they do not identify with the organization or display the commitment that other employees do. Temporary workers also typically get few or no benefits, such as health care or pensions.56 There is no simple solution for motivating contingent employees. For that small set of individuals who prefer the freedom of their temporary status—for example, some students, working mothers, and retirees—the lack of stability may not be an issue. Temporariness might also be preferred by highly compensated physicians, engineers, accountants, or financial planners who do not want the demands of a full-time job. But these are the exceptions. For the most part, temporary employees are not temporary by choice. What will motivate involuntarily temporary employees? An obvious answer is the opportunity to become a permanent employee. In cases in which permanent employees are selected from a pool of temps, the temps will often work hard in hopes of becoming permanent. A less obvious answer is the opportunity for training. The ability of a temporary employee to find a new job is largely dependent on his or her skills. If the employee sees that the job he or she is doing can help develop marketable skills, then motivation is increased. From an equity standpoint, a manager should also consider the repercussions of mixing permanent and temporary workers when pay differentials are significant. When temps work alongside permanent employees who earn more and get benefits, too, for doing the same job, the performance of temps is likely to suffer. Separating such employees or perhaps minimizing interdependence between them might help managers decrease The Great Little Box Company in Richmond, BC, has its own outdoor potential problems.57 beach volleyball court

Chapter 9  Motivating and Rewarding Employees 261

Employee rewards programs play a powerful role in motivating for appropriate employee behaviour. In this section, we look at how managers can design effective rewards programs by using employee recognition programs and pay-for-performance programs. First, though, we should examine the issue of the extent to which money motivates. THE ROLE OF MONEY  The most commonly used

reward in organizations is money. As one author notes, “Money is probably the most emotionally meaningful object in contemporary life: only food Zita Cobb walked away from a lucrative CFO job at JDS Uniphase, where she was responsible for dozens of billion-dollar acquisitions, to revitalize and sex are its close competitors as common carriers the tourism industry in Fogo Island. Her Fogo Island Inn (pictured above), of such strong and diverse feelings, significance, and just north of Newfoundland, is world famous for its futuristic design that strivings.”58 also pays homage to local heritage. Little research attention has been given to individual differences in people’s feelings about money, although some studies indicate that money is not employees’ top priority.59 A survey of 2000 Canadians discovered that trustworthy senior management and a good balance between work and personal or family life mattered more than pay or benefits when it came to employee satisfaction.60 A number of studies suggest that an individual’s attitude toward money is correlated with personality traits and demographic factors.61 People who desire money score higher on self-esteem, need for achievement, and Type A personality measures. Men seem to value money more than women. These studies suggest that individuals who value money will be more motivated by it than individuals who value other things. What these findings suggest is that when organizations develop reward programs, they need to consider carefully what individuals value.

Robert Vincelli/Shutterstock

Designing Effective Rewards Programs That Motivate Employees

OPEN-BOOK MANAGEMENT  How can sharing information motivate employ-

ees? The Great Little Box Company, a one-stop manufacturer/distributor of boxes, displays, labels, and protective packaging, was named to Forbes 2017 list “5 Great Companies that got Corporate Culture Right.”62 “Our culture is based on trust and respect,” says James Palmer, vice-president of sales and marketing. The company shares its financials and income with employees. As a result, the Great Little Box Company is ranked among the top 100 employers in the country and has very high employee attraction and retention.63 Many organizations of various sizes involve their employees in workplace decisions by opening up the financial

And the Survey Says...65  The top five reasons small businesses invest in social responsibility 92% say they have a duty to give back to the community. 77% say the initiatives attract like-minded employees.

75% say their customers expect social responsibility. 73% say the environment is part of their business decisions. 62% say there is a triple bottom line (3BL) impact in being socially responsible.

262  Chapter 9

open-book management A motivational approach in which an organization’s financial statements (the “books”) are shared with all employees.

statements (the “books”). They share that information so that employees will be motivated to make better decisions about their work and better able to understand the implications of what they do, how they do it, and the ultimate impact on the bottom line. This approach is called open-book management, and many organizations are using it.64 The goal of open-book management is to get employees to think like an owner by seeing the impact their decisions have on financial results. Because many employees do not have the knowledge or background to understand financials, they have to be taught how to read and understand the organization’s statements. Once employees have this knowledge, however, managers need to regularly share the numbers with them. By sharing this information, employees begin to see the link between their efforts, level of performance, and operational results. Sharing information about a company’s corporate social responsibility goals and objectives can also motivate employees to stay with the company.

Employee Recognition Programs employee recognition programs Reward programs that provide managers with opportunities to give employees personal attention and express interest, approval, and appreciation for a job well done.

pay-for-performance programs Variable compensation plans that pay employees on the basis of some performance measure.

Employee recognition programs provide managers with opportunities to give employees personal attention and express interest, approval, and appreciation for a job well done.66 These programs can take many forms. For instance, you can personally congratulate an employee in private for a good job. You can send a handwritten note or an e-mail message acknowledging something positive that the employee has done. For employees with a strong need for social acceptance, you can publicly recognize accomplishments. To enhance group cohesiveness and motivation, you can celebrate team successes, perhaps by throwing a pizza party to celebrate a team’s accomplishments. One of the consistent themes that has emerged in the 13 years that Hewitt Associates has studied the 50 Best Companies to work for in Canada is the importance of recognition. A large number of the winning companies show appreciation for their employees frequently and visibly.67 PAY-FOR-PERFORMANCE PROGRAMS  What is in it for me? That is a question every person consciously or unconsciously asks before engaging in any form of behaviour. Our knowledge of motivation tells us that people act in order to satisfy some need. Before they do anything, they look for a payoff or reward. Although organizations may offer many different rewards, most of us are concerned with earning an amount of money that allows us to satisfy our needs and wants. In fact, a large body of research suggests that pay is far more motivational than some motivation theorists, such as Maslow and Herzberg, suggest.68 Because pay is an important variable in motivation, we need to look at how we can use pay to motivate high levels of employee performance. This concern explains the logic behind pay-for-performance programs. Pay-for-performance programs are variable compensation plans that pay employees on the basis of a performance measure.69 Piece-rate pay plans, wage-­ incentive plans, profit-sharing, and lump-sum bonuses are examples. What differentiates these forms of pay from more traditional compensation plans is that instead of paying a person for time on the job, pay is adjusted to reflect a performance measure. Performance measures might include such things as individual productivity, team or work-group productivity, departmental productivity, or the overall organization’s profit performance. Pay-for-performance is probably most compatible with expectancy theory. Specifically, if motivation is to be maximized, individuals should perceive a strong

Chapter 9  Motivating and Rewarding Employees 263

Technology and the Manager’s Job

Gamification and Rewards Organizations have historically assumed that “one size fits all” when it comes to allocating rewards. Managers typically assumed that everyone wants more money and more vacation time. But as organizations become less bureaucratic and more capable of differentiating rewards, managers will be encouraged to differentiate rewards among employees as well as for individual employees over time. Organizations control a vast number of potential rewards that employees might find appealing. A partial list would include increased base pay, bonuses, shortened workweeks, extended vacations, paid sabbaticals, flexible work hours, part-time employment, guaranteed job security, increased pension contributions, college tuition reimbursement, personal days off, help in purchasing a home, recognition awards, paid club memberships, and work-from-home options. And the latest twist in employee rewards comes through the use of social networking, mobile accessibility, and gamification—that is,

applying typical aspects of game playing to other areas of activity especially in a work ­ setting—giving employees the opportunity to earn ongoing “badges” or “honours.” These types of reward programs have the potential to engage and inspire employees. In the future, most organizations will structure individual reward packages in ways that will maximize employee motivation. The opening vignette illustrated how gamification can motivate hospital patients as well as it can employees.

Discussion Questions 1. What are the positive aspects of having individualized rewards? (Think in terms of employees and managers.) 2. What are the negative aspects of having individualized rewards? (Again, think in terms of employees and managers.)

relationship between their performance and the rewards they receive. If rewards are allocated only on nonperformance factors—such as seniority, job title, or across-theboard pay raises—then employees are likely to reduce their efforts. Pay-for-performance programs are popular; the number of employees affected by variable-pay plans has been rising in Canada. More than 80 percent of Canadian companies have variable-pay programs in place.70 Prem Benimadhu, former vicepresident of governance and human resource management with The Conference Board of Canada, noted, “Canadian unions have been very allergic to variable ­compensation.”71 In addition to wage uncertainty, employees may object to pay-forperformance if they feel that factors out of their control might affect the extent to which bonuses are possible.72 Do pay-for-performance programs work? The evidence is mixed, at best.73 One recent study that followed the careers of 1000 top economists found that they put in more effort early in their careers, at a time when productivity-related incentives had a larger impact.74 A recent study in Canada looked at both unionized and nonunionized workplaces and found that variable-pay plans resulted in “increased productivity, a safer work environment, a better understanding of the business by employees, and little risk of employees losing base pay,” according to Prem Benimadhu.75 But there are also studies that question the effectiveness of pay-forperformance approaches, suggesting they can lead to less group cohesiveness in the workplace.76 If the organization uses work teams, managers should consider group-based performance incentives that will reinforce team effort and commitment. But whether these programs are individual based or team based, managers do need to ensure that they are specific about the relationship between an individual’s pay and his or her expected level of appropriate performance. Employees must clearly understand exactly how performance—theirs and the organization’s—translates into dollars on their paycheques.77 Ottawa-based Lee Valley Tools uses quarterly

gamification Applying typical aspects of game playing to other areas of activity, especially in a work setting.

264  Chapter 9 newsletters to employees to let them know how much profit is forecast. The newsletter helps employees understand how hard work will pay off for them. Robin Lee, the company’s president, says that “sharing information and profits promotes an atmosphere in which hard work, innovation, and efficiency pay off for everybody.”78

Improving Work–Life Balance While many employees continue to work an eight-hour day, five days a week, with fixed start and end times, organizations have started to implement programs to help employees manage their lives outside work. Many of the work–life balance programs that organizations have implemented are a response to the varied needs of a diverse workforce. In addition to helping with errands and meals, contemporary companies are looking at a variety of scheduling options, including flextime, job sharing, and telework, to help employees balance work and personal life. FLEXIBLE WORK SCHEDULES  Many organizations have developed flexible compressed workweek A workweek in which employees work longer hours per day but fewer days per week.

flexible work hours (flextime) A scheduling option in which employees are required to work a specific number of hours per week but are free to vary those hours within certain limits.

telework A job arrangement in which employees work at home and are linked to the workplace by computers and other technology.

work schedules that recognize different needs. For instance, a compressed workweek is a workweek in which employees work longer hours per day but fewer days per week. The most common form is four 10-hour days (a 4/40 program). However, organizations could design other types of schedules to fit employees’ needs. Another alternative is flexible work hours (also popularly known as flextime), a scheduling option in which employees are required to work a specific number of hours per week but are free to vary those hours within certain limits. In a flextime schedule, all employees are required to be on the job for certain common core hours, but starting, ending, and lunch-hour times are flexible. Flextime is one of the most desired benefits among employees.79 A 2018 Conference Board of Canada study found that almost 9 out of 10 (86 percent) Canadian employers offer at least one flexible work benefit.80 JOB SHARING  Another scheduling option that can be effective in motivating a diverse workforce is job sharing—the practice of having two or more people split a full-time job. This type of job schedule might be attractive to individuals who want to work but do not want the demands and hassles of a full-time position. TELEWORK  Another alternative made possible by information technology is telecommuting or telework, in which employees work away from their office, usually at home, and are linked to the workplace by computer and other technology. Since many jobs are computer and Internet oriented, this job arrangement might be considered ideal for some people as there is no commuting, the hours are flexible, there is freedom to dress as you please, and there are few or no interruptions from colleagues. However, keep in mind that some employees miss the informal interactions at work that satisfy their social needs and provide a source of new ideas.

Raduga21/Fotolia

Suggestions for Motivating Employees

A 2017 study found that 47 percent of Canadians used telework to decrease commuting time and increase productivity.81

We have covered a lot of information about motivation in this chapter. If you are a manager concerned with motivating your employees, what specific recommendations can you draw from the theories and issues discussed so far? Hey You’re The Boss Now provides suggestions that draw on what we know about motivating employees.

Chapter 9  Motivating and Rewarding Employees 265

Hey, You’re the Boss Now! As a new manager, motivating employees can be one of the most challenging aspects of the job. There is no simple, all-encompassing set of motivational guidelines, but the following suggestions draw on the essence of what research says about motivating employees:82 • Recognize individual differences.  Almost every contemporary motivation theory recognizes that employees are not identical. They have different needs, attitudes, personalities, and other important individual variables. Managers may not be giving enough consideration to what employees really want in terms of pay and benefits from the workplace. A recent survey of 446 employers by Western Compensation and Benefits Consultants found that 94 percent listed competitive base salary as an important incentive. Only 52 percent of employers listed flexible scheduling as a good incentive.83 Meanwhile, a Statistics Canada survey found that employees want “challenging work, continuous learning, flexible work arrangements, and better communication with their employers.”84 Eighty-seven percent of companies in the Western Compensation survey reported having difficulties attracting new employees in 2006. Companies may need to pay more attention to what their employees say that they want. • Match people to jobs.  A great deal of evidence demonstrates the motivational benefits of carefully matching people to jobs. For example, high achievers should have jobs that let them participate in setting moderately challenging goals and give them autonomy and feedback. Also, keep in mind that not everybody is motivated by jobs that are high in autonomy, variety, and responsibility. • Individualize rewards.  Because employees have different needs, what acts as a reinforcer for one may not for another. Managers should use their knowledge of employee differences to individualize the rewards they control, such as pay, promotions, recognition, desirable work assignments, autonomy, and participation. • Link rewards to performance.  Managers need to make rewards contingent on performance. Rewarding factors other than performance will reinforce only those other factors. Important rewards such as pay increases and promotions should be given for the attainment of specific goals. Managers should also look for ways to increase the visibility of rewards, making them potentially more motivating. • Check the system for equity.  Employees should perceive that rewards or outcomes are equal to the inputs. On a simple level, experience, ability, effort, and other obvious inputs should explain differences in pay, responsibility, and other obvious outcomes. Remember that one person’s equity is another’s inequity, so an ideal reward system should weigh inputs differently in arriving at the proper rewards for each job. • Use recognition.  Use the power of recognition. In an economy where cost-cutting and layoffs are widespread (as we are experiencing in the current economy), recognition is a low-cost means to reward employees, and it is a reward that most employees consider valuable. • Do not ignore money.  It is easy to get so caught up in setting goals, creating interesting jobs, and providing opportunities for participation that you forget that money is a major reason why most people work. Some studies indicate that money is not the top priority of employees. Professor Graham Lowe at the University of Alberta and a colleague found that relationships in the workplace are more important than pay or benefits in determining job satisfaction.85 Nevertheless, the allocation of performance-based wage increases, piecework bonuses, and other pay incentives is important in determining employee motivation. We are not saying that managers should focus solely on money as a motivational tool; rather, we are simply stating the obvious—if money is removed as an incentive, people are not going to show up for work. The same cannot be said for removing performance goals, enriched work, or participation.

Raeva/Fotolia

266  Chapter 9

Motivated employees lead to positive business outcomes.

Chapter Summary Learning Objectives Checklist 9.1 Define and explain motivation. Motivation refers to an individual’s willingness to exert high levels of effort to reach organizational goals, conditioned by the degree to which that effort satisfies some individual need.

9.2 Compare and contrast early theories of motivation. According to needs theories, individuals have needs that, when fulfilled, will motivate them to perform well. While the theories do not account for all aspects of motivation, they do inform managers that individuals have different needs that should be considered when developing reward plans.

9.3 Compare and contrast contemporary theories of motivation. Equity theory proposes that employees compare their rewards and their productivity with others and then determine whether they have been treated fairly. Individuals who perceive that they are under-rewarded will try to adjust their behaviour to correct this imbalance. Expectancy theory explores the link between people’s belief in whether

they can do the work assigned, their belief in whether they will get the rewards promised, and the extent to which the reward is something they value. Most research evidence supports expectancy theory.

9.4 Discuss current issues in motivating employees. Current issues in motivation include motivating unique groups of workers, designing effective rewards programs, and improving work–life balance. Managers can motivate employees by recognizing individual differences, matching people to jobs, individualizing rewards, linking rewards to performance, checking the system for equity, using recognition, and not ignoring that money is a major reason why most people work.

Discussion Questions 1. How do needs affect motivation? 2. What are some possible consequences of employees’ perceiving an inequity between their inputs and outcomes and those of others? 3. Describe a task you have done recently for which you exerted a high level of effort. Explain your behaviour

Chapter 9  Motivating and Rewarding Employees 267

using the following motivation approaches: (1) goalsetting theory, (2) four-drive theory, (3) equity theory, and (4) expectancy theory. 4. Describe several means that you might use to motivate (1) part-time, minimum-wage employees working for

a small company that makes tortillas or (2) professional and technical employees working for a software design firm. Which of your suggestions do you think is best? Support your position.

Developing Management Skills Dilemma

• If you are working, assess which of the four drives are strongest in motivating you at your job.

town holds approximately 2500 employees, about 80 percent of whom are males. This $350 million complex is intended to operate from 2015 to 2022, after which the plan is to replace the topsoil and remove the roadways, restoring the land for future agricultural uses. Work camps are common in mining, and traditionally they have featured shared rooms and group washrooms. ATCO approached its temporary town differently. Facilities include 500 single bedrooms, each equipped with a bathroom, Wi-Fi, flat-screen TV, and mini-fridge. Lecture halls used for training during the day provide broadcasts of hockey games and UFC fights, as well as card and video game tournaments. Worker priorities are changing, and ATCO built a 20  000-square-foot fitness facility with a gym, two squash courts, a weight room, and an indoor running track with 360-degree window views. In a quintessentially Canadian move, ATCO put in a full-sized outdoor hockey rink. To keep employees occupied and stem the potential substance abuse problem featured in some camps, one out of every five residents at the facility will be there to look after the workers, including cooking, cleaning, maintenance, and security.

• As you visit various businesses, note what, if any, employee recognition programs these businesses use.

Questions

You are in a team with six other management students, and you have a major case analysis due in four weeks. The case project will count for 25 percent of the course mark. You are the team leader. Several team members are having difficulty motivating themselves to get started on the project. Identify ways you could motivate your team members using needs theories, expectancy theory, and equity theory. How will you motivate yourself?

Becoming a Manager • Start paying attention to times when you are highly motivated and times when you are not as motivated. What accounts for the difference? • When working on teams for class projects or on committees in student organizations, try different approaches to motivating others.

• Talk to practising managers about their approaches to employee motivation. What have they found works?

Developing Your Diagnostic and ­Analytical Skills: Twenty-First-­ Century Factory Town ATCO Structures & Logistics built a town in empty farmland about 100 km north of Regina.86 BHP Billiton opened the largest potash mine in the world in 2015, and the ATCO

1. What is it like to work at one of BHP Billiton’s mining camps? (Hint: Go to BHP Billiton’s website, and click on People and Careers.) What is your assessment of the company’s philosophy toward employees? 2. What do you think is ATCO’s biggest challenge in keeping employees occupied while living in a huge work camp? 3. If you were managing a team of potash miners and tradespeople, how would you keep them motivated?

Team Exercises 3BL: The Triple Bottom Line Corporate sustainability practices can have a positive impact on recruitment, retention, and employee engagement. Willis Towers Watson’s 2018 Global Workforce Study showed that a firm’s reputation for social responsibility (including environmental work) is

one of the top 10 drivers of employee engagement worldwide.87 How do employers engage employees in their sustainability efforts? Some of the steps include public sustainability goals; senior executive support; and training, policies, and programs that integrate sustainability into employee roles.

268  Chapter 9 THINKING STRATEGICALLY ABOUT 3BL There are many ways to motivate employees to modify their behaviour and actions to become more sustainable:

How Can You Motivate Others?

• recognition

This exercise is designed to increase your awareness of how and why you motivate others and to help you focus on the needs of those you are attempting to motivate.

• management feedback

STEP 1

• salary and bonuses

Break into groups of five to seven people. Each group member is to respond individually to the following situations:

• benefits • competition/peer inducements • modified job requirements • opportunities for growth All of these incentives need to be aligned with organizational goals or there will be incongruence and any behavioural changes will be short-lived. Different organizations could use combinations of the above incentives that fit their culture. For example, Intel ties corporate sustainability goals to its annual performance bonus.88 Which of the above incentives would have the greatest impact on your behaviour?

What Rewards Motivate You? Employees at Radialpoint in Montreal can get their laundry washed, dried, and folded for them at work. At trucking company Groupe Robert, based in Rougemont, Quebec, employees are entered into monthly draws for concerts and shows; each employee receives a Christmas food basket; and birthday cards are personally signed by the CEO. At Brantford, Ontario–based S. C. Johnson & Son, employees and their families can take holidays at the company’s resort in Muskoka. The company also provides an on-site massage therapist. All of these companies believe that there is more to rewards than just cash. All of the following traditional and offbeat benefits are currently offered at various Canadian firms. Rank them individually for yourself, putting those that are most likely to motivate you at the top of your list. Now compare your top five choices with classmates. What differences did you find? Why?

Situation 1: You are the owner and president of a 50-­ employee organization that provides call-centre services to a number of local businesses. Your company has two major units. Customer Care answers questions from customers about malfunctioning technology (computers, cell phones, home networks). Sales and Marketing makes telemarketing calls to people’s homes. Employees who work in Sales and Marketing phone people and try to sell them cell phone plans and/or Internet access at reduced prices. They also conduct market research via the phone, calling people to ask them to answer survey questions. Employees who work in Customer Care often receive calls from irate customers who are having technical difficulties. Employees who work in Sales and Marketing often encounter irate people when they phone to sell them something or conduct a survey, particularly at dinnertime. Your goal is to motivate all 50 employees to their highest level of effort. Task 1: Look at the table listing nine factors you could use to motivate your employees. Rank the factors from most important to least important (1 to 10), placing your rankings in the Task 1 column. Situation 2: Consider now that you are one of the 50 employees who has been given insight into what motivates you. Task 2: As an employee, look again at the factors listed in the table and think about what would motivate you most effectively. Again, rank the factors from most important to least important (1 to 10), and place your rankings in the Task 2 column.

Flextime

Dental insurance

Pets at work

Company car

Telework

Vision insurance

Fitness memberships

Subsidized cafeteria

Paid vacation

Life insurance

On-site day care

Annual birthday gift

Management development plan

Retirement plan

Clothing allowance

Transportation voucher

Family picnics and parties

Profit-sharing/stock purchase plan

Children’s college/ university tuition

Benefits for unmarried domestic partners

Paid sick days

Daily nap time

Tuition refund

Free snacks and candy

Child and elder care referral services

Flexible spending plan

Non-work-related courses

Ability to keep frequent flyer miles

Bring your own device (BYOD)

Employee assistance program

Laundry/dry cleaning service

Company-sponsored teams

Chapter 9  Motivating and Rewarding Employees 269

Work Factor

Task 1 Rank

Task 2 Rank

Recognition for customer accomplishments A variety of tasks (sales and customer service) Seeing the results of my work Opportunity for advancement Being compensated for enhanced performance A comfortable physical working environment Job security Equity in access to benefits Interesting work

STEP 2 Each member should share his or her prioritized lists (the lists from Tasks 1 and 2) with the other members of the group. STEP 3 After each member has presented his or her lists, the group should respond to the following questions: 1. How are each individual’s lists (Task 1 and Task 2) similar or dissimilar to the others? What do the differences or similarities suggest to you? 2. What have you learned about how and why to motivate others, and how can you apply this information?

Be the Consultant Microfinance institutions (MFIs) provide poor and low-income individuals with financial

services (microfinance), including microcredit, savings, money transfers, insurance, and payment services.89 A local MFI has engaged your consulting firm to advise it on the benefits of incorporating sustainability practices internally and with clients. Particularly, the MFI is interested in your firm answering the following questions: 1. How will sustainability practices increase the motivation of employees? 2. How can sustainability provide added value to clients? 3. How will sustainability practices of clients lead to decreased credit risk? 4. Which stakeholders might put pressure on MFIs to have better sustainability performance?

Business Cases DevFacto Technologies Micromanagement-free zone: DevFacto cofounders Chris Izquerdo and David Cronin aimed to create a company that values open communication and innovation. To do so meant embracing diversity, enticing creativity, and ensuring constant collaboration. Chris and David, software developers who had suffered through rigidly bureaucratic work environments in their own careers, felt that a selfdirected and engaged workforce would drive efficiency and productivity. “The two most important aspects of our business are our culture and our people,” said Cronin.90 “If you give them a purpose that’s larger than themselves, you can lead them to results.”91 Thus their vision for DevFacto emerged as a team of doers without any micromanaging, needless policies, or even an HR department. DevFacto is an ideas and solutions company in Canada based in Calgary. Started in 2007, it provides technology, services, and solutions for companies to allow them

to focus on their core competences. Their services range from SharePoint business intelligence solutions to enterprise mobile solutions and application and software ­development. The company has grown to 115 people on its payroll and is more engaged than ever. It has offices in Calgary, Edmonton, Toronto, and Regina and earned its third straight spot on the 50 Best Small and Medium Employers (BSME) in Canada. Its annual turnover rate is less than 3  percent, and 73 percent of clients are willing to recommend ­DevFacto. Not every employee is suited to be a self-starter, so the firm conducts a lengthy culture-fit interview with Cronin or a regional director at the satellite office. What Cronin looks for is intrinsic motivation that drives a potential employee to constantly improve. Since the company operates a flat structure, employees are regularly called for group interviews to assess candidates. Any employee can veto a hire who they do not feel will fit in.

270  Chapter 9 Einar Westerlund, from the Queen’s School of Business Centre for Business Venturing, works with BSME firms and believes that self-direction is a major driver of engagement. Providing employees influence over their workload and ongoing projects “allows them to map a lot of their own work direction,” says Westerlund.92 Rather than bosses holding employees accountable for budgets and deadlines, employees do it at DevFacto. It promotes collective decision making and helps people understand their roles more fully. CEO Izquierdo takes this a step further with openbook management. The company uses an internal social network for checking in, with “all hands on deck” staff meetings and for sharing financial information.93 Its approach is not without challenges. Cronin is candid when he admits he spends a lot of time involved with issues that other companies handle via policies and procedures or micromanagement. However, these problems are rare and he prefers to let employees lead the way. “Our approach is: Let’s find something that’s a win–win. We talk about it.”94

Discussion Questions 1. What types of rewards are suited to this type of work environment? 2. Which contemporary theory of motivation is most applicable to DevFacto?

Ubisoft Entertainment SA Ubisoft is a worldwide network of studios that create, publish, and distribute entertainment and services with world-renowned brands like Far Cry, Assassin’s Creed, Just Dance, and Tom Clancy’s Splinter Cell video game series. The sales in 2017 set a new company record of $2.5 billion CAD, thanks to gaming experiences available on all popular platforms, including consoles, mobile phones, tablets, and PCs.95 It took 10 teams in six countries across 13 international time zones to create Assassin’s Creed: Unity, in which a fictional French assassin stalks his prey in 1789 Paris. This huge four-year undertaking presented major practical and logistical challenges along with difficult creative and technical hurdles. Ubisoft’s innovative approach to international collaboration and employee engagement helped it overcome these challenges.96 The Montreal studio led the project, providing coordination for nine other units stationed in Toronto, France, Ukraine, Romania, China, and Singapore. In the creative environment of making video games, things like production, project management, and various other managerial tasks are usually at odds with the creative process. What Ubisoft did was free up creators to focus on the game’s vision and reassigned all the other management functions. Its goal was to engage and empower employees to be innovative and creative at all levels of the company. Creative

directors at Ubisoft do not have staff reporting to them so that they can focus 100 percent on the content. Managers typically have 7 to 10 people reporting to them, which gives teams more ownership and less dependency on other studios.97 Staff in the same roles at different studios are encouraged to collaborate with each other. This allows ideas and best practices to be shared among studios without management intervention.98 The Toronto office is an example of employee engagement and work–life balance on steroids. Their open-concept office features a Ubigallery showcasing the works of Ontario art graduates, whiteboards in every room to stimulate the creative process, subsidized hot lunches, and a Friday evening Scotch-tasting club. It adds more than 100 people a year but still focuses on fostering a strong team culture. To that end, every new employee gets a Nerf gun on his or her first day, and the staff have Nerf battles to break the ice.99 In 2018, Ubisoft announced a studio in Winnipeg, with plans to invest $35 million (CAD) in the province of Manitoba, creating 100 new jobs at the studio over the next five years.100 Ubisoft Winnipeg will hire engineers, tool programmers, technical artists and talent from other specialized areas of expertise to support its ambitious mandate.

Discussion Questions 1. What are the risks of separating the creative side from the production side? 2. What are the challenges of running an organization in multiple countries?

One for the Money... Does money buy happiness? Several of the 120 employees at Gravity Payments, a credit card processing company based in Seattle, are about to find out. The company’s founder, 29-year-old Dan Price, made the news in the spring of 2015 when he decided to bump up the salary of 70 employees to a new “minimum wage” of $70 000. Now, everyone in the company will be making at least $70 000. Some employees at the company, where the average salary was $48 000, doubled their pay, and others got a nice salary increase—probably enough, you’d think, for employees to be pretty happy about!

Money = Happiness, or Does It? Why did Price do it? He said that he had been thinking about employee pay for a while, especially after reading several news reports about the glaring pay disparities between corporate CEOs and employees, which he says struck him as “ridiculous” and “absurd.” Also, Price had read an article on happiness by two Princeton researchers (one a Nobel Prize-winning psychologist) who had surveyed 450 000 US residents on whether money could buy

Chapter 9  Motivating and Rewarding Employees 271

happiness—both as it affected overall happiness but also how it affected day-to-day life. The researchers concluded that people claimed to be happier with each doubling of income but only to a point. But even more interesting was the dollar amount that respondents said would make their daily life more pleasant: about $75 000 a year. Price decided to offer his employees a minimum salary of $70 000. He felt that giving his employees this amount could enable many of them to buy homes and pay for their kids’ educations. To pay for the salary increase, Price is taking a pay cut from his annual $1 million salary down to $70 000. Also, the company will have to use 75 to 80 percent of its profits to help cover the cost. Some management consultants are questioning the move, wondering if it will affect employee productivity and pay off in the long run. Concerns about what happens to employee motivation include, Will employees be less motivated to work to be promoted to higher

levels of responsibility, and would those employees who put in additional effort above and beyond their current tasks lose the incentive to do so (“Why should I work harder if we all get the same pay”)? And what happens to the CEO’s motivation—would Price himself lose the incentive to want to grow the company? Then, there’s also the question of what happens if the company’s profitability starts to fall. Only time will tell if such issues are even relevant.

Discussion Questions 1. What problem(s) might managers face under this new pay approach and how could they use knowledge about employee motivation to help them deal with those problem(s)? 2. Research what has happened to Gravity Payments since the decision was made. What can be learned from this case?

Chapter 10

Darryl Dyck/Bloomberg/Getty Images

Leadership

Learning Objectives 10.1 Define leader and leadership. 10.2 Compare and contrast early leadership theories. 10.3 Describe the four major contingency leadership theories. 10.4 Describe modern views of leadership. 10.5 Explain current issues in leadership. 10.6 Discuss trust as the essence of leadership. Sandra Stuart, President and CEO of HSBC Canada, started as a teller 35 years ago and now is one of the first women to lead a major bank in Canada.1 HSBC is Canada’s seventh-largest bank and its biggest foreign-owned bank, with more than $90 billion in assets and $2 billion in annual revenue. Under Stuart’s watch, it has become a beacon of gender diversity, with equal numbers of men and women on the board and in senior management.2 Its achievements have not gone unnoticed. HSBC has twice received the federal government’s Employment Equity Achievement Awards for Sector Distinction and Outstanding Commitment, and was recognized by Corporate Knights as a Top Performer for Gender Diversity in the financial services sector in 2018.3 “We have had a long history with many strong women leaders,” says Stuart. “Today, women make up 50 percent of HSBC Bank Canada’s board of directors and 60 percent of our senior leadership roles. It was part of a deliberate effort, and emblematic of our wider approach to diversity on all fronts.”4 One of those efforts is the HSBC Woman Leader of Tomorrow award, designed to recognize, celebrate, and honour female university and college students who exemplify success and inspire their peers, community, and country through entrepreneurial leadership. The program,

272

Chapter 10  Leadership 273 founded in 2011, provides scholarships, mentorship, and recognition to exceptional female leaders across the country. The 2018 winner, Hannah Chisholm of St. Francis Xavier University, launched a campus program to tackle mental health and wellness and also started her own vegan business, Eggcitables.5 Kim Hallwood, senior manager of corporate sustainability, has pushed HSBC Canada to be one of Canada’s top corporate citizens. She was responsible for launching a global initiative, with more than 4000 employees engaged in freshwater research and learning. She also launched the HSBC Indigenous education program, which delivered $1 million in programs to support First Nations, Métis, and Inuit youth.6 Stuart acknowledges that mentorship can be valuable in many ways, including making introductions to more senior executives and helping build a profile. Sheryl Sandberg has become a mentor to many female leaders. She wrote the top business bestseller of 2013: Lean In: Women, Work, and the Will to Lead. She advocated that women should be more ambitious, or “lean in” to their careers. Major companies like Cisco and PriceWaterhouseCoopers have established Lean In Circles in their offices.7 Sandberg was Facebook’s chief operating officer and, along with Yahoo’s CEO Marissa Mayer, was evidence of the rise of female executives in technology firms. But an important distinction is that Sandberg and Mayer are not just powerful female executives: They are major players in their industry. What does it mean to be a female leader for today’s organizations? Put yourself in Stuart’s shoes: What kinds of challenges would you face as a female leader in the banking sector? The following text box describes how another Canadian bank has approached diversity. Why is leadership so important? Because leaders in organizations are the ones who make things happen. If leadership is so important, it is only natural to ask, What differentiates leaders from nonleaders? What is the most appropriate style of leadership? What can you do if you want to be seen as a leader? In this chapter, we try to answer these and other questions about what it means to be a leader.

Diversity Matters Diversity is one of Royal Bank of Canada’s (RBC) five core values. The company created a “Diversity Blueprint” to ensure visible senior leadership commitment, employee involvement, collaboration with partners, communication, and accountability. RBC would like to increase the representation of women, minorities, and newcomers to Canada in leadership positions, as well as to maintain an inclusive and supportive work environment. It has set up mentoring programs, cultural competency awareness and training, business communications training, and networking events to help achieve its goals.8 RBC recognizes that diversity provides incredible business and economic potential. Its belief is that harnessing diverse perspectives will drive innovation and growth for both RBC and the Canadian economy.

Here is a common myth about leadership:

  Leadership can’t be taught. MANAGEMENT MYTH DEBUNKED Many people incorrectly assume that leaders are born. For example, they point to kids who, as early as 4 or 5 years old, are leading other kids around on the playground and displaying leadership qualities. The evidence suggests that while there are certainly personality traits associated with leadership and that these traits are more due to nature than nurture, leadership can be taught. For full details on this management myth, check out our Bust the Myth video in Revel.

274  Chapter 10

Who Are Leaders and What Is Leadership? 10.1 Define leader and leadership. Let’s begin by clarifying who leaders are and what leadership is. Our definition of a leader is someone who can influence others and who has managerial authority. leader Someone who can influence others Leadership is what leaders do; that is, it’s a process of leading a group and influencing and provide vision and strategy to that group to achieve its goals. the organization. Are all managers leaders? Because leading is one of the four management functions, ideally all managers should be leaders. Thus, we’re going to study leadleadership ers and leadership from a managerial perspective.9 However, even though we’re The process of influencing looking at these from a managerial perspective, we’re aware that groups often individuals or groups toward the have informal leaders who emerge. Although these informal leaders may be able achievement of goals. to influence others, they have not been the focus of most leadership research and are not the types of leaders we’re studying in this chapter. Managers and leaders act in different but complementary ways. Leaders cope with change to transform organizations, while managers cope with the complexity of keeping organizations running effectively and efficiently. As organizations deal Exhibit 10-1  Distinctions Between Managers and Leaders with much more rapid change, management and SOURCE: Based on “What Leaders Really Do,” by John P. Kotter. Harvard Business leadership are seen as integrated roles rather than Review. separate functions.10 Exhibit 10-1 illustrates the Leaders Managers basic distinction between managers and leaders. Mark Henderson, president and CEO of Ericsson Planning and Creating a vision and What are we Canada, believes that “managers and leaders budgeting setting direction doing? don’t have all the answers, but strong leadership seems to utilize the knowledge of the employees Organizing and Aligning people to the Who is going staffing, providing a and the collective power of their motivation and vision; communicating to do it? structure experience.”11 Leaders and leadership, like motivation, are Problem solving and Motivating and How will we controlling mentoring people do it? organizational behaviour topics that have been researched a lot. Most of that research has been What do the Creating order and Creating change aimed at answering the question, What is an effecresults look like? predictability tive leader?

What’s Cooking in Hospitality? Meet Some of Canada’s Up-and-Coming Hospitality Leaders: Shalin Parikh, Health and Wellness Manager, Chelsea Hotel Toronto Shalin Parikh studied hospitality management in India before completing an advanced diploma in business administration (HR/ finance) at Humber College. His first Canadian job was with a food travel-supply company at Pearson International Airport, before moving to the Chelsea Hotel, where his focus was on improving employee engagement. “I was able to increase employee participation in surveys from 46 per cent to 95 per cent. That’s one of my biggest achievements.” Yatan Nizzar, Director of Training, Fairmont Royal York Hotel

Yatan Nizzar had several internships in the hotel industry in Victoria, BC and North Vietnam before landing at Fairmont, where she graduated from their Leadership Development Program. She cut her teeth as an assistant front-office manager, then as a manager in Boston. By learning the industry from the ground up, Yatan was able to move into a more senior role in Toronto. “I have progressed a lot here and have been allowed to shape my career into what I want it to be,” she says. SOURCE: Based on “Generation Next: Meet Some of Canada’s Up-and-Coming Hospitality Leaders,” by Kotuch, June 11, 2018, http://www.hoteliermagazine. com/generation-next-meet-some-of-canadas-up-and-coming-hospitalityleaders/.

Chapter 10  Leadership 275

And the Survey Says . . .12 The following are critical leadership capabilities required in Canadian health care organizations:

59% developing others 49% building teams

82% championing change

35% self-development

59% strategic alignment

35% encouraging innovation

What Do Early Leadership Theories Tell Us About Leadership? 10.2 Compare and contrast early leadership theories.

Leaders. Groups. Long History! • Early leadership theories focused on: –– The person (leader trait theories) –– The behaviours—how the leader interacted with his or her group members— (behavioural theories) • Are there specific traits or behaviours that leaders of tech companies, such as Sheryl Sandberg, should have?

THE LEADER What Traits Do Leaders Have? • WHAT DO YOU KNOW ABOUT LEADERSHIP? When asked that question, most people cite a list of qualities they admire in leaders—intelligence, charisma, decisiveness, enthusiasm, strength, bravery, integrity, self-confidence, and so on. • That’s the trait theories of leadership in a nutshell—the search for traits or ­characteristics that differentiate leaders from nonleaders. • I f this concept was valid, all leaders would have to possess those unique and consistent characteristics, making it easy to find leaders in organizations.

trait theories of leadership Theories that isolate characteristics (traits) that differentiate leaders from nonleaders.

• A  ttempts to identify traits consistently with leadership (the process, not the person) have been more successful. See Exhibit 10-2 to learn about the eight traits associated with leadership.13 WHAT NOW?

• TRAITS alone were not sufficient for identifying leaders. Why? Explanations based solely on traits ignored the interactions of leaders and their group members as well as situational factors.

Illustration Forest/Shutterstock

• N  ot going to happen. Despite the best efforts of researchers, finding a set of traits that would always differentiate a leader (the person) from a nonleader has not happened.

276  Chapter 10

Exhibit 10-2  Traits Associated with Leadership SOURCES: Based on S. A. Kirkpatrick and E. A. Locke, “Leadership: Do Traits Really Matter?” Academy of Management Executive, May 1991, pp. 48–60; and T. A. Judge, J. E. Bono, R. Iiies, and M. Werner, “Personality and Leadership: A Qualitative and Quantitative Review,” Journal of Applied Psychology, August 2002, pp. 765–780.

Drive. Leaders exhibit a high effort level. They have a relatively high desire for achievement; they are ambitious; they have a lot of energy; they are tirelessly persistent in their activities; and they show initiative.

Desire to lead. Leaders have a strong desire to influence and lead others. They demonstrate the willingness to take responsibility.

Honesty and integrity. Leaders build trusting relationships between themselves and followers by being truthful or non-deceitful and by showing high consistency between word and deed.

Self-confidence. Followers look to leaders for an absence of self-doubt. Leaders, therefore, need to show self-confidence in order to convince followers of the rightness of their goals and decisions.

Cognitive intelligence. Leaders need to be intelligent enough to gather, synthesize, and interpret large amounts of information, and they need to be able to create visions, solve problems, and make correct decisions.

Emotional intelligence. Leaders need to be aware of their emotions and those of others, and they need to be able to use those emotions effectively when making decisions.

Job-relevant knowledge. Effective leaders have a high degree of knowledge about the company, industry, and technical matters. In-depth knowledge allows leaders to make well-informed decisions and to understand the implications of those decisions.

Extroversion. Leaders are energetic, lively people. They are sociable, assertive, and rarely silent or withdrawn.

• Possessing the appropriate traits only made it more likely that an individual would be an effective leader. • Leadership research from the late 1940s to the mid-1960s turned to finding preferred behavioural styles that leaders demonstrated.

Vegefox.com/Fotolia

Was there something unique in what leaders did—in their words or behaviour?

Chapter 10  Leadership 277

THE BEHAVIOURS What Behaviours Do Leaders Exhibit? • Would behavioural theories of leadership provide more definitive answers about the nature of leadership? • If behavioural theories could identify critical behavioural determinants of leadership, people could be trained to be leaders—the premise behind management development programs.

University of IOWA14 Behavioural Dimension Democratic style:  involving subordinates, delegating authority, and encouraging participation Autocratic style:  dictating work methods, centralizing decision making, and limiting participation Laissez-faire style:  giving group freedom to make decisions and complete work

Conclusion Democratic style of leadership was most effective, although later studies showed mixed results.

OHIO State15 Behavioural Dimension Consideration:  being considerate of followers’ ideas and feelings Initiating structure:  structuring work and work relationships to meet job goals

Conclusion High–high leader (high in consideration and high in initiating structure) achieved high subordinate performance and satisfaction, but not in all situations

University of Michigan16 Behavioural Dimension Employee oriented:  emphasized interpersonal relationships and taking care of employees’ needs Production oriented:  emphasized technical or task aspects of job

Conclusion Employee-oriented leaders were associated with high group productivity and higher job satisfaction.

Managerial GRID17 Behavioural Dimension Concern for people:  measured leader’s concern for subordinates on a scale of 1 to 9 (low to high) Concern for production:  measured leader’s concern for getting job done on a scale of 1 to 9 (low to high)

Conclusion Leaders performed best with a 9–9 scale (high concern for production and high concern for people).

behavioural theories of leadership Theories that isolate behaviours that differentiate effective leaders from ineffective leaders.

278  Chapter 10 WHAT NOW?

• Dual nature of leader behaviours—that is, focusing on the work to be done and on employees—is an important characteristic in each of these studies.

Coloures-pic/Fotolia

• Leadership researchers were discovering that predicting leadership success involved something more complex than isolating a few leader traits or preferable behaviours. • They began looking at situational influences. Specifically, which leadership styles might be suitable in different situations, and what were these different situations?

Contingency Theories of Leadership 10.3 Describe the four major contingency leadership theories. “The corporate world is filled with stories of leaders who failed to achieve greatness because they failed to understand the context they were working in.”18 Contingency theories of leadership developed after it became clear that identifying traits or key behaviours was not enough to understand what made good leaders. Contingency researchers considered whether different situations required different styles of leadership. In this section we examine four contingency theories—Fiedler, Hersey-Blanchard, leader-participation, and path-goal. Each looks at defining leadership style and the situation, and attempts to answer the if–then contingencies (that is, if this is the context or situation, then this is the best leadership style to use).

What Was the First Comprehensive Contingency Model? Fiedler contingency model Leadership theory proposing that effective group performance depends on the proper match between a leader’s style and the degree to which the situation allowed the leader to control and influence.

least-preferred co-worker (LPC) questionnaire A questionnaire that measures whether a leader was task or relationship oriented.

The first comprehensive contingency model for leadership was developed by Fred Fiedler.19 The Fiedler contingency model proposed that effective group performance depended on properly matching the leader’s style and the amount of control and influence in the situation. The model was based on the premise that a certain leadership style would be most effective in different types of situations. The keys were as follows: 1. Define those leadership styles and the different types of situations, and then 2. Identify the appropriate combinations of style and situation. Fiedler proposed that a key factor in leadership success was an individual’s basic leadership style, either task oriented or relationship oriented. To measure a leader’s style, Fiedler developed the least-preferred co-worker (LPC) questionnaire. This questionnaire contained 18 pairs of contrasting adjectives—for example, pleasant–unpleasant, cold–warm, boring–interesting, or friendly–unfriendly. Respondents were asked to think of all the co-workers they had ever had and to describe that one person they least enjoyed working with by rating him or her on a scale of 1 to 8 for each of the sets of adjectives. (The 8 always described the positive adjective out of the pair, and the 1 always described the negative adjective out of the pair.) If the leader described the least-preferred co-worker in relatively positive terms (in other words, a “high” LPC score—a score of 64 or above), then the respondent was primarily interested in good personal relations with co-workers, and the style would be described as relationship oriented. In contrast, if the leader saw the least-preferred co-worker in relatively unfavourable terms (a low LPC score—a score of 57 or below),

then the respondent was primarily interested in productivity and getting the job done; thus, the style would be labelled as task oriented. Fiedler did acknowledge that a small number of people might fall in between these two extremes and not have a cut-and-dried leadership style. One other important point is that Fiedler assumed a person’s leadership style was fixed regardless of the situation. In other words, if a person was a relationship-oriented leader, that person would always be one, and the same for task oriented. After an individual’s leadership style had been assessed through the LPC, it was time to evaluate the situation in order to be able to match the leader with the situation. Fiedler’s research uncovered three contingency dimensions that defined the key situational factors in leader effectiveness. These were as follows:

David Woo/Dallas Morning News/Corbis

Chapter 10  Leadership 279

Richard Branson, founder and CEO of Virgin Group, is a relationship-oriented leader. Pictured here with an in-flight teammate while showing the interior of a new Virgin airplane, Branson is fun loving, takes a personal interest in the needs of employees, emphasizes interpersonal relations, and accepts individual differences among workers.

• Leader–member relations:  the degree of confidence, trust, and respect employees had for their leader; rated as either good or poor. • Task structure:  the degree to which job assignments were formalized and structured; rated as either high or low. • Position power:  the degree of influence a leader had over activities such as hiring, firing, discipline, promotions, and salary increases; rated as either strong or weak. Each leadership situation was evaluated in terms of these three contingency variables, which, when combined, produced eight possible situations that were either favourable or unfavourable for the leader. (See the bottom of the chart in Exhibit 10-3.) Situations I, II, and III were classified as highly favourable for the leader. Situations IV, V, and VI were moderately favourable for the leader. And situations VII and VIII were described as highly unfavourable for the leader.

Exhibit 10-3  The Fiedler Model Performance

Task oriented Relationship oriented

Good

Favorable

Poor

Moderate

Highly Favorable Category

Highly Unfavorable

Moderate

I

II

Leader–member relations

Good

Good

Task structure

High

High

Position power

Unfavorable

III

IV

Good Good Low

Low

V

VI

VII

VIII

Poor

Poor

Poor

Poor

High

High

Low

Low

Strong Weak Strong Weak Strong Weak Strong Weak

280  Chapter 10 Once Fiedler had described the leader variables and the situational variables, he had everything he needed to define the specific contingencies for leadership effectiveness. To do so, he studied 1200 groups, comparing relationship-oriented versus task-oriented leadership styles in each of the eight situational categories. He concluded that task-oriented leaders performed better in very favourable situations and in very unfavourable situations. (See the top of Exhibit 10-3, where performance is shown on the vertical axis and situation favourableness is shown on the horizontal axis.) On the other hand, relationship-oriented leaders performed better in moderately favourable situations. Because Fiedler treated an individual’s leadership style as fixed, there were only two ways to improve leader effectiveness. First, you could bring in a new leader whose style better fit the situation. For instance, if the group situation was highly unfavourable but was led by a relationship-oriented leader, the group’s performance could be improved by replacing that person with a task-oriented leader. The second alternative was to change the situation to fit the leader. This could be done by restructuring tasks; by increasing or decreasing the power that the leader had over factors such as salary increases, promotions, and disciplinary actions; or by improving the leader–member relations. Research testing the overall validity of Fiedler’s model has shown considerable evidence to support the model.20 However, his theory wasn’t without criticisms. The major one is that it’s probably unrealistic to assume that a person can’t change his or her leadership style to fit the situation. Effective leaders can, and do, change their styles. Another is that the LPC wasn’t very practical. Finally, the situation variables were difficult to assess.21 Despite its shortcomings, the Fiedler model showed that effective leadership style needed to reflect situational factors. Situational Leadership (SL) A leadership theory that focuses on the readiness of followers.

Paul Hersey and Ken Blanchard developed a leadership theory that has gained a strong following among management development specialists. 22 This contingency theory of leadership, called situational leadership® (SL), focuses on followers’ readiness. Hersey and Blanchard argue that successful leadership is achieved by selecting the right leadership style, which is contingent on the level of the followers’ readiness. Before we proceed, we need to clarify two points: why a leadership theory focuses on the followers and what is meant by the term readiness. The emphasis on the followers in leadership effectiveness reflects the reality that the followers are the ones who accept or reject the leader. Regardless of what the leader does, effectiveness depends on the actions of his or her followers. This fact is an important dimension that has been overlooked or underemphasized in most leadership theories. Readiness, as defined by Hersey and Blanchard, refers French entrepreneur Bertin Nahum is the founder and CEO of Medtech, a firm that to the extent to which people have the develops, designs, and markets computer-assisted neurosurgical robotics. With high ability and willingness to accomplish a follower readiness of being able and willing, Nahum’s managers and staff have the specific task. skills and experience to innovate and provide superior technical support.

readiness

The extent to which people have the ability and willingness to accomplish a specific task.

Alain Robert/APERCU/SIPA/Newscom

How Do Followers’ Willingness and Ability Influence Leaders?

Chapter 10  Leadership 281

Exhibit 10-4  Hersey and Blanchard’s Situational Leadership

SLT uses the same two leadership dimensions that Fiedler identified: task and relationship behaviours. (See Exhibit 10-4.) However, Hersey and Blanchard go a step further by considering each as either high or low and then combining them into four specific leadership styles described as follows: • Telling (high task–low relationship):  The leader defines roles and tells people what, how, when, and where to do various tasks. • Selling (high task–high relationship):  The leader provides both directive and supportive behaviour.

LEADERSHIP STYLE

High

Relationship Behaviour

LEADER

Participating Sharing of ideas

Selling Explain and persuade

Able, unwilling, insecure followers

Unable, willing, confident followers

Delegating Group takes responsibility

Telling Specific directions given

Able, willing, confident followers

Unable, unwilling, insecure followers

Low

Task Behaviour

• Participating (low task–high relationship):  The leader and followers share in decision making; the main role of the leader is facilitating and communicating. • Delegating (low task–low relationship):  The leader provides little direction or support.

FOLLOWERS The final component in the model is the four stages of follower readiness: • R1:  People are both unable and unwilling to take responsibility for doing something. Followers aren’t competent or confident. • R2:  People are unable but willing to do the necessary job tasks. Followers are motivated but lack the appropriate skills. • R3:  People are able but unwilling to do what the leader wants. Followers are competent, but don’t want to do something. • R4:  People are both able and willing to do what is asked of them.

Now—let’s put the two together! SL essentially views the leader–follower relationship as like that of a parent and child. Just as a parent needs to give up control as a child becomes more mature and responsible, so, too, should leaders. As followers reach high levels of readiness, the leader responds not only by continuing to decrease control over their activities, but also by continuing to decrease relationship behaviour. SL says, • If followers are at R1 (unable and unwilling to do a task), the leader needs to use the telling style and give clear and specific directions. • If followers are at R2 (unable but willing), the leader needs to use the selling style and display high task orientation to compensate for the followers’ lack of ability and high relationship orientation to get followers to “buy into” the leader’s desires. • If followers are at R3 (able but unwilling), the leader needs to use the participating style to gain their support. • If followers are at R4 (both able and willing), the leader doesn’t need to do much and should use the delegating style. SL has an intuitive appeal. It acknowledges the importance of followers and builds on the logic that leaders can compensate for ability and motivational limitations in their followers. Yet research efforts to test and support the theory generally have been disappointing.23 Why? Possible explanations include internal inconsistencies in the

High

282  Chapter 10 model itself as well as problems with research methodology. So despite its appeal and wide popularity, any endorsement of the SL theory should be made with caution.

How Participative Should a Leader Be? leader-participation model A leadership contingency theory that’s based on a set of sequential rules for determining how much participation a leader uses in decision making according to different types of situations.

path-goal theory A leadership theory that says the leader’s job is to assist his or her followers in attaining their goals and to provide the necessary direction and support to ensure that their goals are compatible with the overall objectives of the group or organization.

Back in 1973, Victor Vroom and Phillip Yetton developed a leader-participation model that related leadership behaviour and participation to decision making.24 Recognizing that task structures have varying demands for routine and nonroutine activities, these researchers argued that leader behaviour must adjust to reflect the task structure. Vroom and Yetton’s model was normative. That is, it provided a set of sequential rules to be followed in determining the form and amount of participation in decision making in different types of situations. The model was a decision tree incorporating seven contingencies (whose relevance could be identified by making yes or no choices) and five alternative leadership styles. More recent work by Vroom and Arthur Jago has revised that model.25 The new model retains the same five alternative leadership styles but expands the contingency variables to 12—from the leader’s making the decision completely by himself or herself to sharing the problem with the group and developing a consensus decision. These variables are listed in Exhibit 10-5. Research on the original leader-participation model was encouraging.26 But unfortunately, the model is far too complex for the typical manager to use regularly. In fact, Vroom and Jago have developed a computer program to guide managers through all the decision branches in the revised model. Although we obviously can’t do justice to this model’s sophistication in this discussion, it has provided us with some solid, empirically supported insights into key contingency variables related to leadership effectiveness. Moreover, the leader-participation model confirms that leadership research should be directed at the situation rather than at the person. That is, it probably makes more sense to talk about autocratic and participative situations than autocratic and participative leaders. Vroom, Yetton, and Jago argue against the notion that leader behaviour is inflexible. The leaderparticipation model assumes that the leader can adapt his or her style to different situations.27 Only 53 percent of leaders are willing to step outside their leadership comfort zone and try new techniques.28

How Do Leaders Help Followers? Currently, one of the most respected approaches to understanding leadership is path-goal theory, which states that a leader’s job is to assist his or her followers in attaining their goals and to provide the necessary direction and support to ensure

Exhibit 10-5  Contingency Variables in the Revised Leader–Participation Model SOURCE: S. P. Robbins and T. A. Judge, Organizational Behavior, 13th ed., ©2009, p. 400. Reprinted and

electronically reproduced by permission of Pearson Education, Inc., New York, NY.

1. Importance of the decision 2. Importance of obtaining follower commitment to the decision 3. Whether the leader has sufficient information to make a good decision 4. How well structured the problem is 5. Whether an autocratic decision would receive follower commitment 6. Whether followers “buy into” the organization’s goals 7. Whether there is likely to be conflict among followers over solution alternatives 8. Whether followers have the necessary information to make a good decision 9. Time constraints on the leader that may limit follower involvement 10. Whether costs to bring geographically dispersed members together are justified 11. Importance to the leader of minimizing the time it takes to make the decision 12. Importance of using participation as a tool for developing follower decision skills

Chapter 10  Leadership 283

that their goals are compatible with the overall objectives of the group or organization. Developed by University of Toronto Professor Martin Evans in the late 1960s, the path-goal theory was subsequently expanded upon by Robert House (formerly at the University of Toronto and now at the Wharton School of Business). Path-goal theory is a contingency model of leadership that takes key elements from the expectancy theory of motivation (a theory postulating that an individual tends to act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual).29 The term path-goal is derived from the belief that effective leaders clarify the path to help their followers get from where they are to the achievement of their work goals, and make the journey along the path easier by reducing roadblocks and pitfalls. Path-goal theory identifies four leadership behaviours: • Directive leader.  Lets subordinates know what is expected of them, schedules work to be done, and gives specific guidance on how to accomplish tasks. • Supportive leader.  Shows concern for the needs of followers. • Participative leader.  Consults with group members and uses their suggestions before making a decision. • Achievement-oriented leader.  Sets challenging goals and expects followers to perform at their highest level. In contrast to Fiedler’s view that a leader could not change his or her behaviour, House assumed that leaders are flexible. In other words, path-goal theory assumes that the same leader can display any or all of these leadership styles, depending on the situation. As Exhibit 10-6 illustrates, path-goal theory proposes two situational or contingency variables that moderate the leadership behaviour–outcome relationship: 1. those in the environment that are outside the control of the follower (factors including task structure, formal authority system, and the work group) and 2. those that are part of the personal characteristics of the follower (including locus of control, experience, and perceived ability).

Exhibit 10-6  Path-Goal Situations and Preferred Leader Behaviours SOURCE: Based on R. L. Daft. Management, 7th ed. (Mason, OH: Thomson, 2005), p. 566.

Situation

Leader Behaviour

Impact on Follower

Outcome

Follower lacks self-confidence

Supportive leadership

Increase confidence to achieve work outcome

More effort; improved satisfaction and performance

Ambiguous job

Directive leadership

Clarify path to reward

More effort; improved satisfaction and performance

Lack of job challenge

Achievementoriented leadership

Set high goals

More effort; improved satisfaction and performance

Incorrect reward

Participative leadership

Clarify follower’s needs and change rewards

More effort; improved satisfaction and performance

284  Chapter 10 Environmental factors determine the type of leader behaviour required if subordinate outcomes are to be maximized; personal characteristics of the follower determine how the environment and leader behaviour are interpreted. The theory proposes that leader behaviour will not be effective if it is redundant with what the environmental structure is providing or is incongruent with follower characteristics. For example, some predictions from path-goal theory are as follows: • Directive leadership leads to greater satisfaction when tasks are ambiguous or stressful than when they are highly structured and well laid out. The followers aren’t sure what to do, so the leader needs to give them some direction. • Supportive leadership results in high employee performance and satisfaction when subordinates are performing structured tasks. In this situation, the leader only needs to support followers, not tell them what to do. • Directive leadership is likely to be perceived as redundant among subordinates with high perceived ability or with considerable experience. These followers are quite capable, so they don’t need a leader to tell them what to do. • The clearer and more bureaucratic the formal authority relationships, the more leaders should exhibit supportive behaviour and de-emphasize directive behaviour. The organizational situation has provided the structure as far as what is expected of followers, so the leader’s role is simply to support. • Directive leadership will lead to higher employee satisfaction when there is substantive conflict within a work group. In this situation, the followers need a leader who will take charge. • Subordinates with an internal locus of control will be more satisfied with a participative style. Because these followers believe that they control what happens to them, they prefer to participate in decisions. • Subordinates with an external locus of control will be more satisfied with a directive style. These followers believe that what happens to them is a result of the external environment, so they would prefer a leader who tells them what to do. • Achievement-oriented leadership will increase subordinates’ expectancies that effort will lead to high performance when tasks are ambiguously structured. By setting challenging goals, followers know what the expectations are. Research on the path-goal theory is generally encouraging. Although not every study has found support, the majority of the evidence supports the logic underlying the theory.30 In summary, employee performance and satisfaction are likely to be positively influenced when the leader compensates for shortcomings in either the employee or the work setting. However, if the leader spends time explaining tasks when they are already clear or when the employee has the ability and experience to handle them without interference, the employee is likely to see such directive behaviour as redundant or even insulting.

Contemporary Views of Leadership 10.4 Describe modern views of leadership. What are the latest views of leadership? Remember our discussion at the beginning of this chapter where we said that leadership studies have long had the goal of describing what it takes to be an effective leader? That goal hasn’t changed! Even the contemporary views of leadership are interested in answering that question. These views of leadership have a common theme: leaders who interact with, inspire, and support followers. In this section, we’re going to look at the following contemporary views of leadership: leader-member exchange (LMX), transformational-transactional leadership, and charismatic-visionary leadership.

Chapter 10  Leadership 285

Hey, You’re the Boss Now! When you step into a leadership role for the first time, it can be very intimidating. Here are 10 tips to help you as a first-time manager: • Realize that you still have much to learn—don’t pretend you know all the answers. • Be an active listener and communicator—encourage feedback. • Develop your time management skills—this will help you with the extra workload. • Do not take all the credit—share the spotlight with your team and recognize them regularly. • Create a learning environment—learn from your new team and provide guidance. • Manage by walking around—don’t stay locked away in your office. • Embrace diversity—respect your long-term employees and use them as mentors. • Delegation is your friend—learn how to motivate, and don’t expect employees to be perfect. • Look at the bigger picture—take time to understand the business. • Network, network, network—increase your team’s visibility as well as your own.

How Do Leaders Interact with Followers? Have you ever been in a group in which the leader had “favourites” who made up his or her in-group? If so, that’s the premise behind LMX theory.31 Leader–member exchange (LMX) theory says that leaders create in-groups and out-groups and those in the in-group will have higher performance ratings, less turnover, and greater job satisfaction. LMX theory suggests that early on in the relationship between a leader and a given follower, a leader will implicitly categorize a follower as an “in” or as an “out.” That relationship tends to remain fairly stable over time. Leaders also encourage LMX by rewarding those employees with whom they want a closer linkage and punishing those with whom they do not.32 For the LMX relationship to remain intact, however, both the leader and the follower must “invest” in the relationship. It’s not exactly clear how a leader chooses who falls into each category, but evidence indicates that in-group members have demographic, attitude, personality, and even gender similarities with the leader or they have a higher level of competence than out-group members.33 The leader does the choosing, but the follower’s characteristics drive the decision.

leader–member exchange (LMX) theory A leadership theory that says leaders create in-groups and outgroups, and those in the in-group will have higher performance ratings, less turnover, and greater job satisfaction.

Ninety-two percent of executives see favouritism in who gets job promotions.34 Research on LMX has been generally supportive. It appears that leaders do differentiate among followers; that these disparities are not random; and that followers with in-group status will have higher performance ratings, engage in more helping or “citizenship” behaviours at work, and report greater satisfaction with their boss.35 These findings probably shouldn’t be surprising when leaders are most likely to invest their time and other resources in those whom they expect to perform best.

How Do Transactional Leaders Differ from Transformational Leaders? Many early leadership theories viewed leaders as transactional leaders—that is, leaders who lead primarily by using social exchanges (or transactions). Transactional leaders guide or motivate followers to work toward established goals by exchanging

transactional leaders Leaders who guide or motivate their followers in the direction of established goals by clarifying role and task requirements.

286  Chapter 10 transformational leaders Leaders who inspire followers to transcend their own self-interests for the good of the organization, and who have a profound and extraordinary effect on their followers.

rewards for their productivity.36 But another type of leader—a transformational leader—stimulates and inspires (transforms) followers to achieve extraordinary outcomes. How? By paying attention to the concerns and developmental needs of individual followers; changing followers’ awareness of issues by helping those followers look at old problems in new ways; and being able to excite, arouse, and inspire followers to exert extra effort to achieve group goals.37 Examples include Frank Stronach, chair of Aurora, Ontario–based Magna International, and Mogens Smed, CEO of Calgarybased DIRTT (Doing It Right This Time) and former CEO of SMED International. Transformational leaders turn followers into believers in a vision, working toward what they believe is really important. “Part of a leader’s role is to set the vision for the company and to communicate that vision to staff to get their buy-in,” explains Dave Anderson of WorkSafeBC.38 Transactional and transformational leadership shouldn’t be viewed as opposing approaches to getting things done.39 Transformational leadership develops from transactional leadership. Transformational leadership produces levels of employee effort and performance that go beyond what would occur with a transactional approach alone. Moreover, transformational leadership is more than charisma since the transformational leader attempts to instill in followers the ability to question not only established views but those views held by the leader.40 The evidence supporting the superiority of transformational leadership over transactional leadership is overwhelmingly impressive. Studies that looked at managers in different settings, including the military and business, found that transformational leaders were evaluated as more effective, higher performers, and more promotable than their transactional counterparts.41 In addition, evidence indicates that transformational leadership is strongly correlated with lower turnover rates, higher productivity, and higher employee satisfaction.42 Finally, subordinates of transformational leaders may trust their leaders and their organizations more and feel that they are being fairly treated, which in turn may positively influence their work motivation.43 However, transformational leadership should be used with some caution in non–North American contexts, because its effectiveness may be affected by cultural values concerning leadership.44

How Do Charismatic Leadership and Visionary Leadership Differ?

charismatic leader An enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways.

Jeff Bezos, founder and CEO of Amazon.com, is a person who exudes energy, enthusiasm, and drive.45 He’s fun loving (his legendary laugh has been described as a flock of Canada geese on nitrous oxide), but he has pursued his vision for Amazon with serious intensity and has demonstrated an ability to inspire his employees through the ups and downs of a rapidly growing company. Bezos is what we call a charismatic leader—that is, an enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways. Several authors have attempted to identify personal characteristics of the charismatic leader.46 The most comprehensive analysis identified five such characteristics: they have a vision, the ability to articulate that vision, willingness to take risks to achieve that vision, sensitivity to both environmental constraints and follower needs, and behaviours that are out of the ordinary.47

It’s good to be charismatic! An increasing body of evidence shows impressive correlations between charismatic leadership and high performance and satisfaction among followers.48 Although one study found that charismatic CEOs had no impact on subsequent organizational performance, charisma is still believed to be a desirable leadership quality.49

Chapter 10  Leadership 287

Reed Saxon/AP Images

If charisma is desirable, can people learn to be charismatic leaders? Or are charismatic leaders born with their qualities? Although a small number of experts still think that charisma can’t be learned, most believe that individuals can be trained to exhibit charismatic behaviours.50 For example, researchers have succeeded in teaching undergraduate students to “be” charismatic. How? They were taught to articulate a far-reaching goal, communicate high performance expectations, exhibit confidence in the ability of subordinates to meet those expectations, and empathize with the needs of their subordinates; they learned to project a powerful, confident, and dynamic presence; and they practised using a captivating and engaging voice tone. The researchers also trained the student leaders to use charismatic nonverbal behaviours including leaning toward the follower when communicating, maintaining direct eye contact, and having a relaxed posture and animated facial expressions. Amazon.com founder and CEO Jeff Bezos is a charismatic leader. Shown here displaying Amazon’s Kindle Fire tablets, he is described as energetic, In groups with these “trained” charismatic leaders, enthusiastic, optimistic, and self-confident. Bezos has the drive to set and pursue members had higher task performance, higher task goals for risky new ventures and uses his charisma to inspire his employees to adjustment, and better adjustment to the leader work hard to achieve them. and to the group than did group members who worked in groups led by noncharismatic leaders. One last thing we should say about charismatic leadership is that it may not always be necessary in order to achieve high levels of employee performance. It may be most appropriate when the follower’s task has an ideological purpose or when the environment involves a high degree of stress and uncertainty.51 This aspect may explain why, when charismatic leaders surface, it’s more likely to be in politics, religion, or wartime; or when a business firm is starting up or facing a survival crisis. For example, Martin Luther King Jr. used his charisma to bring about social equality through nonviolent means, and Steve Jobs achieved unwavering loyalty and commitment from Apple’s technical staff in the early 1980s by articulating a vision of personal computers that would dramatically change the way people lived. Although the term vision is often linked with charismatic leadership, visionary visionary leadership leadership is different: It’s the ability to create and articulate a realistic, credible, and The ability to create and articulate attractive vision of the future that improves on the present situation.52 This vision, if a realistic, credible, and attractive properly selected and implemented, is so energizing that it “in effect jump-starts the vision of the future that improves on the present situation. future by calling forth the skills, talents, and resources to make it happen.”53 An organization’s vision should offer clear and compelling imagery that taps into people’s emotions and inspires enthusiasm to pursue the organization’s goals. It should be able to generate possibilities that are inspirational and unique and offer new ways of doing things that are clearly better for the organization and its members. Visions that are clearly articulated and have powerful imagery are easily grasped and accepted. For instance, Michael Dell created a vision of a business that sells and delivers customized PCs directly to customers in less than a week. The late Mary Kay Ash’s vision of women as entrepreneurs selling products that improved their self-image gave impetus to her cosmetics company, Mary Kay Cosmetics. What skills do visionary leaders have? Once the vision is identified, these leaders appear to have three skills that are related to effectiveness in their visionary roles.54 First is the ability to explain the vision to others by making the vision clear in terms of required goals and actions through clear oral and written communication. The second skill is the ability to express the vision not just verbally but through behaviour, which

288  Chapter 10 requires behaving in ways that continuously convey and reinforce the vision. The third skill is the ability to extend or apply the vision to different leadership contexts. For example, the vision has to be as meaningful to the people in accounting as it is to those in production, and to employees in Halifax as it is to those in Toronto.

Current Issues in Leadership 10.5 Explain current issues in leadership. It’s not easy being a chief information officer (CIO) today. A person responsible for managing a company’s information technology activities faces a lot of external and internal pressures. Technology changes rapidly—almost daily, it sometimes seems. Business costs continue to rise. Competitors develop new strategies. Economic conditions continue to confound even the experts. Rob Carter, CIO of FedEx, is on the hot seat facing such challenges.55 He’s responsible for all the computer and communication systems that provide around-the-clock and around-the-globe support for FedEx’s products and services. If anything goes wrong, you know who takes the heat. However, Carter has been an effective leader in this seemingly chaotic environment. Leading effectively in today’s environment is likely to involve such challenges for many leaders. Twenty-first-century leaders face some important leadership issues. In this section, we look at these issues, including empowering employees, team leadership, managing power, ethical leadership, emotional intelligence and leadership, and cross-cultural leadership.

Say What? Lead by NOT Leading

A Question of Ethics Have you ever watched the show Undercover Boss? It features a company’s “boss” working undercover in his or her own company to find out how the organization really works. Typically, the executive works undercover for a week, and then the employees the leader has worked with are summoned to company headquarters and either rewarded or punished for their actions. Bosses from organizations ranging from Waste Management to NASCAR have participated.

Discussion Questions 1. What do you think? Is it ethical for a leader to go undercover in his or her organization? Why or why not? 2. What ethical issues could arise? How could managers deal with those issues?

Why Do Leaders Need to Empower Employees? empowerment The act of increasing the decisionmaking discretion of workers.

As we’ve described in different places throughout the text, managers are increasingly leading by not leading; that is, by empowering their employees. Empowerment involves increasing the decision-making discretion of workers. Millions of individual employees and employee teams are making the key operating decisions that directly affect their work. They’re developing budgets, scheduling workloads, controlling inventories, solving quality problems, and engaging in similar activities that until very recently were viewed exclusively as part of the manager’s job.56 For instance, at The Container Store, any employee who gets a customer request has permission to take care of it. The company’s chairman emeritus Garret Boone says, “Everybody we hire, we hire as a leader. Anybody in our store can take an action that you might think of typically being a manager’s action.”57

Chapter 10  Leadership 289

Team Leadership Since leadership is increasingly taking place within a team context and more organizations are using work teams, the role of the leader in guiding team members is gaining importance. The role of team leader is different from the traditional leadership role. Leadership can seem like juggling many things at once. Many leaders are not equipped to handle the change to employee teams. As one consultant noted, “Even the most capable managers have trouble making the transition because all the command-and-control type things they were encouraged to do before are no longer appropriate. There’s no reason to have any skill or sense of this.”58 This same consultant estimated that “probably 15 percent of managers are natural team leaders; another 15 percent could never lead a team because it runs counter to their personality—that is, they’re unable to sublimate their dominating style for the good of the team. Then there’s that huge group in the middle: Team leadership doesn’t come naturally to them, but they can learn it.”59 The challenge for many managers is learning how to become an effective team leader. They have to learn skills such as having the patience to share information, being able to trust others and to give up authority, and understanding when to intervene. Effective team leaders have mastered the difficult balancing act of knowing when to leave their teams alone and when to get involved. New team leaders may try to retain too much control at a time when team members need more autonomy, or they may abandon their teams at times when team members need support and help.60 One study of organizations that had reorganized themselves around employee teams found certain common responsibilities of all leaders. These tasks included coaching, facilitating, handling disciplinary problems, reviewing team and individual performance, training, and communication.61 However, a more meaningful way to describe the team leader’s job is to focus on two priorities: (1) managing the team’s external boundary and (2) facilitating the team process.62 These priorities entail four specific leadership roles. (See Exhibit 10-7.) Team leaders are liaisons with external constituencies, which may include upper management, other organizational work teams, customers, or suppliers. The leader represents the team to other constituencies, secures needed resources, clarifies others’ expectations of the team, gathers information from the outside, and shares that information with team members. Exhibit 10-7  Specific Team Leadership Roles Team leaders are troubleshooters. When the team has problems and asks for assistance, team leaders sit in on meetings Liaison with and try to help resolve the problems. Troubleshooting rarely External Coach Constituencies involves technical or operational issues, because the team members typically know more about the tasks being done than does the leader. The leader is most likely to contribute by Conflict Team Leader Troubleshooter asking penetrating questions, helping the team talk through Manager Roles problems, and getting needed resources to tackle problems.

Freshidea/Fotolia

One reason more companies are empowering employees is the need for quick decisions by those people who are most knowledgeable about the issues—often those at lower organizational levels. If organizations want to successfully compete in a dynamic global economy, employees have to be able to make decisions and implement changes quickly. Another reason is that organizational downsizings left many managers with larger spans of control. In order to cope with the increased work demands, managers had to empower their people. Although empowerment is not a universal answer, it can be beneficial when employees have the knowledge, skills, and experience to do their jobs competently.

Nathan Denette/Canadian Press Images

290  Chapter 10

When Eva Aariak spoke to the Nunavut legislative assembly to explain why she should be elected the territory’s premier, she emphasized that her leadership style included the ability to listen and encourage others to share their ideas. She felt being a team player would work well with the territory’s consensus style of government built from the principles of parliamentary democracy and Indigenous values.

legitimate power The power a leader has as a result of his or her position in the organization.

coercive power The power a leader has through his or her ability to punish or control.

Team leaders are conflict managers. They help identify issues, such as the source of the conflict, who is involved, the issues, the resolution options available, and the advantages and disadvantages of each. By getting team members to address questions such as these, the leader minimizes the disruptive aspects of intra-team conflicts. Finally, team leaders are coaches. They clarify expectations and roles, teach, offer support, and do whatever else is necessary to help team members keep their work performance high.

reward power

Managing Power

The power a leader has to give positive benefits or rewards.

Where do leaders get their power—that is, their capacity to influence work actions or decisions? Exhibit 10-8 illustrates the five sources of leader power.63

expert power The influence a leader has based on his or her expertise, special skills, or knowledge.

referent power The power a leader has because of his or her desirable resources or personal traits.

Providing Ethical Leadership The topic of leadership and ethics has received surprisingly little attention. Only recently have ethics and leadership researchers begun to consider the ethical implications of leadership.64 Visit your local bookstore and you will find quite a few books on ethics and leadership. Why now? One reason is a growing general interest in ethics throughout the field of management. Another, without a doubt, is the recent corporate and government financial scandals that have increased the public’s and politicians’ concerns about ethical standards.

Exhibit 10-8  Types of Power Coercive power

Power based on fear.

Reward power

Power based on the ability to distribute something that others value.

Legitimate power

Power based on one’s position in the formal hierarchy.

Expert power

Power based on one’s expertise, special skill, or knowledge.

Referent power

Power based on identification with a person who has desirable resources or personal traits.

Ethics is part of leadership in a number of ways. For example, transformational leaders have been described as fostering moral virtue when they try to change the attitudes and behaviours of followers.65 We can also see an ethical component to charisma. Unethical leaders may use their charisma to enhance their power over followers and use that power for self-serving purposes. On the other hand, ethical leaders may use their charisma in more socially constructive ways to serve others.66 We also see a lack of ethics when leaders abuse their power and give themselves large salaries and bonuses while, at the same time, they seek to cut costs by laying off employees. Of course, trust, which is important to ethical behaviour, explicitly deals with the leadership traits of honesty and integrity. As we have seen recently, leadership is not value free. When you’re the boss, you pull the strings. Providing moral leadership involves addressing the means that a leader uses in trying to achieve goals, as well as the content of those goals. As a recent study concluded, ethical leadership is more than being ethical; it is reinforcing ethics through organizational mechanisms such as communication and the reward system.67 Thus, before we judge any leader to be effective, we should consider both the moral content of his or her goals and the means used to achieve those goals.

Does National Culture Affect Leadership? One general conclusion that surfaces from leadership research is that effective leaders do not use a single style. They adjust their style to the situation. Although not mentioned explicitly, national culture is certainly an important situational variable in determining which leadership style will be most effective. What works in China isn’t likely to be effective in France or Canada. For instance, one study of Asian leadership styles revealed that Asian managers preferred leaders who were competent decision makers, effective communicators, and supportive of employees.68 Another study of leadership in Sub-Saharan Africa found that charismatic leaders can help overcome cultural problems of corruption, poverty, tribalism, and violence.69 National culture affects leadership style because it influences how followers will respond. Leaders can’t (and shouldn’t) just choose their styles randomly. They’re constrained by the cultural conditions their followers have come to expect. Exhibit 10-9

Exhibit 10-9  Cross-Cultural Leadership • 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 ­selfprotection, low team orientation, high autonomy, and high participation. SOURCES: Based on J.-H. Shin, R. L. Heath, and J. Lee, “A Contingency Explanation of Public Relations Practitioner Leadership Styles: Situation and Culture,” Journal of Public Relations Research, April 2011, pp. 167–90; 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 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.

Adam121/Fotolia

Chapter 10  Leadership 291

292  Chapter 10 provides some findings from selected examples of cross-cultural leadership studies. Because most leadership theories were developed in the United States, they have an American bias. They emphasize follower responsibilities rather than rights; assume self-gratification rather than commitment to duty or altruistic motivation; assume centrality of work and democratic value orientation; and stress rationality rather than spirituality, religion, or superstition.70 However, the GLOBE research program, which we first introduced in Chapter 2, is the most extensive and comprehensive ­cross-cultural study of leadership ever undertaken. The GLOBE study has found that there are some universal aspects to leadership. Specifically, a number of elements of transformational leadership appear to be associated with effective leadership regardless of what country the leader is in.71 These elements include vision, foresight, encouragement, trustworthiness, dynamism, positiveness, and proactiveness. The results led two members of the GLOBE team to conclude that “effective business leaders in any country are expected by their subordinates to provide a powerful and proactive vision to guide the company into the future, strong motivational skills to stimulate all employees to fulfill the vision, and excellent planning skills to assist in implementing the vision.”72 Some people suggest that the universal appeal of these transformational leader characteristics is due to the pressures toward common technologies and management practices, as a result of global competitiveness and multinational influences.

How Does Emotional Intelligence Affect Leadership? Becoming a STAR ✯ leader We mentioned emotional intelligence (EI) in previous chapters. We revisit the topic here because of recent studies indicating that EI—more than IQ, expertise, or any other single factor—is the best predictor of who will emerge as a leader.73 As we said in our earlier discussion of trait research, leaders need basic intelligence and job-relevant knowledge. But IQ and technical skills are “threshold capabilities.” They’re necessary but not sufficient requirements for leadership. It’s the possession of the five components of emotional intelligence—self-awareness, self-management, self-motivation, empathy, and social skills—that allows an individual to become a star performer. Without EI, a person can have outstanding training, a highly analytical mind, a long-term vision, and an endless supply of terrific ideas but still not make a great leader, especially as individuals move up in an organization. The evidence indicates that the higher the rank of a person considered to be a star performer, the more that EI capabilities surface as the reason for his or her effectiveness. Specifically, when star performers were compared with average ones in senior management positions, nearly 90 percent of the difference in their effectiveness was attributable to EI factors rather than basic intelligence. EI has been shown to be positively related to job performance at all levels. But it appears to be especially relevant in jobs that demand a high degree of social interaction. And of course, that’s what leadership is all about. Great leaders demonstrate their EI by exhibiting all five of its key components: self-awareness, self-management, selfmotivation, empathy, and social skills. Although there has been some controversy about the role of EI in leadership,74 most research makes a case for concluding that EI is an essential element in leadership effectiveness.75 As such, it could be added to the list of traits associated with leadership that we described earlier in the chapter.

Chapter 10  Leadership 293

Technology and the Manager’s Job

Virtual Leadership How do you lead people who are physically separated from you and with whom your interactions are primarily written digital communications?76 That’s the challenge of being a virtual leader. And unfortunately, leadership research has been directed mostly toward face-to-face and verbal situations. But we can’t ignore the reality that today’s managers and their employees are increasingly being linked by technology rather than by geographic proximity. So what guidance would be helpful to leaders who must inspire and motivate dispersed employees? It’s easy to soften harsh words in face-to-face communication with nonverbal action. A smile or a comforting gesture can go a long way in lessening the blow behind strong words like disappointed, unsatisfactory, inadequate, or below expectations. That nonverbal component doesn’t exist in online interactions. The structure of words in a digital communication also has the power to motivate or demotivate the receiver. A manager who inadvertently sends a message in short phrases or in ALL CAPS may get a very different response than if the message had been sent in full sentences using appropriate punctuation. To be an effective

virtual leader, managers must recognize that they have choices in the words and structure of their digital communications. They also need to develop the skill of “reading between the lines” in the messages they receive. It’s important to try and decipher the emotional content of a message as well as the written content. Also, virtual leaders need to think carefully about what actions they want their digital messages to initiate. Be clear about what’s expected and follow up on messages. For an increasing number of managers, good interpersonal skills may include the abilities to communicate support and leadership through digital communication and to read emotions in others’ messages. In this “new world” of communication, writing skills are likely to become an extension of interpersonal skills.

Discussion Questions 1. What challenges does a “virtual” leader face? 2. How can virtual leaders use technology to help them be more effective leaders?

Why Is Trust the Essence of Leadership? 10.6 Discuss trust as the essence of leadership. Trust, or lack of trust, is an increasingly important issue in today’s organizations.77 In today’s uncertain environment, leaders need to build, or even rebuild, trust and credibility. Before we can discuss ways leaders can do that, we have to know what trust and credibility are and why they’re so important. The main component of credibility is honesty. Surveys show that honesty is consistently singled out as the number one characteristic of admired leaders. “Honesty is absolutely essential to leadership. If people are going to follow someone willingly, whether it be into battle or into the boardroom, they first want to assure themselves that the person is worthy of their trust.”78 In addition to being honest, credible leaders are competent and inspiring. They are personally able to effectively communicate their confidence and enthusiasm. Thus, followers judge a leader’s credibility in terms of his or her honesty, competence, and ability to inspire. Trust is closely entwined with the concept of credibility, and, in fact, the terms are often used interchangeably. Trust is defined as the belief in the integrity, character, and ability of a leader. Followers who trust a leader are willing to be vulnerable to the leader’s actions because they are confident that their rights and interests will not be abused.79 Research has identified five dimensions that make up the concept of trust: • Integrity:  honesty and truthfulness • Competence:  technical and interpersonal knowledge and skills • Consistency:  reliability, predictability, and good judgment in handling situations • Loyalty:  willingness to protect a person, physically and emotionally • Openness:  willingness to share ideas and information freely80

credibility The degree to which someone is perceived as honest, competent, and able to inspire.

trust The belief in the integrity, character, and ability of a person.

Donald Heupel/Corbis

294  Chapter 10

PepsiCo CEO Indra Nooyi is a leader with high emotional intelligence. Shown here listening to an employee at the firm’s yogourt plant, Nooyi possesses the five EI components that have contributed to her excellent performance in jobs that demand a high degree of social interaction with workers, customers, and business leaders throughout the world.

Of these five dimensions, integrity seems to be the most critical when someone assesses another’s trustworthiness.81 Both integrity and competence were seen in our earlier discussion of leadership traits found to be consistently associated with leadership. Workplace changes have reinforced why such leadership qualities are important. For instance, trends of employee empowerment and self-managed work teams have reduced many of the traditional control mechanisms used to monitor employees. If a work team is free to schedule its own work, evaluate its own performance, and even make its own hiring decisions, trust becomes critical. Employees have to trust managers to treat them fairly, and managers have to trust employees to conscientiously fulfill their responsibilities. Also, leaders have to increasingly lead others who may not be in their immediate work group or even may be physically separated—members of cross-functional or virtual teams, individuals who work for suppliers or customers, and perhaps even people who represent other organizations through strategic alliances. These situations don’t allow leaders the luxury of falling back on their formal positions for influence. Many of these relationships, in fact, are fluid and fleeting. So the ability to quickly develop trust and sustain that trust is crucial to the success of the relationship.

Why Is it Important That Followers Trust Their Leaders? Research has shown that trust in leadership is significantly related to positive job outcomes, including job performance, organizational citizenship behaviour, job satisfaction, and organizational commitment.82 Given the importance of trust to effective leadership, leaders need to build trust with their followers. Some suggestions are shown in Exhibit 10-10.

Chapter 10  Leadership 295

Exhibit 10-10  Suggestions for Building Trust SOURCES: Based on P. S. Shockley-Zalabak and S. P Morreale, “Building High-Trust Organizations,” Leader to Leader,

Spring 2011, pp. 39–45; J. K. Butler Jr., “Toward Understanding and Measuring Conditions of Trust: Evolution of a Condition of Trust Inventory,” Journal of Management, September 1991, pp. 643–63; and F. Bartolome, “Nobody Trusts the Boss Completely—Now What?” Harvard Business Review, March–April 1989, pp. 135–42.

1. Practise openness. Mistrust comes as much from what people don’t know as from what they do know. Openness leads to confidence and trust. So keep people informed; make clear the criteria on how decisions are made; explain the rationale for your decisions; be candid about problems; and fully disclose relevant information. 2. Be fair. Before making decisions or taking actions, consider how others will perceive them in terms of objectivity and fairness. Give credit where credit is due; be objective and impartial in performance appraisals; and pay attention to equity perceptions in reward distributions. 3. Speak your feelings. Leaders who convey only hard facts come across as cold and distant. When you share your feelings, others will see you as real and human. They will know who you are and their respect for you will increase. 4. Tell the truth. If honesty is critical to credibility, you must be perceived as someone who tells the truth. Followers are more tolerant of being told something they “don’t want to hear” than of finding out that their leader lied to them. 5. Be consistent. People want predictability. Mistrust comes from not knowing what to expect. Take the time to think about your values and beliefs. Then let them consistently guide your decisions. When you know your central purpose, your actions will follow accordingly, and you will project a consistency that earns trust. 6. Fulfill your promises. Trust requires that people believe that you’re dependable. So you need to keep your word. Promises made must be promises kept. 7. Maintain confidences. You trust those whom you believe to be discreet and whom you can rely on. If people make themselves vulnerable by telling you something in confidence, they need to feel assured that you won’t discuss it with others or betray that confidence. If people perceive you as someone who leaks personal confidences or someone who can’t be depended on, you won’t be perceived as trustworthy. 8. Demonstrate confidence. Develop the admiration and respect of others by demonstrating technical and professional ability. Pay particular attention to developing and displaying your communication, negotiating, and other interpersonal skills.

Now, more than ever, managerial and leadership effectiveness depends on the ability to gain the trust of followers.83 Downsizing, corporate financial misrepresentations, and the increased use of temporary employees have undermined employees’ trust in their leaders and shaken the confidence of investors, suppliers, and customers. A survey found that only 51 percent of Canadian employees trusted their executive leaders.84 Today’s leaders are faced with the challenge of rebuilding and restoring trust with employees and with other important organizational stakeholders.

A Final Thought Regarding Leadership Despite the belief that some leadership styles will always be effective regardless of the situation, leadership may not always be important! Research indicates that, in some situations, any behaviours a leader exhibits are irrelevant. In other words, certain individual, job, and organizational variables can act as “substitutes for leadership,” negating the influence of the leader.85 For instance, follower characteristics such as experience, training, professional orientation, or need for independence can neutralize the effect of leadership. These characteristics can replace the employee’s need for a leader’s support or ability to create structure and reduce task ambiguity. Similarly, jobs that are inherently unambiguous and routine or that are intrinsically satisfying may place fewer demands on the leadership variable. Finally, such organizational characteristics as explicit formalized goals, rigid rules and procedures, or cohesive work groups can substitute for formal leadership. Tips for Future Leaders gives some suggestions for being a better leader.

296  Chapter 10

Tips for Future Leaders • People work with you, not for you. • Spend time with people at all levels and positions in the organization. • Create a culture of caring—people do not care how much you know until they know how much you care. • Be persistent. Re-evaluate and re-invent yourself. • Support your organization’s people. Look for the good, not the bad. • Energize your team with a vision. Create a sense of urgency.

Chapter Summary Learning Objectives Checklist 10.1 Define leader and leadership. A leader is someone who can influence others and who has managerial authority. Leadership is a process of leading a group and influencing that group to achieve its goals. Managers should be leaders, because leading is one of the four management functions.

10.2 Compare and contrast early leadership theories. Early attempts to define leader traits were unsuccessful, although later attempts found seven traits associated with leadership. The University of Iowa studies explored three leadership styles. The only conclusion was that group members were more satisfied under a democratic leader than under an autocratic one. The Ohio State studies identified two dimensions of leader behaviour—initiating structure and consideration. A leader high in both those dimensions at times, but not always, achieved high group task performance and high group member satisfaction. The University of Michigan studies looked at employee-oriented leaders and production-oriented leaders. They concluded that leaders who were employee oriented could get high group productivity and high group member satisfaction. The Managerial Grid looked at leaders’ concern for production and concern for people and identified five leader styles. Although it suggested that a leader who was high in concern for production and high in concern for people was the best, there was no substantive evidence for that conclusion. As the behavioural studies showed, a leader’s behaviour has a dual nature: a focus on the task and a focus on the people.

10.3 Describe the four major contingency leadership theories. Fiedler’s model attempted to define the best style to use in particular situations. He measured leader style—­ relationship oriented or task oriented—using the least-

preferred co-worker questionnaire. Fiedler also assumed that a leader’s style was fixed. He measured three contingency dimensions: leader-member relations, task structure, and position power. The model suggests that task-oriented leaders performed best in very favourable and very unfavourable situations, and relationship-oriented leaders performed best in moderately favourable situations. Hersey and Blanchard’s situational leadership theory focused on followers’ readiness. They identified four leadership styles: telling (high task–low relationship), selling (high task–high relationship), participating (low task–high relationship), and delegating (low task–low relationship). They also identified four stages of readiness: unable and unwilling (use telling style); unable but willing (use selling style); able but unwilling (use participative style); and able and willing (use delegating style). The leader-participation model relates leadership behaviour and participation to decision making. It uses a decision tree format with seven contingencies and five alternative leadership styles. The path-goal model developed by Robert House identified four leadership behaviours: directive, supportive, participative, and achievement-oriented. He assumes that a leader can and should be able to use any of these styles. The two situational contingency variables were found in the environment and in the follower. Essentially the path-goal model says that a leader should provide direction and support as needed; that is, structure the path so the followers can achieve goals.

10.4 Describe modern views of leadership. LMX theory says that leaders create in-groups and outgroups and those in the in-group will have higher performance ratings, less turnover, and greater job satisfaction. A transactional leader exchanges rewards for productivity, whereas a transformational leader stimulates and inspires followers to achieve goals. A charismatic leader is an enthusiastic

Chapter 10  Leadership 297

and self-confident leader whose personality and actions influence people to behave in certain ways. People can learn to be charismatic. A visionary leader is able to create and articulate a realistic, credible, and attractive vision of the future.

10.5 Explain current issues in leadership. The issues facing leaders today include employee empowerment, team leadership, managing power, ethical leadership, emotional intelligence and leadership, and ­cross-cultural leadership. As employees are empowered, the leader’s role tends to be one of not leading. As leaders adjust their style to the situation, one of the most important situational characteristics is national culture. Finally, EI is proving to be an essential element in leadership effectiveness.

10.6 Discuss trust as the essence of leadership. The five dimensions of trust include integrity, competence, consistency, loyalty, and truthfulness. Integrity refers to one’s honesty and truthfulness. Competence involves an individual’s technical and interpersonal knowledge and skills. Consistency relates to an individual’s reliability, predictability, and good judgment in handling situations.

­ oyalty is an individual’s willingness to protect and save L face for another person. Openness means that you can rely on the individual to give you the whole truth.

Discussion Questions 1. Discuss the strengths and weaknesses of the trait theory of leadership. 2. What similarities, if any, can you find between Hersey and Blanchard’s situational leadership and path-goal theory? 3. What sources of power are available to leaders? Which ones are most effective? 4. “All managers should be leaders, but not all leaders should be managers.” Do you agree or disagree with this statement? Support your position. 5. “Charismatic leadership is always appropriate in organizations.” Do you agree or disagree? Support your position. 6. What kinds of campus activities could a full-time student do that might lead to the perception that he or she is a charismatic leader? In pursuing those activities, what might the student do to enhance this perception of being charismatic?

Developing Management Skills Being a Good Leader The terms management and leadership are frequently used interchangeably. That’s a misnomer. The two aren’t the same, but they are related. Although you don’t need to hold a management position to be a leader, you’re unlikely to be an effective manager if you can’t be an effective leader. SKILL BASICS Simply put, leadership style can be categorized as task oriented or people oriented. Neither one is right for all situations. Although a number of situational variables influence the choice of an effective leadership style, four variables seem most relevant.86 • Structure of tasks.  Structured tasks have procedures and rules that minimize ambiguity. If a job is very structured, the leader should be less directive. • Level of stress.  Situations differ in terms of time and performance stress. High-stress situations favour leaders with more experience. • Level of group support.  Members of close-knit and supportive groups help each other out. They can provide both task support and relationship support. Supportive groups require their leaders less than other groups. • Characteristics of followers. Personal characteristics of followers—such as experience, ability, and

­ otivation—influence which leadership style will be m most effective. Employees with extensive experience, strong abilities, and high motivation don’t require much task behaviour. They will be more effective with a people-oriented style. Conversely, employees with little experience, marginal abilities, and low motivation will perform better when leaders exhibit more task-oriented behaviour.

Increasing Your Power Managerial jobs come with the power of authority. But sometimes that authority isn’t enough to get things done. And other times you may not want to use your formal authority as a means of getting people to do what you want. You may, for instance, want to rely more on your persuasive skills than the power of your title. So effective managers increase their power by developing multiple sources of influence. SKILL BASICS You can increase the likelihood that you’ll survive and thrive in your organization if you learn how to develop a power base. Remember, because you have power doesn’t mean you have to use it. But it’s nice to be able to call upon it when you do need it. Four sources of power can be derived from your job. Another three sources are based on your personal unique characteristics.

298  Chapter 10 • All management jobs come with the power to coerce, reward, and impose authority. Coercive power is based on fear. If you can dismiss, suspend, demote, assign unpleasant work tasks, or write a negative performance review on someone, you hold coercive power over that person. Conversely, if you can give someone something of positive value or remove something of negative value—like control pay rates, raises, bonuses, promotions, or work assignments—you have reward power. And all managerial positions provide authority over subordinates—though within specific limitations. If you can tell someone to do something and they see this request to be within your formal job description, you have authority power over them. • In addition to coercive, reward, and authoritative power, many managerial positions also possess information power that comes from access to and control over information. If you have data or knowledge that others need, and which only you have access to, it gives you power. Of course, you don’t have to be a manager to have information power. Many employees are quite skilled at operating in secrecy, hiding technical short-cuts, or avoiding showing others exactly what they do—all with the intention of keeping important knowledge from getting into others’ hands. • You don’t have to be a manager or control information to have power in an organization. You can also exert influence based on your expertise, admiration that others might have for you, and through charismatic qualities. If you have a special skill or unique knowledge that others in the organization depend on, you hold expert power. In our current age of specialization, this source of power is increasingly potent. If others identify with you and look up to you to the extent that they want to please you, you have referent power. It develops out of admiration and the desire to be like someone else. The final source of influence is charismatic power, which is an extension of referent power. If others will follow you because they admire your heroic qualities, you have charismatic power over them. • Based on these sources of power, we can say that you can increase your power in organizations by (1) taking on managerial responsibilities, (2) gaining access to important information, (3) developing an expertise that the organization needs, or (4) displaying personal characteristics that others admire. SOURCE: Based on J. R. P. French, Jr. and B. Raven, “The Bases of Social Power,” in D. Cartwright (ed.), Studies in Social Power (Ann Arbor: University of Michigan Institute of Social Research, 1959), pp. 150–67; B. J. Raven, “The Bases of Power: Origin and Recent Developments,” Journal of Social Issues 49, 1993, pp. 227–51; E. A. Ward, “Social Power Bases of Managers: Emergence of a New Factor,” Journal of Social Psychology, February 2001, pp. 144–47; and B. H. Raven, “The Bases of Power and the Power/Interaction Model of Interpersonal Influence,” Analyses of Social Issues and Public Policy, December 2008, pp. 1–22.

PRACTISING THE SKILL Read through this scenario and follow the directions at the end of it: Margaret is a supervisor in the online sales division of a large clothing retailer. She has let it be known that she is devoted to the firm and plans to build her career there. Margaret is hardworking and reliable, has volunteered for extra projects, has taken in-house development courses, and joined a committee dedicated to improving employee safety on the job. She undertook an assignment to research ergonomic office furniture for the head of the department and gave up several lunch hours to consult with the head of human resources about her report. Margaret filed the report late, but she explained the delay by saying that her assistant lost several pages that she had to redraft over the weekend. The report was well received, and several of Margaret’s colleagues think she should be promoted when the next opening arises. Evaluate Margaret’s skill in building a power base. What actions has she taken that are helpful to her in reaching her goal? Is there anything she should have done differently?

Developing Your Diagnostic and Analytical Skills: Radical Leadership Ricardo Semler, CEO of Semco Group of São Paulo, Brazil, is considered by many to be a radical. He has never been the type of leader that most people would expect to be in charge of a multimillion-dollar business.87 Why? Semler breaks all the traditional “rules” of leading and managing. He is the ultimate hands-off leader who does not even have an office at the company’s headquarters. As the “leading proponent and most tireless evangelist” of participative management, Semler says his philosophy is simple: Treat people like adults and they will respond like adults. Underlying the participative management approach is the belief that “organizations thrive best by entrusting employees to apply their creativity and ingenuity in service of the whole enterprise and to make important decisions close to the flow of work, conceivably including the selection and election of their bosses.” According to Semler, his approach works well. But how does it work in reality? At Semco, most of the trappings of organizations and management are absent. There are no organization charts, no long-term plans, no statements of corporate values, no dress codes, and no written rules or policy manuals. The company’s 3000 employees decide their work hours and their pay levels. Subordinates decide who their bosses will be and also review their bosses’ performance. The employees elect the corporate leadership and decide most of the company’s new strategic initiatives. Each person has one vote—including Ricardo Semler. At one of the company’s plants outside São Paulo, there are no supervisors telling employees what to do. On any given day, an employee may decide to “run a grinder

Chapter 10  Leadership 299

or drive a forklift, depending on what needs to be done.” João Vendramin Neto, who is in charge of Semco’s manufacturing, says that “the workers know the organization’s objectives and they use common sense to decide for themselves what they should do to hit those goals.” Why did Semler decide that his form of radical leadership was necessary, and does it work? Semler did not pursue such radical self-governance out of some altruistic ulterior motive. Instead, he felt it was the only way to build an organization that was flexible and resilient enough to flourish in chaotic and turbulent times. He maintains that this approach has enabled Semco to survive the roller-coaster nature of Brazilian politics and the Brazilian economy. Although the country’s political leadership and economy have gone from one extreme to another and countless Brazilian banks and companies have failed, Semco has

survived. Not just survived—prospered. Semler says, “If you look at Semco’s numbers, we’ve grown 27.5 percent a year for 14 years.” Semler attributes this fact to flexibility— of his company and, most importantly, of his employees.

Questions 1. Describe Ricardo Semler’s leadership style. What do you think the advantages and drawbacks of his style might be? 2. What challenges might a radically “hands-off” leader face? How could those challenges be addressed? 3. How could future leaders be identified in this organization? Would leadership training be important to this organization? Discuss. 4. What could other businesses learn from Semler’s approach to leadership?

Team Exercises 3BL: The Triple Bottom Line The Center for Creative Leadership conducted a study of executives entitled “Leadership and the Triple Bottom Line.”88 The study found that the top five leadership competencies necessary for adopting 3BL approaches are as follows: • long-term view (20 percent) • communication (15 percent) • influence (11 percent) • scanning the external environment (9 percent) • collaboration (8 percent) The respondents further identified the importance of creating an organizational culture where 3BL approaches are accepted and aligned with strategy, values, rewards, and recognition. Beyond the cultural support, leaders must model 3BL behaviours in their professional and personal lives to successfully achieve organizational support. What other competencies do you think are important for leaders to be effective at maximizing the triple bottom line?

THINKING STRATEGICALLY ABOUT 3BL A 3BL strategy is not enough. Organizations must develop the leadership capacity to manage 3BL opportunities and challenges. The leaders surveyed suggested that success with 3BL would come through an integrated approach, with key stakeholder involvement and a balanced perspective of long-term strategy and short-term results. Pick a small or medium-sized business in your community. Who are the key stakeholders you would recommend involving in order to support 3BL? Which of those stakeholders would be most opposed to 3BL?

The Pre–Post Leadership Assessment OBJECTIVE To compare characteristics intuitively related to leadership with leadership characteristics found in leadership theory.

PROCEDURE Identify three people (e.g., friends, relatives, previous boss, public figures) whom you consider outstanding leaders. List why you feel each individual is a good leader. Compare your lists of the three people. Which traits, if any, are common to all three? Your instructor will lead the class in a discussion of leadership characteristics based on your lists. Students will call out what they identified, and your instructor will display the list on the screen or whiteboard. When all students have shared their lists, class discussion will focus on the following questions: • What characteristics consistently appeared on students’ lists? • Were these characteristics more trait-oriented or behaviour-oriented? • In what situations were these characteristics useful? • What, if anything, does this exercise suggest about leadership attributes?

Be the Consultant: Hiring Ethical Leaders Your consulting firm has been chosen to develop questions that might help organizations select more ethical leaders. You are familiar with behavioural interview questions that generally start with “Tell me about a time when you . . .” or “Give me an example of a situation in which you . . . .”

300  Chapter 10 You feel that four key areas where ethical leadership may come into difficulty are compromise, ethics, time pressure, and formal rules. In business situations, compromise is often necessary for things to happen. Sometimes that compromise might be a situation where your values were not in line with organizational values. Often leaders have to come to quick decisions or use a more informal style where they bend the rules to get something done.

Develop behavioural questions for the four areas mentioned below: Compromise Ethics Time pressure Bending the rules

What are other areas requiring ethical leadership?

Business Cases Developing Gen Y Leaders How important are excellent leaders to organizations? Well, the answer, in theory of course, would be “very important.” However, the answer as practised by countless organizations might indicate otherwise. Only 38 percent of organizations have a formal front-line leadership development program in place.89 It’s important for organizations to commit to strong leadership development, and it’s particularly important for organizations to begin grooming their Gen Y employees to move into critical leadership positions. Why? By 2025, millennials are set to comprise 75 percent of the global workforce. That’s why organizational leadership development programs are absolutely essential.90 Let’s look at what some companies are doing to prepare the next generation for leadership.

Excellent leaders have to be developed and cultivated. 3M’s leadership development program is so effective that it has been one of the “Top 20 Companies for Leadership” in six of the past seven years and ranks as one of the top 25 companies for grooming leadership talent according to consultant Hay Group.91 What is 3M’s leadership program all about? A few years ago, the company’s former CEO and his top team spent 18 months developing a leadership model for the company. After numerous brainstorming sessions and much heated debate, the group finally agreed on six “leadership attributes” that they believed were essential for managers to have in order for the company to become skilled at executing strategy and being accountable. Those six attributes included the ability to develop a plan and implement that plan, motivate and rouse others, be ethical and trustworthy and abide by the rules, achieve outcomes, strive for excellence, and be a capable and creative innovator. The company has continued to reinforce its pursuit of leadership excellence with these six attributes. Other companies, such as Ernst & Young, start early in recruiting and investing in future leaders, often going after talented college freshmen who have leadership potential. They take the best talent and involve them in various leadership development programs both while in school and after

graduation.92 Deloitte, another company rated high for its leadership development programs, is deeply committed to helping its millennial employees learn and absorb the leadership skills they will need to lead the company in the future.93 It starts with a very specific recruiting strategy for hiring millennials and continues with a year-long “Welcome to Deloitte” program. This program is all about teaching this age group client-management skills and team-building skills, and offering professional development opportunities. And, not surprisingly, it’s done largely through social media, using interactive experiences such as role-plays, simulations, games, and a tool to help these employees track their first-year tasks. At Facebook, the first millennial-run organization to become a Fortune 500 company, leadership development is designed around the needs of a fast-moving, fast-growing company.94 The head of leadership development at Facebook says that the only way leadership development works there is by making it consistent with the types of engineering tech types that comprise the company. Engineers are concerned only with “what works.” And it’s the same for any type of leadership development to be successful here; the focus has to be on what works. Also, since Facebook is an extremely flat organization with few levels of management, employees find out early on that in order to get anything done, they’re going to have to be able to influence and inspire people. That’s why leaders at Facebook don’t have to be convinced of the need for people skills. They won’t survive long without them.

Discussion Questions 1. Why do you think that there’s a huge gap in theory (what we know we should do) and practice (what we’re actually doing) of leadership development? 2. What are some reasons that companies might not be addressing Gen Y leadership development programs? 3. Would any of 3M’s six leadership attributes be appropriate for any of the other companies mentioned? Explain.

Serving up Leaders Here’s something to consider: $35 million, 5000 live coffee plants, 1000 lighting instruments, 120 speakers, 21 projection

Chapter 10  Leadership 301

screens. These are just a few of the “numbers” describing the spectacle known as the Starbucks Leadership Lab.95 Starbucks invited 9600 store managers to a conference centre in Houston to be immersed in a massive interactive experience. While there, these managers were steeped in the Starbucks brand.

Immerse yourself in a leadership experience. The Leadership Lab was part leadership training and part trade show. The company’s store managers were given a behind-the-scenes look and introduced up close and personal to what makes Starbucks go—from an exhibit featuring live coffee shrubs and a drying patio where they could get hands-on experience raking through coffee beans to an enormous exhibit of used shoes with customer experiences noted on cards (sort of a “walk in my shoes” theme). Most of these experiences were designed to be instructive for the store managers. However, in addition, the store managers—who are on the “firing line” day in and day out—had the opportunity to interact with top managers of the company’s roasting process, blend development, and customer service functions. Managers also were encouraged to share what they had learned from the Leadership Lab by stopping at a station lined with laptops. The lights, the music, and the dramatic presentation were all designed to immerse the store managers in the Starbucks brand and culture. The goal was to “mobilize its employees to become brand evangelists.” And since presentation is a significant component of what the Starbucks experience is built on—the sights, the sounds, the smells— the entire presentation at the Leadership Lab was well thought out and intentional.

Discussion Questions 1. Describe the leadership lessons you think Starbucks Leadership Lab provided store managers. 2. What role do you think an organization’s culture plays in how its leaders lead? Relate this to the story told above. 3. Using the behavioural theories as a guideline, what do you think would be more important to a Starbucks store manager: focus on task, focus on people, or both? Explain. 4. How might a Starbucks store manager use situational leadership theory? Path-goal theory? Transformational leadership?

ROWE Best Buy was one of the first companies to adopt a “results-only work environment” (ROWE), which is a program that goes beyond work–life balance and allows employees to decide when and where

they want to work. By giving workers autonomy, they could be held accountable for achieving targets. Success would mean promotions; failure might mean termination. Best Buy scrapped the program in 2013, and CEO Hubert Joly called it “flawed from a leadership standpoint.”96 Joly felt that the program had given employees too much independence and failed because it was based on the idea that delegation is always the right leadership style, instead of finding the right style of leadership for different employees. Best Buy employees complained of a divisive two-tiered system, with store-level employees sticking to strict schedules, unlike the corporate employees, who had complete freedom over their schedules.97 Yahoo CEO Marissa Mayer came under fire when she cancelled Yahoo’s work-from-home program so that employees could be more collaborative and innovative by working together. Is ROWE dead? York University professor Souha Ezzedeen indicates that policies like ROWE are not an entitlement and may not be appropriate for a business, depending on its culture and lack of supportive management system.98 A University of Toronto study on flextime found that it boosted profits for firms whose strategies were based on employee investment but harmed firms that were focused on cutting costs. The Gap credited it with raising productivity by 22 percent among program participants. To have ROWE work successfully in your organization, it requires setting the right conditions: 99 • Management support: Managers are there as “result coaches” to shape expectations, set consequences for unmet goals, and hold employees accountable. • Maintaining camaraderie: The loss of the social aspect can be really challenging for ROWE, so managers need to make people still feel like part of a team. • Employee education: All employees must buy in to the concept that it is none of their business where and when a colleague works, so that people do not feel like slackers when not at their desks. • Workflow tools: Invest in good project management and scheduling software for planning communication and meetings. • Patience: It takes time for managers to adapt, employees to buy in, and work processes to evolve.

Discussion Questions 1. What is the rationale behind ROWE? 2. What are the advantages and disadvantages of ROWE?

Chapter 11

Catherine Lazure/Nordic Design

Managing Communication and Information

Learning Objectives 11.1 Describe what managers need to know about communicating

effectively. 11.2 Explain how technology affects managerial communication. 11.3 Discuss contemporary issues in communication.

302

Mini Mioche was founded in Toronto in 2008 by Alyssa Kerbel when she found it difficult to find simple clothing in neutral colours for her daughter. She wanted to make clothing ethically, locally, and in an environmentally friendly way.1 Mini Mioche’s fabrics are knitted locally from organic cotton yarn and dyed locally using low impact, non-toxic, re-usable dyes, and all clothing is cut and sewn at a factory 20 minutes from CEO Kerbel’s house.2 Their philosophy is to make clothing that adults would want to wear, just shrunk down to “mini size.” Kerbel’s background in the fashion design industry meant she wanted to make kids look cool and stylish but more importantly be comfortable, and for their clothing to stand the test of time.3 The company is a leader in social media. Using the hashtag #liveinminimioche, they encourage customers to tag their children on Instagram wearing Mini Mioche clothing in order to have a chance to win a $100 gift certificate for the online store. It started when Kerbel noticed that a Mini Mioche cap sold out online immediately after an influential photographer shared an image of his young son sporting the cap to his 60 000 followers.4 Kerbel quickly realized that people trust and believe in other people rather than a company’s hard sell, and that she could reach a larger target audience through Instagram. Kerbel and her social media manager spend approximately an hour per day searching through social media feeds to find people with the style and attitude that matches Mini Mioche’s.5 You can find out more about Mini Mioche’s story here: https://www.youtube.com/watch? v=qF8cZCM1kJQ&feature=youtu.be. A social media strategy helps drive engagement, but making that content shoppable is difficult for small to mid-sized e-tailers.6 Fellow Toronto startup Foursixty is tapping into the popularity

Chapter 11  Managing Communication and Information  303 of social content by creating a feed on a brand’s site that directs users to their online website for purchasing products. Foursixty co-founder and CEO Michael Chachula says his company has differentiated itself by targeting clients such as Mini Mioche, David’s Tea, and Jenny Bird.7 Welcome to the world of communication! In this “world,” managers are going to have to understand both the importance and the drawbacks of communication—all forms of communication, even the grapevine. Communication takes place every day in every organization. In all areas. By all organizational members. In many different forms. Most of that communication tends to be work related. But as we’ll see, sometimes communication can cause some unintended consequences. In this chapter, we’re going to look at basic concepts of interpersonal communication. We’ll explain the communication process, methods of communicating, barriers to effective communication, and ways to overcome those barriers. In addition, we’ll look at communication issues that today’s managers face.

Effective Communication 11.1 Describe what managers need to know about communicating effectively.

Poor communication can cost a business up to $5000 per employee each year!8 The importance of effective communication for managers cannot be overemphasized for one specific reason: Everything a manager does involves communicating. Not some things but everything! A manager can’t formulate strategy or make a decision without information. That information has to be communicated. Once a decision is made, communication must again take place. Otherwise, no one will know that a decision has been made. The best idea, the most creative suggestion, or the finest plan cannot take form without communication. Managers, therefore, need effective communication skills. We’re not suggesting, of course, that good communication skills alone make a successful manager. We can say, however, that ineffective communication skills can lead to a continuous stream of problems for a manager.

How Does the Communication Process Work? WHAT is communicated? The 3 I’s: Information, Ideas, Instructions Communication can be thought of as a process or flow. Communication problems occur when deviations or blockages disrupt that flow. Before communication can take place, a purpose, expressed as a message to be conveyed, is needed. It passes between a source (the sender) and a receiver. The message is encoded (converted to symbolic form) and is passed by way of some medium (channel) to the receiver, who retranslates (decodes) the message initiated by the sender. The result is communication, which is a transfer of understanding and meaning from one person to another.9 Exhibit 11-1 depicts the communication process. This model has seven parts: (1) the communication source or sender, (2) encoding, (3) the message, (4) the channel, (5) decoding, (6) the receiver, and (7) feedback. 1 and 2. The sender initiates a message by encoding a thought. Four conditions affect the encoded message: skill, attitudes, knowledge, and the social cultural system. Our message in our communication to you in this text depends on our writing skills; if we don’t have the requisite writing skills, our message will not reach you in the form desired. Keep in mind that a person’s total communicative success includes speaking, reading, listening, and reasoning skills as well. Our attitudes influence our behaviour. We hold predisposed ideas on numerous topics, and our communications

communication A transfer of understanding and meaning from one person to another.

communication process The seven-part process of transferring and understanding of meaning.

encoding Converting a message into symbolic form.

304  Chapter 11

Exhibit 11-1  The Communication Process se

Noi

Noi

se

Purpose

Sender

Encoding

Message

Channel

Feedback se

Noi

Message

Decoding

Message

Receiver

Message transferred successfully?

Noi

se

are affected by these attitudes. Furthermore, we’re restricted in our communicative activity by the extent of our knowledge of the particular topic. We can’t communicate what we don’t know, and should our knowledge be too extensive, it’s possible that our receiver will not understand our message. Clearly, the amount of knowledge the source holds about his or her subject will affect the message he or she seeks to transfer. And, finally, just as attitudes influence our behaviour, so does our position in the social cultural system in which we exist. Your beliefs and values, all part of your culture, act to influence you as a communication source. message A purpose for communicating that’s to be conveyed.

channel The medium by which a message travels.

decoding Translating a received message.

feedback Checking to see how successfully a message has been transferred.

3. The message is the actual physical product from the source that conveys some purpose. When we speak, the words spoken are the message. When we write, the writing is the message. When we paint, the picture is the message. When we gesture, the movements of our arms and the expressions on our faces are the message.10 Our message is affected by the code or group of symbols we use to transfer meaning, the content of the message itself, and the decisions that we make in selecting and arranging both codes and content.11 4. The channel is the medium through which the message travels. It’s selected by the source, who must determine whether to use a formal or an informal channel. Formal channels are established by the organization, and they transmit messages that pertain to the job-related activities of members. They traditionally follow the authority network within the organization. Other forms of messages, such as personal or social, follow the informal channels in the organization. 5 and 6. The receiver is the person to whom the message is directed. However, before the message can be received, the symbols in it must be translated into a form that can be understood by the receiver—the decoding of the message. Just as the encoder was limited by his or her skills, attitudes, knowledge, and social cultural system, the receiver is equally restricted. Accordingly, the source must be skillful in writing or speaking; the receiver must be skillful in reading or listening; and both must be able to reason. A person’s knowledge, attitudes, and cultural background influence his or her ability to receive, just as they do the ability to send. 7. The final link in the communication process is a feedback loop. “If a communication source decodes the message that he encodes, if the message is put back into his system, we have feedback.” 12 Feedback is the check on how successful we’ve been in transferring our messages as originally intended. It determines whether understanding has been

Chapter 11  Managing Communication and Information  305

Are Written Communications More Effective than Verbal Ones? Written communications include memos, letters, e-mail and other forms of digital communication, organizational periodicals, bulletin boards, and any other device that transmits written words or symbols. Why would a Participating in a meeting at company headquarters, these employees of Alibaba, sender choose to use written communications? China’s largest e-commerce firm, illustrate the channel part of the communication Advantages: Well, they’re tangible, verifi- process. The meeting is a formal channel established by Alibaba during which able, and more permanent than oral commu- employees transmit messages that pertain to their job-related activities. nication. Typically, both sender and receiver have a record of the communication. The message can be stored for an indefinite period of time. If questions arise about the content of the message, it’s physically available for later reference. This feature is particularly important for complex or lengthy communications. For example, the marketing plan for a new product is likely to contain a number of tasks spread out over several months. By putting it in writing, those who have to carry out the plan can readily refer to the document over the life of the plan. A final benefit of written communication comes from the process itself. Written communications are more likely to be well thought out, logical, and clear. Except in rare instances, such as when presenting a formal speech, more care is taken with the written word than with the spoken word. Having to put something in writing forces a person to think more carefully about what he or she wants to convey. Drawbacks: Of course, written messages have their drawbacks. Writing may be more precise, but it also consumes a great deal of time. You could convey far more information to your college instructor in a one-hour oral exam than in a one-hour written exam. In fact, you could probably say in 10 to 15 minutes what it takes you an hour to write. The other major disadvantage is the lack of feedback. Oral communications allow receivers to respond rapidly to what they think they hear. However, written communications don’t have a built-in feedback mechanism. Sending a memo is no assurance that it will be received and, if it is received, no guarantee that the recipient will interpret it as the sender meant. The latter point is also relevant in oral communication, but it’s easier in such cases merely to ask the receiver to summarize what you have said. An accurate summary presents feedback evidence that the message has been received and understood.

Is the Grapevine an Effective Way to Communicate? The Grapevine: Fruitful or Not? The grapevine is the unofficial way that communication takes place in an organization. It’s neither authorized nor supported by the organization. Rather, information is spread by word of mouth—and even through electronic means. Ironically, good information passes among us rapidly, but bad information travels even faster.14 The grapevine gets information out to organizational members as quickly as possible. The biggest question raised about the grapevine, however, focuses on the accuracy of the rumours. Research on this topic has found somewhat mixed results. In an

grapevine An unofficial channel of communication.

Steven Shi/Reuters

achieved. Given the cultural diversity that exists in our workforce today, the importance of effective feedback to ensure proper communications cannot be overstated.13

306  Chapter 11 organization characterized by openness, the grapevine may be extremely accurate. In an authoritative culture, the rumour mill may not be accurate. But even then, although the information flowing is inaccurate, it still contains some element of truth. Rumours about major layoffs, plant closings, and the like may be filled with inaccurate information regarding who will be affected or when it may occur. Nonetheless, the reports that something is about to happen are probably on target. Here is a common myth about the grapevine:  

Managers should try to stifle the grapevine.

MANAGEMENT MYTH DEBUNKED The grapevine is a well-known source for organizational gossip and news. For the inexperienced manager, it’s seen as a destructive element in an organization’s communication network. But the grapevine isn’t going away. It’s as natural to an organization as water is to an ocean. Astute managers acknowledge the existence of the grapevine and learn to use it in beneficial ways. For full details on this management myth, check out our Bust the Myth video in Revel.

How Do Nonverbal Cues Affect Communication? Some of the most meaningful communications are neither spoken nor written. They are nonverbal communications. A loud siren or a red light at an intersection tells you something without words. A college instructor doesn’t need words to know that students are bored; their eyes get glassy or they begin to read the school newspaper during class. Similarly, when papers start to rustle and notebooks begin to close, the message is clear: Class time is almost over. The size of a person’s office and desk or the clothes he or she wears also convey messages to others. However, the best-known areas of nonverbal communication are body language and verbal intonation. Body language refers to gestures, facial configurations, and other movements of the body.15 A snarl, for example, says something different from a smile. Hand motions,

body language

IgorZD/Shutterstock

Nonverbal communication cues such as facial expressions, gestures, and other body movements.

Body language, which includes gestures, such as hand motions, and facial expressions are areas of nonverbal communication that can express fear, arrogance, anger, boredom, and other emotions and temperaments.

Chapter 11  Managing Communication and Information  307

facial expressions, and other gestures can communicate emotions or temperaments such as aggression, fear, shyness, arrogance, joy, and anger.16

It’s not WHAT you say but HOW you say it. Verbal intonation refers to the emphasis someone gives to words or phrases. To illustrate how intonations can change the meaning of a message, consider the student who asks the instructor a question. The instructor replies, “What do you mean by that?” The student’s reaction will vary, depending on the tone of the instructor’s response. A soft, smooth tone creates a different meaning from one that is abrasive with a strong emphasis on the last word. Most of us would view the first intonation as coming from someone who sincerely sought clarification, whereas the second suggests that the person is aggressive or defensive. The adage “It’s not what you say but how you say it,” is something managers should remember as they communicate. The fact that every oral communication also has a nonverbal message cannot be overemphasized.17 Why? Because the nonverbal component is likely to carry the greatest impact. Research indicates that from 65 to 90 percent of the message of every face-to-face conversation is interpreted through body language. Without complete agreement between the spoken words and the body language that accompanies it, receivers are more likely to react to body language as the “true meaning.”18

verbal intonation An emphasis given to words or phrases that conveys meaning.

What Barriers Keep Communication from Being Effective? A number of interpersonal and intrapersonal barriers affect why the message decoded by a receiver is often different from what the sender intended. We summarize the more prominent barriers to effective communication in Exhibit 11-2 and briefly describe them here. HOW DOES FILTERING AFFECT COMMUNICATION?  Filtering refers to the way a

filtering

sender manipulates information so that it will be seen more favourably by the receiver. For example, when a manager tells his boss what he feels the boss wants to hear, he is filtering information. Does filtering happen much in organizations? Sure it does. As information is passed up to senior executives, it has to be condensed and synthesized by subordinates so upper management doesn’t become overloaded with information.

Deliberately manipulating information to make it appear more favourable to the receiver.

Exhibit 11-2  Barriers to Effective Communication Barrier

Definition

Example

Filtering

Manipulation of information to make it more favourable to the receiver

An employee telling his or her manager what the manager wants to hear

Emotions

How a receiver feels when a message is received influences how he or she interprets it

Reacting negatively to a message when you are upset

Information Overload

Information that exceeds a person’s processing capacity

Texts, e-mails, phone calls, and meetings creating an ­onslaught of data that leads to ignoring or even forgetting

Selective Perception

Interpreting reality based on personal needs, motivations, ­experience, background, and personality

Employers believing that millennials spend too much time on social media and that they won’t work long hours

Defensiveness

People feeling threatened, which leads to reactions that reduce effective communication

Verbal attacks, sarcastic remarks, questioning motives

Mental Models

How we perceive the world through a frame of reference or assigning certain meanings to communication

A manager feeling that an employee is always ­complaining, leading to the manager using negative ­nonverbal signals

Language

Words that have different meanings for different people

Use of jargon to communicate within a group, limiting ­understanding for some members

Culture

Differences in communication patterns, body language, and the way a person communicates as a result of the person’s culture

Detail-oriented and individual-focused Canadian communication patterns compared to more open face-to-face and consensus-based Japanese communication

308  Chapter 11 Those doing the condensing filter communications through their own personal interests and perceptions of what’s important. The extent of filtering tends to be the function of the organization’s culture and number of vertical levels in the organization. More vertical levels in an organization mean more opportunities for filtering. As organizations become less dependent on strict hierarchical arrangements and instead use more collaborative, cooperative work arrangements, information filtering may become less of a problem. In addition, the ever-increasing use of e-mail to communicate in organizations reduces filtering because communication is more direct as intermediaries are bypassed. Finally, the organizational culture encourages or discourages filtering by the type of behaviour it rewards. The more that organizational rewards emphasize style and appearance, the more managers will be motivated to filter communications in their favour. HOW DOES SELECTIVE PERCEPTION AFFECT COMMUNICATION?  The second selective perception Selectively perceiving or hearing a communication based on your own needs, motivations, experiences, or other personal characteristics.

barrier is selective perception. We’ve mentioned selective perception before in this text. We discuss it again here because the receivers in the communication process selectively see and hear based on their needs, motivations, experience, background, and other personal characteristics. Receivers also project their interests and expectations into communications as they decode them. The employment interviewer who expects a female job applicant to put her family ahead of her career is likely to see that tendency in female applicants, regardless of whether the applicants would do so or not. HOW DOES INFORMATION OVERLOAD AFFECT COMMUNICATION?  Individuals

information overload What results when information exceeds processing capacity.

have a finite capacity for processing data. For instance, consider an international sales representative who returns home to find that she has more than 600 e-mails waiting for her. It’s not possible to fully read and respond to each one of those messages without facing information overload. Today’s typical executive frequently complains of information overload.19 The demands of keeping up with e-mail, phone calls, faxes, meetings, and professional reading create an onslaught of data that is nearly impossible to process and assimilate. What happens when you have more information than you can sort out and use? You’re likely to select out, ignore, pass over, or forget information. Or you may put off further processing until the overload situation is over. In any case, the result is lost information and less effective communication. HOW DO EMOTIONS AFFECT COMMUNICATION?  How a receiver feels when a

­ essage is received influences how he or she interprets it. You’ll often interpret the m same message differently, depending on whether you’re happy or distressed. Extreme emotions are most likely to hinder effective communications. In such instances, we often disregard our rational and objective thinking processes and substitute emotional judgments. It’s best to avoid reacting to a message when you’re upset because you’re not likely to be thinking clearly. HOW DOES LANGUAGE AFFECT COMMUNICATION?  Words mean different things to different people. “The meanings of words are not in the words; they are in us.”20 Age, education, and cultural background are three of the more obvious variables that influence the language a person uses and the definitions he or she applies to words. Columnist George F. Will and rapper Iggy Azalea both speak English. But the language one uses is vastly different from how the other speaks.

Forty percent of employees say that buzzwords are very prevalent in normal conversations at work.21 jargon Technical language specific to a discipline or industry.

In an organization, employees usually come from diverse backgrounds and, therefore, have different patterns of speech. Additionally, the grouping of employees into departments creates specialists who develop their own jargon, or technical language.22 In large organizations, members are also frequently widely dispersed

Chapter 11  Managing Communication and Information  309

­ eographically—even operating in different countries—and individuals in each locale g will use terms and phrases that are unique to their area.23 And the existence of vertical levels can also cause language problems. The language of senior executives, for instance, can be mystifying to regular employees not familiar with management jargon. Keep in mind that while we may speak the same language, our use of that language is far from uniform. Senders tend to assume that the words and phrases they use mean the same to the receiver as they do to them. This assumption, of course, is incorrect and creates communication barriers. Knowing how each of us modifies the language would help minimize those barriers.

Diversity Matters

The Communication Styles of Men and Women “You don’t understand what I’m saying, and you never listen!” “You’re making a big deal out of nothing.” Have you said (or heard) these statements or ones like them when communicating with friends of the opposite sex? Most of us probably have. Research shows that men and women tend to have different communication styles.25 Let us look more closely at these differing styles and the problems that can arise, and try to suggest ways to minimize the barriers. Deborah Tannen, professor of linguistics at Georgetown University, has studied the ways that men and women communicate, and she reports some interesting differences. According to her research, men use talk to emphasize status, while women use it to create connection. Tannen states that communication between the sexes can be a continual juggling act to balance our conflicting needs for intimacy, which emphasizes closeness and commonality, and independence, which emphasizes separateness and differences. No wonder communication problems arise! Women hear and speak a language of connection and intimacy. Men hear and speak a language of status and independence. For many men, conversations are merely a way to preserve independence and maintain status in a hierarchical social order. For many women, however, conversations are a way to negotiate closeness and seek out support and confirmation. Let us look at a few examples of what Tannen has described. Men frequently complain that women talk on and on about their problems. Women, however, criticize men for not listening. What is happening? When a man hears a woman talking about a problem, he frequently asserts his desire for independence and control by offering solutions. Many women, in contrast, view conversing about a problem as a way to promote closeness. The woman talks about a problem to gain support and connection, not to get the man’s advice. Here is another example: Men are often more direct than women in conversation. A man might say, “I think you’re wrong on that point.” A woman might say, “Have you looked at the marketing department’s research report on that issue?” The implication in the woman’s comment is that the report will point out the error. Men frequently misread women’s indirectness as “covert” or “sneaky,” but women are not as concerned as men with the status and oneupmanship that directness often creates. Finally, men often criticize women for seeming to apologize all the time. Men tend to see the phrase “I’m sorry” as a sign of weakness, because they interpret the phrase to mean the woman is accepting blame, when he may know she is not to blame. The woman also knows she is not at fault. She is typically using “I’m sorry” to express regret: “I know you must feel bad about this and I do too.” Women learn to listen with empathy, which helps them maintain collaborative relationships. Here are some guidelines to help facilitate communications when gender diversity is present: • Assume differences more than similarity.  Avoid stereotypes, and do not assume the other person will react in the same way as you do. • Focus on description rather than evaluation.  Delay your judgment until you have interpreted the situation from the other person’s perspective. • Be empathetic.  Viewing behaviours from your perspective might lead you to misinterpret; try instead to simply understand the other person’s actions and behaviours.

310  Chapter 11 HOW DOES GENDER AFFECT COMMUNICATION?  Effective communication

between the sexes is important in all organizations if they are to meet organizational goals. But how can we manage the various differences in communication styles? To keep gender differences from becoming persistent barriers to effective communication, individuals must strive for acceptance, understanding, and a commitment to communicate adaptively with each other. Both men and women need to acknowledge that differences are present in communication styles, that one style isn’t better than the other, and that it takes real effort to talk successfully with each other.24 See Diversity Matters to learn more about the communication styles of men and women. HOW DOES NATIONAL CULTURE AFFECT COMMUNICATION?  Finally, communication differences can also arise from the different languages that individuals use to communicate and the national culture of which they’re a part.26 For example, let’s compare countries that place a high value on individualism (such as Canada) with countries where the emphasis is on collectivism (such as Japan).27 In Canada, communication patterns tend to be oriented to the individual and clearly spelled out. Canadian managers rely heavily on memoranda, announcements, position papers, and other formal forms of communication to state their positions on issues. Supervisors here may hoard information in an attempt to make themselves look good (filtering) and as a way of persuading their employees to accept decisions and plans. And for their own protection, lower-level employees also engage in this practice. In collectivist countries, such as Japan, there’s more interaction for its own sake and a more informal manner of interpersonal contact. The Japanese manager, in contrast to the Canadian manager, engages in extensive verbal consultation with employees over an issue first and draws up a formal document later to outline the agreement that was made. The Japanese value decisions by consensus, and open communication is an inherent part of the work setting. Also, face-to-face communication is encouraged.28 Cultural differences can affect the way a manager chooses to communicate.29 And these differences undoubtedly can be a barrier to effective communication if not recognized and taken into consideration.

How Can Managers Overcome Communication Barriers? Given these barriers to communication, what can managers do to overcome them? The following suggestions should help make communication more effective. (See also Exhibit 11-3.) WHY USE FEEDBACK?  Many communication problems are directly attributed to

misunderstanding and inaccuracies. These problems are less likely to occur if the manager gets feedback, both verbal and nonverbal. A manager can ask questions about a message to determine whether it was received and understood as intended. Or the manager can ask the receiver

Exhibit 11-3  Overcoming Barriers to Effective Communication Use Feedback

Check the accuracy of what has been communicated—or what you think you heard.

Simplify Language

Use words that the intended audience understands.

Listen Actively

Listen for the full meaning of the message without making premature ­judgment or interpretation—or thinking about what you are going to say in response.

Constrain Emotions

Recognize when your emotions are running high. When they are, don’t ­communicate until you have calmed down.

Watch Nonverbal Cues

Be aware that your actions speak louder than your words. Keep the two consistent.

Chapter 11  Managing Communication and Information  311

to restate the message in his or her own words. If the manager hears what was intended, understanding and accuracy should improve. Feedback can also be more subtle as general comments can give a manager a sense of the receiver’s reaction to a message. Feedback doesn’t have to be verbal. If a sales manager e-mails information about a new monthly sales report that all sales representatives will need to complete and some of them don’t turn it in, the sales manager has received feedback. This feedback suggests that the sales manager needs to clarify the initial communication. Similarly, managers can look for nonverbal cues to tell whether someone’s getting the message. WHY SHOULD SIMPLIFIED LANGUAGE BE USED?  Because language can be a

barrier, managers should consider the audience to whom the message is directed and tailor the language to them. Remember, effective communication is achieved when a message is both received and understood. For example, a hospital administrator should always try to communicate in clear, easily understood terms and to use language tailored to different employee groups. Messages to the surgical staff should be purposefully different from those directed to the marketing team or office employees. Jargon can facilitate understanding if it’s used within a group that knows what it means, but it can cause problems when used outside that group.

Do you really listen OR do you just hear?

Anthony Devlin/AP Images

WHY MUST WE LISTEN ACTIVELY?  When someone talks, we hear. But too often we don’t listen. Listening is an active search for meaning, whereas hearing is passive. In listening, the receiver is also putting effort into the communication. Many of us are poor listeners. Why? Because it’s difficult, and most of us would rather do the talking. Listening, in fact, is often more tiring than talking. Unlike hearing, active listening, which is listening for full meaning without

Ana Botin, executive chairman of Spain’s Banco Santander, is respected as an empathetic listener and a good communicator and consensus builder. Shown here communicating with employees at a bank in London, Botin asks questions and listens to feedback from employees, customers, and shareholders that helps her plan the company’s strategy.

active listening Listening for full meaning without making premature judgments or interpretations.

312  Chapter 11 making premature judgments or interpretations, demands total concentration. The average SOURCE: P. L. Hunsaker, Training in Management Skills, 1st ed., 2001. Reprinted and person normally speaks at a rate of about 125 electronically reproduced by permission of Pearson Education, Inc., New York, NY. to 200 words per minute. However, the average listener can comprehend up to 400 words per Do not minute.30 The difference leaves lots of idle brain overtalk Avoid Show time and opportunities for the mind to wander. interrupting empathy the speaker Active listening is enhanced by developing empathy with the sender—that is, by putting yourself in the sender’s position. Because Active senders differ in attitudes, interests, needs, Make eye Paraphrase Listening contact and expectations, empathy makes it easier to understand the actual content of a message. An empathetic listener reserves judgment on the Exhibit affirmative message’s content and carefully listens to what Avoid distracting head nods and actions or is being said. The goal is to improve one’s abilappropriate facial gestures Ask expressions ity to get the full meaning of a communication questions without distorting it by premature judgments or interpretations. Other specific behaviours that active listeners use include making eye contact, exhibiting affirmative nods and appropriate facial expressions, avoiding distracting actions or gestures that suggest boredom, asking questions, paraphrasing using your own words, avoiding interrupting the speaker, not talking too much, and making smooth transitions between being a speaker and a listener. Exhibit 11-4 illustrates the most common active listening behaviours.

Exhibit 11-4  Active Listening Behaviours

WHY MUST WE CONSTRAIN EMOTIONS?  It would be naïve to assume that managers always communicate in a rational manner. We know that emotions can cloud and distort communication. A manager who’s upset over an issue is more likely to misconstrue incoming messages and fail to communicate his or her outgoing messages clearly and accurately. What to do? The simplest answer is to calm down and get emotions under control before communicating. WHY THE EMPHASIS ON NONVERBAL CUES?  If actions speak louder than words, then it’s important to make sure your actions align with and reinforce the words that go along with them. An effective communicator watches his or her nonverbal cues to ensure that they convey the desired message.

Technology and Managerial Communication 11.2 Explain how technology affects managerial communication.

IT is where it’s at! • Information technology (IT) has radically changed the way organizational members work and communicate. –– –– –– ––

Improves manager’s ability to monitor individual and team performance Allows employees to have more complete information to make faster decisions Provides employees more opportunities to collaborate and share information Allows employees to be fully accessible 24/7

Chapter 11  Managing Communication and Information  313

Several developments in information technology appear to have the most significant impact on current managerial communication: e-mail, instant messaging, wikis and blogs, social networking websites, and other networked communication systems.

In a networked communication system • Organizational computers are linked through compatible hardware and software, creating an integrated organizational network. •   Employees communicate with each other and get information wherever they are.

Steven Senne/AP Images

Networked Communication

NETWORKED COMMUNICATION APPLICATIONS

E-mail  E-mail is a quick and convenient way for organization members to share information and communicate. However, many people complain about e-mail overload, and it is not always used effectively. A recent study found that opening nasty messages from your boss can harm your health over time.31 While negative e-mail messages from anyone had health consequences, those from superiors resulted in the most significant increase in a person’s blood pressure. Individuals should remember that e-mail tends to be permanent, which means that a message sent in anger could come back to hurt the sender later on. Christina Cavanagh of the University of Western Ontario’s Richard Ivey School of Business32 suggests sleeping on angry e-mails before sending to be sure you are sending the right message. E-mail is also not necessarily private communication, and organizations often take the position that they have the right to read your e-mail. To learn more about e-mail communications protocols, see Writing Better E-mails at the end of the chapter. Instant Messaging  Instant messaging (IM) first became popular among teens and preteens who wanted to communicate online immediately with their friends. Now it has moved to the workplace. IM provides immediate and collaborative communication and may replace the desk phone and e-mail in the future.33 However, IM has drawbacks. Unlike e-mail, it requires users to be logged on to the organization’s computer network in order to communicate with one another, which leaves the network open to security breaches. As a result, some organizations have limited which employees can use IM in the workplace.

Social Networking Websites  Social networking websites such as Facebook, Twitter, and LinkedIn have drawn millions of subscribers who voluntarily post information about themselves that can be viewed by any other subscriber, unless the user deliberately sets privacy restrictions. Some employers post job offerings on sites such as Facebook and LinkedIn; others post recruitment videos on sites such as YouTube. In a

Xtock/Shutterstock

Wikis and Blogs  Wikis and blogs are sites for open discussion and collaborative information sharing that have quickly replaced the company newsletter. Both can be used effectively internally and externally, allowing employees and customers to distribute and document information quickly.

314  Chapter 11 recent twist, some employers have conducted virtual interviews through Second Life, an online virtual community.34 Job seekers create an avatar—a computer-generated image that represents themselves—and then communicate with prospective employers through IM. A recent virtual job fair on Second Life included employers Hewlett-Packard, Microsoft, Verizon, and Sodexho Alliance SA, a food and facilities-management services company. Individuals who use websites such as Facebook may want to consider the lack of privacy that such sites afford when it comes to employers and evaluations. Individuals may forget that once something has been posted to the Web, it is difficult to erase. Although sharing photos of drunken partying may seem like a good idea, the portrait created might not leave a good impression on potential employers. Many employers regularly use social media sites when recruiting potential employees. Though people may feel they have separate private lives and work lives, the Internet makes that line blurry. Every job seeker would be wise to Google themselves and see what cyber footprint they have left, because employers can and may be doing the same thing. OTHER NETWORKED COMMUNICATION APPLICATIONS

• Voice mail—a system that digitizes a spoken message, transmits it over the network, and stores it for a receiver to retrieve later.35 + Information transmitted without receiver being physically present + Message can be saved, deleted, or re-routed – No immediate feedback • Electronic data interchange (EDI)—organizations exchange business transaction documents such as invoices or purchase orders, using direct computer-to-computer networks. + Saves time and money by eliminating printing and handling of paper documents • Teleconference and videoconference meetings—confer simultaneously by telephone, e-mail, or video screens. + Participants don’t need to be in same physical location to share information and collaborate + Saves travel money • Organizational intranet—an organizational communication network using Internet technology that’s accessible only to organizational employees. + Share information and collaborate on documents and projects + Access company policy manuals and employee-specific materials36 – Possible network and data security breaches • Organizational extranet—an organizational communication network using Internet technology that allows authorized organizational users to communicate with certain outsiders such as customers or vendors. + Faster and more convenient communication – Concerns about network and data security breaches • Internet-based voice/video communication—Internet-based communication services (such as Skype, Viber, FaceTime, Vonage, Yahoo!). + Fast and convenient communication + Saves time and money – Concerns about network and data security breaches

Chapter 11  Managing Communication and Information  315

Wireless Communication Wireless communication systems have benefits: •  Employees can be connected without being physically “plugged in” at work! •  Mobile technology is extremely popular! •  Improving the way you work is the payoff!

• People don’t have to be physically “at the office” in order to communicate, collaborate, and share information with managers and colleagues.37 •  Managers and employees “keep in touch” using smartphones, tablet computers, notebook computers, and mobile pocket communication devices.

Scanrail/Fotolia

WIRELESS COMMUNICATION APPLICATIONS

• And wireless communication works anywhere. People can send and receive information from the summit of Mt. Everest to the remotest locations on the planet. HOW INFORMATION TECHNOLOGY AFFECTS ORGANIZATIONS  Employees—

SOCIAL MEDIA  Social networking websites such as Facebook and LinkedIn have become resources for employers seeking job candidates.39 Companies large and small are using these resources to do research, form relationships, and fill positions. More than 350 companies broadcast their job listings to more than 10 million registered users of LinkedIn. A manager looking to fill a key position can use LinkedIn to view posted résumés and read an individual’s postings, and can even check out a competitor’s site for potential candidates. Brian Drum, president of executive search firm Drum Associates, uses social networking sites such as MySpace to see if there is any information about a job candidate’s character that might suggest an inability to perform reliably. “Sometimes all we find is meaningless chitchat,” says Drum, “but once in a while we’ll turn up something useful, like an unflattering picture or a piece of information that really shows what the person is made of.”

Fotolia

working in teams or as individuals—need information to make decisions and do their work. After describing the communication capabilities managers have at their disposal, it is clear that technology can significantly affect the way that organization members communicate, share information, and do their work. Information technology also creates opportunities for organizations. For example, colleges and universities now have the capability to offer online courses and degrees. Over time, these courses could decrease the number of students taught in face-to-face settings, while increasing the overall number of students who can be reached because of online methods of teaching. Communication and the exchange of information among organization members are no longer constrained by geography or time. Collaborative work efforts among widely dispersed individuals and teams, information sharing, and the integration of decisions and work throughout an entire organization have the potential to increase organizational efficiency and effectiveness. While the economic benefits of information technology are obvious, managers must not forget to address the psychological drawbacks.38 For example, what is the psychological cost of an employee being always accessible? Will there be increased pressure for employees to “check in” even during their off hours? How important is it for employees to separate their work lives and their personal lives? While these questions have no easy answers, they are issues that managers will have to face.

Bert Folsom/Fotolia

316  Chapter 11 Some businesses are not just using social networking sites for recruiting, however. They have also placed their own company profiles on such sites, allowing employees to interact with each other. They realize that a number of younger employees are using social networking sites, so they might as well encourage productive use of the medium. The world of communication is not what it used to be. Managers are challenged to keep their organizations functioning smoothly while continually improving work operations and staying competitive, even though both the organization and the environment are changing rapidly. Although changing Big data can be an effective counterpart to the information exchange gathered through technology has been a significant source of social media. When Walmart began looking at its enormous database, it noticed that the environmental uncertainty facing orgawhen a hurricane was forecast, sales of batteries, flashlights, and Pop-Tarts increased. Now when hurricanes threaten, Walmart stocks additional Pop-Tarts along with emernizations, these same technological advances gency storm supplies at the front door.40 have enabled managers to coordinate the work efforts of employees in ways that can lead to increased efficiency and effectiveness. Information technology now touches every aspect of almost every company’s business. The implications for the ways individuals communicate are profound. HOW BUSINESSES CAN USE SOCIAL MEDIA  Social media is a peer-to-peer net-

work based on some type of user profile, which allows people to connect with others who may share their interests, activities, or even contacts. Because of this link, social networks can be created that allow companies to communicate with audiences in a much more personal way. Social media can play an integral role in engaging employees, consumers, suppliers, partners, and even investors. Building relationships and brand loyalty through social media can be faster and lower in cost than through traditional marketing.41 Organizations that use social media for employees to interact with management can make internal communication more stimulating, strengthening the culture of the organization and loyalty to the brand.42 Stantec had an intranet portal called StanNet. With their brand repositioning strategy came an opportunity to harness social media in a coordinated fashion. StanNet 2.0 was introduced to give employees features from the social networking sites they were using elsewhere, such as Facebook, Blogger, YouTube, LinkedIn, and others. The StanNet 2.0 community sites were launched with the internal brand launch and have been tremendously successful at engaging employees in communications strategies. Social media proved to be a powerful ally in helping employees understand, digest, and articulate the new strategic platform. A sound social media strategy should be based on clear metrics benchmarks in terms of sales, brand awareness, and customer service.43 Organizations need to plan in advance for criticisms and complaints so that responses are quick and show that the company takes its customers’ concerns seriously. A little preplanning can help turn a negative experience around when necessary.44 NAVIGATING THE WORKPLACE COMMUNICATION PROTOCOLS IN A TECHNOLOGY AGE  In 2000, faxing and letters were commonplace forms of commu-

nication in the office setting. Technology has advanced rapidly and changed the rules, but maintaining social protocols remains important. Poor etiquette and the excessive use of smartphones and cell phones have led to the term “cell-fishness.” Here are some tips on how to be professional in the age of thumb typing and finger swiping.45

Chapter 11  Managing Communication and Information  317

Social Media • Do not gripe about or jab at your company, even as a joke—the digital record is permanent. • Accept Facebook requests from your superiors but not your subordinates. • Keep your LinkedIn network primarily for business purposes. Email • Be discriminating with the urgent flag. • Stay away from u, ttyl, 2nite, and other e-mail slang. • Avoid the one-word responses “okay” and “thanks.” • “Reply all” is not your friend. Texting/IM • Forget the emoticons. • Do not text or use IM for business purposes unless these forms of communication are a big part of your client’s or company’s culture—they are too informal. • Keep in mind that throwing a “jk” after a jab does not make it less of a jab. Voice Mail • Use office voice mail mainly to let people know how they can find you. • Leave messages longer than the five-second “Hey it’s me, call me back” and shorter than 30 seconds. • Be aware that caller ID is reducing the need for messages—more and more people do not retrieve their messages. Telephone • Consider the telephone when you need to deal with personal, complex, or multiple issues—voice can help you detect tone. • Ensure that the background noise does not overwhelm the conversation. • Never, never, ever call in the bathroom. Face to Face • Set your phone on vibrate unless you must receive a very important call, in which case ask the person if it is all right to leave the phone on. • Do not check your phone every two minutes when you are with someone face to face. • Do not be “cell-fish”—have an uninterrupted, focused conversation. Business Cards • Hand out your card only on request—it is not candy. • Keep your hashtag, blog, and URL off the card—just give basic contact information.

What Communication Issues Do Managers Face Today? 11.3 Discuss contemporary issues in communication. “Pulse lunches.” That’s what managers at Citibank’s offices throughout Malaysia used to address pressing problems of declining customer loyalty and staff morale and increased employee turnover. By connecting with employees and listening to their

318  Chapter 11 concerns—that is, taking their “pulse”—during informal lunch settings, managers were able to make changes that boosted both customer loyalty and employee morale by more than 50 percent and reduced employee turnover to nearly zero.46 Being an effective communicator in today’s organizations means being ­connected—most importantly to employees and customers but in reality, to any of the organization’s stakeholders. In this section, we examine five communication issues of particular significance to today’s managers: managing communication in an Internet world, managing the organization’s knowledge resources, communicating with customers, getting employee input, and communicating ethically.

How Do We Manage Communication in an Internet World? Lars Dalgaard, founder and chief executive of SuccessFactors, a human resource management software company, recently sent an e-mail to his employees banning in-house e-mail for a week. His goal? Getting employees to “authentically address issues amongst each other.”47 And he’s not alone. Other companies have tried the same thing. As we discussed earlier, e-mail can consume employees, but it’s not always easy for them to let go of it, even when they know it can be “intexticating.” But e-mail is only one communication challenge in this Internet world. A recent survey found that 20 percent of employees at large companies say they contribute regularly to blogs, social networks, wikis, and other Web services.48 Managers are learning, the hard way sometimes, that all this new technology has created special communication challenges. The two main ones are (1) legal and security issues, and (2) lack of personal interaction.

This is BIG! LEGAL AND SECURITY ISSUES  The RCMP paid out more than $6.7 million as part of a class action suit stemming from sexual harassment and abuse. Whole Foods Market was investigated by federal regulators and its board after CEO John P. Mackey used a pseudonym to post comments on a blog attacking the company’s rival Wild Oats Markets.49 Although e-mail, blogs, tweets, and other forms of online communication are quick and easy ways to communicate, managers need to be aware of potential legal problems from inappropriate usage. Electronic information is potentially admissible in court. For instance, during the Enron trial, prosecutors entered into evidence e-mails and other documents they say showed that the defendants had defrauded investors. “Today, e-mail and instant messaging are the electronic equivalent of DNA evidence,” says one expert.50 But legal problems aren’t the only issue; security concerns are an issue as well. A survey addressing outbound e-mail and content security found that 26 percent of the companies surveyed saw their businesses affected by the exposure of sensitive or embarrassing information.51 Managers need to ensure that confidential information is kept confidential. Employee e-mails and blogs should not communicate—inadvertently or purposely—proprietary information. Corporate ­ computer and e-mail systems should be protected against hackers (people who try to gain unauthorized access to computer systems) and spam (electronic junk mail). These serious issues must be addressed if the benefits of communication technology are to be realized. The widespread use of voice mail and e-mail at work has led to some ethical concerns as well. These forms of communication are not necessarily private, because employers have access to them. The federal Privacy Act (which protects the privacy

Chapter 11  Managing Communication and Information  319

PERSONAL INTERACTION  It may be

Artur Widak/ZUMA Press/Newscom

of individuals and provides individuals with the right to access personal information about themselves) and the Access to Information Act (which allows individuals to access government information) apply to all federal government departments, most federal agencies, and some federal Crown corporations. However, many private-sector employees are not covered by privacy legislation. Only Quebec’s Privacy Act applies to the entire private sector. Managers need to clearly convey to employees policies on such things as personal Internet and e-mail use, and the extent to which their communications will be monitored. Internal social media enable these IBM employees in Dublin, Ireland, to communicate and collaborate with colleagues at IBM offices throughout the world. They use IBM Connections, a social network platform, and Sametime 8.5.2, IBM’s internal instant messaging system, to share knowledge, improve decision making, and accelerate innovation.

called social media, but another communication challenge posed by the Internet age we live and work in is the lack of personal interaction.52 Even when two people are communicating face to face, understanding is not always achieved. However, it can be especially challenging to achieve understanding and collaborate on getting work done when communication takes place in a virtual environment. In response, some companies have banned e-mail on certain days, as we saw earlier. Others have simply encouraged employees to collaborate more in person. Yet, sometimes and in some situations, personal interaction isn’t physically possible—your colleagues work across the continent or even across the globe. In those instances, real-time collaboration software (such as private workplace wikis, blogs, instant messengers, and other types of groupware) may be a better communication choice than sending an e-mail and waiting for a response.53 Instead of fighting it, some companies are encouraging employees to use the power of social networks to collaborate on work and to build strong connections. This trend is especially appealing to younger workers who are comfortable with this communication medium. Exhibits 11-5 and 11-6 give examples of how Canadians are spending time online and on which platforms.

How Does Knowledge Management Affect Communication? Part of a manager’s responsibility in fostering an environment conducive to learning and effective communications is to create learning capabilities throughout the organization. These opportunities should extend from the lowest to the highest levels in all areas. How can managers create such an environment? An important step is recognizing the value of knowledge as a major resource, just like cash,

And the Survey Says...54 Employees and Social Media 77% say they use social media to connect with colleagues. 35% say that social media has damaged a work relationship.

61% say that social media has led to new or better work relationships. 32% say they use social media to enhance work-related projects or solve problems.

320  Chapter 11 raw materials, or office equipment. To illustrate the value of knowledge, think about how you register for SOURCE: From CIRA: Canadian Internet Registration Authority 2018 Factbook. your college classes. Do you talk to others who have Copyright © 2018 by Canadian Internet Registration Authority (CIRA). Reprinted by permission. had a certain professor? Do you listen to their experiences with this individual and make your decision based on what they have to say (their knowledge about the situation)? If you do, you’re tapping into the value of knowledge. But in an organization, just recognizing the value of accumulated knowledge or wisdom isn’t enough. Managers must deliberately manage that base of knowledge. Knowledge ­management involves cultivating a learning culture in which organizational members systematically gather knowledge and share it with others in the organization so as to achieve better performance.56 For instance, accountants and consultants at Ernst & Young document best practices that they’ve developed, unusual problems they’ve dealt with, and other work information. This “knowledge” is then shared with all employees through computer-based applications and through community-of-interest teams that meet regularly throughout the company. Many other organizations, including General Electric, Toyota, and Hewlett-Packard, have recognized the importance of knowledge management within a learning organization. (See Chapter 4.) Today’s technologies are helping improve knowledge management and facilitating organizaknowledge management tional communications and decision making.

Exhibit 11-5  What Are Canadians Doing Online?

Cultivating a learning culture in which organizational members systematically gather knowledge and share it with others.

What’s Involved with Managing the Organization’s Knowledge Resources?

Kara Johnson is a materials expert at product design firm IDEO. To make finding the right materials easier, she built a master library of samples linked to a dataGroups of people who share a concern, a set of problems, base that explains their properties and manufacturing processes.57 What Johnson or a passion about a topic and is doing is managing knowledge and making it easier for others at IDEO to learn who deepen their knowledge and benefit from her knowledge. That’s what today’s managers need to do with and expertise in that area by the organization’s knowledge resources—make it easy for employees to communiinteracting on an ongoing basis. cate and share their knowledge so they can learn from each other ways to do their jobs more effectively and efficiently. One way organizations can do this is to build online information databases that employees can access. Exhibit 11-6  Top Social Media Platforms in Canada For example, William Wrigley Jr. Co. launched an interactive website that allows sales agents to access marketSOURCE: CIRA: Canadian Internet Registration Authority Factbook, 2018. Copyright © 2018 by Canadian Internet Registration Authority (CIRA). Reprinted ing data and other product information. The sales agents by permission. can question company experts about products or search Social media platforms Canadians use an online knowledge bank. In its first year, Wrigley estimates that the site cut research time of the sales force Facebook 77% by 15 000 hours, making them more efficient and effective.58 This one example, among many others, shows LinkedIn 35% how managers can use communication tools to manage this valuable organizational resource called knowledge. Instagram 35% In addition to online information databases for sharing knowledge, companies can create communities of pracTwitter 26% tice, which are groups of people who share a concern, a set of problems, or a passion about a topic, and who deepen Snapchat 19% their knowledge and expertise in that area by interacting communities of practice

on an ongoing basis. To make these communities of ­practice work, however, it’s important to maintain strong human interactions through communication, using such essential tools as interactive websites, e-mail, and video conferencing. In addition, these groups face the same communication problems that individuals face—filtering, emotions, defensiveness, over documentation, and so forth. However, groups can resolve these issues by focusing on the same suggestions we discussed earlier.

What Role Does Communication Play in Customer Service? You’ve been a customer many times; in fact, you probably find yourself in a customer service Employers have now begun to use social media in the collective bargainencounter several times a day. So what does a cus- ing process to keep employees updated and to quash any false rumours. Unions use social media to gain support and to keep their members aware tomer service encounter have to do with communiof what is happening on their side. “In collective bargaining ... a lot of cation? As it turns out, a lot! What communication employers are using social media or controlled websites about the status takes place and how it takes place can have a sig- of collective bargaining,” says Len Polsky, a Calgary-based employment nificant impact on a customer’s satisfaction with lawyer with MacPherson Leslie and Tyerman LLP. Polsky recalls one case the service and the likelihood of being a repeat in which the union leadership negotiated agreements that the membership took issue with. “Had they taken advantage of social media in a greater customer. Managers in service organizations need way ... maybe the leadership could have aligned itself better with the to make sure that employees who interact with members’ thinking.”59 customers are communicating appropriately and effectively with those customers. How? By first recognizing the three components in any service delivery process: the customer, the service organization, and the individual service provider.60 Each plays a role in whether communication is working. Obviously, managers don’t have a lot of control over what or how the customer communicates, but they can influence the other two. An organization with a strong service culture already values taking care of ­customers—finding out what their needs are, meeting those needs, and following up to make sure that their needs were met satisfactorily. Each of these activities involves communication, whether face-to-face, by phone or e-mail, or through other channels. In addition, communication is part of the specific customer service strategies the organization pursues. Communication also is important to the individual service provider or contact employee. The quality of the interpersonal interaction between the customer and that contact employee does influence customer satisfaction, especially when the service encounter isn’t up to expectations.62 People on the front line involved with those “critical service encounters” are often the first to hear about or notice service failures

Rawpixel.com/Shutterstock

Chapter 11  Managing Communication and Information  321

What’s Cooking in Hospitality? One strategy that many service organizations use is personalization. For instance, at Ritz-Carlton Hotels in Montreal, customers are provided with more than a clean bed and room. Customers who have stayed at a location previously and indicated that certain items are important to them—such as extra pillows, hot chocolate, or a certain brand of shampoo—will find those items waiting in their room at arrival. The hotel’s database

allows service to be personalized to customers’ expectations. In addition, all employees are asked to communicate information related to service provision. For instance, if a room attendant overhears guests talking about celebrating an anniversary, he or she is supposed to relay the information so something special can be done.61 Communication plays an important role in the hotel’s customer personalization strategy.

322  Chapter 11

BigTunaOnline/Shutterstock

or breakdowns. They must decide how and what to communicate during these instances. Their ability to listen actively and communicate appropriately with the customer goes a long way in whether the situation is resolved to the customer’s satisfaction or spirals out of control. Another important communication concern for the individual service provider is making sure that he or she has the information needed to deal with customers efficiently and effectively. If the service provider doesn’t personally have the information, there should be some way to get the information easily and promptly.63

Amazon is a great example of personalization. The homepage is tailored to users “Graham’s Amazon.” There is a personal hello and link to the user’s account, including recent purchases. It suggests popular categories or reminds you to continue watching a video you had been viewing on Prime.

How Can We Get Employee Input and Why Should We?

Nokia’s intranet soapbox, known as Blog-Hub, is open to employee bloggers around the world. There, employees have griped about their employer, but rather than shutting it down, Nokia managers want them to “fire away.” They feel that Nokia’s growth and success can be attributed to a “history of encouraging employees to say whatever’s on their minds, with faith that smarter ideas will result.”65 In today’s challenging environment, companies need to get input from their employees. Have you ever worked somewhere that had an employee suggestion box? When an employee had an idea about a new way of doing something—such as reducing costs, improving delivery time, and so forth—it went into the suggestion box, where it usually sat until someone decided to empty the box. Businesspeople frequently joked about the suggestion box, and cartoonists lambasted the futility of putting ideas in the employee suggestion box. Unfortunately, this attitude about suggestion boxes still persists in many organizations, but it shouldn’t. Managers do business in a world today where you can’t afford to ignore such potentially valuable information.

Why Should Managers Be Concerned with Communicating Ethically? Fifteen percent of employees say they wish their managers would improve their communication skills, especially in clarity and transparency.66 ethical communication Presented material that contains all relevant information, is true in every sense, and is not deceptive in any way.

It’s particularly important today that a company’s communication efforts be ethical. Ethical communication “includes all relevant information, is true in every sense, and is not deceptive in any way.”67 On the other hand, unethical communication often distorts the truth or manipulates audiences. What are some ways that companies communicate unethically? It could be by omitting essential information. For instance, not telling employees that an impending merger is going to mean some of them will lose their jobs is unethical. It’s also unethical to plagiarize, which is “presenting someone else’s words or other creative product as your own.”68 It would also be unethical communication to selectively misquote, misrepresent numbers, distort visuals, or fail to respect privacy or information security needs. For instance, although British Petroleum attempted to communicate openly and truthfully about the Gulf Coast oil

Chapter 11  Managing Communication and Information  323

A Question of Ethics Want to vent about your boss or your company? Now, there are apps to do just that: Yik Yak, Whisper, and Memo, among others.64 In these apps, users post anonymous messages about their employers. Giving and receiving feedback can be a significant challenge for employees and managers. Yes, providing the opportunity for employees to offer honest feedback about their managers and workplace is commendable. But are apps that provide a platform for employees to do that anonymously the answer?

Discussion Questions 1. How do these apps that let employees post anonymous feedback benefit employees? Managers? 2. What ethical dilemmas might arise because of these apps?

spill, the public felt that much of the company’s communication had some unethical elements to it. So how can managers encourage ethical communications? One thing is to “establish clear guidelines for ethical behaviour, including ethical business communication.”69 In a global survey by the International Association of Business Communicators, 70 percent of communication professionals said their companies clearly define what is considered ethical and unethical behaviour.70 If no clear guidelines exist, it’s important to answer the following questions: • Has the situation been defined fairly and accurately? • Why is the message being communicated? • How will the people who may be affected by the message or who receive the message be impacted? • Does the message help achieve the greatest possible good while minimizing possible harm? • Will this decision that appears to be ethical now seem so in the future? • How comfortable are you with your communication effort? What would a person you admire think of it?71 Remember that as a manager, you have a responsibility to think through your communication choices and the consequences of those choices. If you always remember that, you’re likely to have ethical communication.

Chapter Summary Learning Objectives Checklist 11.1 Describe what managers need to know about communicating effectively. Communication is the transfer and understanding of meaning. The communication process consists of seven elements: First, a sender or source has a message. A message is a purpose to be conveyed. Encoding converts a message into symbols. A channel provides the medium along which a message travels. Decoding happens when the receiver retranslates a sender’s message. Finally, feedback lets the sender know whether the communication was successful. The barriers to effective communication include filtering, emotions, information overload, defensiveness,

language, and national culture. Managers can overcome these barriers by using feedback, simplifying language, listening actively, constraining emotions, and watching for nonverbal clues.

11.2 Explain how technology affects managerial communication. Technology has radically changed the way organizational members communicate. It improves a manager’s ability to monitor performance; it gives employees more complete information to make faster decisions; it provides employees more opportunities to collaborate and share information;

324  Chapter 11 and it makes it possible for people to be fully accessible, anytime anywhere. IT has affected managerial communication through the use of networked computer systems and wireless capabilities.

through clear guidelines and through answering questions that force a communicator to think through the communication choices made and the consequences of those choices.

Discussion Questions

11.3 Discuss contemporary issues in communication. The two main challenges of managing communication in an Internet world are the legal and security issues and the lack of personal interaction. Organizations can manage knowledge by making it easy for employees to communicate and share their knowledge so they can learn from each other ways to do their jobs more effectively and efficiently. One way is through online information databases and the other way is through creating communities of practice. Communicating with customers is an important managerial issue because what communication takes place and how it takes place can significantly affect a customer’s satisfaction with the service and the likelihood of being a repeat customer. It’s important for organizations to get input from their employees. Such potentially valuable information should not be ignored. Finally, it’s important that a company’s communication efforts be ethical. Ethical communication can be encouraged

1. Which type of communication do you think is most effective in a work setting? Why? 2. Which do you think is more important for a manager: speaking accurately or listening actively? Why? 3. “Ineffective communication is the fault of the sender.” Do you agree or disagree with this statement? Discuss. 4. Is information technology helping managers communicate more efficiently and effectively? Explain your answer. 5. How might a manager use the grapevine to his or her advantage? Support your response. 6. Research the characteristics of a good communicator. Write up your findings in a bulleted list report. Be sure to cite your sources. 7. For one day, track nonverbal communication that you notice in others. What types did you observe? Was the nonverbal communication always consistent with the verbal communication taking place? Describe.

Developing Management Skills Hey, You’re The Boss Now!

Getting Started with Social Media • Explore. What platforms are your customers and employees using? • Listen. Use Google, Twitter, and Facebook to see what people are saying about your industry, your company, and your products. • Create a strategy. What business goals can social media support? • Choose the right platform. B2B customers are more likely to be reached via blogs, LinkedIn, and Twitter, while YouTube and Facebook are better for contact with consumers. • Offer unique content. Provide insight on hot topics, VIP offers, or special deals. • Manage the conversation. Nurture your brand ambassadors and follow up on all feedback. • Coordinate channels. Ensure that your social media platforms are linked with your website and other communication channels. • Think mobile. Everything needs to be accessible on a mobile device. • Build relationships. Stay connected in real time and build gradually. SOURCE: Based on Connecting With Social Media by Debbie. Dimoff, Vice-President, Consulting, Pricewater-

houseCoopers (PwC).55

Chapter 11  Managing Communication and Information  325

Team Exercises Be the Consultant WRITING BETTER E-MAILS The purpose of the table at the bottom of this page is to learn when to use the active or passive voice, when to be direct or indirect, and how to avoid jargon in e-mails.

Procedure Form groups of five or six individuals. Prepare e-mails that are active, direct, and clear for each of the following four scenarios: 1. The company has been approached by a large competitor who wishes to acquire the company. Staff are

worried the takeover might result in some employee layoffs within the next three months. 2. A customer has complained about an employee via e-mail. You have investigated and found the complaint justified. How do you convey this to the employee? 3. Bonus decisions have been made. Not all individuals will receive a bonus. 4. An employee has gone above and beyond in meeting a customer’s request. You want to acknowledge the employee’s efforts.

Active

Passive

• “The committee determined that the report was inconclusive.” • “I am writing the report.”

• “It was determined by the committee that the report was inconclusive.” • “The report is being written by me.”

• “Please contact Brian to discuss his concerns about your meeting.”

• “It is suggested that your meeting with Brian was less than effective and that it would be appropriate that the matter had further discussions.”

Direct

Indirect

• “I plan to reassign you to one of two different projects. Please let me know if you have any preferences on which application you would like to develop.”

• “We hope to develop two new applications this year. To best use your skills, I plan to reassign all team members to one of two different projects. Please let me know if you have any preferences.”

• “We have selected another candidate for the promotion. Thank you for your consideration.”

• “Thank you for your hard work this quarter. Our selection of a candidate for promotion was taken very seriously. We considered your application very carefully, but another candidate was selected.”

Clear

Jargon

• “When is the proposal expected?” • “Be creative in meeting the target and make sure we’re well organized.” • “Regarding”

• “What is the ETD of the RFP?” • “Push the envelope; get our ducks in a row.” • “With reference to”

• “To be clear”

• “To tell the truth”

Business Cases Social Benefit or Social Disaster? Tweets. Twittering. Prior to 2006, the only definition we would have known for these words would have involved birds and the sounds they make. Now, practically everyone knows that Twitter is also an online service— with 974 million registered users (80% of them on mobile devices), 326 million monthly active users (including 7.4 million Canadians), 500 million tweets daily, 70 million fake Twitter accounts suspended in 2018, and 1.6 billion daily search queries—used to trade short messages of 280 characters or less via the Web, cell phones, and other devices.72 According to its founders (Jack Dorsey, Biz Stone, and Evan Williams), Twitter is many things: a messaging service, a customer service tool to reach customers,

a real-time search tool, and a microblogging platform. And as the numbers show, it’s become quite popular!

The Good and the Bad of TWITTER One place where Twitter has caught on is the sports world, especially in college sports. For instance, Mike Riley, head football coach at the University of Nebraska, uses Twitter to keep fans informed. He understands the power of instant communication. Coach Hugh Freeze of the University of Mississippi was an early adopter of social media to communicate recruitment news. He’s discovered that tweeting is an easy and fun way to communicate quick tidbits of information to fans, alumni boosters, and other interested

326  Chapter 11 people who subscribe to Twitter. And it’s a convenient way for the football staff and football recruitment prospects to communicate with each other. There are pretty strict rules the NCAA has about contact allowed between potential recruits and coaches, but NCAA rules do allow unlimited direct messaging. However, coaches still are cautious about committing recruiting violations. So, using Twitter to announce their destinations on the recruiting trail, coaches can indirectly share their recruitment news without naming names.73 In 2018, Canada and Saudi Arabia had a diplomatic crisis because of Twitter. Canada started the spat with the following tweet:

What some are calling Twitter diplomacy, #diplomacy, or even twiplomacy, led to a major spat between the two countries in which Saudi Arabia threatened to sell off its Canadian assets and stop buying Canadian wheat and barley.74 It also ordered Saudi students to leave Canadian schools, expelled the Canadian ambassador in Saudi Arabia, and even suspended flights between the two countries. Former foreign affairs minister John Baird feels Twitter was the wrong platform on which to send the message. “You do it respectfully and face to face, and not do diplomacy via Twitter,” Baird said.75 Speaking in Montreal, Prime Minister Justin Trudeau said, “Canada will always speak strongly and clearly in private and in public on questions of human rights.”76

Discussion Questions 1. Do you think there are more or fewer communication barriers when using social media? Discuss. 2. What have been your experiences—both positive and negative—with social media? From your experiences, what guidelines could you suggest for managers and organizations?

Banning E-mail. Banning Voice Mail. We have a love–hate relationship with e-mail. On one hand, e-mails are fast and convenient, and we send over 108 billion e-mail messages every day. On the other hand, answering e-mail takes up 23 percent of the average

employee’s workday,77and that average employee sends or receives 112 e-mails per day.78 That’s about 14 e-mails per hour, and even if half of those don’t require a lot of time and concentration, that level of e-mail volume can be stressful and lead to unproductive time. Once imagined to be a time-saver, has the inbox become a burden? What about voice mails? Are phone messages even necessary for organizational communication? These and other concerns are forcing many organizations to take a closer look at how information is communicated. At Edelman, a Toronto-based PR firm, there’s been an unofficial rule in place for roughly five years that encourages no work e-mails between 7 p.m. and 7 a.m. “We implemented it based on input from employees who were feeling overwhelmed by the volume of email they were receiving,” said general manager Scott Evans. “In general, people — including our clients — were highly supportive. The more compliant people were, the less people felt an expectation to check their devices.”79 When it came to implementation, the company found the following guidelines helpful: 1. Set appropriate rules. For example, senior leadership can still communicate with one another after hours and be available should an emergency arise. 2. Lead by example. Managers need to commit to this philosophy when communicating with employees. They can’t send employees after-hours messages. 3. Stick with it. Remind people of the policy and the problem it’s meant to solve.80 In 2019 the federal Liberal government was examining “right-to-disconnect” legislation in relation to updating labour standards for federally regulated fields, which include transportation and telecommunications. The debate has gained attention since 2017, when France gave employees the legal right to avoid work e-mails outside of working hours.81 Mario Zelaya, founder and CEO of Bad Axe Throwing, an indoor entertainment company with more than 200 employees across North America, says the key to productivity is not extending work hours beyond the typical 9-to-5 routine but ensuring that people are fully engaged when they’re on the clock. Bad Axe employees are socialized from day one to refrain from personal social media use while working in order to avoid overtime. “Essentially the unwritten rule is, don’t do any personal Facebook, Twitter or Instagram during the day and we’ll give you back your time and you’ll have the right to disconnect,” Zelaya said in a phone interview.”82

Discussion Questions 1. Do you agree that e-mail and voice mail can be unproductive in the workplace? What strategies have you used to manage the volume of e-mail that you receive?

Chapter 11  Managing Communication and Information  327

Delivering Bad News One thing that’s always hard for managers/executives to do is deliver bad news to employees.83 However, that’s all the more reason to be sure to think through those decisions. And not every CEO or executive has done that! Here are some recent examples. See what you think!

Choose your CHANNEL wisely! • IBM CEO Ginni Rometty, after a disappointing earnings report, publicly reprimanded all the company’s 434 000 employees through a five-minute internal video message. She specifically pointed to the sales staff for missing out on several large deals. When the press heard about it, many referred to it as a public spanking.84 • AOL’s CEO, Tim Armstrong, broke the news about the company’s decision to cut employee retirement benefits on television network CNBC. Only after informing Wall Street did Armstrong hold a companywide conference call with employees to discuss the announcement and explain the rationale. Employees complained about “secret” cuts on Twitter and other social media sites. And Armstrong only added fuel to the fire after he tried to blame the change on the new federal healthcare law and medical expenses associated with two “distressed babies” of AOL employees. After a week of bad publicity, Armstrong informed employees through e-mail that he was reversing his decision and apologized for his controversial comments.85

• Some 90 workers at a Ford Motor Company’s Chicago assembly plant got an automated phone message announcing they had just been laid off.86 Although each of the managers involved in these communications probably thought they were doing the right thing, the choices they made led to an outcome they weren’t expecting.

PRINCIPLES TO REMEMBER Do • understand why the decision was made before sharing the news • prepare and rehearse what you’re going to say • explain the rationale and the process for making the decision Don’t • sugarcoat the news—be clear and direct • let your body language belie your words • allow people to debate the merits of the decision — focus on moving forward87

Discussion Questions 1. What’s your impression of what took place in these scenarios? Did the managers in each of these scenarios communicate effectively? Why or why not? 2. For each of the scenarios, discuss what might have been a better way to communicate the message.

Chapter 12

Serhiichuk Dmytro/Shutterstock

Foundations of Control

Learning Objectives 12.1 Explain the nature and importance of control. 12.2 Describe the control process. 12.3 Discuss the types of controls that organizations and managers use. 12.4 Discuss contemporary issues in control. Four months of waiting for equipment on back order led Mathieu Racine, the 33-year-old president and CEO of family-owned Quebec agricultural equipment dealer Comptoir Agricole SteAnne (CASA), to a radical business transformation. CASA previously sold American-made grain elevators, conveyor belts, fans, and dryers to Canadian farmers. Demand outpaced supply, and they were not fulfilling customer needs.1 Chief financial officer Elie Tochan helped Racine transform from a dealer into a manufacturer. “Now we make our equipment instead of waiting for it,” Tochan explains. “We deliver more quickly to clients, who pay faster and want to keep doing business with us.”2 It was a costly change, with a $3.7 million purchase of a factory and warehouse in Repentigny, east of Montreal, along with another $3 million worth of metal presses and welding machines. With that kind of cash outlay, Tochan analyzed machines that would provide the fastest cash return.3 To maximize efficiency Tochan and Racine use control measures such as tracking the productivity of their factory employees. “Everyone works in front of a computer screen that measures the time they spend on each production task,” says Tochan. Far from feeling spied on, employees embrace the monitoring system: “It tells them if they are doing a good job. We see problems right away, so we can find solutions.”4 Monthly meetings between managers and employees provide feedback on what’s working, what isn’t, and what improvements are needed. “It can be anything,” says Tochan. “Our employees were complaining that the software we used was too slow and too limited. So we did our research

328

Chapter 12  Foundations of Control 329 and replaced it.”5 With the right controls in place, sales have increased 17% in each of the past three years. “We are reliable and fast,” says Tochan, “and the word about us is starting to spread.”6 What is organizational control? Look at the decisions Mathieu Racine made. How did he use control to increase sales so dramatically? As we will see in this chapter, Mathieu Racine understands the importance of management controls. No matter how thorough the planning, a decision may still be poorly implemented without a satisfactory control system in place. This chapter describes controls for monitoring and measuring performance. It also looks at how to create a well-designed organizational control system.

Here is a common myth about control:  

A lack of employee turnover is a sign of a good manager.

MANAGEMENT MYTH DEBUNKED While high employee turnover is almost always dysfunctional, low turnover is not necessarily the best goal. An absence of turnover often can mean a complacent manager, one who’s willing to accept mediocre employee performance. In an effective organizational control system, managers are encouraged to identify and remove marginal employees. Low levels of employee turnover can be functional only if the right people—those who are the weakest performers—are the ones leaving. For full details on this management myth, check out our Bust the Myth video in Revel.

What Is Control? 12.1 Explain the nature and importance of control.

How do you know a control system is effective? Look at whether goals are being achieved! Control is the management function that involves monitoring activities to ensure that they’re being accomplished as planned and correcting any significant deviations. Managers can’t really know whether their units are performing properly until they’ve evaluated what activities have been done and have compared the actual performance with the desired standard. An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals. The effectiveness of a control system is determined by how well it facilitates goal achievement. The more a control system helps managers achieve their organization’s goals, the better it is.

control The process of monitoring activities to ensure that they are being accomplished as planned, and correcting any significant deviations.

Why Is Control Important? Alexmillos/Shutterstock

• After an above-ground radioactive release at a nuclear waste storage vault in New Mexico, a report blamed managers who failed to “understand and control the risks.”7 • McDonald’s Japan has apologized to customers and vowed to better control product safety after objects, including a tooth and plastic, were found in food.8 • After a number of negatively publicized incidents on its cruise ships, Carnival Corporation accelerated its schedule of maintenance and other renovations.9 • A technical error on Walmart’s website led to certain products showing unbelievably low prices (for instance, a treadmill for $33). The

Control helps an organization adapt to change, discover errors, reduce costs, add value, detect opportunities, deal with complexity, and aid teamwork.

330  Chapter 12

A Question of Ethics It’s called the “walk of shame.” Marching employees through stores in handcuffs to discourage theft and other infractions.13 At a Target store in Pasadena, California, an employee who was subjected to the walk of shame was released and never charged with a crime. However, after the emotionally distressing incident, the individual later committed suicide. After the incident went public, other Target employees in other stores told of their experiences either witnessing or experiencing the walk of shame. Target Corporation denies that it has any such policy. The company also did not elaborate on what guidance it gives managers

on how to handle suspected employee theft or other work violations that could potentially involve law enforcement.

Discussion Questions 1. What do you think of this “supposed” practice—positive and negative? Discuss. 2. How could an organization make sure it’s being ethical in controlling employees’ behaviours and still achieving organizational goals?

error was not the result of hacking but rather an internal glitch and was quickly corrected.10 • Clothing return fraud costs retailers almost $9 billion annually. To combat this, many high-end retailers have started placing large black plastic tags in highly visible places on dresses and other pricey clothing items.11 • No fast-food chain wants its employees doing gross stuff behind the scenes, but social media photos and videos of a Taco Bell employee licking a stack of taco shells, a Wendy’s employee bending down under a Frosty machine with mouth wide open gobbling the treat, or a Domino’s Pizza employee performing vulgar and unsanitary actions while preparing food have all shown up online.12

Seventy-seven percent of executives say that the biggest threat to their ­organizations comes from within.14 Can you see now why controlling is such an important managerial function? Planning can be done, an organizational structure created to facilitate efficient achievement of goals, and employees motivated through effective leadership. But there’s no assurance that activities are going as planned and that the goals employees and managers are working toward are, in fact, being attained. Control is important, therefore, because it’s the only way that managers know whether organizational goals are being met and, if not, the reasons why. The value of the control function can be seen in three specific areas: 1. Planning.  Goals provide specific direction to employees and managers, as the foundation of planning. However, just stating goals or having employees accept goals doesn’t guarantee that the necessary actions to accomplish those goals have been taken. As the old saying goes, “The best-laid plans often go awry.” The effective manager follows up to ensure that what employees are supposed to do is, in fact, being done and goals are being achieved. As the final step in the management process, controlling provides the critical link back to planning. (See Exhibit 12-1.) If managers didn’t control, they’d have no way of knowing whether goals and plans were being achieved and what future actions to take. 2. Empowering employees.  The second reason controlling is important because of employee empowerment. Many managers are reluctant to empower their employees because they fear something will go wrong for which they would be held responsible. But an effective control system can provide information and feedback on employee performance and minimize the chance of potential problems.

Chapter 12  Foundations of Control 331

Exhibit 12-1  Planning–Controlling Link Planning Goals Strategies Plans Controlling Standards Measurements Comparison Actions

Organizing Structure Human Resource Management Leading Motivation Leadership Communication Individual and Group Behaviour

performance The end result of an activity.

3.

Protecting the workplace.  The final reason that managers control is to protect the organization and its assets.15 Organizations face threats from natural disasters, financial pressures and scandals, workplace violence, supply chain disruptions, security breaches, and even possible terrorist attacks. Managers must protect organizational assets in the event that any of these should happen. Comprehensive controls and backup plans will help minimize work disruptions.

Performance Standards To achieve control, performance standards must exist. These standards are the specific goals created during the planning process. Performance is the end result of an activity. Whether that activity is hours of intense practice before a concert or race, or carrying out job responsibilities as efficiently and effectively as possible, performance is what results from that activity. Managers are concerned with organizational performance—the accumulated end results of all the organization’s work activities. It is a complex but important concept. Managers need to understand the factors that contribute to a high level of organizational performance. After all, they do not want (or intend) to manage their way to mediocre performance. They want their organizations, work units, or work groups to achieve high levels of performance, no matter what mission, strategies, or goals are being pursued.

organizational performance The accumulated end results of all the organization’s work activities.

productivity The overall output of goods or services produced divided by the inputs needed to generate that output.

organizational effectiveness A measure of how appropriate organizational goals are and how well an organization is achieving those goals.

control process A three-step process that includes measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards.

Productivity is the overall output of goods or services produced ­divided by the inputs needed to generate that output. Organizational effectiveness is a measure of how appropriate ­organizational goals are and how well an organization is achieving those goals.

Bizoo_n/Fotolia

The Control Process 12.2 Describe the control process. The control process is a three-step process: measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards. The control process for managers is similar to what you might do as a student at the beginning of the term: set goals

The companies listed in Report on Business Magazine’s Top 1000 are measured by assets. They are ranked according to after-tax profits in the most recent fiscal year, excluding extraordinary gains or losses.16

332  Chapter 12

Exhibit 12-2  Managerial Decisions in the Control Process Compare actual performance with standard

Is standard being attained?

Yes Do nothing

No

Goals

Standard

Measure actual performance

Is variance acceptable?

Yes Do nothing

No Is standard acceptable?

Yes

Identify cause of variation

No Revise standard

Correct performance

for yourself for studying and marks and then evaluate your performance after midterms, determining whether you have studied enough or need to study more in order to meet whatever goals you set for your marks. Standards evolve out of goals that are developed during the planning process. These goals provide the basis for the control process, which is essentially a continuous flow between measuring, comparing, and taking managerial action. Depending on the results of comparing, a manager’s decision about what course of action to take might be to do nothing, revise the standard, or correct the performance. Exhibit 12-2 summarizes the manager’s decisions in the control process.

What Is Measuring? To determine actual performance, a manager must first get information about it. Thus, the first step in control is measuring. HOW DO MANAGERS MEASURE?  Four common sources of information frequently

management by walking around (MBWA) When a manager is out in the work area interacting with employees.

used to measure actual performance include personal observation, statistical reports, oral reports, and written reports. Each has its own particular strengths and weaknesses, but using a combination of them increases both the number of input sources and the probability of receiving reliable information. Personal observation provides first-hand, intimate knowledge of the actual activity—information that is not filtered through others. It permits intensive coverage because minor as well as major performance activities can be observed, and it provides opportunities for the manager to read between the lines. Management by walking around (MBWA) is a phrase used to describe when a manager is out in the work area, interacting directly with employees and exchanging information about what’s going on. Management by walking around can pick up factual omissions, facial expressions, and tones of voice that may be missed by other sources. Unfortunately, in a time when quantitative information suggests objectivity, personal observation is often considered an inferior information source. It is subject to perceptual biases; what one manager sees, another might not. Personal observation also consumes a good deal of time.

Finally, this method suffers from obtrusiveness. Employees might interpret a manager’s overt observation as a lack of confidence or a sign of mistrust. The widespread use of computers has led managers to rely increasingly on statistical reports for measuring actual performance. This measuring device, however, isn’t limited to computer outputs. It also includes graphs, bar charts, and numerical displays of any form that managers can use for assessing performance. Although statistical information is easy to visualize and effective for showing relationships, it provides limited information about an activity. Statistics report on only a few key areas and may often ignore other important, often subjective, factors. Greeting customers with a handshake, a smile, and a warm welcome is a practice Information can also be acquired through Apple stores adopted from Ritz-Carlton, the luxury hotel chain known as the gold oral reports—that is, through conferences, standard of customer service. Apple benchmarked with Ritz-Carlton because it wants meetings, one-to-one conversations, or tele- its employees to excel at customer service that leads to customer loyalty. phone calls. In employee-oriented organizations where employees work closely together, this approach may be the best way to keep tabs on work performance. The advantages and disadvantages of this method of measuring performance are similar to those of personal observation. Although the information is filtered, it is fast, allows for feedback, and permits expression and tone of voice as well as words themselves to convey meaning. Historically, one of the major drawbacks of oral reports has been the problem of documenting information for later reference. However, our technological capabilities have progressed in the past couple of decades to the point where oral reports can be efficiently taped and become as permanent as if they were written. Actual performance may also be measured by written reports. Like statistical reports, they are slower yet more formal than first-hand or second-hand oral measures. This formality also often gives them greater comprehensiveness and conciseness than found in oral reports. In addition, written reports are usually easy to catalogue and reference. Given the varied advantages and disadvantages of each of these four measurement techniques, managers should use all four for comprehensive control efforts.

What We Measure What we measure is probably more critical to the control process than how we measure. Why? The selection of the wrong criteria can result in serious dysfunctional consequences. Besides, what we measure determines, to a great extent, what people in the organization will attempt to excel at.17 For example, assume that your instructor has required a total of ten writing assignments from the exercises at the end of each chapter. But in the grade computation section of the syllabus, you notice that these assignments are not scored. In fact, when you ask your professor about this, she replies that these writing assignments are for your own enlightenment and do not affect your grade for the course; grades are solely a function of how well you perform on the three exams. We predict that you would, not surprisingly, exert most, if not all, of your effort toward doing well on the three exams. Some control criteria are applicable to any management situation. For example, because all managers, by definition, coordinate the work of others, criteria such as employee satisfaction or turnover and absenteeism rates can be measured. Most managers also have budgets set in dollar costs for their areas of responsibility. Keeping costs within budget is, therefore, a fairly common control measure. However, any control system needs to recognize

Nati Harnik/AP Images

Chapter 12  Foundations of Control 333

Mindscanner/Fotolia

334  Chapter 12 the diversity of activities that managers do. A production manager at a paper tablet manufacturer might use measures such as quantity of paper tablets produced per day and per labour-hour, scrap rate, and/ or percentage of rejects returned by customers. On the other hand, the manager of an administrative unit in a government agency might use the number of client requests processed per hour or the average time required to process paperwork. Marketing managers often use measures such as percentage of market held, average dollars per sale, number of customer visits per salesperson, or number of customer impressions per advertising medium. As you might imagine, some activities are more difficult to measure in quantifiable terms. It is more difficult, for instance, Although subjective measures have significant limitations, for a manager to measure the performance of a medical they are better than having no standards at all and ignoring researcher or a middle-school counsellor than of a person who the control function. If an activity is important, the excuse sells life insurance. But most activities can be broken down into that it is difficult to measure is unacceptable. objective segments that allow for measurement. The manager needs to determine what value a person, department, or unit contributes to the organization and then convert the contribution into standards. Most jobs and activities can be expressed in tangible and measurable terms. When a performance indicator cannot be stated in quantifiable terms, managers should look for and use subjective measures. Certainly, subjective measures have significant limitations. Still, they are better than having no standards at all and ignoring the control function. If an activity is important, the excuse that it’s difficult to measure is inadequate. In such cases, managers should use subjective performance criteria. Of course, any analysis or decisions made on the basis of subjective criteria should recognize the limitations of the data.

How Do Managers Compare Actual Performance to Planned Goals? range of variation The acceptable degree of variation between actual performance and the standard.

The comparing step determines the variation between actual performance and the standard. Although some variation in performance can be expected in all activities, it’s critical to determine an acceptable range of variation. (See Exhibit 12-3). Deviations outside this range need attention. Let’s work through an example.

Exhibit 12-3  Acceptable Range of Variation

Acceptable upper limit

•

Acceptable lower limit

•

•

Standard

•

•

t

•

t+1

t+2

t+3

t+4

t+5

Acceptable range of variation

Chapter 12  Foundations of Control 335

Exhibit 12-4  Example of Determining Significant Variation: Green Earth Gardening Supply—June Sales Product

Standard

Actual

Over (Under) (612)

Vegetable plants

1075

913

Perennial flowers

630

634

4

Annual flowers

800

912

112

Herbs

160

140

(20)

Flowering bulbs

170

286

116

Flowering bushes

225

220

(5)

Heirloom seeds

540

672

132

3600

3777

177

Total

Chris Tanner is a sales manager for Green Earth Gardening Supply, a distributor of specialty plants and seeds in the Pacific Northwest. Chris prepares a report during the first week of each month that describes sales for the previous month, classified by product line. Exhibit 12-4 displays both the sales goals (standard) and actual sales figures for the month of June. After looking at the numbers, should Chris be concerned? Sales were a bit higher than originally targeted, but does that mean there were no significant deviations? That depends on what Chris thinks is significant—that is, outside the acceptable range of variation. Even though overall performance was generally quite favourable, some product lines need closer scrutiny. For instance, if sales of heirloom seeds, flowering bulbs, and annual flowers continue to be over what was expected, Chris might need to order more product from nurseries to meet customer demand. Because sales of vegetable plants were 15 percent below goal, Chris may need to run a special on them. As this example shows, both overvariance and undervariance may require managerial attention, which is the third step in the control process. BENCHMARKING OF BEST PRACTICES  Remember that benchmarking is the search

benchmarking

Z_amir/Fotolia

for the best practices among competitors or noncompetitors that lead to their superior The search for the best performance. The benchmark is the standard of excellence against which to measure practices among competitors or and compare.18 At its most fundamental level, benchmarking means learning from noncompetitors that lead to their others.19 As a tool for monitoring and measuring organizational performance, bench- superior performance. marking can be used to help identify specific performance gaps and potential areas for benchmark improvement.20 To ensure the company is on track, Montreal-based BouClair, a homeThe standard of excellence against decorating store, benchmarks everything against past performance and also against which to measure and compare. what other leading retailers are doing. “If a particular department or category is up 40 percent in sales over last year but we said we expected it to grow at 60 percent, then we are going to investigate and find out why,” Gerry Goldberg, president and CEO, says.21 “Then we look at our own same-store sales increases and compare them to the best companies out there. That’s how we measure our efficiency and our productivity.” Managers should not look just at external organizations for best practices. It is also important for them to look inside their own organization for best practices that can be shared. Research shows that best practices frequently already exist within an organization but usually go unidentified and unused.22 In today’s environment, organizations striving for high performance levels cannot afford to ignore such potentially valuable information. Some companies have already recognized the potential of internally benchmarking best practices as a tool for monitoring and measuring performance. For example, to improve diversity within the company, Saskatoon-based Yanke Group, a trucking company, is committed to hiring First Nations people and persons with disabilities. Yanke reviews its employment equity benchmarks quarterly.23 Toyota Motor Corporation An organization can benchmark almost anything.

336  Chapter 12

Exhibit 12-5  Steps to Successfully Implement an Internal Benchmarking Best-Practices Program SOURCE: Based on T. Leahy, “Extracting Diamonds in the Rough,” Business Finance, August 2000, pp. 33–37.

1. Connect best practices to strategies and goals.  The organization’s strategies and goals should dictate what types of best practices might be most valuable to others in the organization. 2. Identify best practices throughout the organization.  Organizations must have a way to find out what practices have been successful in different work areas and units. 3. Develop best-practices reward and recognition systems.  Individuals must be given an incentive to share their knowledge. The reward system should be built into the organization’s culture. 4. Communicate best practices throughout the organization.  Once best practices have been identified, that information needs to be shared with others in the organization. 5. Create a best-practices knowledge-sharing system.  There needs to be a formal mechanism for organizational members to continue sharing their ideas and best practices. 6. Nurture best practices on an ongoing basis.  Create an organizational culture that reinforces a “We can learn from everyone” attitude and emphasizes sharing information.

developed a suggestion-screening system to prioritize best practices based on p ­ otential impact, benefits, and difficulty of implementation. General Motors sends employees— from upper management to line employees—to different plants, where they learn about internal and external best practices.24 Exhibit 12-5 provides a summary of what managers must do to implement an internal benchmarking best-practices program.

What Managerial Action Can Be Taken? immediate corrective action Corrective action that corrects problems at once to get performance back on track.

basic corrective action

Monty Rakusen/Image Source/Alamy Stock Photo

Corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation.

Managers can choose among three possible courses of action: • Do nothing (self-explanatory) • Correct actual performance • Revise the standards

HOW DO YOU CORRECT ACTUAL PERFORMANCE?  Depending on what the problem is, a manager could take different corrective actions. For instance, if unsatisfactory work is the reason for performance variations, the manager could correct it through training programs, disciplinary action, changes in compensation practices, and so forth. One decision that a manager must make is whether to take immediate corrective action, which corrects problems at once to get performance back on track, or to use basic corrective action, which looks at how and why performance deviated before correcting the source of deviation. It’s not unusual for managers to rationalize that they don’t have time to find the source of a problem (basic corrective action) and continue to perpetually “put out fires” with immediate corrective action. Effective managers analyze deviations and, if the benefits justify it, take the time to pinpoint and correct the causes of variance. HOW DO YOU REVISE THE STANDARD?  It’s possible that the

Toronto-based Celestica redesigned its manufacturing process to cut waste. It did so by watching how factory workers carried out their duties and then designing more efficient processes. Workers at its Monterrey, Mexico, plant “reduced equipment setup time by 85 percent, shortened time between receiving an order and shipping it by 71 percent, reduced floor space used by 34 percent, reduced consumables by 25 percent, reduced scrap by 66 percent and reduced the investment in surface-mount technology (SMT) lines by 49 percent.”25

variance was a result of an unrealistic standard—too low or too high a goal. In such cases, it’s the standard that needs corrective action, not the performance. If performance consistently exceeds the goal, then a manager should look at whether the goal is too easy and needs to be raised. On the other hand, managers must be cautious about revising a standard downward. It’s natural to blame the goal when an employee or a team falls short. For instance, students who get a low score on a test often attack the grade cutoff standards

Chapter 12  Foundations of Control 337

as too high. Rather than accept the fact that their performance was inadequate, they will argue that the standards are unreasonable. Likewise, salespeople who don’t meet their monthly quota often want to blame what they think is an unrealistic quota. The point is that when performance isn’t up to par, don’t immediately blame the goal or standard. If you believe the standard is realistic, fair, and achievable, tell employees that you expect future work to improve, and then take the necessary corrective action to help make that happen.

What Should Managers Control? 12.3 Discuss the types of controls that organizations and managers use. Cost efficiency. The length of time customers are kept on hold. Customers being satisfied with the service provided. These are just a few of the important performance indicators that executives in the intensely competitive call-centre service industry measure. To make good decisions, managers in this industry want and need this type of information so they can control work performance. How do managers know what to control? In this section, we’re first going to look at the decision of what to control in terms of when control takes place. Then, we’re going to discuss some different areas in which managers might choose to establish controls.

When to Introduce Control Managers can implement controls before an activity begins, during the time the activity is going on, or after the activity has been completed. The first type is called feedforward control, the second is concurrent control, and the last is feedback control. (See Exhibit 12-6.) WHAT IS FEEDFORWARD CONTROL?  The most desirable type of control—

feedforward control—prevents problems because it takes place before the actual activity.26 Let us look at some examples of feedforward control. When McDonald’s Canada opened its first restaurant in Moscow, it sent company quality control experts to help Russian farmers learn techniques for growing highquality potatoes and to help bakers learn processes for baking high-quality breads. Why? Because McDonald’s strongly emphasizes product quality no matter what the geographical location. It wants a cheeseburger in Moscow to taste like one in Winnipeg. Still another example of feedforward control is the scheduled preventive maintenance programs on aircraft done by airlines. These programs are designed to detect and prevent structural damage that might lead to an accident. The key to feedforward controls is taking managerial action before a problem occurs. Feedforward controls are desirable because they allow managers to prevent problems rather than having to correct them later, after the damage (such as

Exhibit 12-6  When Does Control Take Place? Input

Processes

Output

Feedforward control

Concurrent control

Feedback control

Anticipates problems

Corrects problems as they happen

Corrects problems after they occur

feedforward control A type of control that focuses on preventing anticipated problems, because it takes place before the actual activity.

338  Chapter 12

Elaine Thompson/AP Images

poor-quality products, lost customers, lost revenue, and so forth) has already been done. Unfortunately, these controls require timely and accurate information that often is difficult to obtain. As a result, managers frequently end up using the other two types of control. WHEN

Microsoft uses concurrent control to track its energy usage. Shown here at its operations centre, control technician Ray Nichols monitors real-time data on heating, cooling, and other systems in the company’s buildings that will help Microsoft achieve its goals of improving its carbon footprint and reducing its impact on the environment.

concurrent control A type of control that takes place while an activity is in progress.

IS

CONCURRENT

CONTROL

USED? 

Concurrent control, as its name implies, takes place while a work activity is in progress. For instance, the director of business product management at Google and his team keep a watchful eye on one of Google’s most profitable businesses—online ads. They watch “the number of searches and clicks, the rate at which users click on ads, the revenue this generates— everything is tracked hour by hour, compared with the data from a week earlier, and charted.”27 If they see something that’s not working particularly well, they fine-tune it.

Fifty-five percent of employees say that micromanaging decreases their productivity.28 Technical equipment (such as computers and computerized machine controls) can be designed to include concurrent controls. For example, you’ve probably experienced this with word-processing software that alerts you to a misspelled word or incorrect grammatical usage. Also, many organizational quality programs rely on concurrent controls to inform workers whether their work output is of sufficient quality to meet standards. The best-known form of concurrent control, however, is direct supervision. For example, Nvidia’s CEO Jen-Hsun Huang had his office cubicle torn down and replaced with a conference table so he’s now available to employees at all times to discuss what’s going on.29 Even GE’s CEO, Jeff Immelt, spends 60 percent of his work week on the road talking to employees and visiting the company’s numerous locations.30 All managers can benefit from using concurrent control because they can correct problems before they become too costly. MBWA, which we described earlier in this chapter, is a great way for managers to do this.

feedback control A type of control that takes place after a work activity is done.

WHY IS FEEDBACK CONTROL SO POPULAR?  The most popular type of control relies on feedback. In feedback control, the control takes place after the activity is done. For instance, in the case at the end of the chapter, Lululemon’s flawed stretch pants were discovered through feedback control. The damage had already occurred, even though the organization corrected the problem once it was discovered. And that’s the major problem with this type of control. By the time a manager has the information, the problems have already occurred, leading to waste or damage. However, in many work areas—the financial area being one example—feedback is the only viable type of control.

Keeping Track of an Organization’s Finances Want to earn a profit? You need financial controls. Traditional financial controls include the following: • Ratio analysis. (See Exhibit 12-7.) Ratios are calculated using selected information from the organization’s balance sheet and income statement.

Chapter 12  Foundations of Control 339

Exhibit 12-7  Popular Financial Ratios Objective

Ratio

Liquidity ratios measure an organization’s ability to meet its current debt obligations.

Current ratio

Calculation

Tests the organization’s ability to meet shortterm obligations

Current assets - Inventories Current liabilities Total debt Total assets Profits before interest and taxes Total interest charges Sales Inventory

Tests liquidity more accurately when inventories turn over slowly or are difficult to sell

Sales Total assets

The fewer assets used to achieve a given level of sales, the more efficient management’s use of the organization’s total assets

Profit margin on sales

Net profit after taxes

Identifies the profits that are being generated

Return on investment

Total sales Net profit after taxes

Acid test Leverage ratios examine the organization’s use of debt to finance its assets and whether it’s able to meet the interest payments on the debt.

Debt to assets

Activity ratios assess how efficiently a company is using its assets.

Inventory turnover

Times interest earned

Total asset turnover

Profitability ratios measure how efficiently and effectively the company is using its assets to generate profits.

Meaning

Current Assets Current liabilities

Total assets

The higher the ratio, the more leveraged the organization Measures how many times the organization is able to cover its interest expenses The higher the ratio, the more efficient the use of inventory assets

Measures the efficiency of assets to generate profits

• Budget analysis.  Budgets are used for both planning and controlling. –– Planning tool: Indicates which work activities are important and what and how much resources should be allocated to those activities. –– Controlling tool: Provides managers with quantitative standards against which to measure and compare resource consumption. Significant deviations require action, and the manager examines what has happened and why and then takes necessary action. Economic value added (EVA) is a tool that measures corporate and divisional performance. EVA = after-tax operating profit minus the total annual cost of capital.31 • As a performance control tool, EVA focuses managers’ attention on earning a rate of return over and above the cost of capital. • About 30 percent of Canadian companies use EVA, including Montreal-based Rio Tinto Alcan; Montreal-based Domtar; Markham, Ontario–based Robin Hood Multifoods; and Montreal-based cable company Cogeco.32 • When EVA is used as a performance measure, employees soon learn that they can improve their organization’s or business unit’s EVA either by using less capital (figuring out how to spend less) or by investing capital in highreturn projects (projects that will bring in more money, with fewer expenses).

economic value added (EVA) A financial tool that measures corporate and divisional performance; calculated by taking after-tax operating profit minus the total annual cost of capital.

market value added (MVA) A financial tool that measures the stock market’s estimate of the value of a firm’s past and expected capital investment projects.

• If the company’s market value (value of all outstanding stock plus the company’s debt) is greater than all the capital invested in it (from shareholders, bondholders, and retained earnings), it has a positive MVA. • If the company’s market value is less than all the capital invested in it, the MVA will be negative, indicating that managers have destroyed wealth. • Studies have shown that EVA is a predictor of MVA and that consecutive years of positive EVA generally lead to a high MVA.33

Ekaterina Tarasenkov/Fotolia

Market value added (MVA) adds a market dimension. It is a tool that measures the stock market’s estimate of the value of a firm’s past and expected capital investment projects.

340  Chapter 12

Keeping Track of an Organization’s Information A. Information—a critical tool for controlling other organizational activities.

WHY   Morenina/Shutterstock

Managers need the RIGHT INFORMATION at the RIGHT TIME and in the RIGHT AMOUNT to help them monitor and measure organizational activities • about what is happening within their area of responsibility • about the standards to be able to compare actual performance with the standard • to help them determine if deviations are acceptable • to help them develop appropriate courses of action

management information system (MIS) A system used to provide management with needed information on a regular basis.

Information is important. HOW  

A MANAGEMENT INFORMATION SYSTEM (MIS)

• can be manual or computer based, although most organizational MISs are computer-supported applications • implies order, arrangement, and purpose • focuses specifically on providing managers with information (processed and analyzed data), not merely data (raw, unanalyzed facts) B. Information—an organizational resource that needs controlling.

Dusit/Shutterstock

• Information is critically important to everything an organization does—and that information needs to be protected. • Controls—data encryption, system firewalls, data backups, and other techniques—are essential.34 • Look for problems in places that might not even have been considered, such as search engines. • Equipment such as laptop computers, tablets, and even RFID (radio-frequency identification) tags are vulnerable to viruses and hacking.

Bedrin/Shutterstock

• Monitor information controls regularly to ensure that all possible precautions are in place to protect important information.

Keeping Track of Employee Performance • Are employees doing their jobs as planned and meeting goals that have been set? • If not, employee counselling or employee discipline may be needed.

Mike Charles/Shutterstock

Over 81 percent of managers say they don’t do very well at giving difficult feedback.35 See Hey, You’re the Boss Now! to learn how to give feedback effectively. Disciplining Difficult Employees  Almost all managers will, at one time or another, have to deal with employees who are difficult. There is no shortage of characteristics that can make someone difficult to work with. Some examples include being short-tempered, demanding, abusive, angry, defensive, complaining, intimidating, aggressive, narcissistic, arrogant, and rigid. Successful managers have learned how to cope with difficult people. No single approach is always effective in dealing with difficult people. See below for suggestions on reducing difficult behaviour in others.37

Chapter 12  Foundations of Control 341 Don’t let your emotions rule

Our first response to a difficult person is often emotional. We get angry. We show frustration. We want to lash out at them or “get even” when we think they’ve insulted or demeaned us. This response is not likely to reduce your angst and may escalate the other person’s negative behaviour. So fight your natural tendencies and keep your cool. Stay rational and thoughtful. At worst, while this approach may not improve the situation, it is also unlikely to encourage and escalate the undesirable behaviour.

Attempt to limit contact

If possible, try to limit your contact with the difficult person. Avoid places where they hang out, and limit non-required interactions. Also, use communication channels—such as e-mail and text messaging—that minimize face-to-face contact and verbal intonations.

Try polite conversation

If you can’t avoid the difficult person, consider standing up to them in a civil but firm manner. Let them know that you’re aware of their behaviour, that you find it unacceptable, and that you won’t tolerate it. For people who are unaware of the effect their actions have on you, confrontation might awaken them to altering their behaviour. For those who are acting purposefully, taking a clear stand might make them think twice about the consequences of their actions.

Practice positive reinforcement

We know that positive reinforcement is a powerful tool for changing behaviour. Rather than criticizing undesirable behaviour, try reinforcing desirable behaviours with compliments or other positive comments. This focus will tend to weaken and reduce the exhibiting of the undesirable behaviours.

Recruit fellow victims and witnesses

Finally, we know strength lies in numbers. If you can get others who are also offended by the difficult person to support your case, several positive things can happen. First, it’s likely to lessen your frustrations because others will be confirming your perception and can offer support. Second, people in the organization with authority to reprimand are more likely to act when complaints are coming from multiple sources. And third, the difficult person is more likely to feel pressure to change when a group is speaking out against his or her specific behaviours than if the complaint is coming from a single source.

Hey, You’re the Boss Now! One of the more critical feedback sessions will occur when you, as a manager, are using feedback control to address performance issues. You can be more effective at providing feedback if you use the following 10 suggestions:36 1. Schedule the feedback session in advance, and be prepared.  One of the biggest mistakes you can make is to treat feedback control lightly. Simply calling in an employee and giving feedback that is not well organized serves little purpose for you or your employee. For feedback to be effective, you must plan ahead. Identify the issues you wish to address and cite specific examples to reinforce what you are saying. Set aside the time for the meeting with the employee. Make sure that what you do is done in private and can be completed without interruptions. That may mean closing your office door (if you have one), holding phone calls, and the like. 2. Put the employee at ease.  Regardless of how you feel about the feedback, you must create a supportive climate for the employee. Recognize that giving and receiving feedback can be an emotional event, even when the feedback is positive. By putting your employee at ease, you begin to establish a supportive environment in which understanding can take place. 3. Make sure the employee knows the purpose of the feedback session.  What is the purpose of the meeting? That is something any employee will wonder. Clarifying what you are going to do sets the appropriate stage for what is to come. 4. Focus on specific rather than general work behaviours.  Feedback should be specific rather than general. General statements are vague and provide little useful information— especially if you are attempting to correct a problem. 5. Keep comments impersonal and job related.  Feedback should be descriptive rather than judgmental or evaluative, especially when you are giving negative feedback. No matter how upset you are, keep the feedback job related and never criticize someone personally because of an inappropriate action. You are censuring job-related behaviour, not the person. 6. Support feedback with hard data.  Tell your employee how you came to your conclusion about his or her performance. Hard data help your employees identify with specific behaviours. Identify the “things” that were done correctly and provide a detailed critique. If you do need to criticize, state the basis of your conclusion that a good job was not completed. 7. Direct the negative feedback toward work-related behaviours that the employee controls.  Negative feedback should be directed toward work-related behaviours that the employee can do something about. Suggest what he or she can do to improve the situation. This practice helps take the sting out of the criticism and offers guidance to an individual who understands the problem but does not know how to resolve it.

342  Chapter 12 8. Let the employee speak.  Get the employee’s perceptions about what you are saying, especially if you are addressing a problem. Of course, you are not looking for excuses, but you need to be empathetic to the employee and hear his or her side. Letting the employee speak involves your employee and just might provide information you were unaware of. 9. Ensure that the employee has a clear and full understanding of the feedback. Feedback must be concise and complete enough that your employee clearly and fully understands what you have said. Consistent with active listening techniques, have your employee rephrase the content of your feedback to check whether it fully captures your meaning. 10. Detail a future plan of action.  Performing does not stop simply because feedback occurred. Good performance must be reinforced and new performance goals set. However, when performance deficiencies have been identified, time must be devoted to helping your employee develop a detailed, step-by-step plan to correct the situation. This plan includes what has to be done, when, and how you will monitor the activities. Offer whatever assistance you can to help the employee, but make it clear that it is the employee, not you, who has to make the corrections.

What’s Cooking in Hospitality?38 A winery in Okanagan, BC, has been winning awards since it started in 1989, such as BC’s Top Wine of 2018.39 Quails’ Gate is family owned, with 70 full-time and 200 seasonal employees. In 2018, 70 000 cases were sold at one of the highest price points in the Okanagan, with an eye to producing only quality products. In 2010, when the crop was underwhelming, they reduced the price of their $50 reserve to $25. “Always make the quality move,” Tony Stewart says. “Don’t look at the dollar.” Quails’ Gate’s family roots can be traced back to Tony’s mother. “She always taught us to be good hosts and make people comfortable here.” They apply this motto to staff by investing in them and trying to teach them about wine. Stewart quips, “Even if you’re an accountant, we want you to learn and be passionate about wine.”

Beyond the usual perks, such as profit-sharing and generous benefits, Quails’ Gate rewards staff with pig roasts, fill-up-your-cellar programs, and Wine Fridays. For 20 years and counting, every Friday at 4  p.m., staff members blindly share a bottle of wine from another producer and compare notes. In addition to the buzz, employees become wine aficionados eager to learn more, which the company nurtures by offering complimentary sommelier courses. The policy has been known to spoil other wineries for employees— including Stewart’s son, who just finished a winemaking program in New Zealand. “He’ll work outside the family business for a few years,” Stewart says. “Then we suspect he’ll be back.”

Keeping Track Using a Balanced Scorecard Approach balanced scorecard

Sharifulin Valery Itar-Tass Photos/Newscom

A performance measurement tool that looks at four areas that contribute to an organization’s performance: finance, customer, internal business process, and learning and growth assets.

A balanced scorecard approach looks at more than the financial perspective by typically looking at four areas that contribute to a company’s performance: 1. finances 2. customer 3. internal processes 4. people/innovation/growth assets

Managers should develop goals for each of the four areas and then measure whether goals are being met. Exhibit 12-8 illustrates how the balanced scorecard is measured for a community curling association. The financial area looks at activities that improve the short- and longterm performance of the organization. The customer area looks at the customer’s view of the organization, whether customers return, and whether they are satisfied. The internal business process looks at how production and

operations, such as order fulfillment, are carried out. The learning and growth area looks at how well the company’s employees are being managed for the company’s future. The intent of the balanced scorecard is to emphasize that all of these areas are important to an organization’s success and that there should be a balance among them. For example, a company might include cash flow, quarterly sales growth, and return on investment (ROI) as measures for success in the financial area. It might include percentage of sales coming from new products as a measure of customer goals. It might include dollars spent toward training, or number of courses taken by employees, as a measure of learning and growth. Although a balanced scorecard makes sense, managers still tend to focus on areas that drive their organization’s success.40 Their scorecards reflect their strategies. If those strategies centre on the customer, for example, then the customer area is likely to get more attention than the other three areas. Yet you really cannot focus on measuring only one performance area because, ultimately, other performance areas will be affected. The Ontario Hospital Association uses a scorecard for 89 hospitals that is designed to evaluate four main areas: clinical use and outcomes, financial performance and financial condition of the hospital, patient satisfaction, and how the hospital is investing for the future. The scorecard is purposefully designed to recognize the synergies among each of these measures. After hospitals are evaluated on the scorecard measures, the results of the scorecard evaluations are made available to patients, giving them an objective basis for choosing a hospital. The association provides the reports on its website.41 Feedback controls have two advantages.42 First, feedback provides managers with meaningful information on how effective their planning efforts were. Feedback that indicates little variance between standard and actual performance is evidence that the planning was generally on target. If the deviation is significant, a manager can use that information when formulating new plans to make them more effective. Second, feedback control can enhance employee motivation. People want information on how well they have performed, and feedback control provides that information. However, managers should be aware of recent research

Exhibit 12-8  The Balanced Scorecard — Community Curling Association SOURCE: Based on “Putting the Balanced Scorecard to Work” by R. S. Kaplan and D. P. Norton, Harvard Business Review, September–October

1993.

Financial Perspective Return on assets Cash flow Income over expenses Membership Perspective

Internal Business Perspective

Number of curlers Members and hours curled Level of curler satisfaction

Facility performance Number of new programs developed Employee safety results Innovation and Learning Perspective % revenue from new programs Revenue per ice pad Number of employee suggestions

Luna2631/Fotolia

Chapter 12  Foundations of Control 343

344  Chapter 12 that suggests that individuals raise their goals when they receive positive feedback but lower their goals when they receive negative feedback.43

Diversity Matters Most Canadian organizations feature a wide range of people with cultural differences. This cultural diversity is strengthened by having effective feedback, team-building activities, and interpersonal communication. When individuals interact they learn to appreciate each other’s culture; consequently, the organizational culture becomes inclusive. Employees need to be sensitive to cross-cultural differences in communication and feedback. Studies have found that European-Canadians are more likely to seek positive versus negative individual feedback, while East Asians are more likely to seek negative feedback due to less ego concern with the positive evaluations of others. European-Canadians are also less likely than East Asians to seek public feedback. Also, European-Canadians prefer feedback from a supervisor instead of a peer, while East Asians are less likely to seek feedback when it comes from a supervisor.44 By better understanding the type of feedback sought and the associated motivations of diverse employees, managers can create an environment in which feedback provides the necessary performance evaluation without interpersonal conflict.45

Contemporary Issues in Control

VRD/Fotolia

12.4 Discuss contemporary issues in control. The Canadian Curling Association (CCA), like virtually all nonprofit organizations, has a board of directors that looks after the interests of members. In recent years, corporate governance has come under scrutiny because of corporate scandals. Many boards, including the CCA, were not overseeing management as well as they might have. The CCA has used Carver’s Policy Governance model to strengthen its board policies in recent years. The primary duty of the CCA board is to “approve, monitor and provide guidance on the strategic planning process.” While the president, CEO, and senior management team create the strategic plan, the board has to review and approve it. The board’s role also includes identifying the principal risks of the CCA’s business and managing and monitoring these risks, as well as approving the CCA’s strategic plans, annual budget, and financial plans. Control is an important managerial function. We look at three contemporary issues facing today’s managers: corporate governance, cross-cultural differences, and workplace concerns.

The employees of Tempe, Arizona–based Integrated Information Systems thought there was nothing wrong with exchanging copyrighted digital music over a dedicated office server they had set up. Like office betting on college basketball games, it was technically illegal but harmless—or so they thought. But after the company had to pay a $1.5 million settlement to the Recording Industry Association of America, managers wished they had controlled the situation better.46

Corporate Governance Although Andrew Fastow, Enron’s former chief financial officer, had an engaging and persuasive personality, that does not explain why Enron’s board of directors failed to raise even minimal concerns about management’s questionable accounting practices. The board even allowed Fastow to set up off-balancesheet partnerships for his own profit at the expense of Enron’s shareholders.

Chapter 12  Foundations of Control 345

THE ROLE OF BOARDS OF DIRECTORS  The original purpose

Comugnero Silvana/Fotolia

Corporate governance, the system used to govern a corporation so that the interests of corporate owners are protected, failed abysmally at Enron, as it did at many of the other companies caught in recent financial scandals. In the aftermath of these scandals, there have been increased calls for better corporate governance. Two areas in which corporate governance is being reformed are the role of boards of directors and financial reporting. The concern over corporate governance exists in Canada and globally.47 For example, 75 percent of senior executives at US and Western European corporations expect their boards of directors to take a more active role in improving corporate governance.48 These types of changes should lead to somewhat better

of a board of directors was to have a group, independent from information—information that is more accurate and management, looking out for the interests of shareholders who, reflective of the firm’s financial condition. because of the corporate structure, were not involved in the dayto-day management of the organization. However, it has not always worked that way in corporate governance practice. Board members and managers often enjoy a cozy relationship in which board The system used to govern a corporation so that the interests of members “take care” of the CEO and the CEO “takes care” of the board members. This quid pro quo arrangement is changing. In the United States, since the pas- corporate owners are protected. sage of the Sarbanes-Oxley Act in 2002, demands on board members of publicly traded companies in the United States have increased considerably.49 The Canadian Securities Administrators rules, which came into effect in March 2004, strive to tighten board responsibility somewhat, though these rules are not as stringent as those developed in the United States. To help sports organizations govern their affairs more effectively, Sport Canada developed five governance principles for Canadian sports organizations.50 (See Exhibit 12-9 for a list of five governance principles.) Exhibit 12-9  Five Governance Principles for Canadian Sport Organizations

Cross-Cultural Differences The concepts of control that we have discussed so far are appropriate for an organization whose units are not geographically separated or culturally distinct. But what about global organizations? Will control systems be different? And what should managers know about adjusting controls for national differences? Methods of controlling people and work can be quite different in different countries. The differences we see in organizational control systems of global organizations are primarily in the measurement and corrective action steps of the control process. In a global corporation, managers of foreign operations tend to be less directly controlled by the home office, if for no other reason than that distance keeps managers from being able to observe work directly. Because distance creates a tendency to formalize controls, the home office of a global company often relies on extensive formal reports for control. The global company may also use the power of information technology to control work activities. For instance, the Japan-based retailer Seven & i Holdings, which owns the 7-Eleven convenience

SOURCE: “Pursuing Effective Governance in Canada’s National Sport Community,” Sport

Canada, November, 2011. Reprinted with permission of the Department of Canadian Heritage.

Effective financial control

Commitment to vision, mission, and values and guided by a strategic plan

Clarity of roles and responsibilities

High standards of ethical behaviour Focused on human resources

Transparent and accountable for outcomes and results

Zhou Junxiang/AP Images

346  Chapter 12 store chain, uses automated cash registers not only to record sales and monitor inventory but also to schedule tasks for store managers and to track managers’ use of the built-in analytical graphs and forecasts. If managers do not use them enough, they are told to increase their activities.51 Technology’s impact on control is most evident in comparisons of technologically advanced nations with those that are less technologically advanced. In Canada, global-minded managers use indirect control devices—especially computer-generated reports and analyses—in addition to standardized rules and direct supervision to ensure that work activities are going as planned. In less technologically advanced counYum! Brands, a global restaurant firm, established tighter control systems in tries, managers tend to rely more on direct superChina after learning that some of its poultry suppliers for its KFC restaurants violated company rules on the use of drugs to fatten chickens. Corrective actions vision and highly centralized decision making as of its control process included strengthening the oversight of its suppliers and means of control. establishing the principle of zero tolerance in food safety. Also, constraints on what corrective actions managers can take may affect managers in foreign countries, because laws in some countries do not allow managers the option of closing facilities, laying off employees, taking money out of the country, or bringing in a new management team from outside the country.

Technology and the Manager’s Job52

Monitoring Employees Technological advances have made the process of managing an organization much easier. And technological advancements have also provided employers a means of sophisticated employee monitoring. Although most of this monitoring is designed to enhance worker productivity, it could, and has been, a source of concern over worker privacy. These advantages bring with them difficult questions regarding what managers have the right to know about employees and how far they can go in controlling employee behaviour, both on and off the job. Consider the following: • Employees at a call centre expect to have their work conversations monitored, but what about two drivers doing deliveries for a carpet company. Should they expect their conversations to be monitored? • In a 2016 decision, the Ontario Labour Board determined that an employer was justified in searching for work-related files on an employee’s USB key.53 • Employers in several organizations require employees to wear badges at all times while on company premises. These badges contain a variety of data that allow employees to enter certain locations in the organization. Smart badges, too, can transmit where the employee is at all times! Just how much control a company should have over the private lives of its employees also becomes an issue. Where should an employer’s rules and controls end? Does the boss have the

right to dictate what you do on your free time and in your own home? Could your boss keep you from engaging in riding a motorcycle, skydiving, smoking, drinking alcohol, or eating junk food? Again, the answers may surprise you. Today many organizations, in their quest to control safety and health insurance costs, are delving into their employees’ private lives. Although controlling employees’ behaviours on and off the job may appear unjust or unfair, nothing in our legal system prevents employers from engaging in these practices provided they don’t violate privacy legislation or provincial employment standards. Canadian case law tends to operate under the premise of “a reasonable expectation of privacy” for an employee, but that relates to their personal information.54 An employer is entitled to monitor an employee’s work. Managers, too, typically defend their actions in terms of ensuring quality, productivity, and proper employee behaviour.

Discussion Questions 1. How do employers know what is too much monitoring? 2. When does management’s need for information about employee performance cross the line and interfere with a worker’s right to privacy? 3. Is any action by management acceptable as long as employees are notified ahead of time that they will be monitored? Discuss.

Chapter 12  Foundations of Control 347

Finally, another challenge for global companies in collecting data for measurement and comparison is comparability. For instance, a company’s manufacturing facility in Mexico might produce the same products as a facility in Scotland. However, the Mexican facility might be much more labour intensive than its Scottish counterpart (to take strategic advantage of lower labour costs in Mexico). If the top-level executives were to control costs by, for example, calculating labour costs per unit or output per employee, the figures would not be comparable. Global managers must address these types of control challenges.

Workplace Concerns Today’s workplace presents considerable control challenges for managers. From monitoring employees’ computer use at work to protecting the workplace from disgruntled employees, managers must control the workplace to ensure that the organization’s work can be carried out efficiently and effectively as planned. In this section, we look at three major workplace concerns: workplace privacy, employee theft, and workplace violence. WORKPLACE PRIVACY  If you work, do you think you have a right to privacy at your workplace? What can your employer find out about you and your work? You might be surprised by the answers! Employers can (and do), among other things, read your e-mail (even those marked “personal” or “confidential”), tap your smartphone, monitor your computer screen, store and review computer files, and monitor you in an employee washroom or dressing room. These actions are not all that uncommon. Nearly 57 percent of Canadian companies have Internet-use policies restricting employees’ personal use of the Internet.55 Employees of the City of Vancouver are warned that their computer use is monitored, and a desktop agent icon of a spinning head reminds them that they are being watched. Why do managers feel they must monitor what employees are doing? A big reason is that employees are hired to work, not to access social media, place bets at online casinos, or shop for presents for family or friends. An Ipsos-Reid poll found that Canadians spend 1.6 billion hours a year online at work for personal reasons, an average of 4.5 hours a week per employee.56 That lost time represents a significant cost to businesses. Conservative estimates suggest that personal use of the Internet at work costs Canadian businesses more than $16 billion annually in lost productivity.57 Watching online video has become an increasingly serious problem, not only because of the time being wasted by employees but also because it clogs already-strained corporate computer networks.58 If you had to guess the video site viewed most often at work, what would you guess? If you said YouTube, you’d be absolutely correct!59 However, as innocent as it may seem (after all, it may be just a 30-second video), all this nonwork adds up to significant costs to businesses. Another reason that managers monitor employee e-mail and computer use is that they do not want to risk being sued for creating a hostile workplace environment because of offensive messages or an inappropriate image displayed on a coworker’s computer screen. Concern about racial or sexual harassment is one of reason that companies might want to monitor or keep backup copies of all e-mail. This electronic record can help establish what actually happened and can help managers react quickly.60 Finally, managers want to ensure that company secrets are not being leaked.61 Although protecting intellectual property is important for all businesses, it is especially important in high-tech industries. Managers need to be certain that employees are not, even inadvertently, passing information on to others who could use that information to harm the company.

Miami Herald/MCT/Landov

348  Chapter 12 Even with the workplace monitoring that managers can do, Canadian employees do have some protection through the Criminal Code, which prohibits unauthorized interception of electronic communication. The Personal Information Protection and Electronic Documents Act, which went into effect in early 2004, gives employees some privacy protection, but it does not make workplace electronic monitoring illegal. Under existing laws, if an individual is aware of a corporate policy of surveillance and does not formally object, or remains at the job, the monitoring is acceptable.62 Unionized employees may have a bit more privacy with respect to their computers. The Canada Labour Code At Citrix, a provider of virtualization, networking, and cloud technologies for requires employers operating under a collecbusinesses, employees are allowed to BYOD—Bring Your Own Device. Although tive agreement to disclose information about more companies are adopting BYOD policies, the control risks are still very much plans for technological change. This informathe same. Even in a BYOD environment, workplace monitoring policies are very tion might provide unions with an opportumuch needed. nity to bargain over electronic surveillance. Because of the potentially serious costs, and given that many jobs now entail work that involves using a computer, many companies are developing and enforcing workplace monitoring policies. The responsibility for workplace monitoring falls on managers, who must develop some type of viable workplace monitoring policy. What can managers do to maintain control in a way that is not demeaning to employees? They should develop a clear and unambiguous computer-use policy and make sure that every employee knows about it. For example, managers should tell employees upfront that their computer use may be monitored at any time and provide clear and specific guidelines as to what constitutes acceptable use of company e-mail systems and the Web. The Bank of Montreal blocks access to “some of the dubious sites that are high risk,” such as Playboy.com and other pornographic sites. The bank has developed policies about appropriate and inappropriate use of the Internet, which are emailed to all employees several times a year.63 EMPLOYEE THEFT  Would you be surprised to find out that up to 75 percent of

employee theft Any unauthorized taking of company property by employees for their personal use.

Canadian organizations have reported experiencing employee theft and fraud?64 It is a costly problem. Air Canada, which has run a campaign against employee theft, noted that the airline “is right in line with industry standards for employee theft, and that means as much as 9 percent of stock such as office supplies and on-board products is taken each year.”65 A Retail Council of Canada study found that 33 percent of theft was due to employees, and that the overall cost of theft was more than $4 billion.66 Employee theft is defined as any unauthorized taking of company property by employees for their personal use.67 It can include embezzlement; fraudulent filing of expense reports; and removing equipment, parts, software, and office supplies from company premises. While retail businesses have long faced serious potential losses from employee theft, loose financial controls at startups and small companies and the ready availability of information technology have made employee stealing an escalating problem in all kinds and sizes of organizations. Employee theft is a control issue. Managers need to educate themselves about this problem and be prepared to deal with it.68

Global employee fraud is estimated to cost organizations $3.7 trillion a year.69

Chapter 12  Foundations of Control 349

Exhibit 12-10  Control Measures for Deterring or Reducing Employee Theft or Fraud Feedforward

Concurrent

Feedback

Use careful prehiring screening.

Treat employees with respect and dignity.

Establish specific policies defining theft and fraud and discipline procedures.

Openly communicate the costs of stealing.

Make sure employees know when theft or fraud has occurred—not naming names but letting people know it is not acceptable.

Involve employees in writing policies. Educate and train employees about the policies. Have professionals review your internal security controls.

Let employees know on a regular basis about their successes in preventing theft and fraud. Use video surveillance equipment if conditions warrant. Install “lock-out” options on computers, telephones, and e-mail.

Use the services of professional investigators. Redesign control measures. Evaluate your organization’s culture and the relationships of managers and employees.

Use corporate hotlines for reporting incidents. Set a good example.

Why do employees steal? The answer depends on whom you ask.70 Experts in various fields—industrial security, criminology, clinical psychology—all have different perspectives. Industrial security people propose that people steal because the opportunity presents itself through lax controls and favourable circumstances. Criminologists say it is because people have financial pressures (such as personal financial problems) or vice-based pressures (such as gambling debts). Clinical psychologists suggest that people steal because they can rationalize whatever they are doing as correct and appropriate behaviour (“Everyone does it,” “They had it coming,” “This company makes enough money and they will never miss anything this small,” “I deserve this for all that I put up with,” and so forth).71 Although each of these approaches provides compelling insights into employee theft and has been instrumental in program designs to deter it, unfortunately employees continue to steal. What can managers do to deter or reduce employee theft or fraud? We can use the concepts of feedforward, concurrent, and feedback controls to identify actions managers can take.72 Exhibit 12-10 summarizes several possible control measures. WHAT CAN MANAGERS DO ABOUT WORKPLACE VIOLENCE?  According to Statistics Canada, there are about 350 000 cases of workplace violence each year in Canada, with the majority of those against women.73 In 2017, a Winnipeg bus driver was killed on the job by an angry passenger who refused to leave the vehicle at the end of a run. Between 2008 and 2013, there were more than 4000 reported incidents of workplace violence against Canada’s registered nurses and licensed practical nurses that caused them to miss time at work. Nurses face more workplace violence than police officers and firefighters put together.74 What factors are believed to contribute to workplace violence? Undoubtedly, employee stress caused by job uncertainties, declining value of retirement accounts, long hours, information overload, other daily interruptions, unrealistic deadlines, and uncaring managers play a role. Even office layout designs with small cubicles where employees work amid the noise and commotion from those around them have been cited as contributing to the problem.75 Other experts have described dangerously dysfunctional work environments characterized by the following as primary contributors to the problem:76

• Employee work driven by TNC (time, numbers, and crises) • Rapid and unpredictable change in which instability and uncertainty plague employees • Destructive communication style in which managers communicate in excessively aggressive, condescending, explosive, or passive-aggressive styles; excessive workplace teasing or scapegoating • Authoritarian leadership with a rigid, militaristic mindset of managers versus employees; employees not allowed to challenge ideas, participate in decision making, or engage in team-building efforts

350  Chapter 12 • Defensive attitude with little or no performance feedback given; only numbers count; and yelling, intimidation, or avoidance as the preferred ways of handling conflict • Double standards in terms of policies, procedures, and training opportunities for managers and employees • Unresolved grievances due to an absence of mechanisms or only adversarial ones in place for resolving them; dysfunctional individuals protected or ignored because of long-standing rules, union contract provisions, or reluctance to take care of problems • Emotionally troubled employees and no attempt by managers to get help for these people • Repetitive, boring work and little chance for doing something else or for new people coming in • Faulty or unsafe equipment or deficient training, which keeps employees from being able to work efficiently or effectively • Hazardous work environment in terms of temperature, air quality, repetitive motions, overcrowded spaces, noise levels, excessive overtime, and so forth; to minimize costs, a failure to hire additional employees when workload becomes excessive, leading to potentially dangerous work expectations and conditions • Culture of violence perpetuated by a history of individual violence or abuse, violent or explosive role models, or tolerance of on-the-job alcohol or drug abuse Reading through this list, you surely hope that workplaces where you’ll spend your professional life won’t be like this. However, the competitive demands of succeeding in a 24/7 global economy put pressure on organizations and employees in many ways. What can managers do to deter or reduce possible workplace violence? Once again, the concept of feedforward, concurrent, and feedback control can help identify actions that managers can take.77 Exhibit 12-11 summarizes several suggestions.

Exhibit 12-11  Controlling Workplace Violence SOURCES: Based on M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence,” Workforce Management Online, December 3, 2000; “Investigating Workplace Violence: Where Do You Start?” Workforce Management Online, December 3, 2000; “Ten Tips on Recognizing and Minimizing Violence,” Workforce Management Online, December 3, 2000; and “Points to Cover in a Workplace Violence Policy,” Workforce Management Online, December 3, 2000.

Feedforward • Ensure management’s commitment to functional, not dysfunctional, work environments. • Provide employee assistance programs (EAPs) to help employees with behavioral problems. • Enforce organizational policy that any workplace rage, aggression, or violence will not be tolerated. • Use careful prehiring screening. • Never ignore threats. • Train employees about how to avoid danger if a situation arises. • Clearly communicate policies to employees.

Concurrent

Feedback

• Use MBWA (managing by walking around) to identify potential problems; observe how employees treat and interact with each other. • Allow employees or work groups to “grieve” during periods of major organizational change. • Be a good role model in how you treat others. • Use corporate hotlines or some other mechanism for reporting and investigating incidents. • Use quick and decisive intervention. • Get expert professional assistance if violence erupts. • Provide necessary equipment or procedures for dealing with violent situations (cell phones, alarm system, code names or phrases, and so forth).

• Communicate openly about violent incidents and what’s being done. • Investigate incidents and take appropriate action. • Review company policies and change, if necessary.

Chapter 12  Foundations of Control 351

Chapter Summary Learning Objectives Checklist 12.1 Explain the nature and importance of control. Control is the management function that involves monitoring activities to ensure that they’re being accomplished as planned and correcting any significant deviations. As the final step in the management process, controlling provides the link back to planning. If managers didn’t control, they’d have no way of knowing whether goals were being met. Control is important because (1) it’s the only way to know whether goals are being met and, if not, why not; (2) it provides information and feedback so managers feel comfortable empowering employees; and (3) it helps protect an organization and its assets.

12.2 Describe the control process. The three steps in the control process are measuring, comparing, and taking action. Measuring involves deciding how to measure actual performance and what to measure. Comparing involves looking at the variation between actual performance and the standard (goal). Deviations outside an acceptable range of variation need attention. Taking action can involve doing nothing, correcting the actual performance, or revising the standards. Doing nothing is self-explanatory. Correcting the actual performance can involve different corrective actions, which can either be immediate or basic. Standards can be revised by either raising or lowering them.

12.3 Discuss the types of controls that organizations and managers use. Feedforward controls take place before a work activity is done. Concurrent controls take place while a work activity is being done. Feedback controls take place after a work activity is done. Financial controls that managers can use include financial ratios (liquidity, leverage, activity, and profitability)

and budgets. One information control that managers can use is an MIS, which provides managers with needed information on a regular basis. Others include comprehensive and secure controls, such as data encryption, system firewalls, data backups, and so forth, that protect the organization’s information. Also, balanced scorecards provide a way to evaluate an organization’s performance in four different areas rather than just from the financial perspective.

12.4 Discuss contemporary issues in control. Adjusting controls for cross-cultural differences may be necessary, primarily in the areas of measuring and taking corrective actions. Canadian organizations are finding that successful governance often comes from improved quality and composition of their boards of directors. Workplace concerns include workplace privacy, employee theft, and workplace violence. For each of these, managers need to have policies in place to control inappropriate actions and ensure that work is getting done efficiently and effectively.

Discussion Questions 1. What is the role of control in management? 2. What are the advantages and disadvantages of feedforward control? 3. Describe the financial control measures managers can use. 4. What can management do to implement a benchmarking best-practices program? 5. How are planning and control linked? Is the control function linked to the organizing and leading functions of management? Explain. 6. Why is feedback control the most popular type of control? Justify your response.

Developing Management Skills Dilemma Your parents have let you know they are expecting a big party for their twenty-fifth wedding anniversary and have put you in charge of planning it. Develop a timeline for carrying out the project, and then identify ways to monitor progress toward getting the party planned. How will you know that your plans have been successful? At what

critical points do you need to examine your plans to make sure that everything is on track?

PRACTISING THE SKILL Think of a skill you would like to acquire or improve, or a habit you would like to break. Perhaps you would like to learn a foreign language, start exercising, quit smoking, ski better, or spend less. For the purpose of this exercise,

352  Chapter 12 assume you have all the necessary funds and three months to make a start on your project. Draft a plan of action that outlines what you need to do, when you need to do it, and how you will know that you have successfully completed each step of your plan. Be realistic, but do not set your sights too low either. Review your plan. What outside help or resources will you require? How will you get them? Add these to your plan. Ask someone to follow the steps in your plan. What modifications did the person suggest you make, if any?

Applying Feedforward, Concurrent, and Feedback Controls You will be assigned one or more of the following tasks: 1. You are a consultant to the manager of a small retail clothing store. Over the past six months, the manager has noticed that a significant amount of inventory has gone missing. The manager is not sure whether it is employees or customers who are taking things from the store. The manager has a somewhat limited budget but wants to know what possibilities there are for

controlling inventory. You have agreed to present a set of recommendations, identifying feedforward, concurrent, and feedback mechanisms that the manager might use. 2. You are a student in a business program at a local college or university. Several of your professors have expressed an interest in developing some specific controls to minimize opportunities for students to cheat on homework assignments and exams. Because you find cheating offensive, you and some other students have volunteered to write a report outlining some suggestions that might be used to control possible cheating (1) before it happens, (2) while in-class exams or assignments are being completed, and (3) after it has happened. 3. Devise control measures for each of the tasks involved in delivering a beverage to a Starbucks customer. Determine whether the measure is a feedforward, concurrent, or a feedback control. Be prepared to present your suggestions before the rest of the class.

Team Exercises  3BL: The Triple Bottom Line Germany’s Siemens has been doing business in Canada for 100 years and recently made a radical change to move away from nuclear energy to focus on green power, sustainable cities, and health care.78 The move started when the German government announced it would stop its nuclear power plants, all built by Siemens. The German action was a response to the 2011 nuclear disaster in Fukushima, Japan, which focused attention on the high risk posed by nuclear power. In Canada, Siemens made a $20 million investment in a wind-turbine-blade manufacturing facility in Tillsonburg, Ontario.79 Recently Siemens signed an agreement with the Ontario government to develop projects such as smart-grid electric vehicles, wind and solar power, water treatment, and energy conservation.80 Siemens has developed a model for Canadian cities to enhance their environmental performance. The city finances the necessary energy-saving measures, with the savings in energy and operational costs guaranteed by Siemens. To date, more than 6500 buildings have been modernized, with savings of $2 billion and a carbon reduction of 9 million tonnes.81 Siemens is an example of an industry giant working collaboratively with Canadian municipal governmental partners to achieve sustainability in green energy. Vancouver recently adopted an “EcoDensity Charter,”

which focuses on limiting sprawl, reducing the carbon footprint, and expanding housing options.82

THINKING STRATEGICALLY ABOUT 3BL Companies like Siemens that are looking at green power instead of nuclear energy might put in place several measures of energy performance, such as pollution prevention, process safety, employee health and safety, and customer perception targets. These measures provide them with a way of evaluating their move away from nuclear energy. What kind of measures could you put in place to gauge community perceptions concerning Siemens’s switch to green power? How could the Canadian nuclear industry convince Siemens to continue using nuclear energy?

Be the Consultant: Financing a New Business Venture Your friend is starting a video game company and has asked for your help in putting together a business plan. She is especially concerned with sources of financing and whether she should use debt or equity financing. She has asked for your recommendations. Which of the following sources should she consider? What costs of operating a business are there apart from rent and raw materials?

Chapter 12  Foundations of Control 353

Source

When and how to use

Comments

Bootstrapping

The company is started with personal finances, borrowed or donated equipment, and using only the finances generated through revenue

• Maintains full ownership and control • Difficult to source certain items

Might be the most viable source if the business model is untested or the venture is brand new or unique

• May be willing to accept low (or zero) interest rates

Can provide operating lines of credit to help with cash flow Term loans can help with fixed assets and equipment

• Lack of credit history can be a major impediment

Venture capitalists

Provide seed money in exchange for equity in the company

• Are less risk averse

Angel investors

Provide personal funds for the business to be repaid or for equity in the business

• Often more interested in medium-sized ventures; harder to get for small businesses

Family and friends

Banks

• Lack of financing can cripple the business • Terms must be clearly spelled out to avoid conflict and disappointment • Leasing equipment might be a better way • Can expect large returns in short periods

• May provide mentorship Other

Government grants; financial cooperatives

• Time consuming • Small amounts available typically

Business Cases Top Secret “Prisons are easier to enter than Visa’s top-secret Operations Center East (OCE), its biggest, newest and most advanced U.S. data center.”83 And Rick Knight, senior vice president at Visa and formerly the head of global operations and engineering, is responsible for its security and functioning. Why all the precautions? Because Visa acknowledges that (1) hackers are increasingly savvy, (2) data is an increasingly desirable black-market commodity, and (3) the best way to keep itself safe is with an information network in a fortress that instantly responds to threats.

Prisons are easier to enter than Visa’s OCE! In a year’s time, Visa processes more than 91.6 billion retail electronic payments from around the globe. And every day, Visa’s system connects up to 2.2 billion debit and credit cards, millions of acceptance locations, 2.1 million ATMs, and 14 400 financial institutions.84 Visa, which completes an annual “stress test” of its system in preparation for the holiday season, at one point processed a peak volume of 56 000 messages per second.85 (Do some math on that and be amazed!) So what seems to us a simple swipe of a card or keying in our card numbers on an online transaction actually triggers a robust set of activities, including the basic sales transaction processing, risk management, and information-based services. That’s why OCE’s workers ­ have two jobs: “Keep hackers out, and keep the network up, no matter what.” And that’s why Visa doesn’t reveal the location of OCE—on the eastern seaboard is as specific as the description gets.

Beneath the road leading to the OCE, hydraulic posts can rise up fast enough to stop a car going 80 kilometres per hour. And a car won’t be able to go that fast or it will miss a “vicious hairpin turn” and drive off into a drainage pond. Back in medieval days, that would have been known as the castle moat, which was also designed as protection. There are also hundreds of security cameras and a superb security team of former military personnel. If you’re lucky enough to be invited as a guest to OCE (which few people are), you’ll have your photo taken and right index fingerprint encoded on a badge. Then you’re locked into a “mantrap portal” where you put your badge on a reader that makes sure you are you, and then put it on another reader with your finger on a fingerprint detector. If you make it through, you’re clear to enter the network operations centre. With a wall of screens in front of them, each employee sits at a desk with four monitors. In a room behind the main centre, three topnotch security experts keep an eye on things. Knight says that “about 60 incidents a day warrant attention.” Although hackers are a primary concern, OCE also worries about network capacity. Right now, maximum capacity is at 56 000 transactions per second. If the network goes over that capacity, the network wouldn’t just stop processing one message, it would stop processing all of them. OCE is described as a “Tier-4” centre, which is a certification from a data centre organization. To achieve that certification, every (and yes, we mean every) mainframe, air conditioner, and battery has a backup.

Discussion Questions 1. Is Visa being overly cautious? Why or why not? 2. Why is this level of managerial controls necessary?

354  Chapter 12 3. Which controls would be more important to Visa: feedforward, concurrent, or feedback? Explain. 4. What other managerial controls might be useful to the company?

Too Relaxed As yoga classes gained in popularity, one company that benefited greatly was Lululemon. In fact, at one point, it was on Fortune’s Fastest-Growing Companies List three years in a row. Company executives had positioned the company as a lifestyle brand, and customers were hooked and loyal. Then, a rare stumble happened. The company had to recall a large batch of its signature black “Luon” yoga pants because the fabric was too sheer.86 Lululemon was founded in Vancouver, BC, by Dennis (Chip) Wilson, who had noticed in his yoga class that other students’ yoga pants became see-through when they bent over after class to roll up their mats. Having just sold his surf/skateboard/snowboard clothing company, he sensed an opportunity to pair his expertise in “technical” athletic wear with the surging demand by yoga enthusiasts. What he developed was revolutionary! Instead of following what others had done—essentially cutting down men’s workout wear and then selling it in feminine colours—Wilson believed that women would prefer working out in clothes that actually fit them. So, in addition to fashionable styles, he concentrated on technical elements, including seamless stitching and breathable fabrics. And surprise, surprise: women were willing to pay $100 or more for his company’s workout clothes. Lululemon was off and running. Like many smaller companies, executives focused on the product and not so much on the “infrastructure” side of the business (human resources, IT, finance). That works ... up to a point. When the chief information officer was hired, she actually found it fairly easy to implement the technology she felt was needed because there wasn’t really anything in place to work around.

Losing your pose... One area where former executives felt focus was lacking was in the production area. No rigorous manufacturing model was in place. There were no schedules or deadlines. The company countered that by saying it wanted to remain flexible. But the manufacturing weakness was also evident in the lack of people who had expertise in the technical aspects of clothing manufacturing, such as quality control or control over raw materials. Which brings us to the problem of sheer yoga pants—yoga pants being a core product

of the company. As customers began returning the product and as the product complaint rate hit 12 percent, Lululemon had no choice but to pull the pants off the store shelves. The CEO at that time said the pants had passed quality assurance tests but admitted that the only way to actually quality test the product was to put them on and bend over. And the company hadn’t done that . . . until it was too late. Although the company’s core business is still women, it is seeing strong growth in men’s and girl’s businesses. In 2018 it had fully rebounded and shares hit an all-time high.87 It’s no longer one of the fastest-growing companies, but it is a successful and sustainable one that has certainly learned something about the importance of control!

Discussion Questions 1. What was Lululemon’s biggest mistake? 2. What type (or types) of control—feedforward, concurrent, or feedback—do you think would have been helpful in this situation? Explain your choice. 3. What role would information controls play in this situation? Customer interaction controls? What other controls do you think might have been useful?

Balanced Scorecard—Your Local Credit Union More than one-third of Canadians use a credit union. They have been innovators in the Canadian financial services industry, including some exciting firsts. Credit unions were the first to offer full-service ABMs, open mortgages, registered education plans, and daily-interest savings and were the first Canadian institutions to lend to women in their own names. Credit unions compete with the strong Canadian big banking sector, and to do so effectively requires sustainable revenue growth, effective capital management, and leadership. Credit unions can use metrics to help set strategy, evaluate results, and solicit feedback on future strategic actions. The use of a balanced scorecard can be for the credit union as a whole as well as for individual departments. Metrics from the scorecard are used to evaluate activities and projects, but a scorecard can also provide insight into the impact of community involvement, for example, which benefits the employees taking part as well as adding value to the credit union. The scorecard is a powerful evaluative tool but also has great potential for driving HR activities. An example of a scorecard that could be used by a credit union is presented in the figure below.

Chapter 12  Foundations of Control 355 Financial • Return on equity: 23–26 percent • Weakened earnings per share growth: 5–10 percent • Increase in Long-term shareholder value through increases in dividends and stock price growth Human Resources

Operational

• Employee give the credit union high rating in satisfaction and engagement • The workforce is quite diversified • Strong community commitment leads to greater involvement in the community, and more corporate social responsibility

Balanced Scorecard

• Productivity ratio: >80 percent • High environmental sustainability ratings • Strong practices in corporate governance and compliance processes • Excellent capital ratios

Customer • High levels of customer satisfaction and loyalty • Stronger relationships with current customers • Acquiring new customers

Instead of developing metrics based on available data, a credit union could create the desired metrics and then formulate plans on how to collect the required data. For example, if diversity was one of the key overall organizational objectives, the balanced scorecard could track compensation, turnover, and cost per hire for women, visible minorities, Indigenous people, and persons with disabilities.

Discussion Questions 1. Why are metrics important, and how they can contribute to improved performance and profitability? 2. Analyze the metrics that are currently being used for the hypothetical credit union’s balanced scorecard. What recommendations would you make?

Chapter 13

JHVEPhoto/Shutterstock

Operations Management

Learning Objectives 13.1 Define operations management, and explain its role. 13.2 Define the nature and purpose of value chain management. 13.3 Describe how value chain management is done. 13.4 Discuss contemporary issues in managing operations. Maple Leaf Foods Inc. is a Canadian icon with roots dating back more than 100 years. It has an ambitious goal of being the most sustainable protein company in the world, and it ties back to its value chain.1 Inputs are sourced internally and through trusted suppliers. Canadian grain is used for animal feed, and Maple Leaf owns five mills that produce food rations for their pigs. Hogs and eggs are sourced from its own system, primarily with support from other sustainable suppliers. Maple Leaf owns pig barns in Manitoba and hatcheries in Ontario and Alberta that supply chicks to contract producers. All are closely monitored and audited to ensure high levels of animal care.2 The next step in its value chain is transportation, using new hydraulic-lift pig trailers and ­climate-controlled poultry trailers to further improve animal care. Animals are transported to processing facilities that follow strict global food safety standards. All facilities are monitored by dedicated Canadian Food Inspection Agency (CFIA) inspectors and veterinarians.3 Finished products go to one of two Canadian Maple Leaf Foods distribution centres, or directly to customers and international markets. Grocery stores across Canada and the US carry Maple Leaf brands and private label products for the stores themselves. Maple Leaf also supplies major restaurants and food-service companies.

356

Chapter 13  Operations Management 357 This value chain has achieved innovation and cost savings through several efforts, such as developing antibiotic-free chicken, needle-free injection for hogs, vertical integration of the flow of hogs, and use of RFID in the consumer packaged goods supply chain.4 All of this so Maple Leaf can provide high-quality, innovative products to Canadian homes and restaurants. Every organization produces something, whether it’s a good or a service. Technology has changed how production is done. This chapter focuses on organizations’ processes of operations management. We also look at the important role that managers play in managing those operations. Here is a common myth about operations:



   In the future of manufacturing, robots will replace almost all workers.

MANAGEMENT MYTH DEBUNKED Recent headlines claiming that robots are making people obsolete in the workforce may be true in some jobs, but robots are more likely to assist people in doing their jobs rather than replace them completely. Robots will do menial or dangerous jobs and those made up entirely of repetitive tasks, so some types of jobs are likely to be replaced by technology. However, technology also means people can focus on more complex work that demands creativity and flexibility. For full details on this management myth, check out our Bust the Myth video in Revel. McKinsey predicts that artificial intelligence and automation could add 20 million to 50 million jobs globally by 2030. Here is a look at three of the more interesting ones:5 • Customer-robot liaisons  Companies that make AI applications use “customer success managers” to help ease clients into working with the systems, answer complaints and make adjustments. This is currently among the most sought-after jobs on ZipRecruiter. • Robot managers  Someone oversees the work of machines to make sure they’re doing their jobs properly and intervenes if the AI asks for help in a tricky situation. • Drone-performance artists  Drones are starting to work their way into the arts, where they act as dynamic light installations and flying props, but humans must customize these drones.

Why Is Operations Management Important to Organizations? 13.1 Define operations management, and explain its role. You’ve probably never given much thought to how organizations “produce” the goods and services that you buy or use. But it’s an important process. Without it, you wouldn’t have a car to drive or McDonald’s fries to snack on, or even a hiking trail in a local park to enjoy. Organizations need to have well-thought-out and w ­ ell-designed operating systems, organizational control systems, and quality programs to survive in today’s increasingly competitive global environment. And it’s the manager’s job to manage those things.

What Is Operations Management? The term operations management refers to the design, operation, and control of the transformation process that converts such resources as labour and raw materials into goods and services that are sold to customers. Exhibit 13-1 portrays a simplified overview of the transformation process of creating value by converting inputs into outputs. The system takes inputs—people, technology, capital, equipment, materials, and information—and transforms them through various processes,

operations management The study and application of the transformation process.

358  Chapter 13 procedures, and work activities into finished goods and services. These processes, procedures, and work activities are found throughOutputs out the organization. For example, department • Goods • Services members in marketing, finance, research and Transformation development, human resources, and accountProcess ing convert inputs into outputs such as sales, increased market share, high rates of return on investments, new and innovative products, motivated and committed employees, and accounting reports. As a manager, you’ll need to be familiar with operations management c­ oncepts, regardless of the area in which you’re managing, in order to achieve your goals more effectively and efficiently. Operations management focuses on several key competitive priorities: cost, quality, delivery, flexibility, and service.

Exhibit 13-1  The Operations System Inputs • People • Technology • Capital • Equipment • Materials • Information

Why is operations management so important to organizations and managers? 1. It encompasses processes in services and manufacturing organizations. 2. It is important in effectively and efficiently managing productivity. 3. It plays a strategic role in an organization’s competitive success.

transformation process

How Do Service and Manufacturing Firms Differ?

With a menu that offers more than 200 items made fresh each day, The Cheesecake Factory restaurants rely on a finely tuned production system. One food-service consultant says, “They’ve evolved with this highly complex menu combined with a highly efficient kitchen.”6 manufacturing organizations All organizations produce goods or services through the transformation Organizations that produce ­process. Simply stated, every organization has an operations system that creates physical goods. value by transforming inputs into finished goods and services outputs. For manufacturers, the products are obvious: cars, cell phones, or food products. After all, service organizations manufacturing organizations produce physical goods. It’s easy to see the operaOrganizations that produce tions management (transformation) process at work in these types of organizanonphysical products in the form tions because raw materials are turned into recognizable physical products. But of services. that transformation process isn’t as readily evident in service organizations, because they produce nonphysical outputs in the form of services. For instance, hospitals provide medical and healthcare services that help people manage their personal health; taxi companies provide transportation services that move people from one location to another; cruise lines provide vacation and entertainment services; and residential plumbers and electricians ensure that we have running water and electricity where we live. All of these service organizations transform inputs into outputs. For example, look at your college. College administrators bring together inputs—instructors, books, academic journals, multimedia classrooms, and similar resources—to transform “unenlightened” students into educated and skilled individuals. Exhibit 13-2 illustrates the differSome economists think the shipping container has done ence between goods and services. more for global trade than every trade agreement signed The reason we’re making this point is that the Canadian econover the past 50 years. One proposal sees containers made omy, and to a large extent the global economy, is dominated by from carbon-fibre composites to lower cost, increase secu10 the creation and sale of services. Most of the world’s developed rity, and enhance tracking.

RealPhotoItaly/Fotolia

The process that converts resources into finished goods and services.

Chapter 13  Operations Management 359

Exhibit 13-2  Goods versus Services Goods

Services

Tangible—have a physical form

Intangible—are experienced

Can be stored in inventory

Production and consumption happen at the same time

Ownership is transferred

Ownership of service is not transferred to the customer

Can be produced independently of the customer

Customers are much more involved

Delays can be tolerated

Time is more important and delays are more challenging

Quality can be measured by defects or deviations in manufacturing

Quality is based on customer perceptions

countries are predominantly service economies. In Canada, for instance, almost 78 percent of all economic activity is services, and in the United States it is nearly 77 percent.7 In less-developed countries, the services sector is less important. For instance, in Nigeria it accounts for only 33 percent of economic activity; in Laos, only 37 percent; and in Vietnam, 38 percent.8,9

One jetliner has some 4 million parts. Efficiently assembling such a finely engineered product requires intense focus. Boeing and Airbus, the two major global manufacturers, have copied techniques from Toyota. However, not every technique can be copied because airlines demand more customization than do car buyers, and there are significantly more rigid safety regulations for jetliners than for cars.12 Amazon purchased robotics company Kiva Systems as part of its push to speed delivery and reduce order costs. Amazon is using 1400 Kiva robots in three of its warehouses, which could save the company almost $900 million per year due to higher operating efficiency across its massive order-fulfillment–centre network. Another interesting potential is for Amazon to begin selling robots to other companies. Prior to its purchase, Kiva was charging about $2 million for a kit of robots and another $20 million for large installations.13 Although most organizations do not make products that have 4 million parts, and most organizations are unable to function without people, improving productivity has become a major goal in virtually every organization. For countries, high productivity can lead to economic growth and development. Employees can receive higher wages, and company profits can increase without causing inflation. For individual organizations, increased productivity provides a more competitive cost structure and the ability to offer more competitive prices. Over the past decade, Canadian and US businesses have made dramatic improvements to increase their efficiency. However, it is important to balance those improvements with effectiveness. For example, H.J. Heinz Company’s frozen-food plant in Pocatello, Idaho, was the highest ranked factory for Firms in the services sector are grappling with delayed supply deliveries because of a truck driver shortage. “You’re getting to the point with the economy growing safety, cleanliness, and efficiency in 2011. In so strong, there’s so much that needs to be delivered, and the supply can’t handle 2014, the plant was closed because of inef- it,” said an industry economist. These stockouts and shortages could lead to fective logistics, such as shipping frozen ramped up price increases and could stunt a recently strong bout of economic enchiladas more than 1000 miles away from growth.11

iQoncept/Shutterstock

How Do Businesses Improve Productivity?

Kirsty Pargeter/Fotolia

360  Chapter 13

The advent of robots that are cheap and safe enough to be used outside big factories is one factor in the rise of the robots. Amazon is imagining a world where drones will deliver products to customers. Companies have used robots as grips on film sets and as panel installers at solar-power plants. Aerial robots—drones—are used by farmers to tend crops, by broadcasters to monitor traffic, and by architects to look for infrastructure in need of repair.14

San Diego to Idaho, and from there to distribution centres on the East Coast.15 These changes impacted Canadian operations as well, with the century-old Leamington, Ontario, plant closed amid much acrimony in November 2013. Organizations that hope to succeed globally are looking for ways to improve productivity. For example, Tim Hortons began offering double lanes in many of its drive-throughs to improve speed and accuracy. The two-lane system would likely be more effective if one lane was dedicated for coffee-only customers. McDonald’s generates 70 percent of its revenues from drive-through customers and recently added a third high-speed window in many stores to counter the fact that the company’s drive-through time of 189 seconds is longer than Wendy’s (158 seconds) or Taco Bell’s (134 seconds).16 According to a study from Gad Allon, a professor at Northwestern University in Chicago, “Every seven seconds of improvement amounts to an average gain of one percent of market share.”17 The Canadian Imperial Bank of Commerce, based in Toronto, automated its purchasing function, saving several million dollars annually.18 And Skoda, the Czech car company owned by Germany’s Volkswagen AG, improved its productivity through an intensive restructuring of its manufacturing process.19

Productivity = People + Operations Variables

Productivity is a composite of people and operations variables. To improve productivity, managers must focus on both. William Edwards Deming was an American statistician, professor, author, lecturer, and consultant.20 He is widely credited with improving production in the United States during World War II, although he’s probably best known for his work in Japan. From 1950 onward, he taught Japanese top managers how to improve product design and product quality, testing, and sales, primarily through applying statistical methods. Deming believed that managers, not workers, were the primary source of increased productivity. He outlined 14 points for improving management’s productivity. A close look at these suggestions reveals Deming’s understanding of the interplay between people and operations. High productivity can’t come solely from good “people management.” The truly effective organization will maximize productivity by successfully integrating people into the overall operations system. For instance, customer lines snaking out the door have been an issue for the burrito chain Chipotle. The fast-food chain, with six locations in Canada, sped up service by six transactions per hour by implementing a system to leverage the strengths of its employees.21 Exhibit 13-3 illustrates the four pillars of its operations system. Chiptole is a company that understands the important interplay between people and the operations system.

Exhibit 13-3  The Four Pillars of Chipotle’s Operations System Pillar

Purpose

Expediters

An extra person between cooks and cashiers

Linebackers

The people who patrol the countertops, serving-ware, and bins of food so that the people servicing customers never turn their backs on them

Mise en place

A zero tolerance policy for not having everything ready and in place for peak periods

Aces in their places

Having each branch’s top servers in the most important positions at peak times

Chapter 13  Operations Management 361

What Is Value Chain Management and Why Is It Important? 13.2 Define the nature and purpose of value chain management.

The following examples of closely integrated work activities among many different players are brought to you by...VALUE CHAIN MANAGEMENT! • Big management assignment due in one week and your computer crashes! NO! Your custom-designed dream computer is built to your exact specifications and delivered three days later. Management assignment DONE!

Marek Kosmal/Fotolia

•  Zero inventory warehousing. Order processing that involves only one change of hands. It’s happening at Siemens AG’s Computed Tomography manufacturing plant in Forchheim, Germany, because its 30 supplier partners share responsibility with the plant for overall process performance. • Black & Decker’s handheld glue gun—totally outsourced to the leading glue gun manufacturer.22

1  What Is Value Chain Management? 1. Every organization needs customers to survive and prosper. 2. Customers want value from the goods and services they purchase or use, and they decide what has value. 3. Organizations must provide that value to attract and keep customers. 4. Value is defined as the performance characteristics, features and attributes, and any other aspects of goods and services for which customers are willing to give up resources (usually money). • Value is provided to customers through transforming raw materials and other resources into some product or service that end users need or desire when, where, and how they want it.

That seemingly simple act of turning varied resources into something that customers value and are willing to pay for involves a vast array of interrelated work activities performed by different participants (suppliers, manufacturers, and even customers)—that is, it involves the value chain.2317 • Value chain management (VCM) is externally oriented and focuses on both incoming materials and outgoing products and services. VCM is effectiveness oriented and aims to create the highest value for customers.24 – Contrast VCM with supply chain management, which is efficiency oriented (its goal is to reduce costs and make the organization more productive) and internally oriented by focusing on efficient flow of incoming materials (resources) to the organization.

value The performance characteristics, features and attributes, and other aspects of goods and services, for which customers are willing to give up resources.

value chain The entire series of work activities that add value at each step from raw materials to finished product.

value chain management (VCM) The process of managing the sequence of activities and information along the entire value chain.

vegefox.com/Fotolia

Let’s start from the beginning...

362  Chapter 13 • Who has the power in the value chain? –– Is it the supplier providing needed resources and materials? After all, suppliers have the ability to dictate prices and quality. –– Is it the manufacturer that assembles those resources into a valuable product or service? A manufacturer’s contribution in creating a product or service is critical.

Intheskies/Fotolia

–– Is it the distributor that makes sure the product or service is available where and when the customer needs it?

Actually, it’s none of these! In value chain management, customers are the ones with the power.25 • They define what value is and how it is created and provided. • Using VCM, managers seek to find that unique combination in which customers are offered solutions that truly meet their needs and at a price that cannot be matched by competitors.26 GOALS OF VALUE CHAIN MANAGEMENT

• Sequence of participants work together as a team, each adding some component of value—such as faster assembly, more accurate information, or better customer response and service—to the overall process.27 • The better the collaboration among the various chain participants, the better the customer solutions. • When value is created for customers and their needs and desires satisfied, everyone along the chain benefits.28

2  How Does Value Chain Management Benefit Businesses? • improved procurement (acquiring needed resources) • improved logistics (managing materials, service, and information) • improved product development (close relationships with customers leads to developing products they value) • enhanced customer order management (managing every step to make sure customers are satisfied)29

Durand Florence/Sipa/Newscom

How Is Value Chain Management Done? 13.3 Describe how value chain management is done. A supply chain is the organizations that are involved in the production and delivery of a product or service. These include facilities such as factories, warehouses, distribution outlets, retail stores, and offices. Supply chains also include functions and activities, such as forecasting, purchasing, inventory management, information

Beawolf/Fotolia

Francois Poirier/Fotolia

Chapter 13  Operations Management 363

Ford’s operations management allows it to produce cars that are greener and cleaner. A typical car is made with 100 kinds of plastic, and Ford has begun to replace many of these with plant-based materials. Seats are filled with foam made from soybeans; coconut husks are being used in sound-absorbing carpet underlay; and latex extracted from dandelion roots is producing natural rubber instead of synthetic rubber made from petroleum.

management, quality control, scheduling, procurement, distribution, delivery, and customer service. Supply chains are often referred to as value chains, indicating that value is added as goods and services progress through the chain.

Supply Chain Management Supply chain management is the coordination of activities across the supply chain. Exhibit 13-4 lists the key elements of supply chain management and some of the typical issues faced in each element. Supply chains and value chains are susceptible to changes in environmental circumstances. Earthquakes, flooding, hurricanes, and good old Canadian winter storms can provide major supply chain disruptions. In its most recent report, Aon Benfield’s Impact Forecasting team recorded 315 natural catastrophe events in 2016 that generated economic losses of US$210 billion—of which only 26 percent were covered by insurance.30 One startling statistic revealed that 60 percent of surveyed managers do not utilize supply chain risk management or do not consider their risk management practices to be effective. Operations executives at Cisco have learned to integrate supply chain design and risk management with proactive capabilities to keep the supply chain resilient, effective, and as profitable as possible.31 Protecting a supply chain from disruption involves increasing inventory, adding capacity at various locations, and using a mix of different suppliers. These tactics to increase supply chain resilience may undermine efforts to improve supply chain efficiency. Recurrent risks cause companies to focus on efficiency while managing demand fluctuations; disruptive risks require companies

Exhibit 13-4  Elements of Supply Chain Management Customers

Forecasting the quantity and timing of customer demand

Facilities

Location, capacity, operational design

Inventory

Meeting demand while managing inventory and safety stock

Production

Product/service design, controlling quality, scheduling work

Transportation

Method of transportation, route, logistics

Information

Information sharing, technology

Suppliers

Monitoring supplier quality, flexibility, maintaining relationships, evaluating suppliers

Kheng Guan Toh/Fotolia

364  Chapter 13 to increase costs to reduce risk. To balance both types of risk requires segmenting or regionalizing the supply chain.32 The dynamic, competitive environment facing contemporary global organizations demands new solutions.33 Understanding how and why value is determined by the marketplace has led some organizations to experiment with a new business model— that is, a strategic design for how a company intends to profit from its broad array of strategies, processes, and activities. For example, IKEA, the home furnishings manufacturer, transformed itself from a small, Swedish mail-order furniture operation into the world’s largest retailer of home furnishings by reinventing the value chain in the home furnishings industry. The company offers customers well-designed products at substantially lower prices in return for the customers’ willingness to take on certain key tasks traditionally Like the diagram, the value chain contains hundreds of linked done by manufacturers and retailers—such as getting the furniture activities that ultimately provide value to the customer. home and assembling it.34 The company’s adoption of a unique business model and willingness to abandon old methods and processes have worked well. It also helped that IKEA recognized the importance of managing its value chain.

What Are the Requirements for Successful Value Chain Management? So what does successful value chain management require? Exhibit 13-5 summarizes the six main requirements. Let’s look at each of these elements more closely. 1. Coordination and collaboration.   For the value chain to achieve its goal of meeting and exceeding customers’ needs and desires, comprehensive and seamless integration among all members of the chain is absolutely necessary. All partners in the value chain must identify things that they may not value but that customers do. Sharing information and being flexible as to who in the value chain does what are important steps in building coordination and collaboration. This sharing of information and analysis requires open communication among the various value chain partners. For example, Furon Company, a manufacturer of specialty polymer products, believes that better communication with customers and with suppliers has facilitated timely delivery of goods and services and opened up additional business opportunities for all its value chain partners.35

Exhibit 13-5  Requirements for Successful Value Chain

Management

Organizational Culture and Attitudes

Coordination and Collaboration

Value Chain Strategy

Employees

Leadership

Technology Investment

Organizational Processes

2. Technology investment.   Successful value chain management isn’t possible without a significant investment in information technology. The payoff from this investment is that information technology can be used to restructure the value chain to better serve end users.36 For example, Rollerblade invested heavily in developing a website and used it to educate customers about its products. Although the company has chosen not to sell its products over the Web for fear of antagonizing its dealer network, managers remain flexible about the issue and would reconsider if they felt that value could be better delivered to customers by doing so.37 What types of technology are important? According to experts, the key tools include a supporting enterprise resource planning software (ERP) system that links all of an organization’s activities, sophisticated work-planning and scheduling

Chapter 13  Operations Management 365

software, customer relationship management systems, business intelligence capabilities, and e-business connections with trading network partners.38 For instance, Dell manages its supplier relationships almost exclusively online. The company has one website for customers and one for suppliers. The supplier website is the primary mode of communication between Dell and 33 of its largest suppliers. The company’s investment in this type of information technology allows it to meet customers’ needs in a way that competitors haven’t been able to match.39 Mercy Hospital in St. Louis has used medication-tracking to save US$600 000 per year in time lost from pharmacists, technicians, and nurses locating medications. Other hospitals are using RFID tags and mobile robots for delivery of meds to reduce the instances of drugs being misplaced or stolen.40 Blockchain software is helping Carrefour, the big France-based grocery chain, answer consumer questions such as “Did the chicken I just bought roam free and eat healthy grains?” A quick scan with your smartphone and all the details you want are at your fingertips. Blockchain can reduce waste and improve food safety. For every one percent reduction in food-borne diseases, the economy is estimated to benefit by $700 million from increased productivity.41

A grocery chain can use blockchain software to track all the points along its poultry supply chain, from the hatchery to the customer. Each party has a record of every change made to the database so that information can’t be tampered with. Hatchery Age of chicken Name, location of hatchery Date chicken left hatchery

Producer Farm name and location Details on feeding and care of chicken Date chicken left producer

Processor Slaughterhouse location Date chicken packaged Transportation date to supermarket Best before date

Valentina_S/Shutterstock

Tracing a Chicken Via Blockchain

Customer Can scan the QR code on the package to access all the data from the hatchery producer, and processor

Pingebat/Shutterstock

Blockchain The integrity of the data is maintained since each party keeps a record of every change to the database

And the Survey Says...42 22% of manufacturers introduced product innovations during a recent three-year time span. 58% of companies are looking to connect better with their ­suppliers. 56% of those companies hope to reduce procurement costs. 16% of employers prefer using employee referrals to locate ­quality employees.

12% of companies say that sustainability is among their top three supply chain priorities. 63% of those companies see sustainability as an opportunity for revenue growth. 64% of manufacturers say that they currently have wireless networks or intend to have them.

366  Chapter 13 organizational processes The way organizational work is done.

3. Organizational processes.  Value chain management radically changes organizational processes—that is, the way organizational work is done.43 Managers must critically evaluate all organizational processes from beginning to end by looking at core competencies—the organization’s unique skills, capabilities, and resources—to determine where value is being added. Non-value-adding activities are eliminated. Questions such as “Where can internal knowledge be leveraged to improve the flow of material and information?” “How can we better configure our product to satisfy both customers and suppliers?” “How can the flow of material and information be improved?” and “How can we improve customer service?” should be asked for each process. For example, when managers at Deere & Company implemented value chain management in its Worldwide Commercial and Consumer Equipment Division, a thorough process evaluation revealed that work activities needed to be better synchronized and interrelationships between multiple links in the value chain better managed. They changed numerous work processes ­division-wide to improve these relationships.44 Airlines have struggled with speeding up the boarding process, as delays are estimated to cost airlines more than $30 billion in the United States alone. Researchers at Clarkson University have proposed assigning seats to airline passengers based on the number of bags they carry. Each row of seats would balance customers with two bags, one bag, and no bags to shave off boarding time and distribute luggage more evenly throughout the plane.45 United Air has boarded passengers by location, using what they call the “WilMA” (Window, Middle, Aisle) system, which is saving the airline four to five minutes per flight and almost $1 million annually46 Three important conclusions can be made about how organizational processes must change: • First, better demand forecasting is necessary and possible because of closer ties with customers and suppliers. For example, in an effort to make sure that Listerine was on the store shelves when customers wanted it, Walmart collaborated with product manufacturer Pfizer Consumer Healthcare on improving product demand forecast information. Through their mutual efforts, the partners boosted Walmart’s sales of Listerine by $6.5 million. Customers also benefited because they were able to purchase the product when and where they wanted it. • Second, selected functions may need to be done collaboratively with other partners in the value chain. This collaboration may even extend to sharing employees. For instance, CAE Aviation in Edmonton was facing a shrinking Canadian defence budget and needed to become more productive to compete internationally. The company changed from single-trade work groups to crossfunctional teams, which required a cultural change to a participatory style of management.47

What’s Cooking in Hospitality?48 Groupe Germain Hotels is a Canadian family-run business that is perhaps best known for its boutique Alt Hotels across Canada. As one of Canada’s 50 Best Managed Companies (for more than six consecutive years), Groupe Germain’s 1250 employees provide personalized services and exceptional quality.

They have been recognized for their innovation in eliminating check-out times as well as for their corporate sustainability. They have adopted energy-efficient technologies, including heating and cooling by geothermal energy, heat recovery, and energy-efficient lighting. Also popular are their charging stations for electric vehicles.

Chapter 13  Operations Management 367

4. Leadership.  The importance of leadership to value chain management is plain and simple—successful value chain management is not possible without strong and committed leadership.49 From top organizational levels to lower levels, managers must support, facilitate, and promote the implementation and ongoing practice of value chain management. Managers must make a serious commitment to identifying what value is, how that val- Canadian consumers purchased more than 12 million ue can best be provided, and how successful those efforts have roses for Valentine’s Day in 2010. Getting fresh roses to been. That type of organizational atmosphere or culture, in which Canadian lovers takes speed, the right temperature, and all efforts are focused on delivering superb customer value, is not skill. As with other perishable products, flowers require specific temperatures to maintain freshness and stay in possible without a serious commitment on the part of the organibloom. Eighty percent of all flowers sold for Valentine’s zation’s leaders. Also, it is important that leaders outline expecta- Day are shipped from Latin America, with 12 percent tions for what is involved in the organization’s pursuit of value coming from US production and 8 percent arriving from chain management. Ideally, articulating expectations should start other locations. with a vision or mission statement that expresses the organization’s commitment to identifying, capturing, and providing the highest possible value to customers. For example, the Alberta barley commission was looking for a way to make people aware that barley is used for more than beer and animal feed; it is also a very healthy grain that can be used in baking due to its low glycemic index. They worked with the Good Earth Café, a coffee house and restaurant that differentiates itself by serving healthy alternatives to mainstream baked goods.50 Throughout the organization, then, managers should clarify expectations regarding each employee’s role in the value chain. Being clear about expectations also extends to partners. The Barley Commission created promotional materials for the Good Earth Café, and barley producer Hamilton’s Milling helped out with recipe development and how bakers could best make use of barley for healthy baked goods. The barley commission worked with barley producers and food retailers to deliver better value to customers. 5. Employees/human resources.  We know from our discussions of management theories and approaches throughout this text that employees are the organization’s most important resource. So, not surprisingly, employees play an important part in value chain management. Three main human resources requirements for value chain management are flexible approaches to job design, an effective hiring process, and ongoing training. Flexibility is the key description of job design in a value chain management organization. Traditional functional job roles—such as marketing, sales, accounts payable, customer service, and so forth—are inadequate in a value chain management environment. Instead, jobs need to be designed around work processes that link all functions involved in creating and providing value to customers. This type of flexible job design supports the company’s commitment to providing superb customer value.51 In designing jobs for a value chain approach, the focus needs to be on how each activity performed by an employee can best contribute to the creation and delivery

Michaeljung/Fotolia

• Finally, new measures are needed for evaluating the performance of various activities along the value chain. Because the goal in value chain management is meeting and exceeding customers’ needs and desires, managers need a better picture of how well value is being created and delivered to customers. For instance, the Canadian lamb chain was established in an effort to secure an increased supply of Canadian lamb to meet rising domestic demand. Processors, who slaughter, process, and package meat, encouraged farmers to diversify operations and increase lamb production.

368  Chapter 13 of customer value, which requires flexibility in what employees do and how they do it. The fact that jobs in a value chain management organization must be ­flexible contributes to the second requirement: Flexible jobs require flexible employees. In a value chain organization, employees may be Cultural assigned to work teams that tackle a given process and are often asked Attitudes to do different things on different days, depending on need. In an environment focusing on collaborative relationships that may change as customer needs change, employees’ ability to be flexible is critical. Accordingly, the organization’s hiring process must be designed to identify those employees who have the ability to quickly learn and adapt. Finally, the need for flexibility also requires a significant investment in ongoing employee training. Whether the training involves Required learning how to use information technology software, how to Capabilities improve the flow of materials throughout the chain, how to identify activities that add value, how to make better decisions faster, or how to improve any number of other potential work activities, managers must see to it that employees have the knowledge and tools they need to do their jobs. For example, Carswell, a division of Thomson Reuters Canada, uses training to grow leaders from within. The Toronto company developed an in-house leadership intern program for its 850 staff, as well as courses that teach new recruits about the business and their role in it, that included 90-minute sessions that help staff navigate the myriad resources available, especially online. As one of Canada’s Top 100 employers, Carswell also uses internal training, cross-functional assignments, mentoring, and coaching directed at staff already in management or on their way there. An impressive 80 percent of those in the two-year internship program are promoted when finished.52

Exhibit 13-6  Obstacles to Successful Value

Chain Management

Organizational Barriers

Obstacles to Value Chain Management

People

6. Organizational culture and attitudes.  The last requirement for value chain management is having a supportive organizational culture and attitudes. Those cultural attitudes include sharing, collaborating, openness, flexibility, mutual respect, and trust. And these attitudes encompass not only the internal partners in the value chain but external partners as well. For instance, American Standard has chosen to practise these attitudes the old-fashioned way—with lots of face time and telephone calls. However, as we mentioned earlier, Dell has taken a completely different approach, as it works with its value chain partners almost exclusively through cyberspace.53 Both approaches, however, reflect each company’s commitment to developing long-lasting, mutually beneficial, and trusting relationships that best meet customers’ needs.

What Are the Obstacles to Value Chain Management? As desirable as value chain management may be, managers must tackle several obstacles in managing the value chain—organizational ­barriers, cultural attitudes, required capabilities, and people. (See Exhibit 13-6.) ORGANIZATIONAL BARRIERS  Organizational barriers are among the most diffi-

cult obstacles to handle. These barriers include refusal or reluctance to share information, reluctance to shake up the status quo, and security issues. Without shared information, close coordination and collaboration is impossible. And the reluctance or refusal of employees to shake up the status quo can impede efforts toward value chain management and prevent its successful implementation. Finally, because value chain management relies heavily on a substantial information technology infrastructure, system security and Internet security breaches are issues that need to be addressed.

Chapter 13  Operations Management 369

A Question of Ethics54 Okay—so here’s an “unusual” ethics dilemma for you, and it’s a fitting conclusion in the last chapter of the text. Why? Because it illustrates that questions of ethics can pop up in the most ordinary of places. Suppose that you went to a popular shopping area where parking was extremely limited and the store owner had instituted “customers only” parking and you were lucky enough to find an open space. Then suppose that once you finished your business at that store—having spent a fair amount of money—you had other shopping to do in the same vicinity so you left your car in that same “customers only” parking space. You believed that

what you did was okay since you “paid” for that spot with your purchase. But your significant other disagreed saying that since you had finished your business at that store, your car should be moved.

Discussion Questions 1. What is the “question of ethics” here? Why is it a “question of ethics”? 2. Who are the other stakeholders in this situation and how might this one, seemingly simple, decision affect them?

CULTURAL ATTITUDES  Unsupportive cultural attitudes—especially trust and

c­ ontrol—also can be obstacles to value chain management. The trust issue is a critical one—both lack of trust and too much trust. To be effective, partners in a value chain must trust each other. There must be a mutual respect for, and honesty about, each partner’s activities all along the chain. When that trust doesn’t exist, the partners will be reluctant to share information, capabilities, and processes. But too much trust also can be a problem. Just about any organization is vulnerable to theft of intellectual property—that is, proprietary information that is critical to an organization’s efficient and effective functioning and competitiveness. You need to be able to trust your value chain partners so your organization’s valuable assets are not compromised.55 Another cultural attitude that can be an obstacle is the belief that when an organization collaborates with external and internal partners, it no longer controls its own destiny. However, this just isn’t the case. Even with the intense collaboration that is important to value chain management, organizations still control critical decisions such as what customers value, how much value they desire, and what distribution channels are important.56 REQUIRED CAPABILITIES  We know from our earlier discussion of

Elena.rudyk/Fotolia

requirements for the successful implementation of value chain management that value chain partners need numerous capabilities. Several of these—coordination and collaboration, the ability to configure products to satisfy customers and suppliers, and the ability to educate internal and external partners—are not easy. But they are essential to capturing and exploiting the value chain. Many of the companies we have described throughout this section endured critical and often difficult self-­evaluations of their capabilities and processes in order to become more effective and efficient at managing their value chains. PEOPLE  The final obstacles to successful value chain management can

be an organization’s people. Without their unwavering commitment to do whatever it takes, value chain management will not be successful. If employees refuse to be flexible in their work—how and with whom they work—collaboration and cooperation throughout the value chain will be hard to achieve. In addition, value chain management takes an incredible amount of time and energy on the part of an organization’s employees. Managers must motivate those high levels of effort from employees, which is not an easy thing to do.

Starbucks CEO Howard Schultz visits with coffee bean growers around the globe to discuss the importance of producing high-quality beans and establishing responsible growing practices. Schultz’s personal visits with external partners illustrate his support of Starbucks’s cultural attitudes of sharing, openness, collaborating, and mutual respect.

370  Chapter 13

What Contemporary Issues Do Managers Face in Managing Operations? 13.4 Discuss contemporary issues in managing operations. Redesigned milk jugs that have been adopted by Walmart and Costco are cheaper to ship, better for the environment, cost less, and keep the milk fresher. Experts say this type of redesign is “an example of the changes likely to play out in the Canadian economy over the next two decades. In an era of soaring global demand and higher costs for energy and materials, virtually every aspect of the economy needs to be re-­ examined and many products must be redesigned for greater efficiency.”57 If you somehow thought that managing operations did not really matter in today’s online 24/7 global economy, think again. It does matter...a lot. We’re going to look at five contemporary issues that managers face in managing operations.

Blueringmedia/Fotolia

What Role Does Technology Play in Operations Management? As we know from our previous discussion of value chain management, today’s competitive marketplace has put tremendous pressure on organizations to deliver products and services that customers value in a timely manner. Smart companies are looking at ways to harness technology to improve operations management. Many fast-food companies are competing to see who can provide faster and better service to drive-through customers. With drive-through now representing a huge portion of sales, faster and better delivery can be a significant competitive edge. For instance, Wendy’s added awnings to some of its menu boards and replaced some of the text with pictures. Others use confirmation screens, a technology that helped McDonald’s boost accuracy by more than 11 percent. And technology used by two national chains tells managers how much food they need to prepare by counting vehicles in the drive-through line and factoring in demand for current promotional and popular staple items.58 Although an organization’s production activities are driven by the recognition that the customer is king, managers still need to be more responsive. For instance, operations managers need systems that can reveal available capacity, status of orders, and product quality while products are in the process of being manufactured, not just after the fact. To connect more closely with customers, production must be synchronized across the enterprise. To avoid bottlenecks and slowdowns, the production function must be a full partner in the entire business system. Walmart is trying to compete with major online rivals like Amazon by offering speedy, same-day grocery delivery. To do so, Walmart is using “dark stores”—spaces that are used only for online order fulfillment. Its inaugural store in Mexico handles the same volume of orders as five regular Walmart stores.59 What makes such extensive collaboration possible is technology. Technology also allows organizations to control costs, particularly in the areas of predictive maintenance, remote diagnostics, and utility cost savings. For instance, Lowe’s is battling with Home Depot for hardware superstore supremacy and has turned to technology to improve customer Internet-compatible equipment contains embedded Web service. Lowe’s is using satellites to gauge traffic at its 1900 stores, servers that can communicate proactively—that is, if a piece scanning images of parking lots to determine how many shoppers of equipment breaks or reaches certain preset parameters it can expect on an hourly basis. It can then analyze how many indicating that it is about to break, it asks for help. But transactions are occurring at various traffic levels and adjust technology can do more than sound an alarm or light up scheduling in accordance.

Chapter 13  Operations Management 371

Technology and the Manager’s Job60 What might the ideal factory of the future look like? Experts at Georgia Tech’s Manufacturing Research Center say that three important trends are driving what tomorrow’s factories will look like. One trend is globalization of the supply chain. In the factories of the future, design and business processes will be performed where it is most efficient and effective to do so. For example, parts for Boeing’s 787 Dreamliner are produced around the world and then come together in Boeing’s US facilities. The second trend is technology that simultaneously dematerializes the product while vastly increasing complexity. The challenge for managing operations is that despite simplicity in products, the production process is becoming more complex. Levi’s uses robotic laser technology to replace the labour-intensive, repetitive-motion jobs.61 The third trend is demographics and the impact on demand patterns. Products will have shorter life cycles and more variety and choices. The key characteristic of the factory of the future will be

its ability to change to accommodate whatever product is being produced in the needed time frame. And it will be particularly important that these factories be efficient and effective. Given these trends, it is clear that technology will continue to play a key role in transformation processes that need to be collaborative, adaptive, flexible, and responsive. But keep in mind that technology is simply a tool. Future factories will also require a ­ talented and skilled workforce and a clear understanding of ­managing operations processes. Those are the challenges facing managers who want their organizations to survive and thrive.

Discussion Questions 1. How will technology contribute to the operations management process? What are the downsides to using technology in the operations management process? 2. In the factory of the future, what role does a manager play?

an indicator button. For instance, some devices have the ability to initiate e-mail or signal a pager to a supplier, the maintenance department, or contractor, describing the specific problem and requesting parts and service. How much is such e-enabled maintenance control worth? It can be worth quite a lot if it prevents equipment breakdowns and subsequent production downtime. Technology allows the production of far more output with far fewer people. Consider the shift that has taken place in agriculture. The number of North American workers employed in agriculture was more than 35 percent a century ago and currently sits at less than 2 percent.62 Agriculture is adapting quickly to technology. Farmers use global positioning systems to plant straighter rows and use “prescriptive planting” technology to collect data on crops and soil and adjust planting depth and distance between crop rows. Data-driven planting is expected to increase worldwide crop production by about $20 billion per year.63 Managers who understand the power of technology to contribute to more effective and efficient performance know that managing operations is more than the traditional view of simply producing the product. Instead, the emphasis is on working together with all the organization’s business functions to find solutions to customers’ business problems.

How Do Managers Control Quality? $100 million—Apple’s settlement with customers over poor quality. Quality problems are expensive. For example, even though Apple has had phenomenal success with its iPod, the batteries in the first three versions died after four hours instead of lasting up to 12 hours, as buyers expected. Apple’s settlement with consumers cost close to $100 million. At Schering-Plough, problems with inhalers and other pharmaceuticals were traced to chronic quality control shortcomings, for which the company eventually paid a $500 million fine. And the auto industry paid $14.5 billion to cover the cost of warranty and repair work in one year.64 Many experts believe that organizations unable to produce high-quality products will not be able to compete successfully in the global marketplace. What is quality? When you consider a product or service to have quality, what does that mean? Does it mean that the product doesn’t break or it quit working—that is, it is reliable? Does it mean that the service is delivered in the way that you intended? Does it mean that the product does

372  Chapter 13

Exhibit 13-7  What Is Quality? Product Quality Dimensions 1. Performance—Operating characteristics 2. Features—Important special characteristics 3. Flexibility—Meeting operating specifications over some period of time 4. Durability—Amount of use before performance deteriorates 5. Conformance—Match with pre-established standards 6. Serviceability—Ease and speed of repair or normal service 7. Aesthetics—How a product looks and feels 8. Perceived quality—Subjective assessment of characteristics (product image)

Service Quality Dimensions 1. Timeliness—Performed in the promised period of time 2. Courtesy—Performed cheerfully 3. Consistency—Giving all customers similar experiences each time 4. Convenience—Accessibility to customers 5. Completeness—Full service, as required 6. Accuracy—Performed correctly each time SOURCE: Based on J. W. Dean and J. R. Evans, Total Quality: Management, Organization, and Society (St. Paul,

MN: West Publishing Company, 1994); H. V. Roberts and B. F. Sergesketter, Quality Is Personal (New York: The Free Press, 1993); D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, Strategic Management, 4th ed. (Cincinnati: South-Western Publishing, 2001), p. 121.

P Cox/Alamy Stock Photo

what it is supposed to do? Or does quality mean something else? Exhibit 13-7 lists the dimensions of quality. We’re going to define quality as the ability of a product or service to reliably do what it’s supposed to do and to satisfy customer expectations. HOW IS QUALITY ACHIEVED?  How quality is achieved is an issue managers must address. A good way to look at quality initiatives is with the management functions— planning, organizing, leading, and controlling—that need to take place. When planning for quality, managers must have quality improvement goals and strategies and plans to achieve those goals. Goals can help focus everyone’s attention toward some objective quality standard. For instance, Caterpillar’s goal is to apply quality improvement techniques to help cut costs.65 Although this goal is specific and challenging, managers and employees are partnering together to pursue well-designed strategies to achieve the goals, and are confident they can do so. When organizing and leading for quality, it is important for managers to look to their employees. For instance, at the Moose Jaw, Saskatchewan, plant of General Cable Corporation, every employee participates in continual quality assurance training. In addition, the plant manager believes wholeheartedly in giving employees the information they need to do their jobs better. He says, “Giving people who are running the machines the information is just paramount. You can set up your cellular structure, you can cross-train your people, you can use lean tools, but if you don’t give people information to drive improvement, there’s no enthusiasm.” Needless to say, this company shares production data and financial performance measures with all employees.66 Organizations with extensive and successful quality improvement programs tend to rely on two important people approaches: cross-functional work teams and selfdirected, or empowered, work teams. Because achieving Italian carmaker Ferrari competes successfully in the global product quality is something that all employees, from marketplace by developing and producing high-quality cars in upper to lower levels, must participate in, it is not surprising terms of design, performance, and reliability.

Chapter 13  Operations Management 373

Diversity Matters One of the key challenges in organizations today is the lack of female representation in the executive ranks. Lack of diversity can be approached as an operations management challenge to be overcome. The operational measure of control can be utilized if the company were to implement key performance indicators for gender diversity and then move toward making the necessary changes to meet the metrics. Monitoring such metrics serves as a tool for defining and directing priorities for action. Indicators could be developed for the following: • the proportion of women in the company’s levels of management and among new recruits • pay levels and attrition rates between men and women working in similar functions • the ratio of women promoted to women eligible for promotion Operations management uses policies, procedures, and processes to ensure that gender diversity change occurs. Employers could enact policies that would encourage women to grow into management careers, such as flexible working hours and career breaks like maternity leave. During the breaks the company could maintain contact to enable easy reintegration into the workforce. Human resources processes may need to be adapted to ensure that women are not held back in their professional development. Operations managers are adept at reengineering processes as needed, and they could implement coaching, network-building, or mentoring programs to raise awareness of the limitations that are imposed on women.67

that quality-driven organizations rely on well-trained, flexible, and empowered employees. Finally, when controlling for quality managers must recognize that quality improvement initiatives are not possible without having some way to monitor and evaluate their progress. Whether it involves standards for inventory control, defect rate, raw materials procurement, or other operations management areas, controlling for quality is important. Delcan is one of Canada’s 50 Best Managed Companies68 and is a leader in quality management and control. Delcan provides quality management of some of the world’s most impressive infrastructure programs and has won numerous industry quality awards. Quality improvement success stories can be found globally. For example, at a Delphi assembly plant in Matamoros, Mexico, employees worked hard to improve quality and made significant strides. For instance, the customer reject rate on shipped products is now 10 ppm (parts per million), down from 3000 ppm—an improvement of almost 300 percent.69 Quality initiatives at several Australian companies, including Alcoa of Australia, Wormald Security, and Carlton and United Breweries, have led to significant quality improvements.70 At Valeo Klimasystemme GmbH of Bad Rodach, Germany, assembly teams build different climate-control systems for high-end German cars, including Mercedes and BMW. Quality initiatives by those teams have led to significant improvements.71 WHAT QUALITY GOALS MIGHT ORGANIZATIONS PURSUE?  To publicly dem-

onstrate their commitment to quality, many organizations worldwide have pursued challenging quality goals. The two best known are the following: 1. ISO 9000/9001 is a series of international quality management standards established by the International Organization for Standardization (www.iso.org), which set uniform guidelines for processes to ensure that products conform to customer requirements. These standards cover everything from contract review to product design to product delivery. The ISO 9000 standards have become the internationally recognized standard for evaluating and comparing companies in the global marketplace. In fact, this type of certification can be a prerequisite for doing business globally. Achieving ISO 9000 certification provides proof that a quality operations system is in place. As of 2013, more than 1 million certifications had been awarded to organizations in 175 countries. Almost 9000 Canadian businesses are ISO 9000 certified,72 and the town of Ajax,

ISO 9000 A series of international quality standards that set uniform guidelines for processes to ensure that products conform to customer requirements.

374  Chapter 13

Tashatuvango/Fotolia

Ontario, was the first fully registered municipality in North America to have ISO 9000 certification.73 Ajax strives to achieve excellence in the delivery of services to its residents and business owners. 2. More than 30 years ago, Motorola popularized the use of stringent quality standards through a trademarked quality improvement program called Six Sigma.74 Very simply, Six Sigma is a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. What does the name mean? Sigma is the Greek letter that statisticians use to define a standard deviation from a bell curve. The higher the sigma, the fewer the deviations from the norm—that is, the fewer the defects. At one sigma, two-thirds of whatever is being measured falls within the curve. Two sigma covers about 95 percent. At Six The National Quality Institute (NQI) has certification and training programs and annually recognizes Sigma, you’re about as close to defect-free as you can get.75 It is organizations with the Canada Awards for Excellence. an ambitious quality goal! Although it is an extremely high stanWhile the NQI has made significant advances in dard to achieve, many quality-driven businesses are using and promoting Canadian quality improvements, other benefiting from it. Other companies pursuing Six Sigma include developed countries are moving faster in this area, BMW, Dow Chemical, 3M Company, American Express, Kraft, giving them a competitive advantage over Canada. Sony Corporation, Nokia Corporation, and Johnson & Johnson.76 Six Sigma Although manufacturers seem to make up the bulk of Six Sigma users, service A quality standard that establishes companies such as financial institutions, retailers, and health care organizations a goal of no more than 3.4 defects are beginning to apply it. What impact can Six Sigma have? Let us look at an per million units or procedures. example. Staples’s Lean Six Sigma program has been the impetus for dozens of improvements that have generated tens of millions of dollars in benefit for Staples and produced a tenfold return on the company’s investment in the process improvement program: • improved lease negotiations and enhanced architecture and construction processes that have shaved four weeks off the time needed to open a new store

3BL: The Triple Bottom Line Lean production is geared toward eliminating waste to increase efficiency. Waste is something that uses resources without creating value. Imagine a company that sold highlighters and dry erase markers that used hundreds of different types of blister packs for packaging. If the company reduced the number of packages by half, it would eliminate not only the waste in extra packaging, but would reduce setup time for packaging, cut tooling costs, and reduce warehouse costs. That is the power of lean.

Thinking Strategically About 3BL Lean thinking applies also to companies in the service sector, even though customers are often involved in the provision of the service. Canadian Tire is a company that has successfully applied lean techniques in its distribution centres and wondered if it could do the same with the company’s recruitment. Liza Provenzano, associate vice-president of human resource operations, looked at every aspect of their heavy recruitment workload, from the time a manager indicated the need for a new hire to the time that new recruit walked in the door, and found a lot of variations in workload, delays, duplication, and unnecessary steps.78 The Canadian Tire team met weekly, using a large whiteboard to brainstorm ideas that could change the company’s HR processes. Ontario’s Institute for Competitiveness and Prosperity has called lean retailing a best practice that “achieves highly efficient operations through a relentless drive to reduce waste of time and resources.”79 The results for Canadian Tire were impressive: Recruitment time fell by 25 percent; the number of steps in the hiring process was cut in half; turnover rates fell; and the cost per hire dropped 34 percent.

Chapter 13  Operations Management 375

• streamlined the item-order cycle, which freed space and generated inventory savings of $3.3 million • reconfigured the loading dock layout to eliminate extra handling of merchandise, efforts that improved on-time-to-duedate performance by 21 percent • achieved a 50 percent reduction in budget for freight distribution and fulfillment centres77

Mybaitshop/Fotolia

Although it is important for managers to recognize that many positive benefits come from obtaining ISO 9000 certification or Six Sigma, the key benefit comes from the quality improvement journey itself. In other words, the goal of quality certification should be having work processes and an operations system in place that enable organizations to meet customers’ needs and employees to perform their jobs in a consistently high-quality way.

How Are Projects Managed? A project is a one-time-only set of activities with definite beginning and ending points.80 Projects vary in size and scope, from a NASA space shuttle launch to a wedding. Project management is the task of getting the activities done on time, within budget, and according to specifications. Project management has actually been around for a long time in industries such as construction and movie making, but now it has expanded into almost every type of business. What explains the growing popularity of project management? It fits well with a dynamic environment and the need for flexibility and rapid response. Organizations are increasingly undertaking projects that are somewhat unusual or unique, have specific deadlines, contain complex interrelated tasks requiring specialized skills, and are temporary in nature. These types of projects do not lend themselves well to the standardized operating procedures that guide routine and continuous organizational activities.81 Managing projects tends to happen in one of four key areas: people, communications, change, and risk. Often a project charter is used, which outlines the project scope, objectives, constraints, and assumptions. In project management, one key aspect is the need to make tradeoffs in the areas of cost, time, and scope—known as the triple constraint. In the typical project, team members are temporarily assigned to and report to a project manager, who coordinates the project’s activities with other departments and reports directly to a senior executive. The project is temporary: It exists only long enough to complete its specific objectives. Then it is wound down and closed up; members move on to other projects, return to their permanent departments, or leave the organization. If you were to observe a group of supervisors or department managers for a few days, you would see them regularly detailing what activities have to be done, the order in which they are to be done, who is to do each, and when they are to be completed. What the managers are doing is called scheduling. The following discussion reviews some useful scheduling devices.

Hey, You’re the Boss Now!

Being a Good Project Manager Managing any project requires good negotiation skills. You will typically have to work across vertical and horizontal levels in an organization, deal with people over whom you have no formal authority, and negotiate schedules, deadlines, work assignments, and the like with people, possibly both inside and outside the organization.

project A one-time-only set of activities with a definite beginning and ending point.

project management The task of getting project activities done on time, within budget, and according to specifications.

376  Chapter 13 You can be more effective at negotiating if you use the following five recommended behaviours: • Begin with a positive overture.  Studies on negotiation show that concessions tend to be reciprocated and lead to agreements. As a result, begin bargaining with a positive overture— perhaps a small concession—and then reciprocate the other party’s concessions. • Address problems, not personalities.  Concentrate on the negotiation issues, not on the personal characteristics of the individual with whom you’re negotiating. When negotiations get tough, avoid the tendency to attack this person. Remember, it is that person’s ideas or position you disagree with, not him or her personally. Separate the people from the problem, and do not personalize differences. • Pay little attention to initial offers.  Treat an initial offer as merely a point of departure. Everyone must have an initial position. These initial offers tend to be extreme and idealistic. Treat them as such. • Emphasize win–win solutions.  Inexperienced negotiators often assume that their gain must come at the expense of the other party. That does not need to be the case. Assuming a zero-sum game means missed opportunities for tradeoffs that could benefit both sides. So if conditions are supportive, look for an integrative solution. Frame options in terms of the other party’s interests and look for solutions that can allow this person, as well as yourself, to declare a victory. • Create an open and trusting climate.  Skilled negotiators are better listeners, ask more questions, focus their arguments more directly, are less defensive, and have learned to avoid words or phrases that can irritate the person with whom they are negotiating (such as “generous offer,” “fair price,” or “reasonable arrangement”). In other words, they are better at creating the open and trusting climate that is necessary for reaching a win–win settlement.82

Gantt chart A planning tool that shows in bar graph form when tasks are supposed to be done and compares that with the actual progress on each.

HOW DO YOU USE A GANTT CHART?  The Gantt chart is a planning tool developed around the turn of the century by Henry Gantt. The idea behind the Gantt chart is relatively simple. It is essentially a bar graph, with time on the horizontal axis and activities to be scheduled on the vertical axis. The bars show output, both planned and actual, over a period of time. The Gantt chart visually shows when tasks are supposed to be done and compares the assigned date with the actual progress on each. This simple but important device allows managers to detail easily what has yet to be done to complete a job or project and to assess whether it is ahead of, behind, or on

Exhibit 13-8  Gantt Chart for Building a Community Hockey Arena Preliminary survey Site selection Design development Seeking major donors Council approval Select architect Establish final budget Obtain final funding Finalize design Hire contractor 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Time (in weeks)

Chapter 13  Operations Management 377

Exhibit 13-9  Developing PERT Charts Developing a PERT network requires the manager to identify all key activities needed to complete a project, rank them in order of dependence, and estimate each activity’s completion time. This procedure can be translated into five specific steps: 1. Identify every significant activity that must be achieved for a project to be completed. The accomplishment of each activity results in a set of events or outcomes. 2. Ascertain 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. Use circles to indicate events and arrows to represent activities. The result is a flowchart diagram that is called the PERT network. 4. Compute a time estimate for completing each activity, using a weighted average that employs an optimistic time estimate (to) of how long the activity would take under ideal conditions, a most-likely estimate (tm) of the time the activity normally should take, and a pessimistic estimate (tp) that represents the time that an activity should take under the worst possible conditions. The formula for calculating the expected time (te) is then te = to + 4tm + tp 6 5. Finally, using a network diagram that contains time estimates for each activity, the manager can determine a schedule for the start and finish dates of each activity and for the entire project. Any delays that occur along the critical path require the most attention because they delay the entire project. That is, the critical path has no slack in it; therefore, any delay along that path immediately translates into a delay in the final deadline for the completed project.

schedule. Exhibit 13-8 shows a Gantt chart that was developed for building a community hockey arena. Time is expressed in months across the bottom of the chart. Major activities are listed down the left side. (See Exhibit 13-8 for more details.) The planning comes in deciding what activities need to be done to get the arena built, the order in which those activities need to be done, and the time that should be allocated to each activity. The blue shading represents actual progress made in completing each activity. A Gantt chart, then, actually becomes a managerial control device as the manager looks for deviations from the plan. In this case, most activities were completed on time. If, for example, the “seeking major donors” activity was two weeks behind, the manager might want to take some corrective action to make up the lost time and to ensure that no further delays will occur. At this point, the manager can expect that the arena will be built at least two weeks late if no corrective action is taken. WHAT IS A PERT NETWORK ANALYSIS?  Gantt and load charts are helpful as long

as the activities or projects being scheduled are few and independent of each other. But what if a manager had to plan a large project—such as a complex reorganization, the launching of a major cost-reduction campaign, or the development of a new product—that required coordinating inputs from marketing, production, and product design personnel? Such projects require coordinating hundreds or thousands of activities, some of which must be done simultaneously and some of which cannot begin until earlier activities have been completed. If you are constructing a shopping mall, you obviously cannot start erecting walls until the foundation has been laid. How, then, to schedule such a complex project? Use PERT. A PERT network is a flowchart-like diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. With a PERT network, a project manager must think through what has to be done, determine which events depend on one another, and identify potential trouble spots. (See Exhibit 13-9.) PERT also makes it easy to compare the effects that alternative actions will have on scheduling and costs. PERT allows managers to monitor a project’s progress, identify possible bottlenecks, and shift resources as necessary to keep the project on schedule. To understand how to construct a PERT network, you need to know three terms: events, activities, and critical path. Let us define these terms, outline the steps in the PERT process, and then develop an example.

378  Chapter 13

Exhibit 13-10  Major Activities in Building a Community Hockey Arena Activity A. Carry out needs analysis/survey B. Determine location for hockey arena

critical path The longest or most timeconsuming sequence of events and activities required to complete a project in the shortest amount of time.

slack time The time difference between the critical path and all other paths.

insourcing Developing products and services in-house.

outsourcing Relocation of an operational process such as manufacturing to another country.

5

A

5 6

B, D

4

F. Select architect

E

3

G. Establish final budget

E

2

F, G

10

J. Hire contractor

Actions that take place.

2

A C

H. Secure outstanding funding

activities

None

C. Develop preliminary design

I. Finalize arena design

End points that represent the completion of major activities.

Time (weeks)

D. Source donations to support funding base E. Obtain council approval

events

Immediate Predecessor(s)

G

6

H, I

2

• Events are end points that represent the completion of major activities. Sometimes called milestones, events indicate that something significant has happened (such as receipt of purchased items) or an important component is finished. In PERT, events represent a point in time. • Activities, on the other hand, are the actions that take place. Each activity consumes time, as determined on the basis of the time or resources required to progress from one event to another. • The critical path is the longest or most time-consuming sequence of events and activities required to complete the project in the shortest amount of time.83 Let us apply PERT to a construction manager’s task of building a hockey arena. As a construction manager, you recognize that time really is money in your business. Delays can turn a profitable job into a money loser. Accordingly, you must determine how long it will take to complete the arena. You have carefully dissected the entire project into activities and events. Exhibit 13-10 outlines the major events in the arena construction project and your estimate of the expected time required to complete each activity. Exhibit 13-11 depicts the PERT network based on the data in Exhibit 13-10. HOW DOES PERT OPERATE?  Your PERT network tells you that if everything goes

as planned, it will take just over 32 weeks to build the arena. This time is calculated by tracing the network’s critical path: A C D E F H J. Any delay in completing the events along this path will delay the completion of the entire project. For example, if onshoring it took six weeks instead of four to get city council approval for the arena (event E), Relocating to lower-cost cities the entire project would be delayed by two weeks (or the time beyond that within the same country. expected). But a one-week delay for establishing the final budget (event G) would have little effect because that event Exhibit 13-11  A PERT Network for Building a is not on the critical path. By using PERT, the construction Community Arena manager would know that no corrective action would be needed. Further delays in installing the brick, however, F H B could present problems—for such delays may, in actuality, result in a new critical path. Now back to our original critiJ cal path dilemma. A E Slack time is the time difference between the critical path and all other paths. What use is there for slack? If the C D G I project manager notices some slippage on a critical activity,

perhaps slack time from a noncritical activity can be borrowed and temporarily assigned to work on the critical one. As you can see, PERT is both a planning and a control tool. Not only does PERT help estimate the times associated with scheduling a project, but it also gives clues about where controls should be placed. Because any event on the critical path that is delayed will delay the overall project (making it not only late but also probably over budget), attention needs to be focused on the critical activities at all times. As stated at the beginning of this chapter, it is the manager’s job to manage the organization’s operating systems, organizational control systems, and quality programs. That is the only way organizations will survive in today’s increasingly competitive global economy.

How Does Lean Manufacturing Work?

VILevi/Fotolia

Chapter 13  Operations Management 379

St. John’s regional health centre in Missouri was running operating rooms at 100 percent capacity. Emergency cases—about 20 percent of the full load—were causing the hospital to bump long-scheduled surgeries. Doctors often waited several hours to perform routine surgeries, and staff members regularly worked unplanned overtime. The solution was to leave an operating room empty. Crazy idea? The empty room added much needed slack to the system. After implementing the idea, the hospital was able to reduce the number of surgeries performed at night by 45 percent and increase overall surgical volume by 11 percent.84

Lean manufacturing and just-in-time (JIT) production are concerned with the timing and flow of parts through the operations system and ensuring it is using very little “fat” (e.g., excess inventory, employees, or space). The JIT approach was developed at Toyota to schedule production with low levels of inventory. But JIT and lean are philosophies that have principles to eliminate disruptions and waste and make the system as flexible as possible. If lean principles are implemented poorly, it may negatively affect product quality. However, the lean philosophy will alter a company’s fundamental definition of quality to focus on those things that are defined by the customer as adding value. If a particular process or feature does not add value for the customer, it should be eliminated. The end user defines “quality” as it relates to the product or service. If the customer receives a product that includes all the features she or he defines as valuable, it must also be available when he or she wants it. A customer will forgo a product with an additional feature if it means that the product is not produced quickly enough.

offshoring Relocation of an operational process to a country not connected by land.

nearshoring Relocating to a nearby country, perhaps one sharing the same border and a market with many geographic, economic, and political similarities.

reshoring Companies that bring production of goods back to the home country.

Managers have to make a decision whether to develop products and services in-house (known also as insourcing) or by outsourcing them to another organization. Outsourcing that features relocation of an operational process, such as manufacturing, to another country, typically in India, China, Malaysia, or other parts of Asia and Africa, is commonly referred to as offshoring. Onshoring is relocating to low-cost cities within the same country, while nearshoring is usually relocating to a country nearby, perhaps one sharing the same border and a market with many geographic, economic, and political similarities. This is becoming more common for Canadian and American companies. Outsourcing offers many advantages, including cost savings, external expertise, and an ability to grow more rapidly. Globalization and the Internet have allowed companies to focus

Kovalenko I/Fotolia

How to Decide About Outsourcing

A mining alliance in Australia is applying lean principles to coal mining. It is using modular building design to save time and money in construction of processing plants. Engines in the alliance’s $5-million trucks are being replaced just-in-time rather than as prescribed by manufacturers, which has increased productivity by 13 percent. Some mines are even using Formula One–style pit stops to improve refuelling of trucks and other vehicles.85

Marc Xavier/Fotolia

380  Chapter 13

Otis Elevator relocated its plant from Mexico to South Carolina to save money and help fill orders faster by putting the manufacturing of elevators closer to the engineers who design them and their customers. The reshoring initiative has not gone easily, with production delays, a backlog of orders, and customer cancellations.87

on their core competencies and farm out the rest of their operational processes or functional activities, such as IT, accounting, and technical support. This may provide companies with better access to technology, faster speed to market, increased operational flexibility, and lower risk exposure. Recently there has been a backlash against companies using offshoring, leading companies to bring production of goods back to the home country, or reshoring. Rising energy prices, wage inflation, and customer demand are some of the factors leading Canadian and US companies to bring back the production of goods bound for domestic markets. Firms that reshore successfully take the time to understand the domestic market in terms of labour, utility services and rates, taxation, government support, transportation costs, and product demand.86 In Ontario, plant closures and an aging workforce have depleted the pool of skilled manufacturing workers.

Chapter Summary Learning Objectives Checklist 13.1 Define operations management, and explain its role. Operations management is the transformation process that converts resources into finished goods and services. Manufacturing organizations produce physical goods. Service organizations produce nonphysical outputs in the form of services. Productivity is a composite of people and operations variables. A manager should look for ways to successfully integrate people into the overall operations systems. Organizations must recognize the crucial role that operations management plays as part of their overall strategy in achieving successful performance.

13.3 Describe how value chain management is done. The six main requirements for successful value chain management include coordination and collaboration, investment in technology, organizational processes, leadership, employees or human resources, and organizational culture and attitudes. The obstacles to value chain management include organizational barriers (refusal to share information, reluctance to shake up the status quo, or security issues), unsupportive cultural attitudes, lack of required capabilities, and employees unwilling or unable to do it.

13.4 Discuss contemporary issues in managing operations.

13.2 Define the nature and purpose of value chain management. The value chain is the sequence of organizational work activities that add value at each step from raw materials to finished product. Value chain management is the process of managing the sequence of activities and information along the entire product chain. The goal of value chain management is to create a value chain strategy that meets and exceeds customers’ needs and desires and allows for full and seamless integration among all members of the chain. Four benefits from value chain management include improved procurement, improved logistics, improved product development, and enhanced customer order management. Lean techniques have to be balanced with quality ­objectives.

Companies are looking at ways to harness technology to improve their operations management by extensive collaboration and cost control. ISO 9000 is a series of international quality management standards that set uniform guidelines for processes to ensure that products conform to customer requirements. Six Sigma is a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. Project management involves getting a project’s activities done on time, within budget, and accomplished to specifications. A project is a one-time-only set of activities that has a definite beginning and ending point in time. Popular project scheduling tools include Gantt charts, load charts, and PERT network analysis. Lean manufacturing and just-in-time are philosophies about minimizing waste. Organizations need to decide whether outsourcing is right for them and consider the various options, such as offshoring, onshoring, and nearshoring.

Chapter 13  Operations Management 381

Discussion Questions 1. What is operations management, and what strategic role does it play? 2. Do you think the need for operations management is greater for manufacturing or service organizations? Explain. 3. What are supply and value chains? What is value chain management? What is the goal of value chain management?

4. What types of organizational benefits does value chain management provide? What obstacles stand in the way of successful value chain management? 5. Explain why managing productivity is important in operations management. 6. Select a company you are familiar with. Describe its value chain. Be as specific as possible in your description. Evaluate how it “uses” the value chain to create value.

Developing Management Skills Being a Good Conflict Manager Managing any project will require good conflict management skills. You’ll typically have to work across vertical and horizontal levels in the organization, deal with people over whom you have no formal authority, and negotiate schedules, deadlines, work assignments, and the like with people possibly both inside and outside the organization. PRACTISING THE SKILL To manage conflict effectively, you need to know yourself, as well as the conflicting parties; to understand the situation that has created the conflict; and to be aware of your options.88 • What’s your underlying conflict-handling style?  Most of us have the ability to vary our conflict response according to the situation, but each of us has a preferred style for handling conflicts. These styles include collaborating (accommodating various points of view to seek a win–win solution), compromising (we both give up something so there is no clear winner or loser), accommodating (self-sacrificing by putting others’ interests above your own), forcing (satisfying your own interest regardless of the impact on others), and avoiding (withdrawing from or suppressing differences). • Selectively choose the conflicts you want to handle.  Not every conflict justifies your attention. Avoidance may appear to be a cop-out, but it can sometimes be the most appropriate response. Avoid trivial conflicts, and save your efforts for the ones that count. • Evaluate the conflict parties.  Who is involved in the conflict? What interests do you or they represent? What are each party’s values, personality, feelings, and resources? • Assess the source of the conflict.  The most common sources of interpersonal conflicts in organizations are communication differences, structural differences (i.e., rules, territorial battles, budget conflicts, questions of authority), and personality and value differences. Communication conflicts are typically the easiest to

resolve, while personality and value differences the most difficult. Knowing the source of a conflict will narrow your choices of resolution techniques. • Select the best option.  In addition to the five preferred styles of handling conflict noted above, additional resolution techniques include expanding the scarce resource (such as a budget or promotion opportunities) that is causing the conflict; creating a shared goal that requires all parties to the conflict to cooperate on; providing behavioural-change intervention and counseling; and reorganizing jobs or departments.

What Is My Negotiation Style? Listed in Exhibit 13-12 are seven characteristics related to a person’s negotiating style. Each characteristic demonstrates a range of variation. Indicate your own preference by selecting a point along the 1-to-5 continuum for each characteristic. ANALYSIS AND INTERPRETATION People differ in the way they handle negotiations. Exhibit 13-12 attempts to tap the key dimensions that differentiate preferences in negotiation style. Add up the scores for the seven items. Your score will range between 7 and 35.

Exhibit 13-12  What Is My Negotiation Style? Approach

Confrontational

12345

Collaborative

Personality

Emotional

12345

Rational

Formality

High

12345

Low

Communication

Indirect

12345

Direct

Candidness

Closed

12345

Open

Search for options, not limited

Limited

12345

Many

Willingness to use power

Low

12345

High

SOURCES: Based on R. Fisher and W. Ury, Getting to Yes (New York: Penguin,

1981); and J. W. Salacuse, “Ten Ways That Culture Affects Negotiating Style: Some Survey Results,” Negotiation Journal (July 1998), pp. 221–239.

382  Chapter 13 Research indicates that negotiation style is influenced by a number of factors—including the situation, your cultural background, and your work occupation. Nevertheless, experts in negotiation generally recommend that individuals use a style that will result in a high score on this test. That is, they favour collaboration, rationality, a direct communication style, and so on. We think it best to consider your total score in a situational context. For instance, while a high total score may generally be favourable, the use of an informal style may be a handicap for North Americans or Europeans when negotiating with Nigerians, who favour high formality. Similarly, Latin Americans tend to show their emotions in negotiation. So if you’re negotiating with

Brazilians or Costa Ricans, a more emotional approach on your part may be appropriate or even expected. PRACTISING THE SKILL 1. Negotiate with a course instructor to raise the grade on an exam or paper on which you think you should have received a higher grade. 2. The next time you purchase a relatively expensive item (e.g., automobile, apartment lease, appliance, jewellery), negotiate a better price and gain some concessions such as an extended warranty, smaller down payment, maintenance services, or the like.

Team Exercises Be the Consultant As marketing director for Done Right, a regional homerepair chain, you’ve come up with a plan you believe has significant potential for future sales. Your plan involves a customer information service designed to help people make their homes more environmentally sensitive. Then, based on homeowners’ assessments of their homes’ environmental impact, your firm will be prepared to help them deal with problems or concerns they may uncover. You are really excited about the competitive potential of this new service. You envision pamphlets, in-store appearances by environmental experts, and contests for consumers and school kids.

After several weeks of preparations, you make your pitch to your boss, Nick Castro. You point out how the market for environmentally sensitive products is growing and how this growing demand represents the perfect opportunity for Done Right. Nick seems impressed by your presentation, but he’s expressed one major concern. He thinks your workload is already too heavy. He does not see how you are going to have enough time to start this new service and still be able to look after all of your other assigned marketing duties. People in the class should form pairs. One will play the marketing director; the other will play the role of Nick Castro. Nick seems convinced you cannot handle your present responsibilities and start the new service. Negotiate a solution.

Business Cases Tragedy in Fashion Although one fortunate and lucky young woman was pulled out alive after 17 days buried in the rubble, over 1100 workers perished in a deadly factory building collapse in Dhaka, Bangladesh, in April 2013.89 The Rana Plaza building collapse is now considered the deadliest disaster in the history of the clothing industry. As stated in this chapter, the dynamic competitive environment facing contemporary global organizations demands new solutions, but, as this story illustrates, sometimes those solutions have consequences—tragic consequences. As global apparel retailers reassess their operations management strategies, changes are likely to be forthcoming. Rock-bottom labour costs enticed global clothing giants to Bangladesh during the mid-2000s. Many of the retailers that have relied on these factories are known for cheap, “fast” apparel: H&M, Zara, Lee, Wrangler, J.C. Penney, and

Walmart. And when you’re selling many articles of clothing for $20 and under, it means your costs (especially when being shipped from another location halfway around the world) need to be tightly controlled. Also, the concept of fashion trends has changed over the past two decades. Where fashion used to be “good” for an entire season, now fashion styles, colours, shapes, and so forth, change, seemingly overnight.

The deadliest disaster in the history of the clothing industry Retailers like Zara and H&M have hooked customers on fast fashion—that is, clothes that go from concept and design to being in your local mall stores in a matter of weeks—and clothing has become a sort of “single-serving disposable item.” Now consumers are wanting new and different items

Chapter 13  Operations Management 383

almost continuously. There’s a “constant, ceaseless rotation through looks and styles.” Providing for that demand has placed a significant strain on the operations system behind this fast, cheap fashion. Hasty expansion of factory capacity, lax governmental enforcement of permits and approvals, and a focus on keeping costs as low as possible in whatever ways needed have become the focus of factory work culture in this developing country. Because garment factories in Bangladesh don’t have a lot of the more-sophisticated machinery, like China has, their edge in the fashion industry had always been basic, simply-constructed clothing. And as the fashion industry’s fashion emphasis changed, Bangladesh’s importance to the global clothing trade rose. In fact, in six years, it rose from the 8th top clothing exporter to the 3rd (after China and Italy). Both Bangladeshi factory owners and the government were fully aware of the importance of this industry to the country. Working conditions for factory employees in developing countries have long been less than desirable. Explosions and fires have been a continual problem, as have other unsafe work conditions. (Unfortunately, this isn’t just a problem of the retail fashion industry.) Workplace protections are expensive, which doesn’t work with consumers hooked on fashionable “cheap” clothing. However, with this latest tragic loss of life at this specific garment factory, the fashion industry’s decisions—good and bad—are now on the world stage for everyone to see and criticize. Says one outspoken critic, “What happened in Bangladesh is a game-changer because of the gravity of the situation and tremendous loss of life.” Now public policy and governmental groups around the world are turning up the heat on Bangladesh to reform its labour standards and are pressuring global retailers to more carefully monitor their sourcing standards. Several of the world’s largest apparel companies agreed to a significant plan to help fund fire safety and building improvements. Part of this agreement is to not hire/use manufacturers whose clothing factories fail to meet safety standards. Well-known European retailers who signed on included Hennes & Mauritz AB (H&M), Inditex (the Spanish parent company of Zara), Tesco PLC, and others. Major US retailers, including Walmart, Target, and Gap, chose not to sign that agreement because they felt it exposed them to unlimited liability. However, a group of nearly 20 US retailers did sign a pact in which they agreed to inspect all the factories they do business with and to set up basic safety standards.90 The Bangladeshi government also has pledged to raise wages for garment workers and to fix labour laws, making it easier for workers to form labour unions.

Discussion Questions 1. Discuss this from a value chain management perspective. What happened? How did it happen? Why did it happen? 2. How do incidents like this affect how managers work with a value chain?

3. Do some research on offshoring. What is it? What are the benefits and the drawbacks of offshoring as far as managing the operations system? 4. What can managers learn about managing operations from this situation? 5. Personal moral issue: Would you pay a higher price for “ethical” clothing? Why or why not? Discuss.

Cow-Milking Robots Dairy farmer Pascal Thuot, of Saint-Alexis, Quebec, modernized his farm in 2014 to the tune of $1.5 million. Small enclosures and restraints have been replaced with a huge indoor pen. Two milking robots now serve the 110 cows, who line up in front of the machines when they feel the urge.91 The robot reads an electronic chip on the collar and can determine when the cow was last milked. Before milking, a unit extends under the cow and cleans her udder; tubes carry the milk to a refrigerator.92 These robots provide data on the amount of milk produced, as well as the cow’s temperature, weight, and udder health. They relay this data right to Thuot’s smartphone.93 All these robots provide dairy farmers with more quality of life. Whereas a dairy farmer might normally have worked from 4 a.m. to 9 p.m., now their schedules are more like anyone else’s. “This brings quality of life to my employees. Their schedules are more flexible than before,” says Thuot.94

Milk production is up 50% The information tracked on the cows has improved their health, while reducing veterinary costs. Milking robots also have allowed farms to milk cows three times per day, instead of twice, increasing the milk yield per animal. For Thuot, that’s an increase of 50 percent.95 Thuot’s farm uses other robotic devices as well: two feed systems to drop food onto the ground for the cows, a machine that pushes silage along the centre aisle for improved food distribution, and a milk bar for feeding calves. Quebec features more dairy farms (5300) than any other province in Canada, but it is a sector in decline, with almost 25 percent of farms ceasing production over the past decade. Many farmers retire with no one to take their place. Instead of displacing workers, automation can actually save dairy farmers.

Discussion Questions 1. How can robotic milking systems help deal with an aging farming population? 2. What are the challenges presented by robotic milking? 3. Are robotics suited for all types of farming?

384  Chapter 13

Dreamliner Nightmare The 787 Dreamliner was born out of desperation.96 The year was 2003, and Boeing had just lost its title as the world’s largest plane manufacturer to European rival Airbus. Boeing’s then CEO had just resigned in a defence-contract scandal. And the company’s stock price had plunged to its lowest price in a decade. Remember, this was two years after the 9/11 terrorist attacks, and financially troubled airlines were reluctant to invest in new equipment. Boeing needed something revolutionary to win back customers. The Boeing 787 program descended from Boeing’s lean philosophy. Boeing initially consulted with 20 international systems suppliers, leading to the selection of carbon-fibre materials for the Dreamliner. Composites provided many benefits: reduced weight, leading to a 20 percent fuel reduction; enhanced modularity of the plane, reducing assembly time by 75 percent; ability to withstand higher pressure and suffer less corrosion; and higher cabin humidity, leading to a more comfortable interior cabin.97 During the Dreamliner’s development, Boeing’s board was primarily focused on keeping costs down. It was this priority focus that allowed Boeing to devise a unique approach in which suppliers would become partners and would finance and produce entire sections of the 787, taking on greater risk and also benefiting from a larger share of revenue from each jet sold. Boeing would manufacture 30 percent of each 787 and outsource the remainder. Main suppliers would build large sections of the plane that would be flown to Boeing’s factory to be assembled in three days and delivered to customers. The result was a technologically advanced aircraft that would be built by a global network of suppliers in three days, compared with a month the traditional way. And it was Boeing’s first aircraft built with lightweight composite materials (graphite, titanium, carbon fibre) rather than traditional metals, making the 787 a lighter and more efficient aircraft than previous models. Why was this so revolutionary? The 787 could fly farther, burn less fuel, and offer more passenger comforts than what was currently

available. The 787 had built-in sensors designed to help counter the effects of turbulence, making for a smoother flight. And it was designed to have more humid air, quieter engines, improved lighting, and the largest windows in the industry. Of course, airlines were eager to save money and entice customers, and ordered a record number of the planes. Despite its innovative features (or, as some critics said, maybe because of), the 787 faced many production setbacks and delays. (The plane was originally scheduled to be delivered in May 2008.) These delays were due to several issues, including design and manufacturing challenges— coordinating that many global suppliers, using new materials in the plane, and assembling the sophisticated components. However, three years after its first expected delivery date, Boeing handed over the first 787 on rainy and blustery September 26, 2011, in Everett, Washington, to Japan’s All Nippon Airways Co. The chief executive of Boeing’s commercial airplanes division said, “Today ... will always be remembered as the dawn of a new day in commercial aviation.” Boeing utilized what was called a Global Collaborative Environment (GCE), a virtual environment for constant collaboration. This new e-enabled environment (Exhibit 13-13) would integrate every aspect of Boeing’s and the suppliers’ operations through information technology. Each partner was provided with the same tools, technologies, and processes to collaborate electronically.98 In the 787’s first year of service, at least four aircraft suffered some type of electrical problem. Although such problems are not unusual, especially in the first year of a newly designed aircraft, a number of incidents, including an electrical fire aboard an All Nippon Dreamliner plane and a similar fire aboard a landed 787 at Boston’s Logan International Airport, led the US Federal Aviation Administration (FAA) to order a review of the design and manufacture of the Dreamliner. There obviously was concern over what the FAA found, because it proceeded to ground the entire Boeing 787 fleet. Aviation safety investigators focused their attention on the 787’s lithium-ion batteries, manufactured by a Japanese company GS Yuasa of Kyoto.

Exhibit 13-13  e-Enabled Supply Chain Process Design eCollaboration

Source eSourcing

Procurement eProcurement

• Build teams across functional enterprise boundaries in secure, virtual workplaces • Manage complex projects and project documentation electronically • Share data with secure, format-neutral tools

• Trading partner directory • Integrated suite of sourcing tools • Development and management of requests for information and requests for quotes • Real-time online negotiations • Integrated to enterprise requirements and procurement systems

• Host procurement onramp and electronic catalogues • Supplier management of customer purchase orders and other transaction documents via the Web • Integrated “machine-to-machine” connections with the Boeing supply chain

SOURCE: Based on L. M. Applegate, J. S. Valacich, M. E. Vatz, and C. Schneider (2006), “Boeing’s e-Enabled Advantage,”

Harvard Business Publishing, retrieved from each case collection.

Chapter 13  Operations Management 385

Boeing’s team immediately set to work to solve the issue because a grounded fleet is a big problem! In mid-March 2013, Boeing announced that it had come up with solutions for the Dreamliner problems. The 787’s chief engineer said, “We may never get to a single root cause.” But the engineers had looked at some 80 potential problems that could lead to a battery fire, categorized them into four groups, and come up with solutions for each group. A major part of the “fix” was a battery enclosure made of stainless steel, not designed to contain a fire, but to prevent the battery from ever having a fire to begin with by quickly starving any flame of oxygen. With the fix in place and approved by the FAA, a team of Dreamliner technicians fanned out

around the globe modifying the 787’s batteries. By the end of April 2013, the Dreamliner fleet went back into service.

Discussion Questions 1. What role does innovation play in managing an organization’s operations? 2. Describe the operations management issues that the Dreamliner team faced. Could these issues have been avoided? Why or why not? 3. Is a global network of suppliers the future of operations management? Discuss.

Glossary A 360-degree appraisal  A performance appraisal method that uses feedback from supervisors, employees, co-workers, and customers in conjunction with another appraisal method. accountability  The need to report and justify work to a manager’s superiors. acquired diversity  A company’s acquisition of a global mindset and social media skills to enable it to better understand and appreciate diversity. active listening  Listening for full meaning without making premature judgments or interpretations. activities  Actions that take place. adjective rating scales  A performance appraisal method in which the evaluator rates an employee on a set of performance factors. adjourning  The final stage of team development for temporary teams, in which members are concerned with wrapping up activities rather than task performance. anonymous mentoring  Using a mentor outside an organization who can provide anonymity and perspective. authority  The rights inherent in a managerial position to tell people what to do and to expect them to do it.

B

boundaryless organization  An organization that is not defined by a chain of command, places no limits on spans of control, and replaces departments with empowered teams. bounded rationality  Limitations on a person’s ability to interpret, process, and act on information. business model  A strategic design for how a company intends to profit from its strategies, work processes, and work activities.

C calm waters metaphor  A description of organizational change that likens that change to a large ship making a predictable trip across a calm sea and experiencing an occasional storm. capabilities  An organization’s skills and abilities that enable it to do the work activities needed in its business. career  The sequence of positions held by a person during his or her lifetime. centralization  The degree to which decision making is concentrated at a single point in the organization. certainty  A condition in which a decision maker can make accurate decisions because the outcome of every alternative is known. chain of command  The continuous line of authority that extends from the top of the organization to the lowest level and clarifies who reports to whom.

balanced scorecard  A performance measurement tool that looks at four areas that contribute to an organization’s performance: finance, customer, internal business process, and learning and growth assets.

change agent  Someone who acts as a catalyst and assumes the responsibility for managing the change process.

basic corrective action  Corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation.

charismatic leader  An enthusiastic, self-confident leader whose personality and actions influence people to behave in certain ways.

behaviourally anchored rating scales (BARS)  A performance appraisal method in which the evaluator rates an employee on examples of actual job behaviours.

civil servants  People who work in a local, provincial, or federal government department.

behavioural theories of leadership  Theories that isolate behaviours that differentiate effective leaders from ineffective leaders. benchmark  The standard of excellence against which to measure and compare. benchmarking  The search for the best practices among competitors or noncompetitors that lead to their superior performance.

channel  The medium by which a message travels.

code of ethics  A formal statement of an organization’s primary values and the ethical rules it expects its employees to follow. coercive power  The power a leader has through his or her ability to punish or control. commitment concept  The idea that plans should extend far enough to meet those commitments made when the plans were developed. communication  A transfer of understanding and meaning from one person to another.

big data  The vast amount of quantifiable information that can be analyzed by highly sophisticated data processing.

communication process  The seven-part process of transferring and understanding of meaning.

body language  Nonverbal communication cues such as facial expressions, gestures, and other body movements.

communities of practice  Groups of people who share a concern, a set of problems, or a passion about a topic and

386

Glossary 387

who deepen their knowledge and expertise in that area by interacting on an ongoing basis.

customer departmentalization  Grouping jobs on the basis of customers who have common needs or problems.

competitive advantage  What sets an organization apart; its distinctive edge.

D

compressed workweek  A workweek where employees work longer hours per day but fewer days per week.

decentralization  The degree to which lower-level employees provide input or actually make decisions.

conceptual skills  A manager’s ability to analyze and diagnose complex situations. concurrent control  A type of control that takes place while an activity is in progress. conflict  Perceived differences that result in some form of interference or opposition. contingency approach (or situational approach)  An approach to management that says that individual organizations, employees, and situations are different and require different ways of managing. contingent workers  Temporary, freelance, or contract workers whose employment is contingent upon demand for their services. control process  A three-step process that includes measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards. controlling  A management function that involves monitoring actual performance, comparing actual performance to a standard, and taking corrective action when necessary. control  The process of monitoring activities to ensure that they are being accomplished as planned, and correcting any significant deviations. core competencies  An organization’s major value-creating skills, capabilities, and resources that determine its competitive weapons. corporate governance  The system used to govern a corporation so that the interests of corporate owners are protected. cost leadership strategy  When an organization competes on the basis of having the lowest costs in its industry. creativity  The ability to produce novel and useful ideas. credibility  The degree to which someone is perceived as honest, competent, and able to inspire. critical incidents  A performance appraisal method in which the evaluator focuses on the critical or key behaviours that separate effective from ineffective job performance.

decision criteria  Criteria that define what is relevant in making a decision. decision  A choice from two or more alternatives. decision-making process  A set of eight steps that includes identifying a problem, selecting an alternative, and evaluating the decision’s effectiveness. decoding  Translating a received message. delegation  The assignment of authority to another person to carry out specific duties, allowing the employee to make some of the decisions. departmentalization  The basis on which jobs are grouped together. design thinking  Approaching management problems as designers approach design problems. differentiation strategy  When an organization competes on the basis of having unique products that are widely valued by customers. directional plans  Plans that are flexible and that set out general guidelines. discipline  Actions taken by a manager to enforce an organization’s standards and regulations. distributive justice  Perceived fairness of the amount and allocation of rewards among individuals. divisional structure  An organizational structure that consists of separate business units or divisions. division of labour (or job specialization)  The breakdown of jobs into narrow, repetitive tasks. downsizing  The planned elimination of jobs in an organization. drive to acquire  The drive to seek, take control of, and retain objects and personal experiences. drive to bond  The drive to form social relationships with others. drive to defend  The drive to protect ourselves both physically and socially. drive to learn  The drive to satisfy our curiosity and understand ourselves and the world around us.

E

critical path  The longest or most time-consuming sequence of events and activities required to complete a project in the shortest amount of time.

economic value added (EVA)  A financial tool that measures corporate and divisional performance; calculated by taking after-tax operating profit minus the total annual cost of capital.

cross-functional teams  Work teams made up of individuals who are experts in various functional specialties.

effectiveness  Completing activities so that organizational goals are achieved.

Crown corporations  Commercial companies owned by the government but independently managed.

efficiency  Getting the most output from the least amount of inputs.

388 Glossary employee assistance programs (EAPs)  Programs offered by organizations to help employees overcome personal and health-related problems.

feedforward control  A type of control that focuses on preventing anticipated problems, because it takes place before the actual activity.

employee counselling  A process designed to help employees overcome performance-related problems.

Fiedler contingency model  Leadership theory proposing that effective group performance depends on the proper match between a leader’s style and the degree to which the situation allowed the leader to control and influence.

employee empowerment  Giving more authority to employees to make decisions. employee recognition programs  Reward programs that provide managers with opportunities to give employees personal attention and express interest, approval, and appreciation for a job well done. employee theft  Any unauthorized taking of company property by employees for their personal use. employee training  A learning experience that seeks a relatively permanent change in employees by improving their ability to perform on the job.

filtering  Deliberately manipulating information to make it appear more favourable to the receiver. first-line managers  Supervisors responsible for directing the day-to-day activities of nonmanagerial employees. flexible work hours (flextime)  A scheduling option in which employees are required to work a specific number of hours per week but are free to vary those hours within certain limits.

encoding  Converting a message into symbolic form.

flextime  A work scheduling system in which employees are required to work a specific number of hours per week but can vary when they work those hours within certain limits.

environmental complexity  The number of components in an organization’s environment and the extent of the organization’s knowledge about those components.

focus strategy  When an organization competes in a narrow segment or niche with either a cost focus or a differentiation focus.

environmental uncertainty  The degree of change and the degree of complexity in an organization’s environment.

foreign subsidiary  An approach to going global that involves a direct investment in a foreign country by setting up a separate and independent production facility or office.

empowerment  The act of increasing the decision-making discretion of workers.

equity theory  The theory that an employee compares his or her job’s input–output ratio with that of relevant others and then responds to correct any inequity. escalation of commitment  An increased commitment to a previous decision despite evidence that the decision might have been wrong. ethical communication  Presented material that contains all relevant information, is true in every sense, and is not deceptive in any way. ethics  Rules and principles that define right and wrong behaviour. events  End points that represent the completion of major activities. expectancy theory  The theory that an individual tends to act in a certain way based on the expectation that the action will be followed by a given outcome and on the attractiveness of that outcome to the individual. expert power  The influence a leader has based on his or her expertise, special skills, or knowledge. exporting  An approach to going global that involves making products at home and selling them abroad. external environment  Outside forces and institutions that can potentially affect the organization’s performance.

formalization  The degree to which jobs within the organization are standardized and the extent to which employee behaviour is guided by rules and procedures. forming  The first stage of team development, in which people join the group and then define the team’s purpose, structure, and leadership. four-drive theory  The theory that behaviour is influenced by our innate drives to acquire, bond, learn, and defend. franchising  An approach to going global in which a service organization gives a person or group the right to sell a product, using specific business methods and practices that are standardized. functional departmentalization  Grouping jobs by functions performed. functional structure  An organizational structure that groups similar or related occupational specialties together.

G gamification  Applying typical aspects of game playing to other areas of activity, especially in a work setting.

F

Gantt chart  A planning tool that shows in bar graph form when tasks are supposed to be done and compares that with the actual progress on each.

family-friendly benefits  Benefits that accommodate employees’ needs for work–life balance.

general administrative theory  Descriptions of what managers do and what constitutes good management practice.

feedback  Checking to see how successfully a message has been transferred.

general environment  Broad external conditions that may affect the organization.

feedback control  A type of control that takes place after a work activity is done.

geographical departmentalization  Grouping jobs on the basis of territory or geography.

Glossary 389

global corporation  An international company that centralizes management and other decisions in the home country.

Industrial Revolution  The advent of machine power, mass production, and efficient transportation that began in the late eighteenth century in Great Britain.

global sourcing  Purchasing materials or labour from around the world, wherever they are cheapest.

information overload  What results when information exceeds processing capacity.

goals (objectives)  Desired outcomes for individuals, groups, or entire organizations.

inherent diversity  The gender, racial, and socioeconomic diversity of an organization

goal-setting theory  The proposition that specific goals increase performance and that difficult goals, when accepted, result in higher performance than do easy goals.

innovation  The process of taking a creative idea and turning it into a useful product, service, or method of operation.

grapevine  An unofficial channel of communication.

insourcing  Developing products and services in-house.

group  Two or more interacting and interdependent individuals who come together to achieve specific goals.

integrative social contracts theory  A view of ethics proposing that ethical decisions be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong.

group cohesiveness  The degree to which group members are attracted to each other and share the group’s goals. group mentoring  Millennials sharing ideas in groups in a peer-to-peer format. groupthink  The withholding by group members of different views in order to appear to be in agreement. growth strategy  A corporate strategy in which an organization expands the number of markets served or the products offered either through its current business(es) or through new business(es).

interpersonal skills  A manager’s ability to work with, understand, mentor, and motivate others, both individually and in groups. intuitive decision making  Making decisions on the basis of experience, feelings, and accumulated judgment. ISO 9000  A series of international quality standards that set uniform guidelines for processes to ensure that products conform to customer requirements.

H

J

Hawthorne studies  Research done in the late 1920s and early 1930s devised by Western Electric industrial engineers to examine the effect of different work environment changes on worker productivity, which led to a new emphasis on the human factor in the functioning of organizations and the attainment of their goals.

job analysis  An assessment that defines jobs and the behaviours necessary to perform them.

heuristics  Rules of thumb that managers use to simplify decision making. hierarchy of needs theory  Maslow’s theory proposing a hierarchy of five human needs: physiological, safety, social, esteem, and self-actualization; as each need becomes satisfied, the next need becomes dominant. human resource inventory  A report listing important information about employees such as name, education, training, skills, languages spoken, and so forth. human resource management (HRM)  The management function concerned with getting, training, motivating, and keeping competent employees. hygiene factors  Factors that eliminate job dissatisfaction but do not motivate.

I idea champions  Individuals who actively and enthusiastically support new ideas, build support for them, overcome resistance to them, and ensure that innovations are implemented.

jargon  Technical language specific to a discipline or industry.

job characteristics model (JCM)  A framework for analyzing and designing jobs that identifies five primary core job dimensions, their interrelationships, and their impact on outcomes. job description  A written statement of what a jobholder does, how the job is done, and why the job is done. job design  The way tasks are combined to form complete jobs. job enrichment  The vertical expansion of a job by adding planning and evaluation responsibilities. job sharing  When two or more people split a full-time job. job specification  A statement of the minimum qualifications that a person must possess to perform a given job successfully. joint venture  An approach to going global in which the partners agree to form a separate, independent organization for some business purpose; it is a type of strategic alliance.

K

immediate corrective action  Corrective action that corrects problems at once to get performance back on track.

karoshi  A Japanese term that refers to a sudden death caused by overworking.

importing  An approach to going global that involves acquiring products made abroad and selling them at home.

knowledge management  Cultivating a learning culture in which organizational members systematically gather knowledge and share it with others.

390 Glossary

L layoff-survivor sickness  A set of attitudes, perceptions, and behaviours of employees who survive layoffs. leader  Someone who can influence others and provide vision and strategy to the organization. leader–member exchange (LMX) theory  A leadership theory that says leaders create in-groups and out-groups, and those in the in-group will have higher performance ratings, less turnover, and greater job satisfaction. leader-participation model  A leadership contingency theory that’s based on a set of sequential rules for determining how much participation a leader uses in decision making according to different types of situations. leadership  The process of influencing individuals or groups toward the achievement of goals. leading  A management function that involves motivating subordinates, directing the work of individuals or teams, selecting the most effective communication channels, and resolving employee behaviour issues. learning organization  An organization that has developed the capacity to continuously learn, adapt, and change. least-preferred co-worker (LPC) questionnaire  A questionnaire that measures whether a leader was task or ­relationship oriented. legitimate power  The power a leader has as a result of his or her position in the organization. licensing  An approach to going global in which a manufacturer gives another organization the right to use its brand name, technology, or product specifications. line managers  Managers responsible for the essential activities of the organization, including production and sales. long-term plans  Plans with a time frame beyond one year. lower-level managers  Managers at the lowest level of the organization, who manage the work of nonmanagerial employees directly or indirectly involved with the production or creation of the organization’s products.

M

manager  Someone who works with and through other people by coordinating their work activities in order to accomplish organizational goals. manufacturing organizations  Organizations that produce physical goods. market economy  An economic system in which resources are primarily owned and controlled by the private sector. market value added (MVA)  A financial tool that measures the stock market’s estimate of the value of a firm’s past and expected capital investment projects. matrix structure  An organizational structure that assigns specialists from different functional departments to work on one or more projects. mechanistic organization  An organization that is rigid and tightly controlled. message  A purpose for communicating that’s to be conveyed. middle managers  Managers between the first-line level and the top level of the organization, who manage the work of first-line managers. motivation  An individual’s willingness to exert high levels of effort to reach organizational goals, conditioned by the degree to which that effort satisfies some individual need. motivators  Factors that increase job satisfaction and motivation. multidomestic corporation  An international company that decentralizes management and other decisions to the local country. multinational corporation (MNC)  A broad term referring to any and all types of international companies that maintain operations in multiple countries. multiperson comparisons  A performance appraisal method in which one individual’s performance is compared with that of others.

N national culture  The values and attitudes shared by individuals from a specific country that shape their behaviour and beliefs about what is important.

management  Coordinating work activities so that they are completed efficiently and effectively with and through other people.

nearshoring  Relocating to a nearby country, perhaps one sharing the same border and a market with many geographic, economic, and political similarities.

management by objectives (MBO)  An approach to goal setting in which specific measurable goals are jointly set by employees and their managers, progress toward ­accomplishing those goals is periodically reviewed, and rewards are allocated on the basis of this progress.

need  An internal state that makes certain outcomes appear attractive.

management by walking around (MBWA)  When a manager is out in the work area interacting with employees.

need for affiliation (nAff)  The desire for friendly and close interpersonal relationships.

management functions  Planning, organizing, leading, and controlling.

need for power (nPow)  The need to make others behave in a way that they would not have behaved otherwise.

management information system (MIS)  A system used to provide management with needed information on a regular basis.

network organization  A small core organization that outsources major business functions.

management roles  Specific categories of managerial behaviour.

need for achievement (nAch)  The drive to excel, to achieve in relation to a set of standards, and to strive to succeed.

nongovernmental organization (NGO)  A nongovernmental organization that emphasizes humanitarian issues, development, and sustainability.

Glossary 391

nonmanagerial employees  People who work directly on a job or task and have no responsibility for overseeing the work of others. nonprofit sector  The part of the economy run by organizations that operate for purposes other than making a profit (that is, providing charity or services). nonprogrammed decisions  Decisions that are unique and nonrecurring and require custom-made solutions. norming  The third stage of team development, which is characterized by close relationships and cohesiveness. norms  Standards or expectations that are accepted and shared by a group’s members.

O offshoring  Relocation of an operational process to a country not connected by land. onshoring  Relocating to lower-cost cities within the same country.

tasks are to be grouped, who reports to whom, and where decisions are to be made. orientation  The introduction of a new employee to his or her job and to the organization. outsourcing  Relocation of an operational process such as manufacturing to another country.

P path-goal theory  A leadership theory that says the leader’s job is to assist his or her followers in attaining their goals and to provide the necessary direction and support to ensure that their goals are compatible with the overall objectives of the group or organization. pay-for-performance programs  Variable compensation plans that pay employees on the basis of some performance measure. performance  The end result of an activity.

open-book management  A motivational approach in which an organization’s financial statements (the “books”) are shared with all employees.

performance management system  A process of establishing performance standards and evaluating performance in order to arrive at objective human resource decisions and to provide documentation in support of those decisions.

open systems  Systems that dynamically interact with their environment.

performance-simulation tests  Selection devices based on actual job behaviours.

operational plans  Plans that specify the details of how the overall goals are to be achieved.

performing  The fourth stage of team development, in which the team structure is fully functional and accepted by team members.

operations management  The study and application of the transformation process. opportunities  Positive trends in external environmental factors. organic organization  An organization that is highly adaptive and flexible. organization  A deliberate arrangement of people who act together to accomplish some specific purpose. organizational behaviour (OB)  The field of study that researches the actions (behaviours) of people at work. organizational change  Any alteration of people, structure, or technology in an organization. organizational culture  A system of shared values, norms, and beliefs held by organizational members that determines, in large degree, how employees act. organizational design  The process of developing or changing an organization’s structure. organizational development (OD)  Techniques or programs meant to change people and the nature and quality of interpersonal work relationships. organizational effectiveness  A measure of how appropriate organizational goals are and how well an organization is achieving those goals.

PESTEL analysis  A way for a company to align its strategy with the external environment by analyzing six contextual factors that shape the external environment: political, economic, sociocultural, technological, environmental, and legal. planned economy  An economic system in which all economic decisions are planned by a central government. planning  A management function that involves defining goals, establishing a strategy for achieving those goals, and developing plans to integrate and coordinate activities. plans  Documents that outline how goals are going to be met and describe resource allocations, schedules, and other necessary actions to accomplish the goals. policy  A guideline for making a decision. political skills  A manager’s ability to build a power base and establish the right connections. power  An individual’s capacity to influence decisions. principles of management  Fayol’s fundamental or universal principles of management practice. privately held organizations  Companies whose shares are not available on the stock exchange but are privately held.

organizational performance  The accumulated end results of all the organization’s work activities.

private sector  The part of the economy run by organizations that are free from direct government control; enterprises in this sector operate to make a profit.

organizational processes  The way organizational work is done.

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

organizational structure  How job tasks are formally divided, grouped, and coordinated within an organization.

procedural justice  Perceived fairness of the process used to determine the distribution of rewards.

organizing  A management function that involves determining what tasks are to be done, who is to do them, how the

procedure  A series of interrelated, sequential steps used to respond to a structured problem.

392 Glossary process departmentalization  Grouping jobs on the basis of product or customer flow.

responsibility  The obligation or expectation to perform any assigned duties.

product departmentalization  Grouping jobs by product line.

reverse mentoring  A junior employee providing insight and expertise on a certain topic to a senior executive.

productivity  The overall output of goods or services produced divided by the inputs needed to generate that output.

reward power  The power a leader has to give positive benefits or rewards.

programmed decision  A repetitive decision that can be handled using a routine approach. project  A one-time-only set of activities with a definite beginning and ending point. project management  The task of getting project activities done on time, within budget, and according to specifications. project structure  An organizational structure in which employees continuously work on projects. publicly held organization  A company whose shares are available on the stock exchange for public trading by brokers/dealers. public sector  The part of the economy directly controlled by government.

Q quality management  A philosophy of management driven by continual improvement and responding to customer needs and expectations. quantitative approach  The use of quantitative techniques to improve decision making.

rights view of ethics  A view of ethics concerned with respecting and protecting individual liberties and privileges. risk  A situation in which a decision maker is able to estimate the likelihood of certain outcomes. role ambiguity  When role expectations are not clearly understood. role conflicts  Work expectations that are hard to satisfy. role overload  Having more work to accomplish than time permits. role  Behaviour patterns expected of someone who occupies a given position in a social unit. rule  An explicit statement that tells a decision maker what he or she can or cannot do.

S satisfice  To accept solutions that are “good enough.” scientific management  The use of the scientific method to define the one best way for a job to be done. selection process  The process of screening job applicants to ensure that the most appropriate candidates are hired.

R

selective perception  Selectively perceiving or hearing a communication based on your own needs, motivations, experiences, or other personal characteristics.

range of variation  The acceptable degree of variation between actual performance and the standard.

service organizations  Organizations that produce nonphysical products in the form of services.

rational decision making  Making decisions that are consistent and value-maximizing within specified constraints.

sexual harassment  Any unwanted action or activity of a sexual nature that explicitly or implicitly affects an individual’s employment, performance, or work environment.

readiness  The extent to which people have the ability and willingness to accomplish a specific task. realistic job preview (RJP)  A preview of a job that includes both positive and negative information about the job and the company. recruitment  The process of locating, identifying, and attracting capable applicants. referent power  The power a leader has because of his or her desirable resources or personal traits. referents  Those things individuals compare themselves against in order to assess equity. relationship conflict  Conflict based on interpersonal relationships. reliability  The ability of a selection device to measure the same thing consistently. renewal strategy  A corporate strategy that addresses declining organizational performance.

short-term plans  Plans with a time frame of one year or less. simple structure  An organizational structure with low departmentalization, wide spans of control, authority centralized in a single person, and little formalization. single-use plans  A one-time plan specifically designed to meet the needs of a unique situation. Situational Leadership (SL)  A leadership theory that focuses on the readiness of followers. Six Sigma  A quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. skill-based pay  A pay system that rewards employees for the job skills and competencies they can demonstrate. slack time  The time difference between the critical path and all other paths.

reshoring  Companies that bring production of goods back to the home country.

social loafing  The tendency of individuals to expend less effort when working collectively than when working individually.

resources  An organization’s assets—financial, physical, human, intangible—that are used to develop, manufacture, and deliver products or services to customers.

social media  Forms of electronic communication through which users create online communities to share ideas, information, personal messages, and other content.

Glossary 393

social obligation  When a business firm engages in social actions because of its obligation to meet certain economic and legal responsibilities. social responsibility (corporate social responsibility, or CSR)  A business firm’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. social responsiveness  When a business firm engages in social actions in response to some popular social need. span of control  The number of employees a manager can efficiently and effectively manage. specific environment  The part of the external environment that is directly relevant to the achievement of an organization’s goals.

SWOT analysis  An analysis of the organization’s strengths, weaknesses, opportunities, and threats. synergy  Combined efforts that are greater than the sum of individual efforts. systems approach  An approach to management that views an organization as a system, which is a set of interrelated and interdependent parts arranged in a manner that produces a unified whole.

T task conflict  Conflict over content and goals of the work. team leaders  Individuals who are responsible for managing and facilitating the activities of a work team.

specific plans  Plans that are clearly defined and leave no room for interpretation.

team structure  An organizational structure in which the entire organization is made up of work groups or teams.

stability strategy  A corporate strategy in which an organization continues to do what it is currently doing.

technical skills  Job-specific knowledge and techniques needed to perform work tasks.

staff managers  Managers who work in the supporting activities of the organizations (such as human resources or accounting).

telecommuting  A work arrangement in which employees work at home and are linked to the workplace by computer.

stakeholders  Any constituencies in the organization’s external environment that are affected by the organization’s decisions and actions. standing plans  Ongoing plans that provide guidance for activities performed repeatedly. storming  The second stage of team development, which is characterized by intragroup conflict. strategic alliance  An approach to going global that involves a partnership between a domestic and a foreign company in which both share resources and knowledge in developing new products or building production facilities. strategic business units (SBUs)  An organization’s single businesses that are independent and formulate their own competitive strategies. strategic management  What managers do to develop the organization’s strategies. strategic management process  A six-step process that encompasses strategic planning, implementation, and evaluation. strategic plans  Plans that apply to the entire organization, establish the organization’s overall goals, and seek to position the organization in terms of its environment. strategies  The decisions and actions that determine the long-run performance of an organization.

telework  A job arrangement in which employees work at home and are linked to the workplace by computers and other technology. theory of justice view of ethics  A view of ethics in which managers impose and enforce rules fairly and impartially, and do so by following all legal rules and regulations. Theory X  The assumption that employees have little ambition, dislike work, want to avoid responsibility, and must be closely controlled to perform effectively. Theory Y  The assumption that employees can exercise selfdirection, accept and seek out responsibility, and consider work a natural activity. threats  Negative trends in external environmental factors. three-needs theory  McClelland’s theory that the needs for achievement, power, and affiliation are major motives in work. top managers  Managers at or near the top level of the organization, who are responsible for making organization-wide decisions and establishing the plans and goals that affect the entire organization. total quality management (TQM)  A managerial philosophy devoted to continual improvement and responding to customer needs and expectations.

strengths  Any activities the organization does well or any unique resources it has.

traditional goal setting  An approach to setting goals in which goals are set at the top of the organization and then broken into subgoals for each organizational level.

stress  Response to anxiety over intense demands, constraints, or opportunities.

trait theories of leadership  Theories that isolate characteristics (traits) that differentiate leaders from nonleaders.

stressors  Factors that cause stress.

transactional leaders  Leaders who guide or motivate their followers in the direction of established goals by clarifying role and task requirements.

strong cultures  Organizational cultures in which the key values are deeply held and widely shared. structured problems  A straightforward, familiar, and easily defined problem. sustainability  A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental, and social opportunities into its business strategies.

transformational leaders  Leaders who inspire followers to transcend their own self-interests for the good of the organization, and who have a profound and extraordinary effect on their followers. transformation process  The process that converts resources into finished goods and services.

394 Glossary transnational (borderless) organization (TNC)  A type of international company in which artificial geographical barriers are eliminated.

value chain  The entire series of work activities that add value at each step from raw materials to finished product.

trust  The belief in the integrity, character, and ability of a person.

value chain management (VCM)  The process of managing the sequence of activities and information along the entire value chain.

two-factor theory  Herzberg’s theory that intrinsic factors are related to job satisfaction and motivation, whereas extrinsic factors are related to job dissatisfaction. Type A personality  People who have a chronic sense of urgency and an excessive competitive drive. Type B personality  People who are relaxed and easygoing and accept change easily.

U uncertainty  A condition in which a decision maker is not certain about the outcomes and cannot even make reasonable probability estimates. unity of command  The management principle that states every employee should receive orders from only one superior. universality of management  The reality that management is needed in all types and sizes of organizations, at all organizational levels, in all organizational work areas, and in organizations in all countries around the globe.

variable pay  A pay system in which an individual’s compensation is contingent on performance. verbal intonation  An emphasis given to words or phrases that conveys meaning. virtual organization  An organization that has elements of a traditional organization but also relies on recent developments in information technology to get work done. vision and mission  The purpose of the organization. visionary leadership  The ability to create and articulate a realistic, credible, and attractive vision of the future that improves on the present situation.

W weaknesses  Activities the organization does not do well or resources it needs but does not possess.

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

wellness programs  Programs offered by organizations to help employees prevent health problems.

utilitarian view of ethics  A view of ethics maintaining that ethical decisions are made solely on the basis of their outcomes or consequences.

white-water rapids metaphor  A description of organizational change that likens that change to a small raft navigating a raging river.

V

work specialization  The degree to which tasks in an organization are subdivided into separate jobs; also known as division of labour.

validity  The proven relationship that exists between the selection device and some relevant job criterion. value  The performance characteristics, features and attributes, and other aspects of goods and services, for which customers are willing to give up resources.

work team  Two or more interacting and interdependent individuals whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills.

Your Essential Management Reading List Learning from key management experts can help you understand today’s management theory and practice. What follows is a list of some of the more influential management books.

Chapter 1: Introduction to Management and Organizations • The Essential Drucker and The Daily Drucker—Peter Drucker • Competitive Advantage: Creating and Sustaining Superior Performance—Michael Porter • In Search of Excellence: Lessons from America’s Best-Run Companies—Thomas J. Peters and Robert J. Waterman Jr. • The $100 Startup—Chris Guillebeau

Chapter 2: Environmental Constraints on Managers • Why Nations Fail—Daron Acemoglu and James Robinson • China Shakes the World—James Kynge • Breakout Nations—Ruchir Sharma

Chapter 3: Decision Making • Creativity, Inc.: Understanding the Unseen Forces That Stand in the Way of True Inspiration—Ed Catmull and Amy Wallace • The Art of Choosing—Sheena Iyengar • Behind Every Good Decision: How Anyone Can Use Business Analytics to Turn Data into Profitable Insight— Piyanka Jain and Puneet Sharma • Thinking Fast and Slow—Daniel Kahneman

Chapter 4: Planning and Strategic Management

Chapter 5: Organizational Structure and Design • Change by Design—Tim Brown • Building the Awesome Organization—Katherine Catlin and Jana Matthews • The Culture Game—Dan Mezick

Chapter 6: Human Resource Management • Games People Play—Eric Berne • First, Break All the Rules: What the World’s Greatest Managers Do Differently—Marcus Buckingham and Curt Coffman • Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life—Spencer Johnson

Chapter 7:  Managing Innovation and Change • The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It—Michael Gerber • The Innovator’s Dilemma—Clayton Christensen • Leading Change—John Kotter • Switch: How to Change Things When Change Is Hard— Chip Heath and Dan Heath

Chapter 8: Understanding Groups and Teams • How to Win Friends and Influence People—Dale Carnegie • The Mentor Leader: Secrets to Building People and Teams That Win Consistently—Tony Dungy • The Five Dysfunctions of a Team—Patrick Lencioni • The 17 Essential Qualities of a Team Player: Becoming the Kind of Person Every Team Wants—John Maxwell

Chapter 9: Motivating and Rewarding Employees • Don’t Sweat the Small Stuff—Richard Carlson

• The Lords of Strategy—Walter Kiechel

• Outliers—Malcolm Gladwell

• The End of Competitive Advantage—Rita Gunther McGrath

• The Power of Positive Thinking—Norman Vincent Peale

• Good Strategy Bad Strategy—Richard Rumelt

• Drive—Daniel Pink

395

396  Your Essential Management Reading List

Chapter 10: Leadership • The Power of Habit—Charles Duhigg • The End of Leadership—Barbara Kellerman • The Lords of Strategy—Walter Kiechel • Lean In: Women, Work, and the Will to Lead—Sheryl Sandberg

Chapter 11:  Managing Communication and Information • Words That Change Minds—Shelle Rose Charvet • How to Talk to Anyone—Leil Lowndes • Talk Like TED—Carmine Gallo

Chapter 12:  Foundations of Control • The Wealthy Barber—David Chilton • Enterprise Risk Management: From Incentives to Controls— James Lam

• Nine Minutes on Monday—James Robbins • The Dragon’s Den Guide to Investor-Ready Business Plans—John Vyge

Chapter 13:  Operations Management • The Goal—Eliyahu Goldratt • #pmot—Project Managers on Twitter is a useful hashtag used by professionals willing to share their experiences and insight • #ftpm—The First Time Project Managers hashtag is useful for those just getting started or who are project managers “by accident”

Endnotes Chapter 1 1. J. Geddes, “The Power Issue: The 50 Most Important People in Canada,” Maclean’s, December 2, 2013, pp. 18–20. 2. “Naheed Nenshi’s Biography,” http://blog.calgarymayor.ca/p/biography.html. 3. A Question of Ethics box based on M. S. Plakhotnik and T. S. Rocco, “A Succession Plan for First-Time Managers,” T&D, December 2011, 42–45; P. Brotherton, “New Managers Feeling Lost at Sea,” T&D, June 2011, 25; and “How Do We Help a New Manager Manage?” Workforce Management Online, June 16, 2011. 4. J. Geddes, “The Power Issue: The 50 Most Important People in Canada,” Maclean’s, December 2, 2013, pp. 18–20. 5. P. Drucker, Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1974). 6. K. A. Tucker and V. Allman, “Don’t Be a Cat-and-Mouse Manager,” Gallup Business Journal, http://businessjournal.gallup.com/content/12574/dont-be-a-cat-andmouse-manager.aspx. 7. See the Tenth Annual Survey of Canada’s Most Respected Corporations, conducted by Ipsos-Reid and sponsored by KPMG, which asks 250 of Canada’s leading CEOs to indicate which corporations they most respect in eight categories, http://www.rbc.com/newsroom/pdf/ CMRC2004En.pdf. 8. “WorkUSA 2004/2005: Effective Employees Drive Financial Results,” Watson Wyatt Worldwide, Washington, DC. 9. D. J. Campbell, “The Proactive Employee: Managing Workplace Initiative,” Academy of Management Executive, August 2000, pp. 52–66. 10. J. S. McClenahen, “Prairie Home Champion,” IndustryWeek, October 2005, pp. 45–47. 11. The Walt Disney Company, Letter to Shareholders, 2012 Annual Report, pp. 1–3. 12. S. J. Carroll and D. A. Gillen, “Are the Classical Management Functions Useful in Describing Managerial Work?” Academy of Management Review, January 1987, p. 48. 13. H. Fayol, Industrial and General Administration (Paris: Dunod, 1916). 14. For a comprehensive review of this question, see C. P. Hales, “What Do Managers Do? A Critical Review of the Evidence,” Journal of Management, January 1986, pp. 88–115. 15. D. Burnett Vachon and C. Lavis, “Women in Leadership: Perceptions and Priorities for Change, Report,” May 2013. The Conference Board of Canada; see also https:// www.osler.com/osler/media/Osler/reports/corporate-governance/2018-Diversity-Disclosure-PracticesWomen-in-leadership-roles-at-TSX-listed-companies.pdf. 16. Easton’s Group, “Reetu Gupta Named New President and CEO,” Easton’s Group of Hotels, https://eastonsgroup. com/reetu-gupta-named-new-president-and-ceo/. 17. Ibid. 18. See, for example, J. G. Harris, D. W. DeLong, and A. Donnellon, “Do You Have What It Takes to Be an

E-Manager?” Strategy and Leadership (August 2001): 10–14; C. Fletcher and C. Baldry, “A Study of Individual Differences and Self-Awareness in the Context of Multi-Source Feedback,” Journal of Occupational and Organizational Psychology (September 2000): 303–19; and R. L. Katz, “Skills of an Effective Administrator,” Harvard Business Review, September–October 1974, 90–102. 19. R. P. Tett, H. A. Guterman, A. Bleier, and P. J. Murphy, “Development and Content Validation of a ‘Hyperdimensional’ Taxonomy of Managerial Competence,” Human Performance 13, no. 3 (2000): 205–51. 20. D. Brown, “2017 Golden Pencil Winner: Darrell Jones,” Canadian Grocer, November 21, 2017, http://www. canadiangrocer.com/worth-reading/2017-golden-pencilwinner-darrell-jones-77022. 21. F. F. Reichheld, “Lead for Loyalty,” Harvard Business Review, July–August 2001, 76. 22. See, for instance, H. Ernst, W. D. Hoyer, M. Krafft, and K. Krieger, “Customer Relationship Management and Company Performance—The Mediating Role of New Product Performance,” Journal of the Academy of Marketing Science (April 2011): 290–306; J. P. Dotson and G. M. Allenby, “Investigating the Strategic Influence of Customer and Employee Satisfaction on Firm Financial Performance,” Marketing Science (September–October 2010): 895–908; R. Grewal, M. Chandrashekaran, and A. V. Citrin, “Customer Satisfaction Heterogeneity and Shareholder Value,” Journal of Marketing Research (August 2010): 612–26; M. Riemann, O. Schilke, and J. S. Thomas, “Customer Relationship Management and Firm Performance: The Mediating Role of Business Strategy,” Journal of the Academy of Marketing Science (Summer 2010): 326–46; and K. A. Eddleston, D. L. Kidder, and B. E. Litzky, “Who’s the Boss? Contending with Competing Expectations from Customers and Management,” Academy of Management Executive (November 2002): 85–95. 23. See, for instance, C. B. Blocker, D. J. Flint, M. B. Myers, and S. F. Slater, “Proactive Customer Orientation and Its Role for Creating Customer Value in Global Markets,” Journal of the Academy of Marketing Science (April 2011): 216–33; G. A. Gorry and R. A. Westbrook, “Once More, with Feeling: Empathy and Technology in Customer Care,” Business Horizons (March–April 2011): 125–34; M. Dixon, K. Freeman, and N. Toman, “Stop Trying to Delight Your Customers,” Harvard Business Review, July–August 2010, 116–22; D. M. Mayer, M. G. Ehrhart, and B. Schneider, “Service Attribute Boundary Conditions of the Service Climate-Customer Satisfaction Link,” Academy of Management Journal (October 2009): 1034–50; B. A. Gutek, M. Groth, and B. Cherry, “Achieving Service Success through Relationships and Enhanced Encounters,” Academy of Management Executive (November 2002): 132–44; Eddleston, Kidder, and Litzky, “Who’s the Boss? Contending with Competing Expectations from Customers and Management”; S. D. Pugh, J. Dietz, J. W. Wiley, and S. M. Brooks, “Driving Service Effectiveness through Employee-Customer Linkages,” Academy of Management Executive (November 2002): 73–84; S. D. Pugh, “Service with a Smile: Emotional Contagion in the Service

397

398 Endnotes

24.

25. 26.

27.

28. 29. 30. 31. 32. 33.

34.

35. 36. 37.

Encounter,” Academy of Management Journal (October 2001): 1018–27; W. C. Tsai, “Determinants and Consequences of Employee Displayed Positive Emotions,” Journal of Management 27, no. 4 (2001): 497–512; Naumann and Jackson, Jr., “One More Time: How Do You Satisfy Customers?”; and M. D. Hartline and O. C. Ferrell, “The Management of Customer-Contact Service Employees: An Empirical Investigation,” Journal of Marketing (October 1996): 52–70. Technology and the Manager’s Job box based on D. Bennett, “I’ll Have My Robots Talk to Your Robots,” Bloomberg BusinessWeek (February 21–27, 2011): 52–62; E. Spitznagel, “The Robot Revolution Is Coming,” Bloomberg BusinessWeek, January 17–23, 2011, 69–71; G. A. Fowler, “Holiday Hiring Call: People vs. Robots,” Wall Street Journal, December 20, 2010, B1+; A. Schwartz, “Bring Your Robot to Work Day,” Fast Company.com (November 2010): 72–74; and P. J. Hinds, T. L. Roberts, and H. Jones, “Whose Job Is It Anyway? A Study of Human-Robot Interaction in a Collaborative Task,” Human-Computer Interaction (March 2004): 151–81. Fast Company Staff, “World’s 50 Most Innovative Companies,” Fast Company, March 2015, 66+. “Top 15 Most Popular Social Networking Sites,” http:// www.ebizmba.com/articles/social-​networking-websites, February 2015; and “Social Media Update 2014,” Pew Research Center, http://www.pewinternet.org/2015/01/09/ social-media-update-2014/, January 9, 2015. A. Porterfield, “9 Companies Doing Social Media Right and Why,” Social Media Examiner, April 12, 2011, https:// www.socialmediaexaminer.com/9-companies-doingsocial-media-right-and-why/. Ibid. A. Taylor III, “BMW Gets Plugged In,” Fortune, March 18, 2013, 150–56. KPMG Global Sustainability Services, Sustainability Insights, October 2007. Vision 2050 Report, Overview, www.wbcsd.org/­ vision2050.aspx. Symposium on Sustainability—Profiles in Leadership, New York, October 2001. S. Y. Todd, K. J. Harris, R. B. Harris, and A. R. Wheeler, “Career Success Implications of Political Skill,” Journal of Social Psychology, June 2009, 179–204; G. R. Ferris, D. C. Treadway, P. L. Perrewé, R. L. Brouer, C. Douglas, and S. Lux, “Political Skill in Organizations,” Journal of Management, June 2007, 290–329; K. J. Harris, K. M. Kacmar, S. Zivnuska, and J. D. Shaw, “The Impact of Political Skill on Impression Management Effectiveness,” Journal of ­Applied Psychology, January 2007, 278–85; and G. R. ­Ferris, D. C. Treadway, R. W. Kolodinsky, W. A. Hochwarter, C. J. Kacmar, C. Douglas, and D. D. Frink, “Development and Validation of the Political Skill Inventory,” Journal of Management, February 2005, 126–52. S. A. Hewlett, M. Marshall, L. Sherbin, and T. Gonsalves, “Innovation, Diversity and Market Growth,” Center for Talent Innovation, 2013, retrieved from Conference Board of Canada, Human Capital in Review Focus on Diversity & Inclusion, vol. 4, no. 1, 2014. Ibid. Pew Research Center, “Millennials—A Portrait of Generation Next,” 2010, retrieved from Diane Piktialis and Kent A. Greenes, Bridging the Gaps, The Conference Board, 2008. Jeanne C. Meister and Karie Willyerd, “Mentoring Millennials,” Harvard Business Review, May 2010.

38. See Shopify, “Shopify Marks Fifth Anniversary,” Press Release, September 13, 2011, http://www.shopify.com/press/ articles/shopify-marks-fifth-anniversary.html; https:// expandedramblings.com/index.php/shopify-statistics/. 39. S. Silcoff, “A Rare Startup Success Story: Shopify Hits $1-Billion Milestone,” Globe and Mail, December 11, 2013, retrieved from http://www.theglobeandmail.com/ report-on-business/small-business/sb-money/businessfunding/a-rare-startup-success-story-shopify-hits-1-­ billion-milestone/article15892998/. 40. Ibid. 41. Industry Canada, Small Business Branch: Key Small Business Statistics, August 2013, retrieved from https://www. ic.gc.ca/eic/site/061.nsf/vwapj/KSBS-PSRPE_AugustAout2013_eng.pdf/$FILE/KSBS-PSRPE_AugustAout2013_eng.pdf. 42. See K. Chow, “Fastest-Growing Companies: Shopify,” Business Journal, May 16, 2011, http://www.obj.ca/ Other/Special-Reports/2011-05-16/article-2507771/ FASTEST-GROWING-COMPANIES% 3A-Shopify/1; Shopify, “Shopify Announces Build-A-Business Competition,” Press Release, 2012, http://www.shopify.com/ press/­articles/shopify-announces-build-a-businesscompetition.html. 43. See FuEL Awards, “Meet the Judges,” http://www. fuelawards.ca/judges. 44. See Shopify, “Shopify Announces $7 Million Series A Funding from Bessemer, FirstMark, and Felicis,” Press Release, December 13, 2010, http://www.shopify.com/ press/articles/7-million-series-a-funding.html. 45. R. Trikha, “Zappos Says Bye to Managers—What if You Had No Boss?” www.cybercoders.com/insights/, January 7, 2014; G. Anders, “No More Bosses for Zappos (A Cautionary Tale),” jobs.aol.com/articles/, January 7, 2014; M. Wohlsen, “The Next Big Thing You Missed: Companies That Work Better without Bosses,” www. wired.com/business/, January 7, 2014; C. Sweeney and J. Gosfield, “No Managers Required: How Zappos Ditched the Old Corporate Structure for Something New,” www. fastcompany.com, January 6, 2014; J. McGregor, “Zappos Says Goodbye to Bosses,” www.washingtonpost. com/blogs/on-leadership/, January 3, 2014; J. Edwards, “Zappos Is Getting Rid of All Job Titles and Managers, but Some Bosses Will Still Decide Who Gets Paid What,” www.businessinsider.com/, January 2, 2014; A. Groth, “Zappos Is Going Holacratic: No Job Titles, No Managers, No Hierarchy,” qz.com/, December 30, 2013; R. E. Silverman, “Managers? Who Needs Those?” Wall Street Journal, August 7, 2013, B1+; M. Shaer, “The Boss Stops Here,” nymag.com/news/features/, June 16, 2013; S. Wagreich, “A Billion Dollar Company with No Bosses? Yes, It Exists,” www.inc.com/, March 14, 2013; R. E. Silverman, “Who’s the Boss? There Isn’t One,” Wall Street Journal, June 20, 2012, B1+; G. Hamel, “First, Let’s Fire All the Managers”; and J. Badal, “Can a Company Be Run as a Democracy?” Wall Street Journal, April 23, 2007, B1. 46. C. Sweeney and J. Gosfield, “No Managers Required: How Zappos Ditched the Old Corporate Structure for ­Something New.” January 6, 2014, https://www.fastcompany. com/3024358/no-managers-required-how-zappos-ditchedthe-old-corporate-structure-for-somethin. 47. Ibid. 48. D. Richards, “At Zappos, Culture Pays,” www.strategybusiness.com/article, August 24, 2010.

Endnotes  399

49. A. Groth, “Zappos Is Going Holacratic: No Job Titles, No Managers, No Hierarchy.” 50. G. Anders, “No More Bosses for Zappos (A Cautionary Tale).” 51. R. E. Silverman, “At Zappos, Some Employees Find Offer to Leave Too Good to Refuse,” Wall Street Journal Online, May 7, 2015. 52. R. Feloni, “Zappos CEO Tony Hsieh Reveals What It Was Like Losing 18% of His Employees in a Radical Management Experiment --and Why It Was Worth It,” Business Insider, January 29, 2016, https://www.businessinsider. com.au/tony-hsieh-explains-how-zappos-reboundedfrom-employee-exodus-2016-1.

Supplement 1C 1. Entrepreneurship Module based on “Frequently Asked Questions,” U.S. Small Business Administration, www.sba. gov/advo (September 2008); D. E. Gumpert, “The Right Business Plan for the Job,” BusinessWeek Online, January 7, 2008; W. H. Stewart, “Risk Propensity Differences between Entrepreneurs and Managers: A Meta-Analytic Review,” Journal of Applied Psychology (February 2001): 145–53; I. O. Williamson, “Employer Legitimacy and Recruitment Success in Small Businesses,” Entrepreneurship Theory and Practice, Fall 2000, 27–42; R. L. Heneman, J. W. Tansky, and S. M. Camp, “Human Resource Management Practices in Small and Medium-Sized Enterprises: Unanswered Questions and Future Research Perspectives,” Entrepreneurship Theory and Practice, Fall 2000, 11–26; T. L. Hatten, Small Business: Entrepreneurship and Beyond (Upper Saddle River, NJ: Prentice Hall, 1997), 5; L. W. Busenitz, “Research on Entrepreneurial Alertness,” Journal of Small Business Management (October 1996): 35–44; J. M. Crant, “The Proactive Personality Scale as Predictor of Entrepreneurial Intentions,” Journal of Small Business Management (July 1996): 42–49; J. C. Collins and J. I. Porras, Built to Last: Successful Habits of Visionary Companies (New York: Harper Business, 1994); Max Depree, Leadership Jazz: The Essential Elements of a Great Leader, Dell; P. B. Robinson, D. V. Simpson, J. C. Huefner, and H. K. Hunt, “An Attitude Approach to the Prediction of Entrepreneurship,” Entrepreneurship Theory and Practice, Summer 1991, 13–31; P. F. Drucker, Innovation and Entrepreneurship: Practice and Principles (New York: Harper & Row, 1985); and J. W. Carland, F. Hoy, W. R. Boulton, and J. C. Carland, “Differentiating Entrepreneurs from Small Business Owners: A Conceptualization,” Academy of Management Review 9, no. 2 (1984): 354–59.

Chapter 2 1. Courtney Shea, “How Spin Master Conquered the Lucrative International Toy Market,” Canadian Business, September 13, 2018, https://www.canadianbusiness. com/lists-and-rankings/growth-500/how-spin-masterconquered-the-lucrative-international-toy-market/. 2. Ibid. 3. Ibid. 4. Christine Owram, “How Spin Master Has Defied the Odds to Transform into a $5.3-Billion Toy Powerhouse,” April 30, 2018, https://business.financialpost.com/ news/retail-marketing/spin-master-defies-tears-in-toyland-with-175-rally-since-ipo. 5. Ibid.

6. Courtney Shea, “How Spin Master Conquered the Lucrative International Toy Market,” Canadian Business, September 13, 2018, https://www.canadianbusiness. com/lists-and-rankings/growth-500/how-spin-masterconquered-the-lucrative-international-toy-market/. 7. C. Matlack, “The Growing Peril of a Connected World,” Bloomberg BusinessWeek, December 6–12, 2010, pp. 63–64. 8. J. S. Harrison and C. H. St. John, “Managing and Partnering with External Stakeholders,” Academy of Management Executive, May 1996, pp. 46–60. 9. A. J. Hillman and G. D. Keim, “Shareholder Value, Stakeholder Management, and Social Issues: What’s the Bottom Line?” Strategic Management Journal, March 2001, pp. 125–39; and J. Kotter and J. Heskett, Corporate Culture and Performance (New York: Free Press, 1992). 10. T. S. Mescon and G. S. Vozikis, “Federal Regulation— What Are the Costs?” Business, January–March 1982, pp. 33–39. 11. CBC Radio, “Interprovincial trade barriers costing us billions, says new Senate report,” June 17, 2016, retrieved from https://www.cbc.ca/radio/thecurrent/ the-current-for-june-17-2016-1.3639977/interprovincialtrade-barriers-costing-us-billions-says-new-senatereport-1.3639982. 12. R. Annan, for Goodmans LLP, “Merger Remedies in Canada,” Competition Bureau, November 4, 2005, http://www.competitionbureau.gc.ca/eic/site/ cb-bc.nsf/vwapj/richard-annan.pdf/$file/richardannan.pdf. 13. R. Hampson, “The Changing Face of American Jobs,” USA Today, January 13, 2011, 1A+; P. Izzo, “Economists Expect Shifting Work Force,” Wall Street Journal Online, February 11, 2010; and J. Lanhart, “Even in a Recovery, Some Jobs Won’t Return,” Wall Street Journal, January 12, 2010, A15. 14. T. Meelen and K. Frenken, “Stop Saying Uber Is Part of the Sharing Economy,” http://www.fastcoexist. com/3040863/stop-saying-uber-is-part-of-the-sharingeconomy, January 14, 2015; and “The Rise of the Sharing Economy,” The Economist, http://www.economist.com/ news/leaders/21573104-internet-everything-hire-risesharing-economy, March 9, 2013. 15. “Airbnb, Snapgoods and 12 More Pioneers of the ‘Share Economy,’” http://www.forbes.com/pictures/ eeji45emgkh/airbnb-snapgoods-and-12-more-pioneersof-the-share-economy/, 2015. 16. N. Ungerleider, “This ‘Airbnb for Creative Equipment’ Will Rent You Drones, Oculus Rifts, Google Glass, More,” Fast Company, http://www.fastcompany. com/3043160/tech-forecast/this-airbnb-for-creativeequipment-will-rent-you-drones-oculus-rifts-google-gl, March 6, 2015. 17. G. M. Eckhardt and F. Bardhi, “The Sharing Economy Isn’t about Sharing at All,” Harvard Business Review, https://hbr.org/2015/01/the-sharing-economy-isntabout-sharing-at-all, January 28, 2015. 18. See “Frito Lay Eliminating Trans Fat from Some Snacks,” Halifax Live.com, February 23, 2004, http://www.halifaxlive.com/snack_02232004_769.php. 19. G. Bonnell, “Food Industry Rushes to Drop Trans Fats,” Calgary Herald, March 11, 2004, p. D1. 20. “Banning Bad Fats,” CBC News, November 6, 2006, http://www.cbc.ca/news/background/fats/banning_ badfats.html.

400 Endnotes 21. Canadian Association of Petroleum Producers (CAPP), “2010 Responsible Canadian Energy Report,” http:// www.rce2010.ca. 22. Sustainable Development Technology Canada (SDTC), “Clean Technologies Help Green the Patch,” SDTC Information Feature, Globe and Mail, February 27, 2012. 23. A. Shama, “Management Under Fire: The Transformation of Management in the Soviet Union and Eastern Europe,” Academy of Management Executive, vol. 7, no. 1 (1993), pp. 22–35. 24. Council of Canadians, “Trans-Pacific Partnership,” http://www.international.gc.ca/trade-agreementsaccords-commerciaux/agr-acc/tpp-ptp/index. aspx?lang=eng. 25. J. Cowan, “The Next Free Trade Quagmire,” Canadian Business, November 13, 2013, p. 26. 26. G. Abramovich, “Google’s China Syndrome,” DM News, June 20, 2006, http://www.dmnews.com/cms/dmnews/search-marketing/37089.html. 27. E. Beinhocker, I. Davis, and L. Mendonca, “The 10 Trends You Have to Watch,” Harvard Business Review, July–August 2009, pp. 55–60 28. Brendan B. Read, “More Bell(s) Tolling for Indian Outsourcing,” TMCnet.com, http://call-center-software. tmcnet.com/topics/call-center-services/articles/50740more-bells-tolling-indianoutsourcing.htm; and Vikas Bajaj, “A New Capital of Call Centers,” New York Times, November 25, 2011, http://www.nytimes. com/2011/11/26/business/philippines-overtakes-indiaas-hub-ofcall-centers.html?pagewanted=all. 29. Mega Brands Inc., Annual Report 2006, http://www. megabrands.com/media/pdf/corpo/en/reports/2006_ annual_report_en.pdf; and Mega Brands Inc., “Mega Brands Reports Fourth Quarter and 2011 Results,” Press Release, March 12, 2012, http://www.megabrands.com/ media/pdf/corpo/en/PressReleaseQ4-20110314.pdf. 30. Statistics Canada, “The Daily: Trade by exporter characteristics: Goods, 2017,” May 25, 2018, retrieved from https://www150.statcan.gc.ca/n1/daily-quotidien/180525/dq180525a-eng.htm. 31. Industry Canada, International Trade, Canadian Economy (NAICS 11-91), https://www.ic.gc.ca/app/scr/sbms/ sbb/cis/internationalTrade.html?code=11-91&lang=eng. 32. Derek Sankey, “U.S. Franchisors Eye Canada for Growth,” Financial Post, November 17, 2009. 33. L. Frost, “Starbucks Lures French Café Society,” Associated Press, January 16, 2004. 34. J. Lorinc, “Gunning for Growth,” Canadian Business, October 20, 2014, pp. 17–18. 35. G. Hofstede, Culture’s Consequences: International Differences in Work-Related Values, 2nd ed. (Thousand Oaks, CA: Sage, 2001), pp. 9–15; and G. Hofstede, “The ­Cultural Relativity of Organizational Practices and Theories,” Journal of International Business Studies, Fall 1983, pp. 75–89. 36. H. L. Sirkin, P. Keenan, and A. Jackson, “The Hard Side of Change Management,” Harvard Business Review, vol. 3, no. 10 (October 1, 2005), pp. 108–18. 37. W. Pietersen, “The Mark Twain Dilemma: The Theory and Practice for Change Leadership,” Journal of Business Strategy, September–October 2002, pp. 32–37; C. Hymowitz, “To Maintain Success, Managers Must Learn How to Direct Change,” Wall Street Journal, August 13, 2002, p. B1; and J. E. Dutton, S. J. Ashford, R. M. O’Neill, and K. A. Lawrence, “Moves That Matter: Issue Selling and Organizational

Change,” Academy of Management Journal, August 2001, pp. 716–36. 38. P. A. McLagan, “The Change-Capable Organization,” Training & Development, January 2003, pp. 50–58. 39. M. Young and J. E. Post, “Managing to Communicate, Communicating to Manage: How Leading Companies Communicate with Employees,” Organizational Dynamics, Summer 1993, pp. 31–43. 40. M. Javidan, P. W. Dorfman, M. S. deLuque, and R. J. House, “In the Eye of the Beholder: Cross-Cultural ­Lessons in Leadership from Project GLOBE,” Academy of Management Perspective, February 2006, pp. 67–90; and E. Fagenson-Eland, E. A. Ensher, and W. W. Burke, “­Organization Development and Change Interventions: A Seven-Nation Comparison,” Journal of Applied Behavioral Science, December 2004, pp. 432–64. 41. E. Fagenson-Eland, E. A. Ensher, and W. W. Burke, “­Organization Development and Change Interventions: A Seven-Nation Comparison,” Journal of Applied Behavioral Science, December 2004, p. 461. 42. “Police Are Pleading with Google to Ditch a Feature in Its Waze App That Could Help Terrorists,” Business Insider, http://www.businessinsider.com/police-googlechange-waze-app-2015-2, February 7, 2015; The Associated Press, “Police Say Waze Cop-Tracker Is Threat to Officers,” CBS News.com, http://www.cbsnews.com/ news/police-say-waze-cop-tracker-is-threat-to-officers/, January 26, 2015; and J. Wells, “LA Residents Complain about ‘Waze Craze’,” www.cnbc.co/id/102261534, December 11, 2014. 43. C. Harvey and M. J. Allard, Understanding and Managing Diversity: Readings, Cases, and Exercises, 2nd ed. (Upper Saddle River, NJ: Prentice Hall, 2002); P. L. Hunsaker, Training in Management Skills (Upper Saddle River, NJ: Prentice Hall, 2001); and J. Greenberg, Managing Behavior in Organizations: Science in Service to Practice, 2nd ed. ­(Upper Saddle River, NJ: Prentice Hall, 1999). 44. Based on A. L. Wilkins, “The Culture Audit: A Tool for Understanding Organizations,” Organizational Dynamics, Autumn 1983, pp. 24–38; H. M. Trice and J. M. Beyer, The Culture of Work Organizations (Upper Saddle River, NJ: Prentice Hall, 1993), pp. 358–62; and D. M. Cable, L. Aiman-Smith, P. W. Mulvey, and J. R. Edwards, “The Sources and Accuracy of Job Applicants’ Beliefs about Organizational Culture,” Academy of Management Journal (December 2000), pp. 1076–85. 45. Information from INDITEX company website, www. inditex; and M. Helft, “Fashion Fast-Forward,” Business 2.0, May 2002, pp. 60–66. 46. “Joe Fresh Launches International Expansion In 23 Countries With Signing Of 3 Partnership Agreements,” PR Newswire, February 20, 2014. 47. L. Nguyen, “Joe Fresh Global Expansion Will See 120 Stores In Europe, Mideast, South Korea,” The Canadian Press, February 20, 2014. 48. L. Nguyen, “Joe Fresh Global Expansion Will See 120 Stores In Europe, Mideast, South Korea Agreements,” PR Newswire, ­February 20, 2014. 49. L. Nguyen, “Joe Fresh Global Expansion Will See 120 Stores In Europe, Mideast, South Korea,” The Canadian Press, February 20, 2014. 50. C. O’Connor, “Extreme Pricing: At What Cost? Retailer Joe Fresh Sends Reps To Bangladesh As Death Toll Rises,” Forbes.com, April 30, 2013.

Endnotes  401

51. Ibid. 52. Ibid. 53. A. Androich, “How well is Joe Fresh handling the Bangladesh factory disaster?” Marketing Mag, May 08, 2013, http://www.marketingmag.ca/news/marketer-news/ how-well-is-joe-fresh-handling-the-bangladesh-factorydisaster-78101#comments. 54. Ibid. 55. Ibid. 56. A. Watson, “Number of Cinema Screens in Selected Provinces in Canada, 2014 and 2016,” Statista, https:// www.statista.com/statistics/538113/number-of-screensselected-provinces-canada/. 57. Ibid. 58. Telefilm Canada, “Audiences in Canada: Trend Report,” 2017, retrieved from https://telefilm.ca/wp-content/ uploads/audiences-in-canada-trend-report.pdf. 59. Ibid. 60. K. McBride, “Smart Cities Start Here,” Miovision Technologies Inc., November 1, 2017, http://www.miovision.com; see also Public Policy Forum, “The Promise and Pitfalls of the Internet of Things in Canada,” Medium, December 16, 2016, https://medium.com/@PPForum/the-promise-andpitfalls-of-the-internet-of-things-in-canada-cff20ca9f4c6. 61. Canada’s Public Policy Forum, “Network Effects: The Promise and Pitfalls of the Internet of Things,” December 2016, ppforum.ca. 62. Josh O’Kane, “Urban innovation firm Miovision Technologies raises $15-million to expand smart intersection products,” The Globe and Mail, May 7, 2018, https://www. theglobeandmail.com/business/article-urban-­innovationfirm-miovision-technologies-raises-15-million-for-ai. 63. Josh O’Kane, “Urban innovation firm Miovision Technologies raises $15-million to expand smart intersection products,” The Globe and Mail, May 7, 2018, https://www. theglobeandmail.com/business/article-urban-innovationfirm-miovision-technologies-raises-15-million-for-ai/.

10.

11.

12.

13.

Chapter 3 1. Timothy Nash, “Green Sectors are Flourishing with $9.3 Trillion of Private Investments Since 2007,” Sustainable Economist (Blog), April 30, 2018, retrieved from http:// www.sustainableeconomist.com/gts_2018. 2. Rob Carrick, “How Socially Responsible Investors Can Put Their Money to Work,” The Globe and Mail, November 9, 2018, retrieved from https://www.theglobeandmail.com/investing/markets/inside-the-market/ article-for-high-minded-investors-there-are-more-lowcarbon-fund-options-than/. 3. Ibid. 4. Ibid. 5. I. Wylie, “Who Runs This Team Anyway?” Fast Company, April 2002, pp. 32–33. 6. D. A. Garvin and M. A. Roberto, “What You Don’t Know about Making Decisions,” Harvard Business Review, September 2001, pp. 108–16. 7. W. Pounds, “The Process of Problem Finding,” Industrial Management Review, Fall 1969, pp. 1–19. 8. P. C. Nutt, Why Decisions Fail: Avoiding the Blunders and Traps that Lead to Debacles (San Francisco, CA: BerrettKoehler Publishers, 2002). 9. T. A. Stewart, “Did You Ever Have to Make Up Your Mind?” Harvard Business Review, January 2006,

14. 15. 16. 17. 18.

p. 12; and E. Pooley, “Editor’s Desk,” Fortune, June 27, 2005, p. 16. J. G. March, “Decision-Making Perspective: Decisions in Organizations and Theories of Choice,” in A. H. Van de Ven and W. F. Joyce (eds.), Perspectives on Organization Design and Behavior (New York: Wiley-Interscience, 1981), pp. 232–33. See T. Shavit and A. M. Adam, “A Preliminary Exploration of the Effects of Rational Factors and Behavioral Biases on the Managerial Choice to Invest in Corporate Responsibility,” Managerial and Decision Economics, April 2011, pp. 205–13; A. Langley, “In Search of Rationality: The Purposes Behind the Use of Formal Analysis in Organizations,” Administrative Science Quarterly, December 1989, pp. 598–631; and H. A. Simon, “Rationality in Psychology and Economics,” Journal of Business (October 1986), pp. 209–24. See D. R. A. Skidd, “Revisiting Bounded Rationality,” Journal of Management Inquiry, December 1992, pp. 343–47; B. E. Kaufman, “A New Theory of Satisficing,” Journal of Behavioral Economics, Spring 1990, pp. 35–51; and N. McK. Agnew and J. L. Brown, “Bounded Rationality: Fallible Decisions in Unbounded Decision Space,” Behavioral Science, July 1986, pp. 148–61. See, for example, G. McNamara, H. Moon, and P. Bromiley, “Banking on Commitment: Intended and Unintended Consequences of an Organization’s Attempt to Attentuate Escalation of Commitment,” Academy of Management Journal, April 2002, pp. 443–52; V. S. Rao and A. Monk, “The Effects of Individual Differences and Anonymity on Commitment to Decisions,” Journal of Social Psychology, August 1999, pp. 496–515; C. F. Camerer and R. A. Weber, “The Econometrics and Behavioral Economics of Escalation of Commitment: A Re-­examination of Staw’s Theory,” Journal of Economic Behavior and ­Organization, May 1999, pp. 59–82; D. R. Bobocel and J. P. Meyer, “Escalating Commitment to a Failing Course of Action: Separating the Roles of Choice and Justification,” Journal of Applied Psychology (June 1994), pp. 360–63; and B. M. Staw, “The Escalation of Commitment to a Course of Action,” Academy of Management Review, October 1981, pp. 577–87. L. Alderman, “A Shoemaker That Walks but Never Runs,” New York Times Online, October 8, 2010. See, for example, A.Styhre and M. Sundgren, Managing Creativity in Organizations (London, UK: Palgrave MacMillan 2005) pp. 115–39. David Lidsky, “Next: Big Idea,” Fast Company, December 2010–January 2011, 39–40. H. McCracken, “50 Most Innovative Companies: LINE,” Fast Company, March 2015, pp. 84+. Based on D. Kahneman, D. Lovallo, and O. Siboney, “Before You Make That Big Decision,” Harvard Business Review, June 2011, pp. 50–60; P. Wang, “To Make Better Choices, Choose Less,” Money, June 2010, pp. 111–14; B. Dumaine, “The Trouble with Teams,” Fortune, September 5, 1994, pp. 86–92; A. S. Wellner, “A Perfect Brainstorm,” Inc., October 2003, pp. 31–35; “The Poll,” BusinessWeek, August 21–28, 2006, p. 44; “Hurry Up and Decide,” BusinessWeek, May 14, 2001, p. 16; J. MacIntyre, “Bosses and Bureaucracy,” Springfield, Missouri Business Journal, August 1–7, 2005, pp. 9; J. Crick, and “On the Road to Invention,” Fast Company, February 2005, p. 16.

402 Endnotes 19. Photo caption based on M. Xu, V. Ong, Y. Duan, and B. Mathews, “Intelligent Agent Systems for Executive Information Scanning, Filtering, and Interpretation: Perceptions and Challenges,” Information Processing & Management, March 2011, pp. 186–201; J. P. Kallunki, E. K. Laitinen, and H. Silvola, “Impact of Enterprise Resource Planning Systems on Management Control Systems and Firm Performance,” International Journal of Accounting Information Systems (March 2011), pp. 20–39; H. W. K. Chia, C. L. Tan, and S. Y. Sung, “Enhancing Knowledge Discovery via Association-Based Evolution of Neural Logic Networks,” IEEE Transactions on Knowledge and Data Engineering (July 2006), pp. 889–901; F. Harvey, “A Key Role in Detecting Fraud Patterns: Neural Networks,” Financial Times, January 23, 2002, p. 3; D. Mitchell and R. Pavur, “Using Modular Neural Networks for Business Decisions,” Management Decision, January–February 2002, pp. 58–64; B. L. Killingsworth, M. B. Hayden, and R. Schellenberger, “A Network Expert System Management System of Multiple Domains,” Journal of Information Science (March–April 2001), p. 81; and S. Balakrishnan, N. Popplewell, and M. Thomlinson, “Intelligent Robotic Assembly,” Computers & Industrial Engineering, December 2000, p. 467. 20. C. Shaffran, “Mind Your Meeting: How to Become the Catalyst for Culture Change,” Communication World, February–March 2003, pp. 26–29. 21. I. L. Janis, Victims of Groupthink (Boston: Houghton Mifflin, 1972); R. J. Aldag and S. Riggs Fuller, “Beyond Fiasco: A Reappraisal of the Groupthink Phenomenon and a New Model of Group Decision Processes,” Psychological Bulletin, May 1993, pp. 533–52; T. Kameda and S. Sugimori, “Psychological Entrapment in Group Decision Making: An Assigned Decision Rule and a Groupthink Phenomenon,” Journal of Personality and Social Psychology, August 1993, pp. 282–92. 22. See, for example, T. W. Costello and S. S. Zalkind, eds., Psychology in Administration: A Research Orientation (Upper Saddle River, NJ: Prentice Hall, 1963), pp. 429–30; R. A. Cooke and J. A. Kernaghan, “Estimating the Difference between Group versus Individual Performance on Problem Solving Tasks,” Group and Organization Studies, September 1987, pp. 319–42; and L. K. Michaelsen, W. E. Watson, and R. H. Black, “A Realistic Test of Individual versus Group Consensus Decision Making,” Journal of Applied Psychology (October 1989), pp. 834–39. See also J. Hollenbeck, D. R. Ilgen, J. A. Colquitt, and A. Ellis, “Gender Composition, Situational Strength, and Team Decision-Making Accuracy: A Criterion Decomposition Approach,” Organizational Behavior and Human Decision Processes, May 2002, pp. 445–75. 23. See Richard Branson, “What Steve Jobs Taught Me by Kicking My Butt,” Canadian Business, September 22, 2011, http://www.canadianbusiness.com/article/46349— branson-what-steve-jobs-taught-me-by-kicking-my-butt. 24. See, for example, L. K. Michaelson, W. E. Watson, and R. H. Black, “A Realistic Test of Individual vs. Group Consensus Decision Making,” Journal of Applied Psychology, vol. 74, no. 5 (1989), pp. 834–39; R. A. Henry, “Group Judgment Accuracy: Reliability and Validity of Postdiscussion Confidence Judgments,” Organizational Behavior and Human Decision Processes, October 1993, pp. 11–27; P. W. Paese, M. Bieser, and M. E. Tubbs, “Framing Effects and Choice Shifts in Group Decision Making,”

25.

26.

27. 28. 29. 30.

31.

32.

33. 34.

­ rganizational Behavior and Human Decision Processes, O October 1993, pp. 149–65; N. J. Castellan Jr., ed., Individual and Group Decision Making (Hillsdale, NJ: Lawrence Erlbaum Associates, 1993); and S. G. Straus and J. E. McGrath, “Does the Medium Matter? The Interaction of Task Type and Technology on Group Performance and Member Reactions,” Journal of Applied Psychology, February 1994, pp. 87–97. E. J. Thomas and C. F. Fink, “Effects of Group Size,” Psychological Bulletin, July 1963, pp. 371–84; F. A. Shull, A. L. Delbecq, and L. L. Cummings, Organizational Decision Making (New York: McGraw-Hill, 1970), p. 151; A. P. Hare, Handbook of Small Group Research (New York: Free Press, 1976); M. E. Shaw, Group Dynamics: The Psychology of Small Group Behavior, 3rd ed. (New York: McGraw-Hill, 1981); P. Yetton and P. Bottger, “The Relationships among Group Size, Member Ability, Social Decision Schemes, and Performance,” Organizational Behavior and Human Performance, October 1983, pp. 145–59. A. Kleingeld, H. Van Tuijl, and J. A. Algera, “Participation in the Design of Performance Management Systems: A Quasi–Experimental Field Study,” Journal of Organizational Behaviour, vol. 25, no. 7 (2004), pp. 831–54. S. McShane and S. Steen, Canadian Organizational Behaviour, 7th ed. (Toronto, ON: McGraw-Hill, 2009), pp. 165–66. D. Kahneman and A. Tversky, “Judgment under Uncertainty: Heuristics and Biases,” Science, vol. 185, no. 4157 (1974), pp. 1124–31. Information for this section is taken from S. P. Robbins, Decide & Conquer (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004). See, for example, B. M. Staw, “The Escalation of Commitment to a Course of Action,” Academy of Management Review, October 1981, pp. 577–87; D. R. Bobocel and J. P. Meyer, “Escalating Commitment to a Failing Course of Action: Separating the Roles of Choice and Justification,” Journal of Applied Psychology, June 1994, pp. 360–63; C. F. Camerer and R. A. Weber, “The Econometrics and Behavioral Economics of Escalation of Commitment: A Re-­examination of Staw’s Theory,” Journal of Economic ­Behavior and Organization, May 1999, pp. 59–82; V. S. Rao and A. Monk, “The Effects of Individual Differences and Anonymity on Commitment to Decisions,” Journal of Social Psychology, August 1999, pp. 496–515; and G. McNamara, H. Moon, and P. Bromiley, “Banking on Commitment: Intended and Unintended Consequences of an Organization’s Attempt to Attenuate Escalation of Commitment,” Academy of Management Journal, April 2002, pp. 443–52. See, for instance, P. Berthon, L. F. Pitt, and M. T. Ewing, “Corollaries of the Collective: The Influence of Organizational Culture and Memory Development on Perceived Decision-Making Context,” Academy of Marketing Science Journal (Spring 2001): 135–50. J. de Haan, M. Yamamoto, and G. Lovink, “Production Planning in Japan: Rediscovering Lost Experiences or New Insights,” International Journal of Production Economics (May 6, 2001), pp. 101–09. T. M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, pp. 39–58. J. V. Anderson, “Mind Mapping: A Tool for Creative Thinking,” Business Horizons, January–February 1993, pp. 42–46; M. Loeb, “Ten Commandments for Managing

Endnotes  403

35.

36.

37. 38. 39. 40. 41. 42. 43. 44. 45.

­ reative People,” Fortune, January 16, 1995, pp. 135–36; C M. Henricks, “Good Thinking,” Entrepreneur, May 1996, pp. 70–73; H.-S. Choi and L. Thompson, “Old Wine in a New Bottle: Impact of Membership Change on Group Creativity,” Organizational Behavior and Human Decision Processes, vol. 98, no. 2 (2005), pp. 121–32; R. Florida and J. Goodnight, “Managing for Creativity,” Harvard Business Review, vol. 83, no. 7 (2005), pp. 124+; L. L. Gilson, J. E. Mathieu, C. E. Shalley, and T. M. Ruddy, “Creativity and Standardization: Complementary or Conflicting Drivers of Team Effectiveness?” Academy of Management Journal, vol. 48, no. 3 (2005), pp. 521–31; and K. G. Smith, C. J. Collins, and K. D. Clark, “Existing Knowledge, Knowledge Creation Capability, and the Rate of New Product Introduction in High-Technology Firms,” Academy of Management Journal, vol. 48, no. 2 (2005), pp. 346–57. D. Dunne and R. Martin, “Design Thinking and How It Will Change Management Education: An Interview and Discussion,” Academy of Management Learning & Education, December 2006, p. 512. M. Korn and R. E. Silverman, “Forget B-School, D-School Is Hot,” Wall Street Journal, June 7, 2012, p. B1+; R. Martin and J. Euchner, “Design Thinking,” Research Technology Management, May/June 2012, pp. 10–14; T. Larsen and T. Fisher, “Design Thinking: A Solution to FractureCritical Systems,” DMI News & Views, May 2012, p. 31; T. Berno, “Design Thinking versus Creative Intelligence,” DMI News & Views, May 2012, p. 28; J. Liedtka and Tim Ogilvie, “Helping Business Managers Discover Their Appetite for Design Thinking,” Design Management Review, Issue 1, 2012, pp. 6–13; and T. Brown, “Strategy by Design,” Fast Company, June 2005, pp. 52–54. C. Guglielmo, “Apple Loop: The Week in Review,” Forbes.com, May 25, 2012, p. 2. D. Dunne and R. Martin, “Design Thinking and How It Will Change Management Education: An Interview and Discussion,” p. 514. K. Cukier and V. Mayer-Schönberger, “The Financial Bonanza of Big Data,” Wall Street Journal, March 8, 2013, p. A15. R. King and S. Rosenbush, “Big Data Broadens Its Range,” Wall Street Journal, March 14, 2013, p. B5. “Big Data, Big Impact: New Possibilities for International Development,” World Economic Forum, weforum.org, 2012. M. Kassel, “From a Molehill to a Mountain,” Wall Street Journal, March 11, 2013, p. R1. D. Laney, “The Importance of ‘Big Data’: A Definition,” March 22, 2013, retrieved from www.gartner.com/itglossary/big-data/. S. Lohr, “Sure, Big Data Is Great. But So Is Intuition,” New York Times Online, December 29, 2012. Based on D. Kahneman, D. Lovallo, and O. Siboney, “Before You Make That Big Decision,” Harvard Business Review, June 2011, pp. 50–60; P. Wang, “To Make Better Choices, Choose Less,” Money, June 2010, pp. 111–14; B. Dumaine, “The Trouble with Teams,” Fortune, September 5, 1994, pp. 86–92; A. S. Wellner, “A Perfect Brainstorm,” Inc., October 2003, pp. 31–35; “The Poll,” BusinessWeek, August 21–28, 2006, p. 44; “Hurry Up and Decide,” BusinessWeek, May 14, 2001, p. 16; J. MacIntyre, “Bosses and Bureaucracy,” Springfield, Missouri Business Journal, August 1–7, 2005, p. 29; J. Crick, and “On the Road to Invention,” Fast ­Company, February 2005, p. 16.

46. “The Critical Role of Teams,” The Ken Blanchard Companies, retrieved from http://www.kenblanchard.com/ img/pub/pdf_critical_role_teams.pdf. 47. K. Davis and W. C. Frederick, Business and Society: Management, Public Policy, Ethics, 5th ed. (New York: McGraw-Hill, 1984), pp. 28–41, 76. 48. G. F. Cavanagh, D. J. Moberg, and M. Valasquez, “The Ethics of Organizational Politics,” Academy of Management Journal, June 1981, pp. 363–74. See also F. N. Brady, “Rules for Making Exceptions to Rules,” Academy of Management Review, July 1987, pp. 436–44, for an argument that the theory of justice is redundant with the prior two theories. See also T. Donaldson and T. W. Dunfee, “Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory,” Academy of Management Review, April 1994, pp. 252–84; M. Douglas, “Integrative Social Contracts Theory: Hype over Hypernorms,” Journal of Business Ethics, July 2000, pp. 101–10; and E. Soule, “Managerial Moral Strategies—In Search of a Few Good Principles,” Academy of Management Review, January 2002, pp. 114–24, for discussions of integrative social contracts theory. 49. E. Soule, “Managerial Moral Strategies—In Search of a Few Good Principles,” Academy of Management Review, January 2002, p. 117. 50. F. D. Sturdivant, Business and Society: A Managerial Approach, 3rd ed. (Homewood, IL: Richard D. Irwin, 1985), p. 128. 51. White Spot Limited, “White Spot Limited Is Once Again Named One of Canada’s Best Managed Companies,” March 13, 2019, https://www.whitespot.ca/news/ awards/CanadasBestManaged. 52. “Triple 0’s Leads Way to Zero Waste,” University of British Columbia, retrieved from https://planning.ubc.ca/ vancouver/news-events/newsletter/2013-07-25/tripleos-leads-way-zero-waste. 53. L. Bogomolny, “Good Housekeeping,” Canadian Business, March 1, 2004, pp. 87–88; and Royal Bank of Canada (RBC), “Community & Sustainability,” http://www.rbc. com/community-sustainability/index.html. 54. See Industry Canada, “Corporate Social Responsibility,” http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/rs00129.html. 55. W. Dabrowski, “Tighter Guidelines Issued on Disclosure: Canada’s ‘Sarbanes,’” Financial Post (National Post), March 30, 2004, p. FP1. 56. L. Bogomolny, “Good Housekeeping,” Canadian Business, March 1, 2004, pp. 87–88. 57. Terry Eyden, “Global Survey on Business Ethics,” Accounting Web, June 21, 2012, http://www.accountingweb. com/article/global-survey-business-ethics/219380; and J. Alexander, “On the Right Side,” World Business, ­January–February 1997, pp. 38–41. 58. P. Richter, “Big Business Puts Ethics in Spotlight,” Los Angeles Times, June 19, 1986, p. 29. 59. 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). 60. P. S. Ridge, “Ethics Programs Aren’t Stemming Employee Misconduct,” Wall Street Journal, May 11, 2000, p. A1. 61. L. Bogomolny, “Good Housekeeping,” Canadian Business, March 1, 2004, pp. 87–88. 62. A. K. Reichert and M. S. Webb, “Corporate Support for Ethical and Environmental Policies: A Financial Management Perspective,” Journal of Business Ethics, May 2000;

404 Endnotes

63. 64. 65.

66.

67.

68.

69. 70. 71.

G. R. Weaver, L. K. Trevino, and P. L. Cochran, “Corporate Ethics Programs as Control Systems: Influences of Executive Commitment and Environmental Factors,” Academy of Management Journal, February 1999, pp. 41–57; G. R. Weaver, L. K. Trevino, and P. L. Cochran, “Integrated and Decoupled Corporate Social Performance: Management Commitments, External Pressures, and Corporate Ethics Practices,” Academy of Management Journal, October 1999, pp. 539–52; and B. Z. Posner and W. H. Schmidt, “Values and the American Manager: An Update,” California Management Review, Spring 1984, pp. 202–16. L. Nash, “Ethics without the Sermon,” Harvard Business Review, November–December 1981, p. 81. D. Dearlove and S. Crainer, “Enterprise Goes Social,” Chief Executive, March 2002, 18; and “Bronze Winner: Ben & Jerry’s Citizen Cool,” Brandweek, March 18, 2002, p. R-24. M. Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962); and M. Friedman, “The Social Responsibility of Business Is to Increase Profits,” New York Times Magazine, September 13, 1970, p. 33. See, for instance, N. A. Ibrahim, J. P. Angelidis, and D. P. Howell, “The Corporate Social Responsiveness Orientation of Hospital Directors: Does Occupational Background Make a Difference?” Health Care Management Review, Spring 2000, pp. 85–92. See, for example, D. J. Wood, “Corporate Social Performance Revisited,” Academy of Management Review, October 1991, pp. 703–08; and S. L. Wartick and P. L. Cochran, “The Evolution of the Corporate Social Performance Model,” Academy of Management Review, October 1985, p. 763. The Triple Bottom Line was first introduced in J. Elkington, Cannibals with Forks: The Triple Bottom Line of 21st Century Business (Stony Creek, CT: New Society Publishers, 1998). J. Bakan, The Corporation (Toronto: Big Picture Media Corporation, 2003). This section has been influenced by E. Gatewood and B. Carroll, “The Anatomy of Corporate Social Response,” Business Horizons, September–October 1981, pp. 9–16. See, for example, P. Cochran and R. A. Wood, “Corporate Social Responsibility and Financial Performance,” Academy of Management Journal, March 1984, pp. 42–56; K. Aupperle, A. B. Carroll, and J. D. Hatfield, “An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability,” Academy of Management Journal, June 1985, pp. 446–63; J. B. McGuire, A. Sundgren, and T. Schneeweis, “Corporate Social ­Responsibility and Firm Financial Performance,” Academy of Management Journal, December 1988, pp. 854–72; D. M. Georgoff and J. Ross, “Corporate Social Responsibility and Management Performance” (paper presented at the National Academy of Management Conference, Miami, Florida, August 1991); S. A. Zahra, B. M. Oviatt, and K. Minyard, “Effects of Corporate Ownership and Board Structure on Corporate Social Responsibility and Financial Performance” (paper presented at the National Academy of Management Conference, Atlanta, Georgia, August 1993); “Social Responsibility and the Bottom Line,” Business Ethics, July–August 1994, p. 11; D. B. Turban and D. W. Greening, “Corporate Social Performance and Organizational Attractiveness to Prospective Employees,” Academy of Management Journal, June 1996, pp. 658–72; S. A. Waddock and S. B. Graves,

72.

73.

74. 75.

76.

“The ­Corporate Social Performance–Financial Performance Link,” Strategic Management Journal, April 1997, pp. 303–19; and S. L. Berman, A. C. Wicks, S. Kotha, and T. M. Jones, “Does Stakeholder Orientation Matter? The Relationship between Stakeholder Management Models and Firm Financial Performance,” Academy of Management Journal, October 1999, pp. 488–506. D. J. Wood and R. E. Jones, “Stakeholder Mismatching: A Theoretical Problem in Empirical Research on Corporate Social Performance,” International Journal of Organizational Analysis, vol. 3, no. 3 (1995), pp. 229–67. See A. A. Ullmann, “Data in Search of a Theory: A Critical Examination of the Relationships among Social Performance, Social Disclosure, and Economic Performance of U.S. Firms,” Academy of Management Review, July 1985, pp. 540–57; R. E. Wokutch and B. A. Spencer, “Corporate Saints and Sinners: The Effects of Philanthropic and Illegal Activity on Organizational Performance,” California Management Review, Winter 1987, pp. 62–77; R. Wolfe and K. Aupperle, “Introduction to Corporate Social Performance: Methods for Evaluating an Elusive Construct,” ed. J. E. Post, Research in Corporate Social Performance and Policy, vol. 13 (1991), pp. 265–68; and D. J. Wood and R. E. Jones, “Stakeholder Mismatching: A Theoretical Problem in Empirical Research on Corporate Social Performance,” International Journal of Organizational Analysis, vol. 3 (1995), pp. 229–67. D. Macfarlane, “Why Now?” Report on Business Magazine, March 2004, pp. 45–46. See, for instance, R. Lacy and P. A. Kennett-Hensel, “Longitudinal Effects of Corporate Social Responsibility on Customer Relationships,” Journal of Business Ethics (December 2010), pp. 581–97; S. Arendt and M. Brettel, “Understanding the Influence of Corporate Social Responsibility on Corporate Identity, Image, and Firm Performance,” Management Decision 48, no. 10 (2010), pp. 1469–92; J. Peloza, “The Challenge of Measuring Financial Impacts from Investments in Corporate Social Performance,” Journal of Management (December 2009), pp. 1518–41; J. D. Margolis and H. Anger Elfenbein, “Do Well by Doing Good? Don’t Count on It,” Harvard Business Review, January 2008, pp. 19–20; M. L. Barnett, “Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility,” 2007; D. O. Neubaum and S. A. Zahra, “Institutional Ownership and Corporate Social Performance: The Moderating Effects of Investment Horizon, Activism, and Coordination,” Journal of Management (February 2006), pp. 108–31; B. A. Waddock and S. B. Graves, “The Corporate Social Performance–Financial Performance Link,” Strategic Management Journal (April 1997), pp. 303–19; J. B. McGuire, A. Sundgren, and T. Schneeweis, “Corporate Social Responsibility and Firm Financial Performance,” Academy of Management Journal (December 1988), pp. 854–72; K. Aupperle, A. B. Carroll, and J. D. Hatfield, “An Empirical Examination of the Relationship between Corporate Social Responsibility and Profitability,” Academy of Management Journal (June 1985), pp. 446–63; and P. Cochran and R. A. Wood, “Corporate Social Responsibility and Financial Performance,” Academy of Management Journal (March 1984), pp. 42–56. J. Peloza, “The Challenge of Measuring Financial Impacts from Investments in Corporate Social Performance,” Journal of Management (December 2009), pp. 1518–41.

Endnotes  405

77. B. Seifert, S. A. Morris, and B. R. Bartkus, “Having, Giving, and Getting: Slack Resources, Corporate ­Philanthropy, and Firm Financial Performance,” Business & Society, June 2004, pp. 135–61; and J. B. McGuire, A. Sundgren, and T. Schneeweis, “Corporate Social Responsibility and Firm Financial Performance,” Academy of Management Journal (December 1988), pp. 854–72. 78. A. McWilliams and D. Siegel, “Corporate Social Responsibility and Financial Performance: Correlation or Misspecification?” Strategic Management Journal (June 2000), pp. 603–09. 79. A. J. Hillman and G. D. Keim, “Shareholder Value, Stakeholder Management, and Social Issues: What’s the Bottom Line?” Strategic Management Journal 22 (2001), pp.125–39. 80. M. Orlitzky, F. L. Schmidt, and S. L. Rynes, “Corporate Social and Financial Performance,” Organization Studies 24, no. 3 (2003), pp. 403–41. 81. Information for this section comes from B. C. McDonald and D. Hutcheson, “Dealing with Diversity Is Key to Tapping Talent,” Atlanta Business Chronicle, December 18, 1998, p. 45A1; P. M. Elsass and L. M. Graves, “Demographic Diversity in Decision-Making Groups: The Experience of Women and People of Color,” Academy of Management Review, October 1997, pp. 946–73; and N. J. Adler, ed., International Dimensions of Organizational Behavior, 4th ed. (Cincinnati, OH: South-Western College Publishing, 2001). 82. I. Hunter, “Hudgens Was Hitting Coach for the Astros from 2015-2018,” Twitter, November 7, 2018, https://twitter.com/BlueJayHunter/status/ 1060343867449339904?ref_src=twsrc%5Etfw%7Ctw camp%5Etweetembed%7Ctwterm%5E1060343867 449339904&ref_url=https%3A%2F%2Fjaysjournal. com%2F2018%2F11%2F08%2Fblue-jays-defensivemetrics-not-kind-2018%2F. 83. D. D. Stanford, “Coke Has a Secret Formula for Orange Juice, Too,” Bloomberg Businessweek, February 4–February 10, 2013, pp. 19–20; P. Sellers, “The New Coke,” Fortune, May 21, 2012, pp. 138–44; and Adi Ignatious, “Shaking Things Up at Coca-Cola,” Harvard Business Review, October 2011, pp. 94–99.

Chapter 4 1. See, for example, J. A. Pearce II, K. K. Robbins, and R. B. Robinson Jr., “The Impact of Grand Strategy and Planning Formality on Financial Performance,” Strategic Management Journal, March–April 1987, pp. 125–34; L. C. Rhyne, “Contrasting Planning Systems in High, Medium, and Low Performance Companies,” Journal of Management Studies, July 1987, pp. 363–85; J. A. Pearce II, E. B. Freeman, and R. B. Robinson Jr., “The Tenuous Link between Formal Strategic Planning and Financial Performance,” Academy of Management Review, October 1987, pp. 658–75; D. K. Sinha, “The Contribution of Formal Planning to Decisions,” Strategic Management Journal, October 1990, pp. 479–92; N. Capon, J. U. Farley, and J. M. Hulbert, “Strategic Planning and Financial Performance: More Evidence,” Journal of Management Studies, January 1994, pp. 22–38; C. C. Miller and L. B. Cardinal, “Strategic Planning and Firm Performance: A Synthesis of more than Two Decades of Research,” Academy of Management Journal, March 1994, pp. 1649–85; and

P. J. Brews and M. R. Hunt, “Learning to Plan and Planning to Learn: Resolving the Planning School/Learning School Debate,” Strategic Management Journal, December 1999, pp. 889–913. 2. H. Mintzberg, The Rise and Fall of Strategic Planning (New York: Free Press, 1994). 3. Ibid. 4. G. Hamel and C. K. Prahalad, Competing for the Future (Boston: Harvard Business School Press, 1994). 5. D. Miller, “The Architecture of Simplicity,” Academy of Management Review, January 1993, pp. 116–38. 6. R. Molz, “How Leaders Use Goals,” Long Range Planning, October 1987, p. 91. 7. From “The ROI of D&I,” Municipal World – Canada’s ­Municipal Magazine, July 2013, vol. 123, no. 7. ­Copyright © 2013 by Municipal World Inc. Reprinted by ­permission. 8. P. N. Romani, “MBO by Any Other Name Is Still MBO,” Supervision, December 1997, pp. 6–8; and A. W. Schrader and G. T. Seward, “MBO Makes Dollar Sense,” Personnel Journal, July 1989, pp. 32–37. 9. P. N. Romani, “MBO by Any Other Name Is Still MBO,” Supervision, December 1997, pp. 6–8; and R. Rodgers and J. E. Hunter, “Impact of Management by Objectives on Organizational Productivity,” Journal of Applied Psychology, April 1991, pp. 322–36. 10. For additional information on goals, see, for example, P. Drucker, The Executive in Action (New York: HarperCollins Books, 1996), pp. 207–14; and E. A. Locke and G. P. Latham, A Theory of Goal Setting and Task Performance (Upper Saddle River, NJ: Prentice Hall, 1990). 11. J. D. Hunger and T. L. Wheelen, Strategic Management, 7th ed. (Upper Saddle River, NJ: Prentice Hall, 2000). 12. Several of these factors were suggested by R. K. Bresser and R. C. Bishop, “Dysfunctional Effects of Formal Planning: Two Theoretical Explanations,” Academy of Management Review, October 1983, pp. 588–99; and J. S. Armstrong, “The Value of Formal Planning for Strategic Decisions: Review of Empirical Research,” Strategic Management Journal (July–September 1982), pp. 197–211. 13. K. Garber, “Powering the Information Age,” U.S. News & World Report, April 2009, pp. 46–48; and S. Hamm, “It’s Too Darn Hot,” BusinessWeek, March 31, 2008, pp. 60–63. 14. J. R. Schermerhorn Jr. and B. Wright, Management, 2nd Canadian Edition (Mississauga, ON: Wiley, 2011). 15. Ibid. 16. Ibid. 17. P. J. Brews and M. R. Hunt, “Learning to Plan and Planning to Learn: Resolving the Planning School/Learning School Debate,” Strategic Management Journal, December 1999, pp. 889–913. 18. Paul J. H. Schoemaker and Cornelius A. J. M. van der Heijden, “Integrating Scenarios into Strategic Planning at Royal Dutch/Shell,” Planning Review 20, no. 3 (1992), pp. 41–46. 19. F. Jossi, “Take a Peek Inside,” HR Magazine, June 2002, pp. 46–52; and R. A. Martins, “Continuous Improvement Strategies and Production Competitive Criteria: Some Findings in Brazilian Industries,” Total Quality Management, May 2001, pp. 281–91. 20. See http://www.mapleleaf.ca/en/corporate/companyinfo/overview, (accessed November 14, 2011). 21. Based on A. A. Thompson, Jr., A. J. Strickland III, and J. E. Gamble, Crafting and Executing Strategy, 14th ed. (New York: McGraw-Hill Irwin, 2005).

406 Endnotes 22. J. Magretta, “Why Business Models Matter,” Harvard Business Review, May 2002, pp. 86–92. 23. J. W. Dean Jr. and M. P. Sharfman, “Does Decision Process Matter? A Study of Strategic Decision-Making Effectiveness,” Academy of Management Journal, April 1996, pp. 368–96. 24. M. Gruber, F. Heinemann, M. Brettel, and S. Hungeling, “Configurations of Resources and Capabilities and Their Performance Implications: An Exploratory Study on Technology Ventures,” Strategic Management Journal (December 2010), pp. 1337–56; T. H. Poister, “The Future of Strategic Planning in the Public Sector: Linking Strategic Management and Performance,” Public Administration Review, December 2010, pp. S246–54; J. González-Benito and Isabel Suárez-González, “A Study of the Role Played by Manufacturing Strategic Objectives and Capabilities in Understanding the Relationship between Porter’s Generic Strategies and Business Performance,” British Journal of Management, vol. 21 (2010), pp. 1027–43; J. A. Parnell and E. B. Dent, “The Role of Luck in the Strategy-Performance Relationship,” Management Decision, vol. 47, no. 6 (2009), pp. 1000–21; H. J. Cho and V. Pucik, “Relationship between Innovativeness, Quality, Growth, Profitability, and Market Value,” Strategic Management Journal (June 2005), pp. 555–75; W. F. Joyce, “What Really Works,” Organizational Dynamics, May 2005, pp. 118–29; M. A. Roberto, “Strategic Decision-Making Processes,” Group & Organization Management, December 2004, pp. 625–58; A. Carmeli and A. Tischler, “The Relationships between Intangible Organizational Elements and Organizational Performance,” Strategic Management Journal (December 2004), pp. 1257–78; D. J. Ketchen, C. C. Snow, and V. L. Street, “Improving Firm Performance by Matching Strategic Decision-Making Processes to Competitive Dynamics,” Academy of Management Executive, November 2004, pp. 29–43; E. H. Bowman and C. E. Helfat, “Does Corporate Strategy Matter?” Strategic Management Journal 22 (2001), pp. 1–23; P. J. Brews and M. R. Hunt, “Learning to Plan and Planning to Learn: Resolving the Planning School-Learning School Debate,” Strategic Management Journal 20 (1999), pp. 889–913; D. J. Ketchen Jr., J. B. Thomas, and R. R. McDaniel Jr., “Process, Content and Context; Synergistic Effects on Performance,” Journal of Management 22, no. 2 (1996), pp. 231–57; C. C. Miller and L. B. Cardinal, “Strategic Planning and Firm Performance: A Synthesis of more than Two Decades of Research,” Academy of Management Journal (December 1994), pp. 1649–65; and N. Capon, J. U. Farley, and J. M. Hulbert, “Strategic Planning and Financial Performance: More Evidence,” Journal of Management Studies (January 1994), pp. 105–10. 25. Hotel Association of Canada, “Strategic Plan 2017–2020,” http://hotelassociation.ca/wp-content/uploads/2018/ 06/HAC-Strategic-Plan.pdf. 26. M. Carpenter, G. Sanders, and K. Harling, Strategic Management, Canadian ed. (Toronto: Pearson, 2012). 27. C. K. Prahalad and G. Hamel, “The Core Competence of the Corporation,” Harvard Business Review, May–June 1990, pp. 79–91. 28. See Kevin O’Marah and Debra Hofman, “The AMR Supply Chain Top 25 for 2010,” Gartner, June 2, 2010, retrieved from http://www.gartner.com/ DisplayDocument?id=1379613.

29. See, for example, H. J. Cho and V. Pucik, “Relationship between Innovativeness, Quality, Growth, Profitability, and Market Value,” Strategic Management Journal, vol. 26, no. 6 (2005), pp. 555–75; W. F. Joyce, “Building the 4+2 Organization,” Organizational Dynamics, May 2005, pp. 118–29; R. S. Kaplan and D. P. Norton, “Measuring the Strategic Readiness of Intangible Assets,” Harvard Business Review, February 2004, pp. 52–63; C. M. Fiol, “Managing Culture as a Competitive Resource: An Identity-Based View of Sustainable Competitive Advantage,” Journal of Management, March 1991, pp. 191–211; T. Kono, “Corporate Culture and Long-Range Planning,” Long Range Planning, August 1990, pp. 9–19; S. Green, “Understanding Corporate Culture and Its Relation to Strategy,” International Studies of Management and Organization, Summer 1988, pp. 6–28; C. Scholz, “Corporate Culture and Strategy—The Problem of Strategic Fit,” Long Range Planning, August 1987, pp. 78–87; and J. B. Barney, “Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?” Academy of Management Review, July 1986, pp. 656–65. 30. A. Carmeli and A. Tischler, “The Relationships between Intangible Organizational Elements and Organizational Performance,” Strategic Management Journal, vol. 25, no. 13, December 2004, pp. 1257–78; P. W. Roberts and G. R. Dowling, “Corporate Reputation and Sustained Financial Performance,” Strategic Management Journal, December 2002, pp. 1077–93; and C. J. ­Fombrun, ­“Corporate Reputations as Economic Assets,” in Handbook of Strategic Management, ed. M. A. Hitt, R. E. ­Freeman, and J. S. Harrison (Malden, MA: Blackwell Publishers, 2001), pp. 289–312. 31. “Johnson & Johnson Ranks No. 1 in National Corporate Reputation Survey for Seventh Consecutive Year,” Harris Interactive Press Release, www.harrisinteractive.com, December 7, 2005. 32. M. Carpenter, G. Sanders, K. Harling, Strategic Management, Canadian ed. (Toronto: Pearson, 2012), p. 75. 33. H. Mintzberg, “The Strategy Concept I: Five Ps for Strategy,” California Management Review, Fall 1987, pp. 11–24. 34. Based on A. A. Thompson, Jr., A. J. Strickland III, and J. E. Gamble, Crafting and Executing Strategy, 14th ed. (New York: McGraw-Hill Irwin, 2005). 35. Ibid. 36. T. Mullaney, “‘Social Business’ Launched This Burger,” USA Today, May 17, 2012, pp. 1A+. 37. B. Roberts, “Social Media Gets Strategic,” HR Magazine, October 2012, p. 30. 38. C. Newberry, “130+ Social Media Statistics that Matter to Marketers in 2019,” Hootsuite, March 5, 2019, https:// blog.hootsuite.com/social-media-statistics-for-socialmedia-managers/. 39. B. Acohido, “Social-Media Tools Boost Productivity,” USA Today, August 13, 2012, pp. 1B+. 40. Ibid. 41. A. McAfee and E. Brynjolfsson, “Big Data: The Management Revolution,” Harvard Business Review, October 2012, p. 62. 42. K. Cukier and V. Mayer-Schönberger, “The Financial Bonanza of Big Data,” Wall Street Journal, March 8, 2013, p. A15. 43. “In-Store Cell Phone Tracking Pits Consumers against Retailers: Transparency Is Vital if Retailers Want to Build Trust with Customers,” adage.com, April 17, 2014;

Endnotes  407

44. 45. 46.

47.

48.

49.

50. 51.

52.

“New Study: Consumers Overwhelmingly Reject InStore Tracking by Retailers,” www.prweb.com, March 27, 2014; A. Farnham, “Retailers Snooping on Holiday Shoppers Raises Privacy Concerns,” abcnews.go.com/ Business/, December 10, 2013; V. Kopytoff, “Stores Sniff out Smartphones to Follow Shoppers,” MIT Technology Review, www.technologyreview.com, November 12, 2013; “How Stores Spy on You,” www.consumerreports.org, March 2013; J. O’Donnell and S. Meehan, “Retailers Want to Read Your Mind,” USA Today, March 2, 2012, pp. 1B+; and C. Duhigg, “How Companies Learn Your Secrets,” New York Times Online, February 16, 2012. A. Brandenburger and B. Nalebuff, Co-opetition (New York, NY: Currency/Doubleday, 1996). M. Carpenter, G. Sanders, K. Harling, Strategic Management, Canadian ed. (Toronto: Pearson, 2012). See, for example, P. Tarraf and R. Molz, “Competitive Intelligence,” SAM Advanced Management Journal (Autumn 2006), pp. 24–34; W. M. Fitzpatrick, “Uncovering Trade Secrets: The Legal and Ethical Conundrum of Creative Competitive Intelligence,” SAM Advanced Management Journal (Summer 2003), pp. 4–12; L. Lavelle, “The Case of the Corporate Spy,” BusinessWeek, November 26, 2001, pp. 56–58; C. Britton, “Deconstructing Advertising: What Your Competitor’s Advertising Can Tell You about Their Strategy,” Competitive Intelligence, January/February 2002, pp. 15–19; and L. Smith, “Business Intelligence Progress in Jeopardy,” InformationWeek, March 4, 2002, p. 74. S. Greenbard, “New Heights in Business Intelligence,” Business Finance, March 2002, pp. 41–46; K. A. Zimmermann, “The Democratization of Business Intelligence,” KN World, May 2002, pp. 20–21; and C. Britton, “Deconstructing Advertising: What Your Competitor’s Advertising Can Tell You about Their Strategy,” Competitive Intelligence, January–February 2002, pp. 15–19. C. Hausman, “Business-Ethics News Featured in WorldPress Reports,” Ethics Newsline, March 14, 2011; and L. Weathersby, “Take This Job and ***** It,” Fortune, January 7, 2002, p. 122. P. Lattiman, “Hilton and Starwood Settle Dispute,” New York Times Online, December 22, 2010; “Starwood vs. Hilton,” Hotels’ Investment Outlook, June 2009, p. 14; R. Kidder, “Hotel Industry Roiled by Corporate Espionage Claim,” Ethics Newsline, www.globalethicslorg/news-line; Reuters, “Hilton Hotels Is Subpoenaed in Espionage Case,” New York Times Online, April 22, 2009; T. Audi, “U.S. Probes Hilton over Theft Claims,” Wall Street Journal, April 22, 2009, p. B1; and T. Audi, “Hilton Is Sued over Luxury Chain,” Wall Street Journal, April 17, 2009, p. B1. K. Western, “Ethical Spying,” Business Ethics, September– October 1995, pp. 22–23. Based on E. A. Locke and G. P. Latham, Goal-Setting: A Motivational Technique that Works! (Upper Saddle River, NJ: Prentice Hall, 1984); and E. A. Locke and G. P. Latham, “Building a Practically Useful Theory of Goal Setting and Task Motivation,” American Psychologist, September 2002, pp. 705–17. “Sustainability & Community,” SilverBirch Hotels, http://www.silverbirchhotels.com/about/environment. html; “Vision, Mission and Values,” SilverBirch Hotels, http://www.silverbirchhotels.com/about/vision.html; “Our Story, SilverBirch Hotels,” http://www.silverbirchhotels.com/about/history.html; “News,” SilverBirch

53. 54. 55. 56. 57.

Hotels, http://www.silverbirchhotels.com/press; “Green Key,” Hotel Association of Canada, http://www.hotelassociation.ca/site/programs/green_key.htm. T. Buckley, “This Tiny Canadian Peninsula Wants to Be the Next Burgundy,” Bloomberg Business News, August 17, 2018. Ibid. Ibid. Ibid. C. Bjork, “Zara Builds Its Business around RFID,” Wall Street Journal, September 17, 2014, pp. B1+; D. Roman and W. Kemble-Diaz, “Owner of Fast-Fashion Retailer Zara Keeps up Emerging-Markets Push,” Wall Street Journal, June 14, 2012, p. B3; Press Releases, “Inditex Achieves Net Sales of 9,709 Million Euros, an Increase of 10 percent,” , February 22, 2012; C. Bjork, “‘Cheap Chic’ Apparel Sellers Heat up U.S. ­Rivalry on Web,” Wall Street Journal, September 6, 2011, pp. B1+; A. Kenna, “Zara Plays Catch-up with Online Shoppers,” Bloomberg BusinessWeek, ­August 29–­September 4, 2011, pp. 24–25; K. Girotra and S. Netessine, “How to Build Risk into Your Business Model,” Harvard Business Review, May 2011, pp. 100–05; M. Dart and R. Lewis, “Break the Rules the Way Zappos and ­Amazon Do,” Bloomberg BusinessWeek Online, April 29, 2011; K. Cappell, “Zara Thrives by Breaking All the Rules,” BusinessWeek, October 20, 2008, p. 66; C. Rohwedder and K. Johnson, “Pace-Setting Zara Seeks More Speed to Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal, February 20, 2008, pp. B1+; and https://martinroll.com/resources/articles/strategy/ the-secret-of-zaras-success-a-culture-of-customerco-creation/.

Chapter 5 1. M.Strauss, “Meet the Saviour of Sobeys, our 2018 CEO of the Year,” Globe and Mail, November 29, 2018. 2. See, for example, R. L. Daft, Organization Theory and Design, 6th ed. (St. Paul, MN: West Publishing, 1998). 3. W. Hillier, “BC Forest Fires: A Time of Need,” Canadian Underwriter, vol. 72, no. 1 (2004), pp. 22–23. 4. For a discussion of authority, see W. A. Kahn and K. E. Kram, “Authority at Work: Internal Models and Their Organizational Consequences,” Academy of Management Review, January 1994, pp. 17–50. 5. R. C. Morais, “The Old Lady Is Burning Rubber,” Forbes, November 26, 2007, pp. 146–50. 6. Based on P. L. Hunsaker, Training in Management Skills (Upper Saddle River, NJ: Prentice Hall, 2001), pp. 135–36 and 430–32; R. T. Noel, “What You Say to Your ­Employees When You Delegate,” Supervisory ­Management, December 1993, p. 13; and S. Caudron, “Delegate for Results,” IndustryWeek, February 6, 1995, pp. 27–30. 7. See J. R. P. French and B. Raven, “The Bases of Social Power,” in D. Cartwright and A. F. Zander, eds., Group Dynamics: Research and Theory (New York: Harper & Row, 1960), pp. 607–23. 8. L. Urwick, The Elements of Administration (New York: Harper & Row, 1944), pp. 52–53. See also, J. H. Gittel, “Supervisory Span, Relational Coordination, and Flight Departure Performance: A Reassessment of Post-­ Bureaucracy Theory,” Organizational Science, July–August 2001, pp. 468–83.

408 Endnotes 9. S. Harrison, “Is There a Right Span of Control? Simon Harrison Assesses the Relevance of the Concept of Span of Control to Modern Businesses,” Business Review, ­February 2004, pp. 10–13. 10. D. Drickhamer, “Lessons from the Leading Edge,” Industry Week, February 21, 2000, pp. 23–26. 11. See, for instance, D. Van Fleet, “Span of Management Research and Issues,” Academy of Management Journal, September 1983, pp. 546–52; and S. H. Cady and P. M. Fandt, “Managing Impressions with Information: A Field Study of Organizational Realities,” Journal of Applied Behavioral Science, June 2001, pp. 180–204. 12. Question of Ethics box based on R. E. Silverman, “Psst... This Is What Your Co-Worker Is Paid,” Wall Street ­Journal, January 30, 2013, pp. B6. 13. See, for example, Nestlé’s website, www.nestle.com; and Ben Worthen, “Nestlé’s Enterprise Resource Planning (ERP) Odyssey,” CIO, May 15, 2002, http://www. cio.com/article/31066/Nestl_eacute_s_Enterprise_­ Resource_Planning_ERP_Odyssey. 14. Based on L. Millan, “Who’s Scoffing Now? The Lemaire Brothers Started Out Using Recycled Fibre in One Small Paper Mill in Rural Quebec,” Canadian Business, March 27, 1998, pp. 74–77; and Cascades Inc., “Profile,” www.cascades.com/profile; and Cascades Inc., Resolutely ­Cascades: 2008 Annual Report, http:// www.cascades.com//client_file/upload/pdf/rapports/2008_annuel_an.pdf. 15. E. W. Morrison, “Doing the Job Well: An Investigation of Pro-Social Rule Breaking,” Journal of Management, ­February 2006, pp. 5–28. 16. Ibid. 17. T. Burns and G. M. Stalker, The Management of Innovation (London: Tavistock, 1961). 18. D. Dougherty, “Re-imagining the Differentiation and Integration of Work for Sustained Product Innovation,” Organization Science, September–October 2001, pp. 612–31. 19. A. Bosanac, “How flat hierarchies help companies stay nimble and grow faster,” Canadian Business, September 21, 2015. 20. Ibid. 21. Ibid. 22. A. D. Chandler, Jr., Strategy and Structure: Chapters in the History of the Industrial Enterprise (Cambridge, MA: MIT Press, 1962). 23. See, for instance, L. L. Bryan and C. I. Joyce, “Better Strategy through Organizational Design,” McKinsey Quarterly, no. 2 (2007), pp. 21–29; D. Jennings and S. Seaman, “High and Low Levels of Organizational Adaptation: An Empirical Analysis of Strategy, Structure, and Performance,” Strategic Management Journal, July 1994, pp. 459–75; D. C. Galunic and K. M. Eisenhardt, “Renewing the Strategy-Structure-Performance Paradigm,” in B. M. Staw and L. L. Cummings (eds.), Research in Organizational Behavior, vol. 16 (Greenwich, CT: JAI Press, 1994), pp. 215–55; R. Parthasarthy and S. P. Sethi, “Relating Strategy and Structure to Flexible Automation: A Test of Fit and Performance Implications,” Strategic Management Journal, vol. 14, no. 6 (1993), pp. 529–49; H. A. Simon, “Strategy and Organizational Evolution,” Strategic Management Journal, January 1993, pp. 131–42; H. L. Boschken, “Strategy and Structure: Re-conceiving the Relationship,” Journal of Management, March 1990, pp. 135–50; D. Miller, “The Structural and

24.

25.

26. 27.

28.

29. 30. 31.

Environmental Correlates of Business Strategy,” Strategic Management Journal, January–February 1987, pp. 55–76; and R. E. Miles and C. C. Snow, Organizational Strategy, Structure, and Process (New York: McGraw-Hill, 1978). See, for instance, P. M. Blau and R. A. Schoenherr, The Structure of Organizations (New York: Basic Books, 1971); D. S. Pugh, “The Aston Program of Research: Retrospect and Prospect,” in A. H. Van de Ven and W. F. Joyce (eds.), Perspectives on Organization Design and Behavior (New York: John Wiley, 1981), pp. 135–66; and R. Z. Gooding and J. A. Wager III, “A Meta-Analytic Review of the Relationship between Size and Performance: The Productivity and Efficiency of Organizations and Their Subunits,” Administrative Science Quarterly, December 1985, pp. 462–81. See, for example, H. M. O’Neill, “Restructuring, Reengineering and Rightsizing: Do the Metaphors Make Sense?” Academy of Management Executive, vol. 8, no. 4 (1994), pp. 9–30; R. K. Reger, J. V. Mullane, L. T. Gustafson, and S. M. Demarie, “Creating Earthquakes to Change Organizational Mindsets,” Academy of Management Executive, vol. 8, no. 4 (1994), pp. 31–41; and J. Tan, “Impact of Ownership Type on Environment–Strategy Linkage and Performance: Evidence from a Transitional Company,” Journal of Management Studies, May 2002, pp. 333–54. H. Mintzberg, Structure in Fives: Designing Effective Organizations (Upper Saddle River, NJ: Prentice Hall, 1983), p. 157. R. J. Williams, J. J. Hoffman, and B. T. Lamont, “The Influence of Top Management Team Characteristics on M-Form Implementation Time,” Journal of Managerial Issues, Winter 1995, pp. 466–80. See, for example, R. E. Hoskisson, C. W. L. Hill, and H. Kim, “The Multidivisional Structure: Organizational Fossil or Source of Value?” Journal of Management, vol. 19, no. 2 (1993), pp. 269–98; I. I. Mitroff, R. O. Mason, and C. M. Pearson, “Radical Surgery: What Will Tomorrow’s Organizations Look Like?” Academy of Management Executive, February 1994, pp. 11–21; T. Clancy, “Radical Surgery: A View from the Operating Theater,” Academy of Management Executive, February 1994, pp. 73–78; M. Hammer, “Processed Change: Michael Hammer Sees Process as ‘the Clark Kent of Business Ideas’—A Concept That Has the Power to Change a Company’s Organizational Design,” Journal of Business Strategy, November– December 2001, pp. 11–15; D. F. Twomey, “Leadership, Organizational Design, and Competitiveness for the 21st Century,” Global Competitiveness, Annual 2002, pp. S31–S40; and G. J. Castrogiovanni, “Organization Task Environments: Have They Changed Fundamentally over Time?” Journal of Management, vol. 28, no. 2 (2002), pp. 129–50. T. Starner, “Room for Improvement,” IQ Magazine, March–April 2003, pp. 36–37. Q. Hardy, “Google Thinks Small,” Forbes, November 14, 2005, pp. 198–202. See, for example, H. Rothman, “The Power of Empowerment,” Nation’s Business, June 1993, pp. 49–52; B. Dumaine, “Payoff from the New Management,” Fortune, December 13, 1993, pp. 103–10; J. A. Byrne, “The Horizontal Corporation,” BusinessWeek, December 20, 1993, pp. 76–81; J. R. Katzenbach and D. K. Smith, The Wisdom of Teams (Boston: Harvard Business School Press,

Endnotes  409

32. 33. 34. 35. 36.

37.

38. 39. 40.

41.

1993); L. Grant, “New Jewel in the Crown,” U.S. News & World Report, February 28, 1994, pp. 55–57; D. Ray and H. Bronstein, Teaming Up: Making the Transition to a SelfDirected Team-Based Organization (New York: McGraw Hill, 1995); and D. R. Denison, S. L. Hart, and J. A. Kahn, “From Chimneys to Cross-Functional Teams: Developing and Validating a Diagnostic Model,” Academy of Management Journal, December 1996, pp. 1005–23. C. Fishman, “Whole Foods Is All Teams,” Fast Company, Greatest Hits, vol. 1, 1997, pp. 102–13. W. Hillier, “BC Forest Fires: A Time of Need,” Canadian Underwriter, January 2004, pp. 22–23. P. LaBarre, “This Organization Is Dis-Organization,” Fast Company, www.fastcompany.com/magazine/03/oticon. html. See, for example, G. G. Dess et al., “The New Corporate Architecture,” Academy of Management Executive, August 1995, pp. 7–20. S. C. Certo and S. T. Certo, Modern Management, 10th ed. (Upper Saddle River, NJ: Prentice Hall, 2006), p. 316; P. M. J. Christie and R. R. Levary, “Virtual Corporations: Recipe for Success,” Industrial Management, July/August 1998, pp. 7–11; and C. C. Snow, R. E. Miles, and H. J. Coleman Jr., “Managing 21st Century Network Organizations,” Organizational Dynamics, Winter 1992, pp. 5–20. See, for example, W. H. Davidow and M. S. Malone, The Virtual Corporation (New York: HarperCollins, 1992); H. Chesbrough and D. Teece, “When Is Virtual Virtuous? Organizing for Innovation,” Harvard Business Review, January–February 1996, pp. 65–73; G. G. Dess, A. Rasheed, K. J. McLaughlin, and R. L. Priem, “The New Corporate Architecture,” Academy of Management Executive, August 1995, pp. 7–20; M. Sawhney and D. Parikh, “Break Your Boundaries,” Business 2.0, May 2000, pp. 198–207; D. Pescovitz, “The Company Where Everybody’s a Temp,” New York Times Magazine, June 11, 2000, pp. 94–96; W. F. Cascio, “Managing a Virtual Workplace,” Academy of Management Executive, August 2000, pp. 81–90; D. Lyons, “Smart and Smarter,” Forbes, March 18, 2002, pp. 40–41; and B. Hedberg, G. Dahlgren, J. Hansson, and N. Goran Olve, Virtual Organizations and Beyond: Discovering Imaginary Systems (New York: John Wiley, 2001). Based on G. Shaw, “Vancouver Law Firm Opens Virtual Branch Office,” Vancouver Sun, September 26, 2007, p. F4. “Virtual Organizations—Avatars and the Business World,” 899ALK, https://899alk.wordpress.com/category/traditional-vs-modern-design (June 28, 2011). SMTnet, “Mitel Outsources Manufacturing to New Company,” News Release, September 7, 2001, http:// www.smtnet.com/news/index.cfm?fuseaction=view_ news&news_id=1884. R. E. Miles and C. C. Snow, “Causes of Failures in Network Organizations,” California Management Review, vol. 34, no. 4 (1992), pp. 53–72; R. E. Miles and C. C. Snow, “The New Network Firm: A Spherical Structure Built on Human Investment Philosophy,” Organizational Dynamics, Spring 1995, pp. 5–18; C. Jones, W. Hesterly, and S. Borgatti, “A General Theory of Network Governance: Exchange Conditions and Social Mechanisms,” Academy of Management Review, October 1997, pp. 911–45; and R. E. Miles, C. C. Snow, J. A. Mathews, G. Miles, and H. J. Coleman, “Organizing in the Knowledge Age:

42. 43. 44.

45. 46. 47. 48. 49.

50.

51.

52.

­ nticipating the Cellular Form,” Academy of Management A Executive, November 1997, pp. 7–24. J. Barthelemy and D. Adsit, “The Seven Deadly Sins of Outsourcing,” Academy of Management Executive, vol. 17, no. 2 (2003), pp. 87–100. K. Restivo, “Most Canadian Tech Firms Prefer Not to Outsource, Study Shows,” Financial Post (National Post), June 11, 2004, p. FP5. PricewaterhouseCoopers LLP, Embracing the New: The Business Insights® Survey of Canadian Private Companies 2011, http://www.pwc.com/ca/en/private-company/ publications/business-insights-2011-10-en.pdf. S. Brearton, “Circles and Squares,” Canadian Business, November 2014, p. 57–63. Ibid. T. Schadler, “2013 Mobile Workforce Adoption Trends,” Forrester Research, Inc., Cambridge, MA. C. E. Connelly and D. G. Gallagher, “Emerging Trends in Contingent Work Research,” Journal of Management, November 2004, pp. 959–83. Based on R. Cheng, “So You Want to Use Your iPhone for Work? How the Smartest Companies Are Letting Employees Use Their Personal Gadgets to Do Their Jobs,” Wall Street Journal, April 25, 2011, pp. R1+; B. Roberts, “Mobile Workforce Management,” HR Magazine, March 2011, pp. 67–70; D. Darlin, “Software That Monitors Your Work, Wherever You Are,” New York Times Online, April 12, 2009, www.nytimesonline.com,; D. Pauleen and B. Harmer, “Away from the Desk...Always,” Wall Street Journal, December 15, 2008, p. R8; J. Marquez, “Connecting a Virtual Workforce,” Workforce Management Online, September 22, 2008, www.workforce.com; R. Yu, “Work Away from Work Gets Easier with Technology,” USA Today, November 28, 2006, p. 8B; M. Weinstein, “GOing Mobile,” Training, September 2006, pp. 24–29; C. Cobbs, “Technology Helps Boost Multitasking,” Springfield, Missouri News-Leader, June 15, 2006, p. 5B; C. Edwards, “Wherever You Go, You’re on the Job,” BusinessWeek, June 20, 2005, pp. 87–90; and S. E. Ante, “The World Wide Work Space,” BusinessWeek, June 6, 2005, pp. 106–08. P. B. Smith and M. F. Peterson, “Demographic Effects on the Use of Vertical Sources of Guidance by Managers in Widely Differing Cultural Contexts,” International Journal of Cross Cultural Management (April 2005), pp. 5–26. P. Olson, “Tesco’s Landing,” Forbes, June 4, 2007, pp. 116–18; and P. M. Senge, The Fifth Discipline: The Art and Practice of Learning Organizations (New York: Doubleday, 1990). D. A. Garvin, A. C. Edmondson, and F. Gino, “Is Yours a Learning Organization?” Harvard Business Review, March 2008, pp. 109–16; A. N. K. Chen and T. M. Edgington, “Assessing Value in Organizational Knowledge Creation: Considerations for Knowledge Workers,” MIS Quarterly, June 2005, pp. 279–309; K. G. Smith, C. J. Collins, and K. D. Clark, “Existing Knowledge, Knowledge Creation Capability, and the Rate of New Product Introduction in High-Technology Firms,” Academy of Management Journal, April 2005, pp. 346–57; R. Cross, A. Parker, L. Prusak, and S. P. Borgati, “Supporting Knowledge Creation and Sharing in Social Networks,” Organizational Dynamics, Fall 2001, pp. 100–20; M. Schulz, “The Uncertain Relevance of Newness: Organizational Learning and Knowledge Flows,” Academy of Management Journal, August 2001,

410 Endnotes

53.

54.

55. 56.

57. 58. 59. 60. 61.

62. 63. 64.

65.

pp. 661–81; G. Szulanski, “Exploring Internal Stickiness: Impediments to the Transfer of Best Practice within the Firm,” Strategic Management Journal, Winter Special Issue, 1996, pp. 27–43; and J. M. Liedtka, “Collaborating across Lines of Business for Competitive Advantage,” Academy of Management Executive, April 1996, pp. 20–37. See, for example, Deloitte, “Organizing for Corporate Responsibility and Sustainability: How a Company’s Organizational Structure and Governance Models Can Support CS&R Success,” Deloitte Development LLC, 2009, http://www.corpgov.deloitte.com/site/us/board-­ governance/corporate-responsibility-and-­sustainability/; Canadian Business for Social Responsibility (CBSR) and the Network for Business Sustainability, Embedding Sustainability in Organizational Culture—Framework and Best Practices (report emerging from the workshop ­“Embedding Sustainability into Corporate Cultures,” presented February 23, 2010, in Toronto, Ontario, by CBSR and Network for Business Sustainability), http://www. cbsr.ca/sites/default/files/file/CultureReport_­Final. pdf; and Kathee Rebernak, “Where Sustainability Lives: A Path to Integration and Innovation,” Environmental Leader, July 12, 2009, http://www.environmentalleader. com/2009/07/12/where-­sustainability-lives-a-path-tointegration-and-innovation/. Deloitte, “Organizing for Corporate Responsibility and Sustainability: How a Company’s Organizational Structure and Governance Models Can Support CS&R Success,” Deloitte Development LLC, 2009, http://www. corpgov.deloitte.com/site/us/board-governance/corporate-responsibility-and-sustainability/. N. M. Adler, International Dimensions of Organizational Behavior, 4th ed. (Cincinnati, OH: South-Western College Publishing), 2002, p. 66. P. B. Smith and M. F. Peterson, “Demographic Effects on the Use of Vertical Sources of Guidance by Managers in Widely Differing Cultural Contexts,” International Journal of Cross Cultural Management, April 2005, pp. 5–26. J. Marquez, “Connecting a Virtual Workforce,” Workforce Management Online, February 3, 2009. M. Conlin, “Home Offices: The New Math,” ­BusinessWeek, March 9, 2009, pp. 66–68. Ibid. J. Marquez, “Connecting a Virtual Workforce.” S. Jayson, “Working at Home: Family-Friendly,” USA Today, April 15, 2010, pp. 1A+; T. D. Hecht and N. J. Allen, “A Longitudinal Examination of the Work-Nonwork Boundary Strength Construct,” Journal of Organizational Behavior (October 2009), pp. 839–62; and G. E. Kreiner, E. C. Hollensbe, and M. L. Sheep, “Balancing Borders and Bridges: Negotiating the Work-Home Interface via Boundary Work Tactics,” Academy of Management Journal (August 2009), pp. 704–30. J. T. Marquez, “The Future of Flex,” Workforce Management Online, January 2010. S. Greenhouse, “Work-Sharing May Help Companies Avoid Layoffs,” New York Times Online, June 16, 2009. R. King, “Meet the Microworkers,” Bloomberg BusinessWeek Online, February 1, 2011; and R. King, “Mechanical Serfdom Is Just That,” Bloomberg BusinessWeek Online, February 1, 2011. K. Bennhold, “Working (Part-Time) in the 21st Century,” New York Times Online, December 29, 2010; and J. Revell,

C. Bigda, and D. Rosato, “The Rise of Freelance Nation,” CNNMoney, cnnmoney.com, June 12, 2009. 66. Revell, Bigda, and Rosato, “The Rise of Freelance ­Nation.” 67. Ibid. 68. H. G. Jackson, “Flexible Workplaces: The Next Imperative,” HR Magazine, March 2011, p. 8; E. Frauenheim, “Companies Focus Their Attention on Flexibility,” Workforce Management Online, February 2011; P. Davidson, “Companies Do More with Fewer Workers,” USA Today, February 23, 2011, pp. 1B+; M. Rich, “Weighing Costs, Companies Favor Temporary Help,” New York Times Online, December 19, 2010; and P. Davidson, “Temporary Workers Reshape Companies, Jobs,” USA Today, October 13, 2010, pp. 1B+. 69. See the Nova Scotia Association of Social Workers (NSASW) website, http://www.nsasw.org; NSASW, “Board of Examiners Annual Report,” January 1–­December 31, 2010, http://www.nsasw.org/files/File/Board%20 of%20Examiners/BOARD%20OF%20EXAMINERS-2011. pdf; and Richard G. Ramsay Management Consultants Inc., The Nova Scotia Association of Social Workers: Organization Structure Review, Final Report, October, 2009, http://www. nsasw.org/inner.php?id=70. 70. FAST COMPANY by A. Cohen. Copyright 2008 by Mansueto Ventures LLC. Reproduced with permission of Mansueto Ventures LLC in the format Textbook via Copyright Clearance Center. 71. S. Silbermann, “How Culture and Regulation Demand New Ways to Sell,” Harvard Business Review, July/ August 2012, pp. 104–05; P. Miller and T. WedellWedellsborg, “How to Make an Offer That Managers Can’t Refuse?” IESE Insight, second quarter, issue 9 (2011), pp. 66–67; S. Hernández, “Prove Its Worth,” IESE Insight, second quarter, issue 9 (2011), p. 68; T. Koulopoulos, “Know Thyself,” IESE Insight, second quarter, issue 9 (2011), p. 69; M. Weinstein, “Retrain and Restructure Your Organization,” Training, May 2009, p. 36; J. McGregor, “The Chore Goes Offshore,” BusinessWeek, March 23 & 30, 2009, pp. 50–51; “Pfizer: Making It ‘Leaner, Meaner, More Efficient,’” BusinessWeek Online, March 2, 2009; and A. Cohen, “Scuttling Scut Work,” Fast Company, February 2008, pp. 42–43. 72. See, for example, Northern Light Technologies, “About Us,” http://www.nltinc.com/about.html; LevittSafety, “About Us,” http://www.levitt-safety.com/ Company/AboutUs/tabid/61/Default.aspx; and “As I See It,” Interview with Bruce Levitt of Levitt-Safety Limited in Embracing the New: The Business Insights® Survey of Canadian Private Companies 2011, PricewaterhouseCoopers LLP, p. 25, http://www.pwc.com/ca/ en/private-company/publications/business-insights2011-10-en.pdf.

Chapter 6 1. K. Underwood, “Freshco brought fresh talent to an industry that needs it,” Canadian Business September 13, 2018. 2. M. Rennehan, “I was outraged when Sobey’s rebranded its chain with the same name as my company,”The Globe and Mail, March 21, 2016. 3. Ibid. 4. K. Underwood, “Freshco brought fresh talent to an industry that needs it,” Canadian Business September 13, 2018.

Endnotes  411

5. Ibid. 6. Material for this chapter is drawn from D. A. DeCenzo and S. P. Robbins, Fundamentals of Human Resources Management, 10th ed. (Hoboken, NJ: John Wiley & Sons, 2010). 7. See, for example, Y. Y. Kor and H. Leblebici, “How Do Interdependencies among Human-Capital Deployment, Development, and Diversification Strategies Affect Firms’ Financial Performance?” Strategic Management Journal, October 2005, pp. 967–85; D. E. Bowen and C. Ostroff, “Understanding HRM–Firm Performance Linkages: The Role of the ‘Strength’ of the HRM System,” Academy of Management Review, April 2004, pp. 203–21; R. Batt, “Managing Customer Services: Human Resource Practices, Quit Rates, and Sales Growth,” Academy of Management Journal, June 2002, pp. 587–97; A. S. Tsui, J. L. Pearce, L. W. Porter, and A. M. Tripoli, “Alternative Approaches to the Employee–Organization Relationship: Does Investment in Employees Pay Off?” Academy of Management Journal, October 1997, pp. 1089–21; M. A. Huselid, S. E. Jackson, and R. S. Schuler, “Technical and Strategic Human Resource Management Effectiveness as Determinants of Firm Performance,” Academy of Management Journal, January 1997, pp. 171–88; J. T. Delaney and M. A. Huselid, “The Impact of Human Resource Management Practices on Perceptions of Organizational Performance,” Academy of Management Journal, August 1996, pp. 949–69; B. Becker and B. Gerhart, “The Impact of Human Resource Management on Organizational Performance: Progress and Prospects,” Academy of Management Journal, August 1996, pp. 779–801; M. J. Koch and R. G. McGrath, “Improving Labor Productivity: Human Resource Management Policies Do Matter,” Strategic Management Journal, May 1996, pp. 335–54; and M. A. Huselid, “The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance,” Academy of Management Journal, June 1995, pp. 635–72. 8. “Maximizing the Return on Your Human Capital Investment: The 2005 Watson Wyatt Human Capital Index® Report,” “WorkAsia 2004/2005: A Study of Employee Attitudes in Asia,” and “European Human Capital Index 2002,” Watson Wyatt Worldwide (Washington, DC). 9. Adapted from Gareth Morgan, Images of Organization, (Thousand Oaks, CA: Sage Publications, 2006). 10. G. Lowson, “Three companies that strive to create employee-friendly cultures,” The Globe and Mail, October 13, 2016. 11. Deloitte Canada, “Congratulations to Canada’s 50 Best Managed Companies,” National Post, February 21, 2011. 12. Statistics Canada, “Labour Force Survey, August 2012,” The Daily (Statistics Canada), http://www.statcan.gc.ca/ daily-quotidien/120907/dq120907a-eng.htm. 13. Peter O’Neill, “Chamber Seeks Changes to EI to Combat Skills Shortage Crisis; President Says Ottawa Believes Its Own ‘Propaganda’ About the State of the Economy; ‘Competitiveness’ Should Be Its Mandate,” Vancouver Sun, February 8, 2012, p. C2; Canadian Chamber of Commerce, “Taking on the Top 10 Barriers to Canadian Competitiveness,” Connect!, February 8, 2012, http://www.chamber.ca/index.php/en/news/ C197/taking-on-the-top-10-barriers-to-canadiancompetitiveness; and Canadian Chamber of Commerce, “Top 10 Barriers to Competitiveness,” Connect!, http:// chambertop10.ca.

14. Working in Canada, “Canada Targets Skilled Trades,” http://www.workingin-canada.com/visa/skills-indemand/canada-targets-skilled-trades. 15. Human Resources and Skills Development Canada, ­“Canadians in Context—Aging Population,” http:// www4.hrsdc.gc.ca/[email protected]?iid=33. 16. “Canada’s Foreign-Born Population Soars to 6.8 Million,” CBC News, 2014, http://www.cbc.ca/news/ canada/canada-s-foreign-born-population-soars-to6-8-million-1.1308179; https://www.statcan.gc.ca/eng/ dai/btd/othervisuals/other006. 17. G. Dessler and N. Cole, Human Resources Management in Ca-nada, 10th ed. (Toronto, ON: Pearson Prentice-Hall). 18. Based on G. Dessler and N. Chhinzer, Human Resources Management in Canada, 13th ed. (Toronto, ON: Pearson Prentice-Hall),Chapter 2. 19. S. Armour, “Lawsuits Pin Target on Managers,” USA Today, October 1, 2002, www.usatoday.com. 20. M. Wilson, “Hooters Manager Asks Waitress to Wear a Wig after Brain Surgery,” http://www.hrcommunication. com/Main/Articles/Hooters_manager_asks_waitress_to_ wear_a_wig_after_8781.aspx, April 10, 2013; A. Langfield, “Hooters Sued by Former Waitress in Dispute over Wig,” NBC News, http://www.cnbc.com/id/100627864, April 9, 2013; and R. Patrick, “Suit Says Hooters Waitress Forced out after Surgery,” St. Louis Post Dispatch, http://www.stltoday.com/news/local/crime-and-courts/suit-says-hooters-waitress-forced-out-after-surgery/article_db861563d08b-5cb7-9cc9-91150b39351b.html, April 6, 2013. 21. D. Sankey, “Technologies Extend HR Reach,” Ottawa Citizen, November 9, 2011, http://www2.canada.com/ ottawacitizen/story.html?id=a6638454-3711-422e-9c0e1a40d1ac52f2. 22. I. Khrennikov, “The Russian Robot That’s Hiring Humans.” Bloomberg Businessweek, March 28, 2018, https:// www.bloomberg.com/news/articles/2018-03-28/thisai-software-aims-to-do-90-percent-of-hr-s-recruitingwork. 23. D. Vanheukelom, “HR Tech’s Future (and Present) in the Cloud,” Canadian HR Reporter, October 10, 2011, http:// www.hrreporter.com/articleview/11414-hr-techs-futureand-present-in-the-cloud. 24. “HRIS in 2010 (or Sooner!): Experts Predict Use of Wrist Mounted Devices, Virtual HR Access, and HR Voice Recognition,” Managing HR Information Systems, February 2002, pp. 1–4. 25. E. Beauchesne, “Skills Training Rebounds: But Labour Shortage May Still Be Looming,” Telegram, November 21, 2003, p. D1. 26. E. Komarnicki, Labour and Skills Shortages in Canada: Addressing Current and Future Challenges, Report of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities (2012). 27. P. P. Shah, “Network Destruction: The Structural Implications of Downsizing,” Academy of Management Journal (February 2000), p. 101–12. 28. See, for example, K. A. Mollica and B. Gray, “When Layoff Survivors Become Layoff Victims: Propensity to Litigate,” Human Resource Planning, January 2001, pp. 22–32. 29. S. Berfield, “After the Layoff, the Redesign,” Business Week, April 14, 2008, pp. 54–56; L. Uchitelle, “Retraining Laid-off Workers, but for What?” New York Times Online,

412 Endnotes

30.

31.

32.

33. 34. 35.

March 26, 2006; D. Tourish, N. Paulsen, E. Hobman, and P. Bordia, “The Downsides of Downsizing: Communication Processes and Information Needs in the Aftermath of a Workforce Reduction Strategy,” Management Communication Quarterly, May 2004, pp. 485–516; J. Brockner, G. Spreitzer, A. Mishra, W. Hochwarter, L. Pepper, and J. Weinberg, “Perceived Control as an Antidote to the Negative Effects of Layoffs on Survivors’ Organizational Commitment and Job Performance,” Administrative Science Quarterly, 49, 2004, pp. 76–100; and E. Krell, “Defusing Downsizing,” Business Finance, December 2002, pp. 55–57. Based on “Find the Sharpest Needle in the Stack,” HR Magazine, June 2012, p. 16; J. Yang and P. Trap, “If You Started a Job and You Didn’t Like It, How Long Would You Stay?” USA Today, June 11, 2012, p. 1B; J. Yang and P. Trap, “Do You Use Social Networking Sites to Research Candidates?” USA Today, June 5, 2012, p. 1B; J. Yang and A. Gonzalez, “Top Actions Workers Feel Are Grounds for Termination,” USA Today, May 7, 2012, p. 1B; L. Weber, “Little Time for Resumes,” Wall Street Journal, March 21, 2012, p. B8; J. Yang and P. Trap, “Top Reasons Why Someone Hired Would Not Work Out in the Position,” USA Today, October 26, 2011, p. 1B; J. Yang and V. Salazar, “Are Annual Performance Reviews an Accurate Appraisal / for Employees’ Work?” USA Today, September 27, 2011, p. 1B; J. Yang and S. Ward, “What Are the Most Common Mistakes Candidates Make During Job Interviews?” USA Today, August 15, 2011, p. 1B; and P. Kujawa, “For Some Workers, the Piggy Bank Is Fat for Retirement,” Workforce Management Online, July 16, 2012. J. J. Salopek, “Employee Referrals Remain a Recruiter’s Best Friend,” Workforce Management Online, December 2010; L. G. Klaff, “New Internal Hiring Systems Reduce Cost and Boost Morale,” Workforce Management, March 2004, pp. 76–79; M. N. Martinez, “The Headhunter Within,” HR Magazine, August 2001, 48–55; “Even NonRecruiting Companies Must Maintain Hiring Networks,” HR Focus, November 2001, p. 8; and L. Greenhalgh, A. T. Lawrence, and R. I. Sutton, “Determinants of Work Force Reduction Strategies in Declining Organizations,” Academy of Management Review, April 1988, pp. 241–54. J. J. Salopek, “Employee Referrals Remain a Recruiter’s Best Friend”; “Employee Referral Programs: Highly Qualified New Hires Who Stick Around,” Canadian HR Reporter, June 4, 2001, p. 21; and C. Lachnit, “Employee Referral Saves Time, Saves Money, Delivers Quality,” Workforce, June 2001, pp. 66–72. J. Mooney, “Pre-Employment Testing on the Internet: Put Candidates a Click Away and Hire at Modem Speed,” Public Personnel Management, Spring 2002, pp. 41–52. L. Weber and E. Dwoskin, “As Personality Tests Multiply, Employers Are Split,” Wall Street Journal, September 30, 2014, p. A1+. See, for instance, R. D. Arvey and J. E. Campion, “The Employment Interview: A Summary and Review of Recent Research,” Personnel Psychology, Summer 1982, pp. 281–322; M. M. Harris, “Reconsidering the Employment Interview: A Review of Recent Literature and Suggestions for Future Research,” Personnel Psychology, Winter 1989, pp. 691–726; J. H. Prager, “Nasty or Nice: 56-Question Quiz,” Wall Street Journal, February 22, 2000, p. A4; and M. K. Zachary, “Labor Law for Supervisors,” Supervision, March 2001, pp. 23–26.

36. See, for instance, G. Nicholsen, “Screen and Glean: Good Screening and Background Checks Help Make the Right Match for Every Open Position,” Workforce, October 2000, p. 70. 37. R. A. Posthuma, F. P. Morgeson, and M. A. Campion, “Beyond Employment Interview Validity: A Comprehensive Narrative Review of Recent Research and Trends over Time,” Personnel Psychology, Spring 2002, pp. 1–81. 38. A. I. Huffcutt, J. M. Conway, P. L. Roth, and N. J. Stone, “Identification and Meta-Analysis Assessment of Psychological Constructs Measured in Employment Interviews,” Journal of Applied Psychology (October 2001), pp. 897–913; and A. I. Huffcutt, J. A. Weekley, W. H. Wiesner, T. G. Degroot, and C. Jones, “Comparison of Situational and Behavioural Description Interview Questions for Higher-Level Positions,” Personnel Psychology, Autumn 2001, pp. 619–44. 39. See C. H. Middendorf and T. H. Macan, “Note-Taking in the Employment Interview: Effects on Recall and Judgments,” Journal of Applied Psychology (April 2002), pp. 293–303; D. Butcher, “The Interview Rights and Wrongs,” Management Today, April 2002, p. 4; P. L. Roth, C. H. Can Iddekinge, A. I. Huffcutt, C. E. Eidson, and P. Bobko, “Corrections for Range Restriction in Structured Interview Ethnic Group Differences: The Value May Be Larger Than Researchers Thought,” Journal of Applied Psychology (April 2002), pp. 369–76; and E. Hermelin and I. T. Robertson, “A Critique and Standardization of Meta-Analytic Coefficients in Personnel Selection,” Journal of Occupational and Organizational Psychology (September 2001), pp. 253–77. 40. See J. Merritt, “Improv at the Interview,” BusinessWeek, February 3, 2003, p. 63; P. J. Taylor and B. Small, “Asking Applicants What They Would Do versus What They Did Do: A Meta-Analysis Comparison of Situation and Past Behaviour Employment Interview Questions,” Journal of Occupational and Organizational Psychology (September 2002), pp. 277–95; S. D. Mauer, “A Practitioner-Based Analysis of Interviewer Job Expertise and Scale Format as Contextual Factors in Situational Interviews,” Personnel Psychology, Summer 2002, pp. 307–28; and J. M. Barclay, “Improving Selection Interviews with Structure: Organizations’ Use of Behavioural Interviews,” Personnel Review 30, no. 1 (2001), pp. 81–95. 41. J. Merritt, “Improv at the Interview,” p. 63. 42. See, for example, T. Janz, L. Hellervik, D. Gilmore. Behaviour Description Interviewing (Newton, MA: Allyn and Bacon Publishers, 1986); S. J. Motowidlo, G. W. Carter, M. D. Dunnette, et al., “Studies of the Structured Behavioural Interview,” Journal of Applied Psychology, vol. 77, no. 5 (1992), pp. 571–87; M. A. McDaniel, D. Whetzel, F. L. Schmidt, S. D. Maurer, “The Validity of Employment Interviews: A Comprehensive Review and Meta-Analysis,” Journal of Applied Psychology, vol. 79, no. 4, (1994), pp. 599–616; and T. Janz, “Initial Comparisons of Patterned Behaviour-Based Interviews versus Unstructured Interviews,” Journal of Applied Psychology, vol. 67, no. 5 (1982), pp. 577–80. 43. Based on S. P. Robbins and D. A. DeCenzo, Fundamentals of Management, 4th ed. (Upper Saddle River, NJ: Prentice Hall, 2004), p. 194. 44. S. H. Applebaum and M. Donia, “The Realistic Downsizing Preview: A Management Intervention in the Prevention of Survivor Syndrome (Part II),” Career Development International, January 2001, 5–19.

Endnotes  413

45. D. Zielinski, “Effective Assessments,” HRMagazine, January 2011, pp. 61–64; W. L. Gardner, B. J. Reithel, R. T. Foley, C. C. Cogliser, and F. O. Walumbwa, “Attraction to Organizational Culture Profiles: Effects of Realistic Recruitment and Vertical and Horizontal IndividualismCollectivism,” Management Communication Quarterly, February 2009, 437–72; and S. L. Premack and J. P. Wanous, “A Meta-Analysis of Realistic Job Preview Experiments,” Journal of Applied Psychology (November 1985), pp.706–20. 46. A. Wahl, “People Power,” Canadian Business, March 29–April 11, 2004, p. 58. 47. C. Garvey, “The Whirlwind of a New Job,” HR Magazine, June 2001, pp. 110–18. 48. B. P. Sunoo, “Results-Oriented Customer Service Training,” Workforce (May 2001), pp. 84–90. 49. Technology and the Manager’s Job box based on D. Zielinski, “Referral Booster,” HR Magazine, March 2013, 63–65; B. Horovitz, “Tweet for This Job—And It Could Be Yours,” USA Today, February 18, 2013, A 4; “Action Items,” HR Magazine, January 2013, 33–35; B. Roberts, “From E-Learning to Mobile Learning,” HR Magazine, August 2012, 61–65; D. Zielinski, “Effective Assessments”; R. E. DeRouin, B. A. Fritzsche, and E. Salas, “E-Learning in Organizations,” Journal of Management (December 2005): 920–40; K. O’Leonard, HP Case Study: Flexible Solutions for Multi-Cultural Learners (Oakland: CA: Bersin & Associates, 2004); S. Greengard, “The Dawn of Digital HR,” Business Finance, October 2003, 55–59; and J. Hoekstra, “Three in One,” Online Learning vol. 5 (2001): 28–32. 50. See, for instance, E. G. Tripp, “Aging Aircraft and Coming Regulations: Political and Media Pressures Have Encouraged the FAA to Expand Its Pursuit of Real and Perceived Problems of Older Aircraft and Their Systems. Operators Will Pay,” Business and Commercial Aviation, March 2001, pp. 68–75. 51. “A&S Interview: Sully’s Tale,” Air & Space Magazine, www.airspacemag.com (February 18, 2009); A. Altman, ­“Chesley B. Sullenberger III,” Time, www.time.com (January 16, 2009); and K. Burke, P. Donohue, and C. Siemaszko, “US Airways Airplane Crashes in Hudson River—Hero Pilot Chesley Sullenberger III Saves All Aboard,” New York Daily News, www.nydailynews.com (January 16, 2009). 52. C. S. Duncan, J. D. Selby-Lucas, and W. Swart, “Linking Organizational Goals and Objectives to Employee Performance: A Quantitative Perspective,” Journal of American Academy of Business (March 2002), pp. 314–18. 53. “Training Expenditures,” Training (November–December 2010), p.19. 54. D. Sankey, “Canadian Companies Skimp on Training,” National Post, June 27, 2007, p. WK3. 55. R. Langlois, “Fairmont Hotels: Business Strategy Starts with People,” Canadian HR Reporter, November 5, 2001, p. 19. 56. B. Hall, “The Top Training Priorities for 2003,” Training, February 2003, p. 40. 57. M. Dalahoussaye, “Show Me the Results,” Training (March 2002), p. 28. 58. See, for example, R. E. Catalano and D. L. Kirkpatrick, “Evaluating Training Programs: The State of the Art,” Training and Development Journal (May 1968), pp. 2–9. 59. “Genesis Hospitality Management Named One of Canada’s Best Managed Companies,” March 9, 2018, https:// bdnmb.ca/genesis-hospitality-management-named-oneof-canadas-best-managed-companies/.

60. Based on WorldatWork®, Total Rewards Model, (WorldatWork®, 2011), http://www.worldatwork.org/waw/ adimLink?id=28330&nonav=y. 61. This section based on R. I. Henderson, Compensation Management in a Knowledge-Based World, 9th ed. (Upper Saddle River, NJ: Prentice Hall, 2003). 62. L. R. Gomez-Mejia, “Structure and Process of Diversification, Compensation Strategy, and Firm Performance,” Strategic Management Journal, vol. 13, no. 5 (1992), pp. 381–97; and E. Montemayor, “Congruence between Pay Policy and Competitive Strategy in High-­ Performing Firms,” Journal of Management, vol. 22, no. 6 (1996), pp. 889–908. 63. E. E. Lawler III, G. E. Ledford Jr., and L. Chang, “Who Uses Skill-Based Pay and Why,” Compensation & Benefits Review, March–April 1993, p. 22; G. E. Ledford, “Paying for the Skills, Knowledge and Competencies of Knowledge Workers,” Compensation & Benefits Review, July–August 1995, pp. 55–62; C. Lee, K. S. Law, and P. Bobko, “The Importance of Justice Perceptions on Pay Effectiveness: A Two-Year Study of a SkillBased Pay Plan,” Journal of Management, vol. 26, no. 6 (1999), pp. 851–73. 64. J. D. Shaw, N. Gupta, A. Mitra, and G. E. Ledford Jr., “Success and Survival of Skill-Based Pay Plans,” Journal of Management, February 2005, pp. 28–49. 65. Information from Hewitt Associates Studies, “Hewitt Study Shows Pay-for-Performance Plans Replacing Holiday Bonuses,” December 6, 2005; “Salaries Continue to Rise in Asia Pacific,” Hewitt Annual Study Reports, November 23, 2005; and CLA Personnel, “Hewitt Associates Study Reveals Salary Increases Remain Flat,” Info CLA, http://www.clapersonnel.ca/en_employ_articles_­ details.asp?id=2086. 66. Based on G. Dessler and N. Cole, Human Resources Management in Canada, 10th ed. (Toronto, ON: Pearson Prentice-Hall),Chapter 13. 67. C. Oglesby, “More Options for Moms Seeking Work– Family Balance,” CNN.com, May 10, 2001. 68. J. Miller and M. Miller, “Get a Life!” Fortune, November 28, 2005, pp. 108–24. 69. M. Elias, “The Family-First Generation,” USA Today, December 13, 2004, p. 5D. 70. F. Hansen, “Truths and Myths about Work/Life Balance,” Workforce, December 2002, pp. 34–39. 71. M. M. Arthur, “Share Price Reactions to Work–Family Initiatives: An Institutional Perspective,” Academy of Management Journal, August 2003, pp. 497–505. 72. N. P. Rothbard, T. L. Dumas, and K. W. Phillips, “The Long Arm of the Organization: Work–Family Policies and Employee Preferences for Segmentation,” paper presented at the 61st Annual Academy of Management meeting, Washington, D.C., August 2001. 73. Based on WorldatWork®, Total Rewards Model, (WorldatWork®, 2011), http://www.worldatwork.org/waw/ adimLink?id=28330&nonav=y. 74. S. Purba, “When Reviews Deserve a Failing Grade,” Globe and Mail, June 11, 2004, p. C1. 75. D. E. Super and D. T. Hall, “Career Development: Exploration and Planning,” in Annual Review of Psychology, vol. 29, eds. M. R. Rosenzweig and L. W. Porter (Palo Alto, CA: Annual Reviews, 1978), p. 334. 76. D. E. Super, “A Life-Span Life Space Approach to Career Development,” Journal of Vocational Behavior, Spring 1980,

414 Endnotes pp. 282–98. See also E. P. Cook, and M. Arthur, Career Theory Handbook (Upper Saddle River, NJ: Prentice Hall, 1991), pp. 99–131; and L. S. Richman, “The New Worker Elite,” Fortune, August 22, 1994, pp. 56–66. 77. A. Joshi, “Managing the Organizational Melting Pot: Dilemmas of Workplace Diversity,” Administrative Science Quarterly, December 2001, pp. 783–84. 78. L. Dishman, “These Are the Companies Winning the Race to Increase Diversity,” http://www.fastcompany. com/3045438/these-are-the-companies-winning-therace-to-increase-diversity, April 25, 2015. 79. See, for instance, K. Iverson, “Managing for Effective Workforce Diversity,” Cornell Hotel and Restaurant Administration Quarterly, April 2000, pp. 31–38. 80. “Filling the Gaps,” Maclean’s, September 16, 2013, pp. 40–41. 81. Ibid. 82. Ibid. 83. N. F. Foy, “Sexual Harassment Can Threaten Your Bottom Line,” Strategic Finance (August 2000), pp. 56–57. 84. “Federal Monitors Find Illinois Mitsubishi Unit Eradicating Harassment,” Wall Street Journal (September 7, 2000), p. A8. 85. A. MacNab, “Unpaid Intern Awarded $75,000 for Sexual Harassment” Canadian Occupational Safety, April 3, 2018 https://www.cos-mag.com/ohs-lawsregulations/36472-unpaid-intern-awarded-75000-forsexual-harassment/. 86. Ibid. 87. L. J. Munson, C. Hulin, and F. Drasgow, “Longitudinal Analysis of Dispositional Influences and Sexual Harassment: Effects on Job and Psychological Outcomes,” Personnel Psychology (Spring 2000), pp. 21. 88. B. Leonard, “Survey: 10% of Employees Report Harassment at Work,” HR Magazine, October 2010, p. 18. 89. Based on G. Dessler and N. Cole, Human Resources Management in Canada, 10th ed. (Toronto, ON: Pearson Prentice-Hall),Chapter 2. 90. “Nichols v. Azteca Restaurant Enterprises,” Harvard Law Review, May 2002, 2074; A. J. Morrell, “Non-Employee Harassment,” Legal Report (January–February 2000), p. 1. See also S. Lim and L. M. Cortina, “Interpersonal Mistreatment in the Workplace: The Interface and Impact of General Incivility and Sexual Harassment,” Journal of Applied Psychology (May 2005), pp. 483–96. 91. See A. M. O’Leary-Kelly, L. Bowes-Sperry, C. A. Bates, and E. R. Lean, “Sexual Harassment at Work: A Decade (Plus) of Progress,” Journal of Management (June 2009), pp. 503–36; M. Rotundo, D. H. Nguyen, and P. R. Sackett, “A Meta-Analytic Review of Gender Differences in Perceptions of Sexual Harassment,” Journal of Applied Psychology (October 2001), pp. 914–22. 92. “Sexual Harassment,” http://www.eeoc.gov/laws/ types/sexual_harassment.cfm, April 24, 2015. 93. R. L. Wiener and L. E. Hurt, “How Do People Evaluate Social Sexual Conduct at Work? A Psychological Model,” Journal of Applied Psychology (February 2000), p. 75. 94. A. R. Karr, “Companies Crack Down on the Increasing Sexual Harassment by E-Mail,” Wall Street Journal, September 21, 1999, p. A1; and A. Fisher, “After All This Time, Why Don’t People Know What Sexual Harassment Means?” Fortune, January 12, 1998, p. 68. 95. Ibid. 96. “You and DuPont: Diversity,” DuPont Company Documents (1999–2000), http://www.dupont.com/careers/

you/diverse.html; and “DuPont Announces 2000 Dr. Martin Luther King, Days of Celebration,” DuPont Company Documents, http://www.dupont.com/corp/ whats-news/releases/00/001111.html (January 11, 2000). 97. J. W. Janove, “Sexual Harassment and the Big Three Surprises,” HR Magazine, November 2001, pp. 123–30; and L. A. Baar and J. Baar, “Harassment Case Proceeds Despite Failure to Report,” HR Magazine, June 2005, p. 159. 98. See, for instance, P. W. Dorfman, A. T. Cobb, and R. Cox, “Investigations of Sexual Harassment Allegations: Legal Means Fair—Or Does It?” Human Resources Management, Spring 2000, pp. 33–39. 99. “OSH Answer Fact Sheets: Bullying in the Workplace,” Canadian Centre for Occupational Health and Safety, last updated December 1, 2016, https://www.ccohs.ca/oshanswers/psychosocial/bullying.html. 100. Ibid. 101. Ibid. 102. Based on G. Dessler and N. Cole, Human Resources Management in Canada, 10th ed. (Toronto, ON: Pearson Prentice-Hall), Chapter 14. 103. K. Underwood, “Freshco brought fresh talent to an industry that needs it,” Canadian Business September 13, 2018. 104. See WorldatWork®, Total Rewards Model, (WorldatWork®, 2011), http://www.worldatwork.org/waw/ adimLink?id=28330&nonav=y. 105. Communications New Brunswick, “New Initiatives to Help Aboriginal Students Pursue Post-Secondary Education,” Government of New Brunswick News Release, January 6, 2010, http://www.gnb.ca/cnb/news/ pet/2010e0007pe.htm. 106. “New Brunswick Invests in Training for Aboriginal Peoples,” Canadian HR Reporter, October 7, 2911, http:// www.hrreporter.com/articleprint.aspx?articleid=11403. 107. Laura A. DeCarlo, “The 30-Second Commercial: What’s Unique about You?” The Global Career Services Network, http://www.careerdirectors.com/members/ articles/I01.pdf. 108. Dragon’s Den, Canadian Broadcasting Corporation, http://www.cbc.ca/dragonsden. 109. Wellington West, Rock Steady, Annual Report 2008, http:// www.wellwest.ca/documents/reports/WW_AR_2008. pdf. 110. Ibid. 111. Ibid. 112. M. Cash, “Steady Growth Brings $333-M Payoff— National Bank Buys Wellington West,” Winnipeg Free Press, May 27, 2011, http://www.winnipegfreepress. com/business/steady-growth-brings-333-m-payoff-122710338.html. 113. Wellington West, Rock Steady, Annual Report 2008, http:// www.wellwest.ca/documents/reports/WW_AR_2008. pdf. 114. M. Cash, “Steady Growth Brings $333-M Payoff— National Bank Buys Wellington West,” Winnipeg Free Press, May 27, 2011, http://www.winnipegfreepress. com/business/steady-growth-brings-333-m-payoff-122710338.html. 115. A. Hopkins, “Manulife Buys Financial Planning Firm Wellington West,” Reuters, August 29, 2012, http:// www.reuters.com/article/2012/08/29/us-manulifewellingtonwest-idUSBRE87S11F20120829; “Manulife Acquires Wellington West Arm,” Winnipeg Free Press,

Endnotes  415

August 30, 2012, http://www.winnipegfreepress. com/business/manulife-acquires-wellington-westarm-167960166.html. 116. S. Rudner, “Dealing with Romance In the Workplace,” Canadian HR Reporter, January 3, 2018, https://www. hrreporter.com/columnist/canadian-hr-law/archive/2018/01/30/dealing-with-romance-in-the-workplace/. 117. “Work Is for Lovers: Vault’s 2017 Office Romance Survey Results,” Vault Newsletter, February 13, 2017, https:// www.vault.com/blogs/workplace-issues/work-is-forlovers-vaults-2017-office-romance-survey-results. 118. M. Vander Wier, “Is Office Romance Off Limits?” ­Canadian HR Reporter, February 14, 2018, https://www. hrreporter.com/culture-and-engagement/35973-isoffice-romance-off-limits/. 119. Ibid. 120. Ibid. 121. “Digital Report: Tug-of-War for Digital Talent,” Campaign Asia-Pacific, June 2012, p. 12; N. Blacksmith and Y. Yang, “Executives: Your Company Isn’t Attracting the Best Talent,” Gallup Management Journal Online, May 29, 2012, p. 1; J. Cullen, “Stop Searching for the Elusive Purple Squirrel,” Computerworld, April 9, 2012, 25; G. Anders, “The Rare Find,” Bloomberg BusinessWeek, October 17–23, 2011, 106–12; and J. Light, “At Mature Techs, a Young Vibe,” Wall Street Journal, June 13, 2011, p. B7.

12. 13. 14. 15. 16.

17. 18. 19. 20.

Chapter 7 1. A. Van Toi, “How Article shook up a staid industry to become Canada’s Fastest-Growing Company,” Canadian Business, September 13, 2018. 2. See A. Van Toi, “How Article shook up a staid industry to become Canada’s Fastest-Growing Company,” Canadian Business, September 13, 2018; M. Greenwood, “Article’s Minimalistic Vancouver Loft,” July 20, 2018, retrieved from https://techvibes.com/2018/07/20/killer-spaces-article-vancouver; www.article.com/aboutus. 3. M. Greenwood, “Article’s Minimalistic Vancouver Loft,” July 20, 2018, retrieved from https://techvibes. com/2018/07/20/killer-spaces-article-vancouver. 4. A. Van Toi, “How Article shook up a staid industry to become Canada’s Fastest-Growing Company,” Canadian Business, September 13, 2018. 5. Ibid. 6. Ibid. 7. Ibid. 8. S.Findlay, “Ehtiopian Potash Heats Up.” Canadian Business, March 2014, p.12. 9. J. Gallaugher, Information Systems: A Manager’s Guide to Harnessing Technology, v.1.0 (Flat World Knowledge 2010), http://catalog.flatworldknowledge.com/catalog/ editions/p61083. 10. K. Grzbowska, “The Social Aspect of Introducing Changes into the Organization,” International Journals of Human Resources Development and Management, February 2, 2007, p. 67; and I. M. Jawahar and G. L. McLaughlin, “Toward a Descriptive Stakeholder Theory: An Organizational Life Cycle Approach,” Academy of Management Review, July 2001, pp. 397–415. 11. E. Shannon, “Agent of Change,” Time, March 4, 2002, p. 17; B. Kenney, “SLA Head Shaffer Resigns Abruptly: Did ‘Change Agent’ Move Too Fast in Aggressive

21.

22.

23.

­Restructuring?” Library Journal, March 15, 2002, pp. 17–19; and T. Mudd, “Rescue Mission,” Industry Week, May 1, 2000, pp. 30–37. The idea for these metaphors came from P. Vaill, Managing as a Performing Art: New Ideas for a World of Chaotic Change (San Francisco: Jossey Bass, 1989). K. Lewin, Field Theory in Social Science (New York: Harper & Row, 1951). R. E. Levasseur, “People Skills: Change Management Tools—Lewin’s Change Model,” Interfaces, August 2001, pp. 71–74. D. Lieberman, “Nielsen Media Has Cool Head at the Top,” USA Today, March 27, 2006, p. 3B. S. Hicks, “What Is Organization Development?” Training and Development, August 2000, pp. 65; and H. Hornstein, “Organizational Development and Change Management: Don’t Throw the Baby Out with the Bath Water,” Journal of Applied Behavioral Science, June 2001, pp. 223–27. J. Wolfram and S. Minahan, “A New Metaphor for Organization Development,” Journal of Applied Behavioral Science, June 2006, pp. 227–43. See, for instance, H. B. Jones, “Magic, Meaning, and Leadership: Weber’s Model and the Empirical Literature,” Human Relations, June 2001, p. 753. G. Akin and I. Palmer, “Putting Metaphors to Work for a Change in Organizations,” Organizational Dynamics, Winter 2000, pp. 67–79. J. Grieves, “Skills, Values or Impression Management: Organizational Change and the Social Processes of Leadership, Change Agent Practice, and Process Consultation,” Journal of Management Development, May 2000, pp. 407. M. McMaster, “Team Building Tips,” Sales & Marketing Management, January 2002, p. 140; and “How To: Executive Team Building,” Training and Development, January 2002, pp. 16. S. Shinn, “Stairway to Reinvention,” BizEd, January–­ February 2010, p. 6; M. Scott, “A Stairway to Marketing Heaven,” BusinessWeek, November 2, 2009, p. 17; and The Fun Theory, November 10, 2009, http://thefuntheory.com. See, for example, J. Robison and D. Jones, “Overcoming the Fear of Change,” Gallup Management Journal Online, January 7, 2011; J. D. Ford, L. W. Ford, and A. D’Amelio, “Resistance to Change: The Rest of the Story,” Academy of Management Review, April 2008, pp. 362–77; A. Deutschman, “Making Change: Why Is It So Hard to Change Our Ways?” Fast Company, May 2005, pp. 52–62; S. B. Silverman, C. E. Pogson, and A. B. Cober, “When Employees at Work Don’t Get It: A Model for Enhancing Individual Employee Change in Response to Performance Feedback,” Academy of Management Executive, May 2005, pp. 135–47; C. E. Cunningham, C. A. Woodward, H. S. Shannon, J. MacIntosh, B. Lendrum, D. Rosenbloom, and J. Brown, “Readiness for Organizational Change: A Longitudinal Study of Workplace, Psychological and Behavioral Correlates,” Journal of Occupational and Organizational Psychology, December 2002, pp. 377–92; M. A. Korsgaard, H. J. Sapienza, and D. M. Schweiger, “Beaten Before Begun: The Role of Procedural Justice in Planning Change,” Journal of Management 28, no. 4 (2002), pp. 497–516; R. Kegan and L. L. Lahey, “The Real Reason People Won’t Change,” Harvard Business Review, November 2001, pp. 85–92; S. K.

416 Endnotes

24.

25.

26.

27. 28. 29. 30. 31. 32.

33. 34.

35.

Piderit, “­Rethinking Resistance and Recognizing Ambivalence: A Multidimensional View of Attitudes Toward an Organizational Change,” Academy of Management Review, October 2000, pp. 783–94; C. R. Wanberg and J. T. Banas, “Predictors and Outcomes of Openness to Changes in a Reorganizing Workplace,” Journal of Applied Psychology, February 2000, pp. 132–42; A. A. Armenakis and A. G. Bedeian, “Organizational Change: A Review of Theory and Research in the 1990s,” Journal of Management 25, no. 3 (1999), pp. 293–315; and B. M. Staw, “Counterforces to Change,” in P.S. Goodman and Associates (eds.), Change in Organizations (San Francisco: Jossey-Bass, 1982), pp. 87–121. A. Reichers, J. P. Wanous, and J. T. Austin, “Understanding and Managing Cynicism about Organizational Change,” Academy of Management Executive, February 1997, pp. 48–57; P. Strebel, “Why Do Employees Resist Change?” Harvard Business Review, May–June 1996, pp. 86–92; and J. P. Kotter and L. A. Schlesinger, “Choosing Strategies for Change,” Harvard Business Review, March– April 1979, pp. 107–09. Based on S. Schomer, “Under Pressure,” Fast Company, April 2010, p. 112; “Organizational Change: Facebook Poll,” Harvard Business Review, March 2010, p. 16; J. Yang and S. Ward, “I’d Rather Give Up,” USA Today, March 4, 2010, p. 1B; M. Weinstein, “Missing Something,” Training, January 2010, p. 6; J. MacIntyre, “Hard at Work,” Springfield Business Journal, November 30–December 6, 2009, p. 16; J. MacIntyre, “Accidental Innovation,” Springfield Business Journal, September 28–October 4, 2009, p. 22; and M. Healy and S. Ward, “Workplace Worries,” USA Today, August 28, 2008, p. 1D. T. M. Egan and C. M. Lancaster, “Comparing Appreciative Inquiry to Action Research: OD Practitioner Perspectives,” Organizational Development Journal, vol. 23, no. 2 (Summer 2005): pp. 29–49. McShane and S. Steen, Canadian Organizational Behaviour, 7th ed. (Toronto, ON: McGraw-Hill, 2009), pp. 364–65. Ibid., pp. 365–67. “Team Values the Canadian Tire Way,” Appreciative Inquiry Commons, http://appreciativeinquiry.case.edu/ practice/ppCT.cfm. P. A. McLagan, “Change Leadership Today,” Training & Development, November 2002, p. 29. H. L. Sirkin, P. Keenan, and A. Jackson, “The Hard Side of Change Management,” Harvard Business Review, vol. 83, no. 10 (October 1, 2005), pp. 108–18. W. Pietersen, “The Mark Twain Dilemma: The Theory and Practice for Change Leadership,” Journal of Business Strategy, September–October 2002, pp. 32–37; C. Hymowitz, “To Maintain Success, Managers Must Learn How to Direct Change,” Wall Street Journal, August 13, 2002, p. B1; and J. E. Dutton, S. J. Ashford, R.M. O’Neill, and K. A. Lawrence, “Moves That Matter: Issue Selling and Organizational Change,” Academy of Management Journal, August 2001, pp. 716–36. P. A. McLagan, “The Change-Capable Organization,” Training & Development, January 2003, pp. 50–58. M. Young and J. E. Post, “Managing to Communicate, Communicating to Manage: How Leading Companies Communicate with Employees,” Organizational Dynamics, Summer 1993, pp. 31–43. See R. S. Schuler, “Definition and Conceptualization of Stress in Organizations,” Organizational Behavior and

36. 37. 38. 39. 40.

41. 42.

43.

44.

45.

46.

­Human Performance, April 1980, p. 191; and adapted from the UK National Work-Stress Network, www.workstress. net, www.workstress.net. M. Greenwood, “Article’s Minimalistic Vancouver Loft,” July 20, 2018, retrieved from https://techvibes. com/2018/07/20/killer-spaces-article-vancouver. See, for example, “Stressed Out: Extreme Job Stress: Survivors’ Tales,” Wall Street Journal January 17, 2001, p. B1. See, for instance, S. Bates, “Expert: Don’t Overlook Employee Burnout,” HR Magazine, August 2003, p. 14. Question of Ethics box based on D. Cole, “The Big Chill,” US News & World Report, December 6, 2004, pp. EE2–EE5. H. Benson, “Are You Working Too Hard?” Harvard Business Review, November 2005, pp. 53–58; B. Cryer, R. McCraty, and D. Childre, “Pull the Plug on Stress,” Harvard Business Review, July 2003, pp. 102–07; C. Daniels, “The Last Taboo,” Fortune, October 28, 2002, pp. 137–44; C. L. Cooper and S. Cartwright, “Healthy Mind, Healthy Organization—A Proactive Approach to Occupational Stress,” Human Relations, April 1994, pp. 455–71; C. A. Heaney et al., “Industrial Relations, Worksite Stress Reduction and Employee Well-Being: A Participatory Action Research Investigation,” Journal of Organizational Behavior (September 1993), pp. 495–510; C. D. Fisher, “Boredom at Work: A Neglected Concept,” Human Relations, March 1993, pp. 395–417; and S. E. Jackson, “Participation in Decision Making as a Strategy for Reducing Job-Related Strain,” Journal of Applied Psychology, February 1983, pp. 3–19. T. Barton, “Brave Face,” Employee Benefits, January 2011, p. 41; and “Employee Assistance Programs,” HR Magazine, May 2003, p. 143. S. Barrett, “Employee Assistance Programs,” Employee Benefits, January 2011, pp. 49–52; “EAPs with the Most,” Managing Benefits Plans, March 2003, p. 8; and K. Tyler, “Helping Employees Cope with Grief,” HR Magazine, September 2003, pp. 55–58. N. Faba, “The EAP Problem,” Benefits Canada, March 2011, p. 7; D. A. Masi, “Redefining the EAP Field,” Journal of Workplace Behavioral Health, January–March 2011, pp. 1–9; R. M. Weiss, “Brinksmanship Redux: Employee Assistance Programs’ Precursors and Prospects,” Employee Responsibilities & Rights Journal, December 2010, pp. 325–43; and F. Hansen, “Employee Assistance Programs (EAPs) Grow and Expand Their Reach,” Compensation and Benefits Review, March–April 2000, p. 13. A. Saha-Bubna and M. Jarzemsky, “MasterCard President Is Named CEO,” Wall Street Journal, April 13, 2010, p. C3; and S. Vandebook, “Quotable,” IndustryWeek, April 2010, p. 18. R. M. Kanter, “Think Outside the Building,” Harvard Business Review, March 2010, p. 34; T. Brown, “Change By Design,” BusinessWeek, October 5, 2009, pp. 54–56; J. E. Perry-Smith and C. E. Shalley, “The Social Side of Creativity: A Static and Dynamic Social Network Perspective,” Academy of Management Review, January 2003, pp. 89–106; and P. K. Jagersma, “Innovate or Die: It’s Not Easy, but It Is Possible to Enhance Your Organization’s Ability to Innovate,” Journal of Business Strategy, January–February 2003, pp. 25–28. Fast Company staff, “The World’s 50 Most Innovative Companies,” Fast Company, March 2011, pp. 66+; and G. Colvin, “The World’s Most Admired Companies,” Fortune, March 21, 2011, pp. 109+.

Endnotes  417

47. T. Floyd, “Innovation in Canada: The Hospitality Company that’s Part Hotel, Part Home-Ahare,” Yahoo Finance Canada, November 21, 2018. 48. Ibid. 49. Ibid. 50. These definitions are based on T. M. Amabile, Creativity in Context (Boulder, CO: Westview Press, 1996). 51. C. Salter, “Mattel Learns to ‘Throw the Bunny,’” Fast Company, November 2002, 22; and L. Bannon, “Think Tank in Toyland,” Wall Street Journal, June 6, 2002, pp. B1, B3. 52. C. Vogel and J. Cagan, Creating Breakthrough Products: Innovation from Product Planning to Program Approval (Upper Saddle River, NJ: Prentice Hall, 2002). 53. B. Anderson, Canadian Association Management, 2nd ed., CSAE. 54. R. W. Woodman, J. E. Sawyer, and R. W. Griffin, “Toward a Theory of Organizational Creativity,” Academy of Management Review, April 1993, pp. 293–321. 55. R. Tate, “Google Couldn’t Kill 20 Percent Time Even If It Wanted To,” wired.com, August 21, 2013; C. Mims, “Google Engineers Insist 20% Time Is Not Dead—It’s Just Turned into 120% Time,” qz.com, August 16, 2013; R. Neimi, “Inside the Moonshot Factory,” Bloomberg BusinessWeek, May 22, 2013, pp. 56–61; and A. Foege, “The Trouble with Tinkering Time,” Wall Street Journal, January 19/20, 2013, p. C3. 56. T. M. Egan, “Factors Influencing Individual Creativity in the Workplace: An Examination of Quantitative Empirical Research,” Advances in Developing Human Resources, May 2005, pp. 160–81; N. Madjar, G. R. Oldham, and M. G. Pratt, “There’s No Place Like Home? The Contributions of Work and Nonwork Creativity Support to Employees’ Creative Performance,” Academy of Management Journal, August 2002, pp. 757–67; T. M. Amabile, C. N. Hadley, and S. J. Kramer, “Creativity Under the Gun,” Harvard Business Review, August 2002, pp. 52–61; J. B. Sorensen and T. E. Stuart, “Aging, Obsolescence, and Organizational Innovation,” Administrative Science Quarterly, March 2000, pp. 81–112; G. R. Oldham and A. Cummings, “Employee Creativity: Personal and Contextual Factors at Work,” Academy of Management Journal, June 1996, pp. 607–34; and F. Damanpour, “Organizational Innovation: A Meta-Analysis of Effects of Determinants and Moderators,” Academy of Management Journal, September 1991, pp. 555–90. 57. M. Greenwood, “Article’s Minimalistic Vancouver Loft,” July 20, 2018, retrieved from https://techvibes. com/2018/07/20/killer-spaces-article-vancouver. 58. P. R. Monge, M. D. Cozzens, and N. S. Contractor, “Communication and Motivational Predictors of the Dynamics of Organizational Innovations,” Organization Science, May 1992, pp. 250–74. 59. T. M. Amabile, C. N. Hadley, and S. J. Kramer, “Creativity Under the Gun,” Harvard Business Review, August 2002, pp. 52–61. 60. N. Madjar, G. R. Oldham, and M. G. Pratt, “There’s No Place Like Home? The Contributions of Work and Nonwork Creativity Support to Employees’ Creative ­Performance,” Academy of Management Journal, August 2002, pp. 757–67. 61. See, for instance, J. E. Perry-Smith, “Social Yet Creative: The Role of Social Relationships in Facilitating Individual Creativity,” Academy of Management Journal,

62.

63. 64.

65. 66.

67.

68. 69. 70.

February 2006, pp. 85–101; C. E. Shalley, J. Zhou, and G. R. Oldham, “The Effects of Personal and Contextual Characteristics on Creativity: Where Should We Go from Here?” Journal of Management, vol. 30, no. 6 (2004), pp. 933–58; J. E. Perry-Smith and C. E. Shalley, “The Social Side of Creativity: A Static and Dynamic Social Network Perspective”; J. M. George and J. Zhou, “When Openness to Experience and Conscientiousness Are Related to Creative Behavior: An Interactional Approach,” Journal of Applied Psychology, June 2001, pp. 513–24; J. Zhou, “Feedback Valence, Feedback Style, Task Autonomy, and Achievement Orientation: Interactive Effects on Creative Behavior,” Journal of Applied Psychology, vol. 83 (1998), pp. 261–76; T. M. Amabile, R. Conti, H. Coon, J. Lazenby, and M. Herron, “Assessing the Work Environment for Creativity,” Academy of Management Journal, October 1996, pp. 1154–84; S. G. Scott and R. A. Bruce, “Determinants of Innovative People: A Path Model of Individual Innovation in the Workplace,” Academy of Management Journal, June 1994, pp. 580–607; R. Moss Kanter, “When a Thousand Flowers Bloom: Structural, Collective, and Social Conditions for Innovation in Organization,” in B. M. Staw and L. L. Cummings, eds., Research in Organizational Behavior, vol. 10 (Greenwich, CT: JAI Press, 1988), pp. 169–211; and T. M. Amabile, Creativity in Context (Boulder, CO: Westview Press, 1996). J. Ramos, “Producing Change That Lasts,” Across the Board, March 1994, pp. 29–33; T. Stjernberg and A. Philips, “Organizational Innovations in a Long-Term Perspective: Legitimacy and Souls-of-Fire as Critical Factors of Change and Viability,” Human Relations, October 1993, pp. 1193–2023; and J. M. Howell and C. A. Higgins, “Champions of Change,” Business Quarterly, Spring 1990, pp. 31–32. J. Liedtka and T. Ogilvie, Designing for Growth: A Design Thinking Tool Kit for Managers, (New York: Columbia Business School Press, 2011). R. E. Silverman, “Companies Change Their Way of Thinking,” Wall Street Journal, June 7, 2012, p. B8; and R. L. Martin, “The Innovation Catalysts,” Harvard Business Review, June 2011, pp. 82–87. A. Van Toi, “How Article shook up a staid industry to become Canada’s Fastest-Growing Company,” Canadian Business, September 13, 2018. Based on K. Lewin, Field Theory in Social Science (New York: Harper & Row, 1951); and S. McShane and S. Steen, Canadian Organizational Behaviour, 7th ed. (Toronto, ON: McGraw-Hill, 2009). Based on J. E. Newman and T. A. Beehr, “Personal and Organizational Strategies for Handling Job Stress,” Personnel Psychology, Spring 1979, pp. 1–38; M. T. Matteson and J. M. Ivancevich, “Individual Stress Management Interventions: Evaluation of Techniques,” Journal of Management Psychology, January 1987, pp. 24–30; and K. M. Richardson and H. R. Rothstein, “Effects of Occupational Stress Management Intervention Programs: A Meta-Analysis,” Journal of Occupational Health Psychology, January 2008, pp. 69–93. S. A. Hewlett, M. Marshall, and L. Sherbin, (2013) “How Diversity Can Drive Innovation,” Harvard Business Review, December 2013. Ibid. Ibid.

418 Endnotes 71. L. Friedman, “Ladder of Sustainability: Moving Sustainable Business Practices,” Leadership Excellence, http:// www.enterprisedevelop.com/pdf/Ladder_Sustainability.pdf. 72. M. Shin, “Westport’s Time to Shine,” Corporate Knights, vol. 24 (2008), http://www.corporateknights.ca/article/ westports-time-shine. 73. Information from Nike Grind website, http://www. nikereuseashoe.com/using-nike-grind. 74. L. Friedman, “Ladder of Sustainability: Moving Sustainable Business Practices,” Leadership Excellence, http:// www.enterprisedevelop.com/pdf/Ladder_Sustainability.pdf. 75. Algonquin College, “Sustainability: Explore the Sustainable Algonquin Centre for Construction Excellence,” Algonquin College website, http://www2.algonquincollege.com/acce/home/sustainability. 76. Based on information from the ShareGreen website, http://www.sharegreen.ca/about. 77. Based on M. Warner, “Under the Knife,” Business 2.0, January 1, 2004, http://money.cnn.com/magazines/ business2/business2_archive/2004/01/01/359617/index.htm. 78. S. Ember, “Under Armour Is Swinging for the Stars,” New York Times Online, June 14, 2015; 2014 Annual Report, “Letter to the Shareholders,” http://files.shareholder.com/ downloads/UARM/165448209x0x816471/3BEBC6648584-4F22-AC0B-844CB2949814/UA_2014_Annual_Report.PDF, January 31, 2015; B. Horovitz, “In Search of Next Big Thing,” USA Today, July 9, 2012, pp. 1B+; Press Release, “Under Armour Reports Fourth Quarter Net Revenues Growth of 34% and Fourth Quarter EPS Growth of 40%,” investor.underarmour.com, January 26, 2012; D. Roberts, “Under Armour Gets Serious,” Fortune, November 7, 2011, pp. 153–62; E. Olson, “Under Armour Applies Its Muscle to Shoes,” New York Times Online, August 8, 2011; M. Townsend, “Under Armour’s Daring Half-Court Shot,” Bloomberg BusinessWeek, November 1–7, 2010, pp. 24–25; and E. Olson, “Under Armour Wants to Dress Athletic Young Women,” New York Times Online, August 31, 2010. 79. See Island Water Technologies, “IWT One of Top 20 Innovative Canadian Companies,” November 16, 2018, http://www.islandwatertech.com/iwt-team-selectedone-top-20-innovative-canadian-companies/ and Natural Products Canada, “NPC Invests in Island Water Technologies,” February 15, 2018, https://www.naturalproductscanada.com/en/npc-invests-in-island-watertechnologies/. 80. Natural Products Canada, “NPC Invests in Island Water Technologies,” February 15, 2018, https://www.naturalproductscanada.com/en/npc-invests-in-island-watertechnologies/. 81. WaterTAP, “Water Innovation Leaders Honoured at Clean50 Summit in Toronto,” October 1, 2018, https:// watertapontario.com/water-innovation-leaders-honoured-at-clean50-summit-in-toronto/. 82. T. McEachern, “Island Water Technologies Validated World’s First Solar poWered Modular Wastewater Treatment Unit,” The Guardian, November 3, 2017, https:// www.theguardian.pe.ca/business/island-water-technologies-validated-worlds-first-solar-powered-modularwastewater-treatment-unit-158976/. 83. Ibid.

Chapter 8 1. J. Ankeny, “Richard Branson on Building an Empire,” Entrepreneur, June 19, 2012, http://www.entrepreneur. com/article/223639. 2. Ibid. 3. Ibid. 4. Ibid. 5. Ibid. 6. “Virgin Mobile Canada launches ‘Pitch to Rich’ contest, inspiring entrepreneurship and innovation in mobility”, April 4, 2018, https://www.newswire.ca/news-releases/ virgin-mobile-canada-launches-pitch-to-rich-contestinspiring-entrepreneurship-and-innovation-in-mobility-678757453.html. 7. R. Branson, “Empowering Employees,” Entrepreneur, January 17, 2011, http://www.entrepreneur.com/article/217880. 8. See, for example, “Canada’s Best Managed Companies Embrace Courage for Continual Success”, March 9, 2017, https://www2.deloitte.com/ca/en/pages/pressreleases/articles/canadas-best-managed-companies-embrace-courage-for-continual-success.html; “Truro-Based Company Receives Prestigious Recognition”, Truro News, April 30, 2017, https://www.trurodaily.com/business/ truro-based-company-trucorp-investments-earns-pretigious-recognition-151181/. 9. Ibid. 10. Information for this section is based on J. R. Katzenbach and D. K. Smith, The Wisdom of Teams (Boston: Harvard Business School Press, 1993), pp. 21, 45, 85; and D. C. Kinlaw, Developing Superior Work Teams (Lexington, MA: Lexington Books, 1991), pp. 3–21. 11. S. Adams and L. Kydoniefs, “Making Teams Work: Bureau of Labor Statistics Learns What Works and What Doesn’t,” Quality Progress, January 2000, pp. 43–49. 12. “Canada’s Best Workplaces,” Randall Anthony Communications, April 27, 2018, https://www.greatplacetowork.ca/images/article/Globe-and-Mail-Best-Workplaces-2018.pdf. 13. T. Capozzoli, “How to Succeed with Self-Directed Work Teams,” Supervision, February 2002, pp. 25–27. 14. B. W. Tuckman and M. C. Jensen, “Stages of Small-Group Development Revisited,” Group and Organizational Studies, December 1977, pp. 419–27; and M. F. Maples, “Group Development: Extending Tuckman’s Theory,” Journal for Specialists in Group Work, Fall 1988, pp. 17–23. 15. L. N. Jewell and H. J. Reitz, Group Effectiveness in Organizations (Glenview, IL: Scott, Foresman, 1981); and M. Kaeter, “Repotting Mature Work Teams,” Training, April 1994, pp. 54–56. 16. Question of Ethics box based on S. Shellenbarger, “Office Oversharers: Don’t Tell Us about Last Night,” Wall Street Journal, June 25, 2014, p. D2; E. Bernstein, “Thank You for Not Sharing,” Wall Street Journal, May 7, 2013, pp. D1+; P. Klaus, “Thank You for Sharing. But Why at the Office?” New York Times Online, August 18, 2012; K. McCullum, “Hush, Hush,” OfficePro, March–April 2011, pp. 18–22; and E. Bernstein, “You Did What? Spare the Office the Details,” Wall Street Journal, April 6, 2010, pp. D1+. 17. S. E. Asch, (1951). “Effects of Group Pressure upon the Modification and Distortion of Judgments,” in H. Guetzkow (Ed.), Groups, Leadership and Men; Research in Human Relations (Oxford, UK: Carnegie Press), pp. 177–90.

Endnotes  419

18. O. A. Alnuaimi, L. P. Robert Jr., and L. M. Maruping, “Team Size, Dispersion, and Social Loafing in ­Technology-Supported Teams: A Perspective on the Theory of Moral Disengagement,” Journal of Management Information Systems, Summer 2010, pp. 203–30; C. Cheshire and J. Antin, “None of Us Is as Lazy as All of Us,” Information, Communication & Society, June 2010, pp. 537–55; R. van Dick, J. Stellmacher, U. Wagner, G. Lemmer, and P. A. Tissington, “Group Membership Salience and Task Performance,” Journal of Managerial Psychology 24, no. 7, 2009, pp. 609–26; A. Jassawalla, H. Sashittal, and A. Malshe, “Students’ Perceptions of Social Loafing: Its Antecedents and Consequences in Undergraduate Business Classroom Teams,” Academy of Management Learning & Education, March 2009, pp. 42–54; and R. Albanese and D. D. Van Fleet, “Rational Behaviour in Groups: The Free Riding Tendency,” Academy of Management Review, April 1985, pp. 244–55. 19. L. Berkowitz, “Group Standards, Cohesiveness, and Productivity,” Human Relations, November 1954, pp. 509–19. 20. R. Branson, “Five Rules for Good Business,” Entrepreneur, July 30, 2012, http://www.entrepreneur.com/article/223979. 21. Based on J. Yang and P. Trap, “As a Manager, It’s Most Challenging to...,” USA Today, April 19, 2011, p. 1B; J. Yang and K. Gelles, “Workplace Friendships,” USA Today, April 13, 2010, p. 1B; K. Merriman, “Low-Trust Teams Prefer Individualized Pay,” Harvard Business Review, November 2008, p. 32; B. J. West, J. L. Patera, and M. K. Carsten, “Team Level Positivity: Investigating Positive Psychological Capacities and Team Level Outcomes,” Journal of Organizational Behaviour, February 2009, p. 249; J. Yang and K. Simmons, “Traits of Good Team Players,” USA Today, November 21, 2007, p. 1B; J. Yang and M. E. Mullins, “Workers More Productive in Small Groups,” USA Today, January 10, 2007, p. 1B; and M. Weinstein, “Coming Up Short? Join the Club,” Training, April 2006, p. 14. 22. See, for instance, D. C. Jones and T. Kato, “The Impact of Teams on Output, Quality, and Downtime: An Empirical Analysis Using Individual Panel Data,” Industrial and Labor Relations Review, January 2011, pp. 215–40; A. Gilley, J. W. Gilley, C. W. McConnell, and A. Veliquette, “The Competencies Used by Effective Managers to Build Teams: An Empirical Study,” Advances in Developing ­Human Resources, February 2010, pp. 29–45; M. A. Campion, G. J. Medsker, and C. A. Higgs, “Relations between Work Group Characteristics and Effectiveness: Implications for Designing Effective Work Groups,” Personnel Psychology, Winter 1993, pp. 823–50; and J. R. Hackman, “The Design of Work Teams,” in J. W. Lorsch (ed.), Handbook of Organizational Behaviour (Upper Saddle River, NJ: Prentice Hall, 1987), pp. 315–42. 23. This model is based on M. A. Campion, E. M. Papper, and G. J. Medsker, “Relations between Work Team Characteristics and Effectiveness: A Replication and Extension,” Personnel Psychology, Summer 1996, pp. 429–52; D. E. Hyatt and T. M. Ruddy, “An Examination of the Relationship between Work Group Characteristics and Performance: Once More into the Breech,” Personnel Psychology, Autumn 1997, pp. 553–85; S. G. Cohen and D. E. Bailey, “What Makes Teams Work: Group Effectiveness Research from the Shop Floor to the Executive Suite,”

24.

25.

26.

27.

28.

Journal of Management, September 1997, pp. 239–90; L. Thompson, Making the Team (Upper Saddle River, NJ: Prentice Hall, 2000), pp. 18–33; and J. R. Hackman, Leading Teams: Setting the Stage for Great Performance (Boston: Harvard Business School Press, 2002). See M. Mattson, T. V. Mumford, and G. S. Sintay, “Taking Teams to Task: A Normative Model for Designing or Recalibrating Work Teams,” paper presented at the National Academy of Management Conference, Chicago, August 1999; and G. L. Stewart and M. R. Barrick, “Team Structure and Performance: Assessing the Mediating Role of Intrateam Process and the Moderating Role of Task Type,” Academy of Management Journal, April 2000, pp. 135–48. R. I. Sutton, “The Boss as Human Shield,” Harvard Business Review, September 2010, pp. 106–09; and Hyatt and Ruddy, “An Examination of the Relationship between Work Group Characteristics and Performance,” p. 577. M. E. Palanski, S. S. Kahai, and F. J. Yammarino, “Team Virtues and Performance: An Examination of Transparency, Behavioural Integrity, and Trust,” Journal of Business Ethics, March 2011, pp. 201–16; H. H. Chang, S. S. Chuang, and S. H. Chao, “Determinants of Cultural Adaptation, Communication Quality, and Trust in Virtual Teams’ Performance,” Total Quality Management and Business Excellence, March 2011, pp. 305–29; A. C. Costa and N. Anderson, “Measuring Trust in Teams: Development and Validation of a Multifaceted Measure of Formative and Reflective Indicators of Team Trust,” European Journal of Work & Organizational Psychology, February 2011, pp.119–54; M. Mach, S. Dolan, and S. Tzafrir, “The Differential Effect of Team Members’ Trust on Team Performance: The Mediation Role of Team Cohesion,” Journal of Occupational and Organizational Psychology, September 2010, pp. 771–94; B. A. DeJong and T. Elfring, “How Does Trust Affect the Performance of Ongoing Teams? The Mediating Role of Reflexivity, Monitoring, and Effort,” Academy of Management Journal, June 2010, pp. 535–49; M. Williams, “In Whom We Trust: Group Membership as an Affective Context for Trust Development,” Academy of Management Review, July 2001, pp. 377–96; and K. T. Dirks, “Trust in Leadership and Team Performance: Evidence from NCAA Basketball,” Journal of Applied Psychology, December 2000, pp. 1004–12. SmartPulse, “How Effectively Does Your Team Communicate Using New Electronic Channels?” Smart Brief on Leadership, www.smartbrief.com/leadership, October 7, 2014. L. J. Gressgard, “Virtual Team Collaboration and Innovation in Organizations,” Team Performance Management 17 (1/2) 102–19, March 2011; M. Flammia, Y. Cleary, and D. M. Slattery, “Leadership Roles, Socioemotional Strategies, and Technology Use of Irish and U.S. Students in Virtual Teams” IEEE Transactions on Professional Communication, vol. 53, no. 2, (June 2010); A. Malhotra, A. Majchrzak, and B. Rosen, “Leading Virtual Teams,” Academy of Management Perspectives, February 2007, pp. 60–70; B. L. Kirkman and J. E. Mathieu, “The Dimensions and Antecedents of Team Virtuality,” Journal of Management, October 2005, pp. 700–18; J. Gordon, “Do Your Virtual Teams Deliver Only Virtual Performance?” Training, June 2005, pp. 20–25; L. L. Martins, L. L. Gilson, and M. T. Maynard, “Virtual Teams: What Do We Know and

420 Endnotes

29.

30.

31.

32.

33. 34.

Where Do We Go from Here?” Journal of ­Management, December 2004, pp. 805–35; S. A. Furst, M. Reeves, B. Rosen, and R. S. Blackburn, “Managing the Life Cycle of Virtual Teams,” Academy of Management Executive, May 2004, 6–20; B. L. Kirkman, B. Rosen, P. E. Tesluk, and C. B. Gibson, “The Impact of Team Empowerment on Virtual Team Performance: The Moderating Role of Face-to-Face Interaction,” Academy of Management Journal, April 2004, pp. 175–92; F. Keenan and S. E. Ante, “The New Teamwork,” Business Week e.biz, February 18, 2002, pp. EB12–EB16; and G. Imperato, “Real Tools for Virtual Teams,” Fast Company, July 2000, pp. 378–87. R. R. Hirschfeld, M. J. Jordan, H. S. Field, W. F. Giles, and A. A. Armenakis, “Becoming Team Players: Team Members’ Mastery of Team Knowledge as a Predictor of Team Task Proficiency and Observed Teamwork Effectiveness,” Journal of Applied Psychology 91, no. 2, 2006, pp. 467–74. S. T. Bell, “Deep-Level Composition Variables as Predictors of Team Performance: A Meta-Analysis,” Journal of Applied Psychology 92, no. 3, 2007, pp. 595–615; and M. R. Barrick, G. L. Stewart, M. J. Neubert, and M. K. Mount, “Relating Member Ability and Personality to Work-Team Processes and Team Effectiveness,” Journal of Applied Psychology, June 1998, pp. 377–91. K. H. T. Yu and D. M. Cable, “Unpacking Cooperation in Diverse Teams,” Team Performance Management, March 2011, pp. 63–82; A. Nederveen Pieterse, D. van Knippenberg, and W. P. van Ginkel, “Diversity in Goal Orientation, Team Reflexivity, and Team Performance,” Organizational Behaviour and Human Performance, March 2011, pp. 153–64; M.-E. Roberge and R. van Dick, “Recognizing the Benefits of Diversity: When and How Does Diversity Increase Group Performance,” Human Resource Management Review, December 2010, pp. 295–308; and E. Mannix and M. A. Neale, “What Differences Make a Difference: The Promise and Reality of Diverse Teams in Organizations,” Psychological Science in the Public Interest, October 2005, pp. 31–55. Based on L. Copeland, “Making the Most of Cultural Differences at the Workplace,” Personnel, June 1988, pp. 52–60; C. R. Bantz, “Cultural Diversity and Group CrossCultural Team Research,” Journal of Applied Communication Research, February 1993, pp. 1–19; L. Strach and L. Wicander, “Fitting In: Issues of Tokenism and Conformity for Minority Women,” SAM Advanced Management Journal, Summer 1993, pp. 22–25; M. L. Maznevski, “Understanding Our Differences: Performance in Decision-Making Groups with Diverse Members,” Human Relations, May 1994, pp. 531–52; F. Rice, “How to Make Diversity Pay,” Fortune, August 8, 1994, pp. 78–86; J. Jusko, “Diversity Enhances Decision Making,” IndustryWeek, April 2, 2001, p. 9; and K. Lovelace, D. L. Shapiro, and L. R. Weingart, “Maximizing Cross-Functional New Product Teams’ Innovativeness and Constraint Adherence: A Conflict Communications Perspective,” Academy of Management Journal, August 2002, pp. 779–93. A. Deutschman, “Inside the Mind of Jeff Bezos,” Fast Company, August 2004, pp. 50–58. Hyatt and Ruddy, “An Examination of the Relationship between Work Group Characteristics and Performance”; J. D. Shaw, M. K. Duffy, and E. M. Stark, “Interdependence and Preference for Group Work: Main and Congruence Effects on the Satisfaction and

35.

36.

37.

38.

39. 40.

­ erformance of Group Members,” Journal of Management, P June 2000, pp. 259–79; and S. A. Kiffin-Peterson and J. L. Cordery, “Trust, Individualism, and Job Characteristics of ­Employee Preference for Teamwork,” International Journal of Human Resource Management, February 2003, pp. 93–116. J. S. Bunderson and P. Boumgarden, “Structure and Learning in Self-Managed Teams: Why ‘Bureaucratic’ Teams Can Be Better Learners”; and R. Wageman, “Critical Success Factors for Creating Superb Self-Managing Teams,” Organizational Dynamics, Summer 1997, pp. 55. Campion, Papper, and Medsker, “Relations between Work Team Characteristics and Effectiveness,” pp. 430; B. L. Kirkman and B. Rosen, “Powering Up Teams,” Organizational Dynamics, Winter 2000, pp. 48–66; and D. C. Man and S. S. K. Lam, “The Effects of Job Complexity and Autonomy on Cohesiveness in Collectivist and Individualist Work Groups: A Cross-Cultural Analysis,” Journal of Organizational Behaviour, December 2003, pp. 979–1001. A. Mehta, H. Feild, A. Armenakis, and N. Mehta, “Team Goal Orientation and Team Performance: The Mediating Role of Team Planning,” Journal of Management, August 2009, pp. 1026–46; K. Blanchard, D. Carew, and E. Parisi-Carew, “How to Get Your Group to Perform Like a Team,” Training and Development, September 1996, pp. 34–37; K. D. Scott and A. Townsend, “Teams: Why Some Succeed and Others Fail,” HR Magazine, August 1994, pp. 62–67; K. Hess, Creating the High-Performance Team (New York: Wiley, 1987); and Katzenbach and Smith, The Wisdom of Teams, (Harvard Business School Press, 1993), pp. 43–64. H. van Emmerik, I. M. Jawahar, B. Schreurs, and N. de Cuyper, “Social Capital, Team Efficacy and Team Potency: The Mediating Role of Team Learning Behaviours,” Career Development International, February 2011, pp. 82– 99; T. Lewis, “Assessing Social Identity and Collective Efficacy as Theories of Group Motivation at Work,” International Journal of Human Resource Management, February 2011, pp. 963–80; K. Tasa, G. J. Sears, and A. C. H. Schat, “Personality and Teamwork Behaviour in Context: The Cross-Level Moderating Role of Collective Efficacy,” Journal of Organizational Behaviour, January 2011, pp. 65–85; J. A. Goncalo, E. Polman, and C. Maslach, “Can Confidence Come Too Soon? Collective Efficacy, Conflict and Group Performance Over Time,” Organizational Behaviour & Human Decision Processes, September 2010, pp. 13–24; K. Tasa, S. Taggar, and G. H. Seijts, “The Development of Collective Efficacy in Teams: A Multilevel and Longitudinal Perspective,” Journal of Applied Psychology, January 2007, pp. 17–27; C. B. Gibson, “The Efficacy Advantage: Factors Related to the Formation of Group Efficacy,” Journal of Applied Social Psychology, October 2003, pp. 2153–86; and D. I. Jung and J. J. Sosik, “Group Potency and Collective Efficacy: Examining Their Predictive Validity, Level of Analysis, and Effects of Performance Feedback on Future Group Performance,” Group & Organization Management, September 2003, pp. 366–91. SmartPulse, “How Effectively Do You Resolve Conflict with Others?” Smart Brief on Leadership, www.smartbrief.com, April 21, 2015. K. C. Kostopoulos and N. Bozionelos, “Team Exploratory and Exploitative Learning: Psychological Safety, Task Conflict, and Team Performance,” Group & Organization

Endnotes  421

41.

42.

43. 44. 45. 46. 47.

48.

49.

Management, June 2011, pp. 385–415; K. J. Behfar, E. A. Mannix, R. S. Peterson, and W. M. Trochim, “Conflict in Small Groups: The Meaning and Consequences of Process Conflict,” Small Group Research, April 2011, pp. 127–76; R. S. Peterson and K. J. Behfar, “The Dynamic Relationship between Performance Feedback, Trust, and Conflict in Groups: A Longitudinal Study,” Organizational Behaviour and Human Decision Processes, September– November 2003, pp. 102–12; and K. A. Jehn, “A Qualitative Analysis of Conflict Types and Dimensions in Organizational Groups,” Administrative Science Quarterly, September 1997, pp. 530–57. K. W. Thomas, “Conflict and Negotiation Processes in Organizations,” in Handbook of Industrial and Organizational Psychology, vol. 3, 2nd ed., eds. M. D. Dunnette and L. M. Hough, pp. 651–717 (Palo Alto, CA: Consulting Psychologists Press, 1992). O. A. Alnuaimi, L. P. Robert Jr., and L. M. Maruping, “Team Size, Dispersion, and Social Loafing in ­Technology-Supported Teams: A Perspective on the Theory of Moral Disengagement”; C. Cheshire and J. Antin, “None of Us Is as Lazy as All of Us”; R. van Dick, J. Stellmacher, U. Wagner, G. Lemmer, and P. A. Tissington, “Group Membership Salience and Task Performance”; A. Jassawalla, H. Sashittal, and A. Malshe, “Students’ Perceptions of Social Loafing: Its Antecedents and Consequences in Undergraduate Business Classroom Teams”; K. H. Price, D. A. Harrison, and J. H. Gavin, “Withholding Inputs in Team Contexts: Member Composition, Interaction Processes, Evaluation Structure, and Social Loafing,” Journal of Applied Psychology, December 2006, pp. 1375–84; and R. Albanese and D. D. Van Fleet, “Rational Behaviour in Groups: The Free Riding Tendency,” Academy of Management Review, April 1985, pp. 244–55. S. G. Harkins and K. Szymanski, “Social Loafing and Group Evaluation,” Journal of Personality and Social Psychology, December 1989, pp. 934–41. SmartPulse, “If Someone on Your Team Hates Their Job, What Do You Do?” Smart Brief on Leadership, www. smartbrief.com/leadership, October 21, 2014. R. M. Yandrick, “A Team Effort,” HR Magazine, June 2001, pp. 136–41. Ibid. M. A. Marks, C. S. Burke, M. J. Sabella, and S. J. Zaccaro, “The Impact of Cross-Training on Team Effectiveness,” Journal of Applied Psychology, February 2002, pp. 3–14; and M. A. Marks, S. J. Zaccaro, and J. E. Mathieu, “Performance Implications of Leader Briefings and Team Interaction for Team Adaptation to Novel Environments,” Journal of Applied Psychology, December 2000, p. 971. C. Garvey, “Steer Teams with the Right Pay: Team-Based Pay Is a Success When It Fits Corporate Goals and Culture, and Rewards the Right Behaviour,” HR Magazine, May 2002, pp. 71–77. B. L. Kirkman, C. B. Gibson, and D. L. Shapiro, “Exporting Teams: Enhancing the Implementation and Effectiveness of Work Teams in Global Affiliates,” Organizational Dynamics, Summer 2001, pp. 12–29; J. W. Bing and C. M. Bing, “Helping Global Teams Compete,” Training & Development, March 2001, pp. 70–71; P. Christopher Earley and E. Mosakowski, “Creating Hybrid Team Cultures: An Empirical Test of Trans-national Team Functioning,” Academy of Management Journal, February 2000, pp. 26–49;

50.

51. 52.

53.

54. 55. 56. 57.

58. 59.

60. 61. 62.

J. Tata, “The Cultural Context of Teams: An Integrative Model of National Culture, Work Team Characteristics, and Team Effectiveness,” Academy of Management Proceedings, CD-ROM, 1999; D. I. Jung, K. B. Baik, and J. J. Sosik, “A Longitudinal Investigation of Group Characteristics and Work Group Performance: A Cross-Cultural Comparison,” Academy of Management Proceedings, CD-ROM, 1999; and C. B. Gibson, “They Do What They Believe They Can? Group-Efficacy Beliefs and Group Performance across Tasks and Cultures,” Academy of Management Proceedings, CD-ROM, 1996. R. Bond and P. B. Smith, “Culture and Conformity: A Meta-Analysis of Studies Using Asch’s [1952, 1956] Line Judgment Task,” Psychological Bulletin, January 1996, pp. 111–37. I. L. Janis, Groupthink, 2nd ed. (New York: Houghton Mifflin Company, 1982), p. 175. See P. C. Earley, “East Meets West Meets Mideast: Further Explorations of Collectivistic and Individualistic Work Groups,” Academy of Management Journal, April 1993, pp. 319–48; and P. C. Earley, “Social Loafing and Collectivism: A Comparison of the United States and the People’s Republic of China,” Administrative Science Quarterly, December 1989, pp. 565–81. See P. C. Earley, “Social Loafing and Collectivism: A Comparison of the United States and the People’s Republic of China,” Administrative Science Quarterly, December 1989, pp. 565–81; and P. C. Earley, “East Meets West Meets Mideast: Further Explorations of Collectivistic and Individualistic Work Groups,” Academy of Management Journal, April 1993, pp. 319–48. N. J. Adler, International Dimensions of Organizational Behaviour, 4th ed. (Cincinnati, OH: South-Western College Publishing, 2002), p. 142. K. B. Dahlin, L. R. Weingart, and P. J. Hinds, “Team Diversity and Information Use,” Academy of Management Journal, December 2005, pp. 1107–23. N. J. Adler, International Dimensions of Organizational Behaviour, 4th ed. (Cincinnati, OH: South-Western College Publishing, 2002), p. 142. S. Paul, I. M. Samarah, P. Seetharaman, and P. P. Mykytyn, “An Empirical Investigation of Collaborative Conflict Management Style in Group Support System-Based Global Virtual Teams,” Journal of Management Information Systems, Winter 2005, pp. 185–222. D. Brown, “Innovative HR Ineffective in Manufacturing Firms,” Canadian HR Reporter, April 7, 2003, pp. 1–2. R. Forrester and A. B. Drexler, “A Model for Team-Based Organization Performance,” Academy of Management Executive, August 1999, p. 47. See also S. A. Mohrman, with S. G. Cohen and A. M. Mohrman Jr., Designing TeamBased Organizations (San Francisco: Jossey-Bass, 1995); and J. H. Shonk, Team-Based Organizations (Homewood, IL: Business One Irwin, 1992). Based on P. L. Hunsaker, Training in Management Skills (Upper Saddle River, NJ: Prentice Hall, 2001), Chapter 12. R. Branson, “How Virgin Unite Connects Philanthropy with Entrepreneurialism,” Canadian Business, February 20, 2012. M. Toneguzzi, “Canadian Whole Foods Stores Examined Under Amazon Ownership”, Retail Insider, January 28, 2018, https://www.retail-insider.com/ retail-insider/2018/1/whole-foods-stores-canadafield-agent.

422 Endnotes 63. A. Cuenllas, “Whole Foods Case Study: A Benchmark Model of Management for Hospitality,” Hospitality Net—Industry News, February 11, 2013, http://www. hospitalitynet.org/news/4059396.html. 64. Ibid. 65. Ibid. 66. Ibid. 67. Ibid. 68. Ibid. 69. Kiley, D., “The Toyota Way to No. 1,” BusinessWeek, April 27, 2007, https://www.schoolsolver.com/attachments/ attachment/126980/. 70. Caprino, K., “How Companies Like Uber, Facebook and Salesforce Engage in Team-Building (It’s not what you think), Forbes, January 14, 2016. 71. Ibid. 72. Ibid.

Chapter 9 1. “The Cube gives youngsters a leg-up during rehabilitation,” Alberta Health Services, December 15, 2010, http://www.gesturetekhealth.com/press/glenroserehabilitation-hospital. 2. Ibid. 3. P. Bronson, “What Should I Do with My Life Now?” Fast Company, April 2009, pp. 35–37. 4. Ibid. 5. R. M. Steers, R. T. Mowday, and D. L. Shapiro, “The Future of Work Motivation Theory,” Academy of Management Review, July 2004, pp. 379–87. 6. R. Pendell, “6 Scary Numbers For Your Organization’s C-Suite,” Workplace, October 30, 2018, https:// www.gallup.com/workplace/244100/scary-numbersorganization-suite.aspx?g_source=link_wwwV9&g_ medium=TOPIC&g_campaign=item_&g_content=6%252 0Scary%2520Numbers%2520for%2520Your%2520Organi zation%27s%2520C-Suite. 7. “The 2014 Global Workforce Study: Driving Engagement through a Consumer-Like Experience”, August 2014, https://www.towerswatson.com/en-BE/Insights/ICTypes/Survey-Research-Results/2014/08/the-2014-global-workforce-study; See also R. Pendell, “6 Scary Numbers for Your Organization’s C-Suite,”Workplace, October 30, 2018, https://www.gallup.com/workplace/244100/ scary-numbers-organization-suite.aspx?g_source=link_ WWWV9&g_medium=TOPIC&g_campaign=item_&g_ content=6%2520Scary%2520Numbers%2520for%2520Yo ur%2520Organization%27s%2520C-Suite. 8. J. Krueger and E. Killham, “At Work, Feeling Good Matters,” Gallup Management Journal, December 8, 2005, http://gmj.gallup.com. 9. S. P. Robbins and T. A. Judge, Essentials of Organizational Behavior, 11th ed. (Upper Saddle River, NJ: Prentice Hall, 2010). 10. M. S. Christian, A. S. Garza, and J. E. Slaughter, “Work Engagement: A Quantitative Review and Test of Its Relations with Task and Contextual Performance,” Personnel Psychology, Spring 2011, pp. 89–136; V. T. Ho, S-S Wong, and C. H. Lee, “A Tale of Passion: Linking Job Passion and Cognitive Engagement to Employee Work Performance,” Journal of Management Studies, January 2011, pp. 26–47; D. R. May, R. L. Gilson, and L. M. Harter, “The Psychological Conditions of Meaningfulness, Safety and Availability and the Engagement of the Human Spirit at Work,” Journal

11. 12.

13.

14.

15.

16.

17.

of Occupational and Organizational Psychology, March 2004, pp. 11–37; R. T. Keller, “Job Involvement and Organizational Commitment as Longitudinal Predictors of Job Performance: A Study of Scientists and Engineers,” Journal of Applied Psychology, August 1997, pp. 539–45; W. Kahn, “Psychological Conditions of Personal Engagement and Disengagement at Work,” Academy of Management Journal (December 1990), pp. 692–794; and P. P. Brooke, Jr., D. W. Russell, and J. L. Price, “Discriminant Validation of Measures of Job Satisfaction, Job Involvement, and Organizational Commitment,” Journal of Applied Psychology, May 1988, pp. 139–45. Also, see, for example, J. Smythe, “Engaging Employees to Drive Performance,” Communication World, May–June 2008, pp. 20–22; A. B. Bakker and W. B. Schaufeli, “Positive Organizational Behavior: Engaged Employees in Flourishing Organizations,” Journal of Organizational Behavior, February 2008, pp. 147–54; U. Aggarwal, S. Datta, and S. Bhargava, “The Relationship between Human Resource Practices, Psychological Contract, and Employee Engagement—Implications for Managing Talent,” IIMB Management Review, September 2007, pp. 313–25; M. C. Christian and J. E. Slaughter, “Work Engagement: A Meta-Analytic Review and Directions for Research in an Emerging Area,” AOM Proceedings, August 2007, pp. 1–6; C. H. Thomas, “A New Measurement Scale for Employee Engagement: Scale Development, Pilot Test, and Replication,” AOM Proceedings, August 2007, pp. 1–6; A. M. Saks, “Antecedents and Consequences of Employee Engagement,” Journal of Managerial Psychology, vol. 21, no. 7 (2006), pp. 600–19; and A. Parsley, “Road Map for Employee Engagement,” Management Services, Spring 2006, pp. 10–11. Mercer, IndustryWeek, April 2008, p. 24. J. M. George, “The Wider Context, Costs, and Benefits of Work Engagement,” European Journal of Work & Organizational Psychology, February 2011, pp. 53–59; and “Employee Engagement Report 2011,” BlessingWhite Research, http://www.blessingwhite.com/eee__report. asp (January 2011), pp. 7–8. A. J. Elliott and P. G. Devine, “On the Motivational Nature of Cognitive Dissonance: Dissonance as Psychological Discomfort,” Journal of Personality and Social Psychology, September 1994, pp. 382–94. L. Festinger, A Theory of Cognitive Dissonance (Stanford, CA: Stanford University Press, 1957); C. Crossen, “Cognitive Dissonance Became a Milestone in 1950s Psychology,” Wall Street Journal, December 4, 2006, p. B1; and Y. “Sally” Kim, “Application of the Cognitive Dissonance Theory to the Service Industry,” Services Marketing Quarterly, April–June 2011, pp. 96–112. H. C. Koh and E. H. Y. Boo, “The Link between Organizational Ethics and Job Satisfaction: A Study of Managers in Singapore,” Journal of Business Ethics, February 15, 2001, p. 309. See, for example, W. D. Crano and R. Prislin, “Attitudes and Persuasion,” Annual Review of Psychology, 2006, pp. 345–74; and J. Jermias, “Cognitive Dissonance and Resistance to Change: The Influence of Commitment Confirmation and Feedback on Judgment Usefulness of Accounting Systems.” Accounting, Organizations, and Society, March 2001, p. 141. M. L. Ambrose and C. T. Kulik, “Old Friends, New Faces: Motivation Research in the 1990s,” Journal of Management 25, no. 3 (1999), pp. 231–92.

Endnotes  423

18. D. A. Harrison, D. A. Newman, and P. L. Roth, “How Important Are Job Attitudes?: Meta-Analytic Comparisons of Integrative Behavioral Outcomes and Time Sequences,” Academy of Management Journal, April 2006, pp. 305–25. 19. G. Chen, R. E. Ployhart, H. C. Thomas, N. Anderson, and P. D. Bliese, “The Power of Momentum: A New Model of Dynamic Relationships between Job Satisfaction Change and Turnover Intentions,” Academy of Management Journal, February 2011, pp. 159–81. 20. I. Arnsdorf, “No More New Kid on Campus,” Wall Street Journal, August 5, 2010, pp. D1+. 21. CPP, Inc., Myers-Briggs Type Indicator® (MBTI®), http://www.cpp.com/products/mbti/index.asp (2011); and J. Llorens, “Taking Inventory of Myers-Briggs,” T&D, April 2010, pp. 18–19. 22. Ibid. 23. See, for instance, J. Overbo, “Using Myers-Briggs Personality Type to Create a Culture Adapted to the New Century,” T&D, February 2010, pp. 70–72; K. Garrety, R. Badham, V. Morrigan, W. Rifkin, and M. Zanko, “The Use of Personality Typing in Organizational Change: Discourse, Emotions, and the Reflective Subject,” Human Relations, February 2003, pp. 211–35. 24. P. Moran, “Personality Characteristics and Growth-­ Orientation of the Small Business Owner Manager,” Journal of Managerial Psychology, July 2000, p. 651; and M. Higgs, “Is There a Relationship between the MyersBriggs Type Indicator and Emotional Intelligence?” Journal of Managerial Psychology, September–October 2001, pp. 488–513. 25. J. M. Digman, “Personality Structure: Emergence of the Five Factor Model,” in M. R. Rosenweig and L. W. Porter, eds., Annual Review of Psychology, vol. 41 (Palo Alto, CA: Annual Reviews, 1990), pp. 417–40; O. P. John, “The Big Five Factor Taxonomy: Dimensions of Personality in the Natural Language and in Questionnaires,” in L. A. Pervin, ed., Handbook of Personality Theory and Research (New York: Guilford Press, 1990), pp. 66–100; and M. K. Mount, M. R. Barrick, and J. P. Strauss, “Validity of Observer Ratings of the Big Five Personality Factors,” Journal of Applied Psychology, April 1996, pp. 272–80. 26. M. Barrick, M. Mount, and L. Parks-Leduc, “Autonomy as a Moderator of the Relationship between the Big Five Personality Dimensions and Job Performance,” Personnel Psychology, 58(3), September 2005, pp.745–67. 27. See, for example, R. W. Griffin, “Toward an Integrated Theory of Task Design,” in L. L. Cummings and B. M. Staw (eds.), Research in Organizational Behavior, vol. 9 (Greenwich, CT: JAI Press, 1987), pp. 79–120; and M. Campion, “Interdisciplinary Approaches to Job Design: A Constructive Replication with Extensions,” Journal of Applied Psychology, August 1988, pp. 467–81. 28. See J. R. Hackman and G. R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance, August 1976, pp. 250–79; Y. Fried and G. R. Ferris, “The Validity of the Job Characteristics Model: A Review and Meta Analysis,” Personnel Psychology, Summer 1987, pp. 287–322; S. J. Zaccaro and E. F. Stone, “Incremental Validity of an Empirically Based Measure of Job Characteristics,” Journal of Applied Psychology, May 1988, pp. 245–52; and R. W. Renn and R. J. Vandenberg, “The Critical Psychological States: An Underrepresented Component in Job Characteristics

29.

30. 31. 32.

33.

34.

35.

36.

37.

Model Research,” Journal of Management, February 1995, pp.279–303. G. Van Der Vegt, B. Emans, and E. Van Der Vliert, “Motivating Effects of Task and Outcome Interdependence in Work Teams,” Journal of Managerial Psychology, July 2000, pp. 829; and B. Bemmels, “Local Union Leaders’ Satisfaction with Grievance Procedures,” Journal of Labor Research, Summer 2001, pp. 653–69. P. R. Lawrence and N. Nohria, Driven: How Human Nature Shapes Our Choices (San Francisco: Jossey-Bass, 2002). S. McShane and S. Steen, Canadian Organizational Behaviour, 7th ed. (Toronto, ON: McGraw-Hill, 2009), p. 113. J. S. Adams, “Inequity in Social Exchanges,” in Advances in Experimental Social Psychology, vol. 2, ed. L. Berkowitz (New York: Academic Press, 1965), pp. 267–300; and M. L. Ambrose and C. T. Kulik, “Old Friends, New Faces: Motivation Research in the 1990s,” Journal of Management, vol. 25, no. 3 (1999), pp. 231–92. See, for example, P. S. Goodman and A. Friedman, “An Examination of Adams’ Theory of Inequity,” Administrative Science Quarterly, September 1971, pp. 271–88; E. Walster, G. W. Walster, and W. G. Scott, Equity: Theory and Research (Boston: Allyn & Bacon, 1978); and J. Greenberg, “Cognitive Reevaluation of Outcomes in Response to Underpayment Inequity,” Academy of Management Journal, March 1989, pp. 174–84. See, for example, M. R. Carrell, “A Longitudinal Field Assessment of Employee Perceptions of Equitable Treatment,” Organizational Behavior and Human Performance, February 1978, pp. 108–18; R. G. Lord and J. A. Hohenfeld, “Longitudinal Field Assessment of Equity Effects on the Performance of Major League Baseball Players,” Journal of Applied Psychology, February 1979, pp. 19–26; and J. E. Dittrich and M. R. Carrell, “Organizational Equity Perceptions, Employee Job Satisfaction, and Departmental Absence and Turnover Rates,” Organizational Behavior and Human Performance, August 1979, pp. 29–40. P. S. Goodman, “An Examination of Referents Used in the Evaluation of Pay,” Organizational Behavior and Human Performance, October 1974, pp. 170–95; S. Ronen, “Equity Perception in Multiple Comparisons: A Field Study,” Human Relations, April 1986, pp. 333–46; R. W. Scholl, E. A. Cooper, and J. F. McKenna, “Referent Selection in Determining Equity Perception: Differential Effects on Behavioral and Attitudinal Outcomes,” Personnel Psychology, Spring 1987, pp. 113–27; and C. T. Kulik and M. L. Ambrose, “Personal and Situational Determinants of Referent Choice,” Academy of Management Review, April 1992, pp. 212–37. A. Wahl, J. Castaldo, Z. Olijnyk, E. Pooley, and A. ­Jezovit, “The Best Workplaces in Canada 2007,” Canadian ­Business, April 23, 2007, pp. 39–61. http://resources. greatplacetowork.com/article/pdf/the_best_workplaces_in_­canada_2007.pdf. See, for example, R. C. Dailey and D. J. Kirk, “Distributive and Procedural Justice as Antecedents of Job Dissatisfaction and Intent to Turnover,” Human Relations, March 1992, pp. 305–16; D. B. McFarlin and P. D. Sweeney, “Distributive and Procedural Justice as Predictors of Satisfaction with Personal and Organizational Outcomes,” Academy of Management Journal, August 1992, pp. 626–37; M. A. Konovsky, “Understanding Procedural Justice and Its Impact on Business ­Organizations,”

424 Endnotes

38. 39.

40.

41. 42.

43.

44.

45.

46.

Journal of Management, vol. 26, no. 3, 2000, pp. 489–511; J. A. Colquitt, “Does the Justice of One Interact with the Justice of Many? Reactions to Procedural Justice in Teams,” Journal of Applied Psychology, August 2004, pp. 633–46; J. Brockner, “Why It’s so Hard to Be Fair,” Harvard Business Review, March 2006, pp. 122–29; and B. M. Wiesenfeld, W. B. Swann, Jr., J. Brockner, and C. A. Bartel, “Is More Fairness Always Preferred? Self-Esteem Moderates Reactions to Procedural Justice,” Academy of Management Journal, October 2007, pp. 1235–53. G. Hofstede, “Motivation, Leadership and Organization: Do American Theories Apply Abroad?” Organizational Dynamics, Summer 1980, p. 55. J. K. Giacobbe-Miller, D. J. Miller, and V. I. Victorov, “A Comparison of Russian and U.S. Pay Allocation Decisions, Distributive Justice Judgments and Productivity under Different Payment Conditions,” Personnel Psychology, Spring 1998, pp. 137–63. S. L. Mueller and L. D. Clarke, “Political–Economic Context and Sensitivity to Equity: Differences between the United States and the Transition Economies of Central and Eastern Europe,” Academy of Management Journal, June 1998, pp. 319–29. V. H. Vroom, Work and Motivation (New York: John Wiley, 1964). See, for example, H. G. Heneman III and D. P. Schwab, “Evaluation of Research on Expectancy Theory Prediction of Employee Performance,” Psychological Bulletin, July 1972, pp. 1–9; and L. Reinharth and M. Wahba, “Expectancy Theory as a Predictor of Work Motivation, Effort Expenditure, and Job Performance,” Academy of Management Journal, September 1975, pp. 502–37. See, for example, V. H. Vroom, “Organizational Choice: A Study of Pre- and Post-decision Processes,” Organizational Behavior and Human Performance, April 1966, pp. 212–25; L. W. Porter and E. E. Lawler III, Managerial Attitudes and Performance (Homewood, IL: Richard D. Irwin, 1968); W. Van Eerde and H. Thierry, “Vroom’s Expectancy Models and Work-Related Criteria: A MetaAnalysis,” Journal of Applied Psychology, October 1996, pp. 575–86; and M. L. Ambrose and C. T. Kulik, “Old Friends, New Faces: Motivation Research in the 1990s,” Journal of Management, vol. 25, no. 3 (1999), pp. 231–92. See, for example, M. Siegall, “The Simplistic Five: An Integrative Framework for Teaching Motivation,” Organizational Behavior Teaching Review, vol. 12, no. 4 (1987– 1988), pp. 141–43. S. Butcher, “Relentless Rise in Pleasure Seekers,” Financial Times, July 6, 2003; “Tesco Pilots Student Benefits,” Employee Benefits, November 7, 2003, p. P12; and Tesco PLC, Corporate Responsibility Report 2009, pp. 40–45, http://www.investis.com/plc/storage/tesco_cr_09.pdf. “100 Best Companies to Work For,” Fortune, February 7, 2011, pp. 91+; V. Nayar, “Employee Happiness: Zappos vs. HCL,” Businessweek.com, January 5, 2011; D. Richards, “At Zappos, Culture Pays,” Strategy+Business Online, Autumn 2010; T. Hseih, “Zappos’s CEO on Going to Extremes for Customers,” Harvard Business Review, July– August 2010, pp. 41–45; A. Perschel, “Work-Life Flow: How Individuals, Zappos, and Other Innovative Companies Achieve High Engagement,” Global Business & Organizational Excellence, July 2010, pp. 17–30; and J. M. O’Brien, “Zappos Know How to Kick It,” Fortune, February 2, 2009, pp. 54–60.

47. T. Barber, “Inspire Your Employees Now,” Bloombeg BusinessWeek Online, May 18, 2010; D. Mattioli, “CEOs Welcome Recovery to Look After Staff,” Wall Street Journal, April 5, 2010, p. B5; J. Sullivan, “How Do We Keep People Motivated Following Layoffs?” Workforce Management Online, March 2010; S. Crabtree, “How to Bolster Employees’ Confidence,” The Gallup Management Journal Online, February 25, 2010; S. E. Needleman, “Business Owners Try to Motivate Employees,” Wall Street Journal, January 14, 2010, p. B5; H. Mintzberg, “Rebuilding Companies as Communities,” Harvard Business Review, July–August, 2009, pp. 140–43; and R. Luss, “Engaging Employees through Periods of Layoffs,” Towers Watson, March 3, 2009, www.towerswatson.com. 48. A. Schwartz, “Workers Seeking Productivity in a Pill Are Abusing ADHD Drugs,” New York Times Online, April 18, 2015. 49. J. R. Billings and D. L. Sharpe, “Factors Influencing Flextime Usage among Employed Married Women,” Consumer Interests Annual, vol. 45 (Ames, IA: American Council on Consumer Interests, 1999), pp. 89–94; and I. Harpaz, “The Importance of Work Goals: An International Perspective,” Journal of International Business Studies, First Quarter 1990, pp. 75–93. 50. N. Ramachandran, “New Paths at Work,” US News & World Report, March 20, 2006, p. 47; S. Armour, “Generation Y: They’ve Arrived at Work with a New Attitude,” USA Today, November 6, 2005, pp. B1+; R. Kanfer and P. L. Ackerman, “Aging, Adult Development, and Work Motivation,” Academy of Management Review, July 2004, pp. 440–58; and R. Bernard, D. Cosgrave, and J. Welsh, Chips and Pop: Decoding the Nexus Generation (Toronto: Malcolm Lester Books, 1998). 51. I. Harpaz, “The Importance of Work Goals: An International Perspective,” Journal of International Business Studies, First Quarter 1990, pp. 75–93. 52. G. E. Popp, H. J. Davis, and T. T. Herbert, “An International Study of Intrinsic Motivation Composition,” Management International Review, January 1986, pp. 28–35. 53. R. W. Brislin, B. MacNab, R. Worthley, F. Kabigting Jr., and B. Zukis, “Evolving Perceptions of Japanese Workplace Motivation: An Employee-Manager Comparison,” International Journal of Cross-Cultural Management, April 2005, pp. 87–104. 54. See, for example, M. Alpert, “The Care and Feeding of Engineers,” Fortune, September 21, 1992, pp. 86–95; G. Poole, “How to Manage Your Nerds,” Forbes ASAP, December 1994, pp. 132–36; and T. J. Allen and R. Katz, “Managing Technical Professionals and Organizations: Improving and Sustaining the Performance of Organizations, Project Teams, and Individual Contributors,” Sloan Management Review, Summer 2002, pp. S4–S5. 55. “One CEO’s Perspective on the Power of Recognition,” Workforce Management, February 27, 2004, www.workforce.com; and R. Fournier, “Teamwork Is the Key to Remote Development—Inspiring Trust and Maintaining Motivation Are Critical for a Distributive Development Team,” InfoWorld, March 5, 2001, p. 48. 56. R. J. Bohner Jr. and E. R. Salasko, “Beware the Legal Risks of Hiring Temps,” Workforce, October 2002, pp. 50–57. 57. J. P. Broschak and A. Davis-Blake, “Mixing Standard Work and Nonstandard Deals: The Consequences of Heterogeneity in Employment Arrangements,” Academy

Endnotes  425

58.

59. 60.

61.

62.

63.

64.

65. 66.

67. 68.

69.

of Management Journal, April 2006, pp. 371–93; M. L. Kraimer, S. J. Wayne, R. C. Liden, and R. T. Sparrowe, “The Role of Job Security in Understanding the Relationship between Employees’ Perceptions of Temporary Workers and Employees’ Performance,” Journal of Applied Psychology, March 2005, pp. 389–98; and C. E. Connelly and D. G. Gallagher, “Emerging Trends in Contingent Work Research,” Journal of Management, November 2004, pp. 959–83. D. W. Krueger, “Money, Success, and Success Phobia,” in The Last Taboo: Money as a Symbol and Reality in Psychotherapy and Psychoanalysis, ed. D. W. Krueger (New York: Brunner/Mazel, 1986), pp. 3–16. T. R. Mitchell and A. E. Mickel, “The Meaning of Money: An Individual-Difference Perspective,” Academy of Management, July 1999, pp. 568–78. This paragraph is based on Graham Lowe, 21st Century Job Quality: Achieving What Canadians Want, Research Report W|37, Work and Learning (Ottawa, ON: Canadian Policy Research Networks, September 2007). This paragraph is based on T. R. Mitchell and A. E. Mickel, “The Meaning of Money: An Individual-­ Difference ­Perspective,” Academy of Management, July 1999, pp. 568–78. The reader may want to refer to the myriad references cited in the article. “Believing in Great People: GLBC’s Guide to Great Company Culture,” August 23, 2017, https://www.glbc. com/blog/believing-great-people-glbcs-guide-greatcompany-culture/. “CN’s Remarkable Story of Transformation in Canadian Business,” Financial Post, February 4, 2013, http://­business.financialpost.com/2013/02/04/ cns-­remarkable-story-of-transformation-in-canadianbusiness. G. Miller and T. Lawson, “The Effect of an Informational Option on the Fundamental Attribution Error,” Personality and Social Psychology Bulletin, June 1989, pp. 194–204. See also G. Charness and E. Haruvy, “Self-Serving Bias: Evidence from a Simulated Labour Relationship,” Journal of Managerial Psychology, July 2000, p. 655; and T. J. Elkins, J. S. Phillips, and R. Konopaske, “Gender-Related Biases in Evaluations of Sex Discrimination Allegations: Is Perceived Threat a Key?” Journal of Applied Psychology, April 2002, pp. 280–93. “Is Giving Back Worthwhile?” Canadian Business, May 2014, p. 22. F. Luthans and A. D. Stajkovic, “Provide Recognition for Performance Improvement,” in Principles of Organizational Behavior, ed. E. A. Locke (Oxford, UK: Blackwell, 2000), pp. 166–80. “Secrets of Their Success (and Failure),” Report on Business, January 2006, pp. 54–55. S. L. Rynes, B. Gerhart, and L. Parks, “Personnel Psychology: Performance Evaluation and Pay for Performance,” Annual Review of Psychology, vol. 56, no. 1 (2005), p. 572; and A. M. Dickinson, “Are We Motivated by Money? Some Results from the Laboratory,” Performance Improvement, vol. 44, no. 3 (March 2005), pp. 18–24. R. K. Abbott, “Performance-Based Flex: A Tool for Managing Total Compensation Costs,” Compensation and Benefits Review, March–April 1993, pp. 18–21; J. R. Schuster and P. K. Zingheim, “The New Variable Pay: Key Design Issues,” Compensation and Benefits Review, March–April 1993, pp. 27–34; C. R. Williams and

70.

71. 72. 73.

74.

75. 76.

77.

78.

79. 80.

81.

L. P. Livingstone, “Another Look at the Relationship between Performance and Voluntary Turnover,” Academy of Management Journal, April 1994, pp. 269–98; and A. M. Dickinson and K. L. Gillette, “A Comparison of the Effects of Two Individual Monetary Incentive Systems on Productivity: Piece Rate Pay versus Base Pay Plus Incentives,” Journal of Organizational Behavior ­Management, Spring 1994, pp. 3–82. Canadian Newswire (CNW), “Calgary Salary Increases Reach New Heights, According to Hewitt,” news release, www.newswire.ca/en/releases/archive/September2007/06/c5734.html; G. Teel, “City Leads Nation in Salary Increases,” Calgary Herald, September 7, 2007; Hewitt Associates, “Hewitt Study Shows Pay-for-Performance Plans Replacing Holiday Bonuses,” news release, December 6, 2005; and P. Brieger, “Variable Pay Packages Gain Favour: Signing Bonuses, Profit Sharing Taking Place of Salary Hikes,” Financial Post (National Post), September 13, 2002, p. FP5. “Hope for Higher Pay: The Squeeze on Incomes Is Gradually Easing Up,” Maclean’s, November 25, 1996, pp. 100–01. Hewitt Associates, LLC, “Hewitt Study Shows Base Pay Increases Flat for 2006 with Variable Pay Plans Picking Up the Slack,” August 31, 2005. G. D. Jenkins Jr., N. Gupta, A. Mitra, and J. D. Shaw, “Are Financial Incentives Related to Performance? A Meta-­Analytic Review of Empirical Research,” Journal of Applied Psychology, October 1998, pp. 777–87. T. Coupé, V. Smeets, and F. Warzynski, “Incentives, Sorting and Productivity Along the Career: Evidence from a Sample of Top Economists,” Journal of Law Economics & Organization, vol. 22, no. 1 (April 2006), pp. 137–67. E. Beauchesne, “Pay Bonuses Improve Productivity, Study Shows,” Vancouver Sun, September 13, 2002, p. D5. P. A. Siegel and D. C. Hambrick, “Pay Disparities within Top Management Groups: Evidence of Harmful Effects on Performance of High-Technology Firms,” Organization Science, vol. 16, no. 3 (May–June 2005), pp. 259–76; S. Kerr, “Practical, Cost-Neutral Alternatives That You May Know, but Don’t Practice,” Organizational Dynamics, vol. 28, no. 1 (1999), pp. 61–70; and E. E. Lawler, Strategic Pay (San Francisco: Jossey Bass, 1990); and J. Pfeffer, The Human Equation: Building Profits by Putting People First (Boston: Harvard Business School Press, 1998). T. Reason, “Why Bonus Plans Fail,” CFO, January 2003, p. 53; and J. D. Day, P. Y. Mang, A. Richter, and J. Roberts, “Has Pay for Performance Had Its Day?” McKinsey Quarterly, no. 4 (November 2002). V. Sanderson, “Sweetening Their Slice: More Hardware and Lumberyard Dealers Are Investing in Profit-Sharing Programs as a Way to Promote Employee Loyalty,” Hardware Merchandising, May–June 2003, p. 66. “Health Club Membership, Flextime Are Most Desired Perks,” Business West, September 1999, p. 75. “Rethinking 9 to 5: Canadian Organizations Step Up to Support Employees through Flexible Work Arrangements,” The Conference Board of Canada, May 30, 2018, https://www.newswire.ca/news-releases/ rethinking-9-to-5-canadian-organizations-stepup-to-support-­employees-through-flexible-workarrangements-684047821.html. “Utilize Collaboration Tools to Make Virtual Meetings More Productive,” ACT Conferencing’s Corporate

426 Endnotes ­Communication Blog, August 28, 2012, http://blog. actconferencing.com/default.aspx?Tag=unified%20 ­communications%20and%20collaboration; “47% of Canadian employees work remotely: survey,” Benefits Canada, March 9, 2017, https://www.benefitscanada. com/­human-resources/other/47-of-canadian-employees-work-remotely-survey-94694. 82. K. Clark, “Perking Up the Office,” U.S. News & World Report, November 22, 1999, p. 73; L. Brenner, “Perks That Work,” BusinessWeek Frontier, October 11, 1999, pp. F22– F40. 83. D. Penner, “Survey: Top Pay Trumps Work-Life Balance,” The Gazette (Montreal), March 10, 2007, p. G2. 84. “What Employees Want,” CMA Management, vol. 75, no. 7, October 2001, p. 8. 85. Information in this paragraph is based on D. Grigg and J. Newman, “Labour Researchers Define Job Satisfaction,” Vancouver Sun, February 16, 2002, p. E2. 86. Jacqueline Nelson, “A 21st-century Factory Town,” Canadian Business, April 16, 2012. 87. Willis Towers Watson, “The 2018 Global Benefits Attitudes Study,” https://www.willistowerswatson.com/ en/insights/2017/11/2017-global-benefits-attitudessurvey. 88. Jackie Pitera, “Aligned Incentives and Engaged Employees Improve Triple Bottom Line Performance,” Environmental Leader, August 4, 2011, http://www.­ environmentalleader.com/2011/08/04/aligned-­ incentives-and-engaged-employees-improve-triplebottom-line-performance. 89. Canadian International Development Agency (CIDA), “Microfinance: The Government of Canada Supports Microfinance in Developing Countries,” CIDA website, http://www.acdi-cida.gc.ca/acdi-cida/ACDI-CIDA. nsf/eng/RAC-1110131744-PG5. 90. “The DevFacto Team,” DevFacto, www.devfacto.com/ company. Reprinted by permission from David Cronin. 91. “Agents of Agency,” Canadian Business, Special Report— Canada’s Best Employers, December 2014, pp. 69–70. 92. Ibid. 93. Ibid. 94. Ibid. 95. “Our News,” Ubisoft, http://toronto.ubisoft. com/en/ubisoft-our-news; “Ubisoft Reports FullYear 2017-18 Sales and Earnings Figures”, May 17, 2018, https://www.globenewswire.com/news-release/2018/05/17/1508389/0/en/UBISOFT-REPORTSFULL-YEAR-2017-18-SALES-AND-EARNINGS-­ FIGURES.html. 96. S. Khan, “The Massive Creative Collaboration Behind Ubisoft,” Fast Company, November 13, 2014. 97. Ibid. 98. Ibid. 99. “Office Space: Ubisoft,” Canadian Business, August 2014, pp. 14–15. 100. “Ubisoft Announces the Creation of Ubisoft Winnipeg”, April 6, 2018, https://montreal.ubisoft.com/en/ubisoftannounces-the-creation-of-ubisoft-winnipeg/.

Chapter 10 1. M. Good, “HSBC’s Sandra Stuart: from teller to titan,” BC Business, August 15, 2016, https://www.bcbusiness. ca/president-CEO-HSBC-Canada-Sandra-Stuart-profile.

2. M. McCullough, “HSBC Canada CEO Sandra Stuart on Canada’s global export opportunity,” Canadian Business, January 4, 2017, retrieved from https://www. canadianbusiness.com/leadership/sandra-stuart-hsbcbank-canada/. 3. D. J. Deveau, “Trio of Trailblazers,” Financial Post, ­November 21, 2018, https://business.financialpost.com/ executive/executive-women/trio-of-trailblazers. 4. Ibid. 5. S. Reza, “St. Francis Xavier Student Named 2018 HSBC Woman Leader of Tomorrow,” Enactus Canada, http:// enactus.ca/st-francis-xavier-student-named-2018-hsbcwoman-leader-of-tomorrow/. 6. D. J. Deveau, “Trio of Trailblazers,” Financial Post, ­November 21, 2018, https://business.financialpost.com/ executive/executive-women/trio-of-trailblazers. 7. P. Preville, “Women in Business,” Canadian Business, Winter 2013/2014, pp. 26–27. 8. “RBC Diversity Blueprint 2012–2015,” http://www.rbc. com/diversity/pdf/rbc-diversity-blueprint.pdf. 9. Most leadership research has focused on the actions and responsibilities of managers and extrapolated the results to leaders and leadership in general. 10. See, for example, “Feature Interview with Peter Drucker,” Training & Development Magazine (September 1998); J. Kotter, “What Leaders Really Do,” Harvard Business Review, vol. 68 (1990), pp. 103–11; and H. Mintzberg, In Conversation, CBC Ideas, The Canadian Broadcasting Corporation, 1999. 11. “Portraits in Leadership 2011,” Canadian Business and the Ted Rogers Leadership Centre, Ryerson University, www.canadianbusiness.com/portraits. 12. Advancing Canadian Health Leadership, CHLNet, http://chlnet.ca/CHLNet-Leadership-BenchmarkingStudy-Final-Report.pdf. 13. See D. S. Derue, J. D. Nahrgang, N. Wellman, and S. E. Humphrey, “Trait and Behavioral Theories of Leadership: An Integration and Meta-Analytic Test of Their Relative Validity,” Personnel Psychology, Spring 2011, pp. 7–52; T. A. Judge, J. E. Bono, R. Ilies, and M. W. Gerhardt, “Personality and Leadership: A Qualitative and Quantitative Review,” Journal of Applied Psychology, August 2002, pp. 765–80; and S. A. Kirkpatrick and E. A. Locke, “Leadership: Do Traits Matter?” Academy of Management Executive, May 1991, pp. 48–60. 14. K. Lewin and R. Lippitt, “An Experimental Approach to the Study of Autocracy and Democracy: A Preliminary Note,” Sociometry 1, 1938, pp. 292–300; K. Lewin, “Field Theory and Experiment in Social Psychology: Concepts and Methods,” American Journal of Sociology 44, 1939, pp. 868–96; K. Lewin, R. Lippitt, and R. K. White, “Patterns of Aggressive Behavior in Experimentally Created Social Climates,” Journal of Social Psychology 10, 1939, pp. 271–301; and R. Lippitt, “An Experimental Study of the Effect of Democratic and Authoritarian Group Atmospheres,” University of Iowa Studies in Child Welfare 16, 1940, pp. 43–95. 15. R. M. Stodgill and A. E. Coons, eds., Leader Behavior: Its Description and Measurement, Research Monograph No. 88 (Columbus: Ohio State University, Bureau of Business Research, 1951). See also S. Kerr, C. A. Schriesheim, C. J. Murphy, and R. M. Stodgill, “Toward a Contingency Theory of Leadership Based upon the Consideration and Initiating Structure Literature,” Organizational Behavior

Endnotes  427

16.

17. 18. 19. 20.

21.

22.

23.

24. 25. 26.

27.

and Human Performance, August 1974, pp. 62–82; and B. M. Fisher, “Consideration and Initiating Structure and Their Relationships with Leader Effectiveness: A Meta Analysis,” in F. Hoy, ed., Proceedings of the 48th Annual Academy of Management Conference (Anaheim, CA, 1988), pp. 201–05. R. Kahn and D. Katz, “Leadership Practices in Relation to Productivity and Morale,” in D. Cartwright and A. Zander, eds., Group Dynamics: Research and Theory, 2nd ed. (Elmsford, NY: Pow, Paterson, 1960). R. R. Blake and J. S. Mouton, The Managerial Grid III (Houston: Gulf Publishing, 1984). W. G. Bennis, “The Seven Ages of the Leader,” Harvard Business Review, January 2004, 52. F. E. Fiedler, A Theory of Leadership Effectiveness (New York: McGraw-Hill, 1967). R. Ayman, M. M. Chemers, and F. Fiedler, “The Contingency Model of Leadership Effectiveness: Its Levels of Analysis,” Leadership Quarterly, Summer 1995, pp. 147–67; C. A. Schriesheim, B. J. Tepper, and L. A. Tetrault, “Lease Preferred Co-Worker Score, Situational Control, and Leadership Effectiveness: A Meta-Analysis of Contingency Model Performance Predictions,” Journal of Applied Psychology, August 1994, pp. 561–73; and L. H. Peters, D. D. Hartke, and J. T. Pholmann, “Fiedler’s Contingency Theory of Leadership: An Application of the Meta-Analysis Procedures of Schmidt and Hunter,” Psychological Bulletin, March 1985, pp. 274–85. See B. Kabanoff, “A Critique of Leader Match and Its Implications for Leadership Research,” Personnel Psychology, Winter 1981, pp. 749–64; and E. H. Schein, Organizational Psychology, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 1980), pp. 116–17. P. Hersey and K. Blanchard, “So You Want to Know Your Leadership Style?” Training & Development, February 1974, pp. 1–15; and P. Hersey and K. Blanchard, Management of Organizational Behavior: Leading Human Resources, 8th ed. (Englewood Cliffs, NJ: Prentice Hall, 2001). See, for example, C. F. Fernandez and R. P. Vecchio, “Situational Leadership Theory Revisited: A Test of an Across-Jobs Perspective,” Leadership Quarterly, vol. 8, no. 1 (1997), pp. 67–84; and C. L. Graeff, “Evolution of Situational Leadership Theory: A Critical Review,” Leadership Quarterly, vol. 8, no. 2 (1997), pp. 153–70. V. H. Vroom and P. W. Yetton, Leadership and Decision Making (Pittsburgh: University of Pittsburgh Press, 1973). V. H. Vroom and A. G. Jago, The New Leadership: Managing Participation in Organizations (Upper Saddle River, NJ: Prentice Hall, 1988). See, for example, R. H. G. Field and R. J. House, “A Test of the Vroom Yetton Model Using Manager and Subordinate Reports,” Journal of Applied Psychology, June 1990, pp. 362–66; J. T. Ettling and A. G. Jago, “Participation Under Conditions of Conflict: More on the Validity of the Vroom Yetton Model,” Journal of Management Studies, January 1988, pp. 73–83; C. R. Leana, “Power Relinquishment versus Power Sharing: Theoretical Clarification and Empirical Comparison of Delegation and Participation,” Journal of Applied Psychology, May 1987, pp. 228–33; and R. H. G. Field, “A Test of the Vroom Yetton Normative Model of Leadership,” Journal of Applied Psychology, October 1982, pp. 523–32. For additional information about the exchanges that occur between the leader and the follower, see A. S. Phillips

28.

29.

30.

31.

32.

and A. G. Bedeian, “Leader Follower Exchange Quality: The Role of Personal and Interpersonal Attributes,” Academy of Management Journal 37, no. 4 (1994): 990–1001; and T. A. Scandura and C. A. Schriesheim, “Leader Member Exchange and Supervisor Career Mentoring as Complementary Constructs in Leadership Research,” Academy of Management Journal 37, no. 6 (1994): 1588–602. SmartPulse, “How Willing Are You to Step Outside Your Leadership Style ‘Comfort Zone’ and Try New Techniques?” www.smartbrief.com/leadership, December 10, 2013. R. J. House, “A Path-Goal Theory of Leader Effectiveness,” Administrative Science Quarterly, September 1971, pp. 321–38; R. J. House and T. R. Mitchell, “Path-Goal Theory of Leadership,” Journal of Contemporary Business, Autumn 1974, p. 86; and R. J. House, “Path-Goal Theory of Leadership: Lessons, Legacy, and a Reformulated Theory,” Leadership Quarterly, Fall 1996, pp. 323–52. J. C. Wofford and L. Z. Liska, “Path-Goal Theories of Leadership: A Meta-Analysis,” Journal of Management, Winter 1993, pp. 857–76; M. G. Evans, “R. J. House’s ‘A Path-Goal Theory of Leader Effectiveness,’” Leadership Quarterly, Fall 1996, pp. 305–09; C. A. Schriesheim and L. L. Neider, “Path-Goal Leadership Theory: The Long and Winding Road,” Leadership Quarterly, Fall 1996, pp. 317–21; A. Somech, “The Effects of Leadership Style and Team Process on Performance and Innovation in Functionally Heterogeneous Teams,” Journal of Management, vol. 32, no. 1 (2006), pp. 132–57; and S. Yun, S. Faraj, and H. P. Sims, “Contingent Leadership and Effectiveness of Trauma Resuscitation Teams,” Journal of Applied Psychology, vol. 90, no. 6 (2005), pp. 1288–96. L. Ma and Q. Qu, “Differentiation in Leader-Member Exchange: A Hierarchical Linear Modeling Approach,” Leadership Quarterly, October 2010, pp. 733–44; C. P. Schriesheim, S. L. Castro, X. Zhou, and F. J. Yamarinno, “The Folly of Theorizing ‘A’ but Testing ‘B’: A Selective Level-of-Analysis Review of the Field and a Detailed Leader-Member Exchange Illustration,” Leadership Quarterly, Winter 2001, pp. 515–51; R. C. Liden, R. T. Sparrowe, and S. J. Wayne, “Leader-Member Exchange Theory: The Past and Potential for the Future,” in G. R. Ferris (ed.), Research in Personnel and Human Resource Management, vol. 15 (Greenwich, CT: JAI Press, 1997), pp. 47–119; G. B. Graen and M. Uhl-Bien, “RelationshipBased Approach to Leadership: Development of LeaderMember Exchange (LMX) Theory of Leadership Over 25 Years: Applying a Multi-Domain Perspective,” Leadership Quarterly, Summer 1995, pp. 219–47; and R. M. Dienesch and R. C. Liden, “Leader-Member Exchange Model of Leadership: A Critique and Further Development,” Academy of Management Review, July 1986, pp. 618–34. J. B. Wu, A. S. Tsui, and A. J. Kinicki, “Consequences of Differentiated Leadership in Groups,” Academy of Management Journal, February 2010, pp. 90–106; S. S. Masterson, K. Lewis, and B. M. Goldman, “Integrating Justice and Social Exchange: The Differing Effects of Fair Procedures and Treatment on Work Relationships,” Academy of Management Journal, August 2000, pp. 738–48; S. J. Wayne, L. J. Shore, W. H. Bommer, and L. E. Tetrick, “The Role of Fair Treatment and Rewards in Perceptions of Organizational Support and Leader-Member Exchange,” Journal of Applied Psychology, June 2002, pp. 590–98; R. C. Liden, S. J. Wayne, and D. Stilwell, “A Longitudinal Study of

428 Endnotes

33.

34. 35.

36. 37.

the Early Development of Leader-Member Exchanges,” Journal of Applied Psychology, August 1993, pp. 662–74; and R. C. Liden and G. Graen, “Generalizability of the Vertical Dyad Linkage Model of Leadership,” Academy of Management Journal, September 1980, pp. 451–65. V. L. Goodwin, W. M. Bowler, and J. L. Whittington, “A Social Network Perspective on LMX Relationships: Accounting for the Instrumental Value of Leader and Follower Networks,” Journal of Management, August 2009, pp. 954–80; R. Vecchio and D. M. Brazil, “Leadership and Sex-Similarity: A Comparison in a Military Setting,” Personnel Psychology, vol. 60, 2007, pp. 303–35; M. UhlBien, “Relationship Development as a Key Ingredient for Leadership Development,” in S. E. Murphy and R. E. Riggio (eds.), Future of Leadership Development (Mahwah, NJ: Lawrence Erlbaum, 2003), pp. 129–47; R. C. Liden, S. J. Wayne, and D. Stilwell, “A Longitudinal Study of the Early Development of Leader-Member Exchanges”; and D. Duchon, S. G. Green, and T. D. Taber, “Vertical Dyad Linkage: A Longitudinal Assessment of Antecedents, Measures, and Consequences,” Journal of Applied Psychology, February 1986, pp. 56–60. P. Drexler, “The Upside of Favoritism,” Wall Street Journal, June 8–9, 2013, p. C3. See, for instance, F. O. Walumbwa, D. M. Mayer, P. Wang, H. Wang, K. Workman, and A. L. Christensen, “Linking Ethical Leadership to Employee Performance: The Roles of Leader-Member Exchange Theory, Self-Efficacy, and Organizational Identification,” Organizational Behavior & Human Decision Processes, July 2011, pp. 204–13; K. J. Harris, A. R. Wheeler, and K. M. Kacmar, “The Mediating Role of Organizational Embeddedness in the LMXOutcomes Relationship,” Leadership Quarterly, April 2011, pp. 271–81; W. M. Bowler, J. R. B. Halbesleben, J. R. B. Paul, “If You’re Close with the Leader, You Must Be a Brownnose: The Role of Leader-Member Relationships in Follower, Leader, and Coworker Attributions of Organizational Citizenship Behavior Motives,” Human Resource Management Review, December 2010, pp. 309–16; G. Sears and C. Holmvall, “The Joint Influence of Supervisor and Subordinate Emotional Intelligence on Leader-Member Exchange,” Journal of Business & Psychology, December 2010, pp. 593–605; V. Venkataramani, S. G. Green, and D. J. Schleicher, “Well-Connected Leaders’ Social Network Ties on LMX and Members’ Work Attitudes,” Journal of Applied Psychology, November 2010, pp. 1071–84; Z. Chen, W. Lam, and J. A. Zhong, “Leader-Member Exchange and Member Performance: A New Look at Individual-Level Negative Feedback-Seeking Behavior and Team-Level Empowerment Culture,” Journal of Applied Psychology, January 2007, pp. 202–12; R. Ilies, J. D. Nahrgang, and F. P. Morgeson, “Leader-Member Exchange and Citizenship Behaviors: A Meta-Analysis,” Journal of Applied Psychology, January 2007, pp. 269–77; and C. R. Gerstner and D. V. Day, “Meta-Analytic Review of Leader-Member Exchange Theory: Correlates and Construct Issues,” Journal of ­Applied Psychology, December 1997, pp. 827–44. B. M. Bass and R. E. Riggio, Transformational Leadership, 2d ed. (Mahwah, NJ: Lawrence Erlbaum Associates, Inc., 2006), p. 3. J. M. Howell and B. Shamir, “The Role of Followers in the Charismatic Leadership Process: Relationships and Their Consequences,” Academy of Management Review, vol. 30, no. 1 (2005), pp. 96–112.

38. L. Manfield, “Creating a Safety Culture from Top to Bottom,” Worksafe Magazine, February 2005, pp. 8–9; “Canadian CEOs Give Themselves Top Marks for Leadership!” Canada Newswire, September 9, 1999. 39. J. Seltzer and B. M. Bass, “Transformational Leadership: Beyond Initiation and Consideration,” Journal of Management, December 1990, pp. 693–703; and B. M. Bass, “Leadership: Good, Better, Best,” Organizational Dynamics, Winter 1985, pp. 26–40. 40. B. J. Avolio and B. M. Bass, “Transformational Leadership, Charisma, and Beyond,” working paper, School of Management, State University of New York, Binghamton, 1985, p. 14. 41. R. S. Rubin, D. C. Munz, and W. H. Bommer, “Leading from Within: The Effects of Emotion Recognition and Personality on Transformational Leadership Behavior,” Academy of Management Journal, October 2005, pp. 845–58; T. A. Judge and J. E. Bono, “Five-Factor Model of Personality and Transformational Leadership,” Journal of Applied Psychology, October 2000, pp. 751–65; B. M. Bass and B. J. Avolio, “Developing Transformational Leadership: 1992 and Beyond,” Journal of European Industrial Training, January 1990, p. 23; and J. J. Hater and B. M. Bass, “Supervisors’ Evaluation and Subordinates’ Perceptions of Transformational and Transactional Leadership,” Journal of Applied Psychology, November 1988, pp. 695–702. 42. R. F. Piccolo and J. A. Colquitt, “Transformational Leadership and Job Behaviors: The Mediating Role of Core Job Characteristics,” Academy of Management Journal, April 2006, pp. 327–40; O. Epitropaki and R. Martin, “From Ideal to Real: A Longitudinal Study of the Role of Implicit Leadership Theories on Leader-Member Exchanges and Employee Outcomes,” Journal of Applied Psychology, July 2005, pp. 659–76; J. E. Bono and T. A. Judge, “Self-Concordance at Work: Toward Understanding the Motivational Effects of Transformational Leaders,” Academy of Management Journal, October 2003, pp. 554–71; T. Dvir, D. Eden, B. J. Avolio, and B. Shamir, “Impact of Transformational Leadership on Follower Development and ­Performance: A Field Experiment,” Academy of Management Journal, August 2002, pp. 735–44; N. Sivasubramaniam, W. D. Murry, B. J. Avolio, and D. I. Jung, “A Longitudinal Model of the Effects of Team Leadership and Group Potency on Group Performance,” Group & Organization Management, March 2002, pp. 66–96; J. M. Howell and B. J. Avolio, “Transformational Leadership, Transactional Leadership, Locus of Control, and Support for Innovation: Key Predictors of Consolidated-Business-Unit ­Performance,” Journal of ­Applied Psychology, December 1993, pp. 891–911; R. T. Keller, “Transformational Leadership and the Performance of Research and Development Project Groups,” Journal of Management, September 1992, pp. 489–501; and B. M. Bass and B. J. A-volio, “Developing Transformational Leadership: 1992 and Beyond,” Journal of European Industrial Training, ­January 1990, p. 23. 43. R. Pillai, C. A. Schriesheim, and E. S. Williams, “Fairness Perceptions and Trust as Mediators of Transformational and Transactional Leadership: A Two-Sample Study,” Journal of Management, vol. 25, 1999, pp. 897–933. 44. G. M. Spreitzer, K. H. Perttula, and K. Xin, “Traditionality Matters: An Examination of the Effectiveness of Transformational Leadership in the United States and

Endnotes  429

45.

46.

47. 48.

49.

Taiwan,” Journal of Organizational Behavior, vol. 26, no. 3 (2005), pp. 205–27. M. Thompson and B. Tracy, “Building a Great Organization,” Leader to Leader, Fall 2010, pp. 45–49; and F. Vogelstein, “Mighty Amazon,” Fortune, May 26, 2003, pp. 60–74. J. M. Crant and T. S. Bateman, “Charismatic Leadership Viewed from Above: The Impact of Proactive Personality,” Journal of Organizational Behavior, February 2000, pp. 63–75; G. Yukl and J. M. Howell, “Organizational and Contextual Influences on the Emergence and Effectiveness of Charismatic Leadership,” Leadership Quarterly, Summer 1999, pp. 257–83; and J. A. Conger and R. N. Kanungo, “Behavioral Dimensions of Charismatic Leadership,” in J. A. Conger, R. N. Kanungo and Associates, Charismatic Leadership (San Francisco: Jossey-Bass, 1988), pp. 78–97. J. A. Conger and R. N. Kanungo, Charismatic Leadership in Organizations (Thousand Oaks, CA: Sage, 1998). F. Walter and H. Bruch, “An Affective Events Model of Charismatic Leadership Behavior: A Review, Theoretical Investigation, and Research Agenda,” Journal of Management, December 2009, pp. 1428–52; K. S. Groves, “Linking Leader Skills, Follower Attitudes, and Contextual Variables via an Integrated Model of Charismatic Leadership,” Journal of Management, April 2005, pp. 255–77; J. J. Sosik, “The Role of Personal Values in the Charismatic Leadership of Corporate Managers: A Model and Preliminary Field Study,” Leadership Quarterly, April 2005, pp. 221–44; A. H. B. deHoogh, D. N. den Hartog, P. L. Koopman, H. Thierry, P. T. van den Berg, J. G. van der Weide, and C. P. M. Wilderom, “Leader Motives, Charismatic Leadership, and Subordinates’ Work Attitudes in the Profit and Voluntary Sector,” Leadership Quarterly, February 2005, pp. 17–38; J. M. Howell and B. Shamir, “The Role of Followers in the Charismatic Leadership Process: Relationships and Their Consequences,” Academy of Management Review, January 2005, pp. 96–112; J. Paul, D. L. Costley, J. P. Howell, P. W. Dorfman, and D. Trafimow, “The Effects of Charismatic Leadership on Followers’ Self-Concept Accessibility,” Journal of Applied Social Psychology, September 2001, pp. 1821–44; J. A. Conger, R. N. Kanungo, and S. T. Menon, “Charismatic Leadership and Follower Effects,” Journal of Organizational Behavior, vol. 21, 2000, pp. 747–67; R. W. Rowden, “The Relationship between Charismatic Leadership Behaviors and Organizational Commitment,” Leadership & Organization Development Journal, January 2000, pp. 30–35; G. P. Shea and C. M. Howell, “Charismatic Leadership and Task Feedback: A Laboratory Study of Their Effects on Self-Efficacy,” Leadership Quarterly, Fall 1999, pp. 375–96; S. A. Kirkpatrick and E. A. Locke, “Direct and Indirect Effects of Three Core Charismatic Leadership Components on Performance and Attitudes,” Journal of Applied Psychology, February 1996, pp. 36–51; D. A. Waldman, B. M. Bass, and F. J. Yammarino, “Adding to ContingentReward Behavior: The Augmenting Effect of Charismatic Leadership,” Group & Organization Studies, December 1990, pp. 381–94; and R. J. House, J. Woycke, and E. M. Fodor, “Charismatic and Noncharismatic Leaders: Differences in Behavior and Effectiveness,” in Conger and Kanungo, Charismatic Leadership, pp. 103–04. B. R. Agle, N J. Nagarajan, J. A. Sonnenfeld, and D. Srinivasan, “Does CEO Charisma Matter? An

50.

51.

52.

53. 54.

55. 56.

Empirical Analysis of the Relationships among Organizational Performance, Environmental Uncertainty, and Top Management Team Perceptions of CEO Charisma,” Academy of Management Journal, February 2006, pp. 161–74. R. Birchfield, “Creating Charismatic Leaders,” Management, June 2000, pp. 30–31; S. Caudron, “Growing Charisma,” Industry Week, May 4, 1998, pp. 54–55; and J. A. Conger and R. N. Kanungo, “Training Charismatic Leadership: A Risky and Critical Task,” in Conger and Kanungo, Charismatic Leadership, pp. 309–23. J. G. Hunt, K. B. Boal, and G. E. Dodge, “The Effects of Visionary and Crisis-Responsive Charisma on Followers: An Experimental Examination,” Leadership Quarterly, Fall 1999, pp. 423–48; R. J. House and R. N. Aditya, “The Social Scientific Study of Leadership: Quo Vadis?” Journal of Management 23, no. 3, 1997, pp. 316–23; and R. J. House, “A 1976 Theory of Charismatic Leadership.” This definition is based on M. Sashkin, “The Visionary Leader,” in Conger and Kanungo et al., Charismatic Leadership, pp. 124–25; B. Nanus, Visionary Leadership (New York: Free Press, 1992), p. 8; N. H. Snyder and M. Graves, “Leadership and Vision,” Business Horizons, January–­ February 1994, p. 1; and J. R. Lucas, “Anatomy of a Vision Statement,” Management Review, February 1998, pp. 22–26. Nanus, Visionary Leadership, p. 8. Based on M. Sashkin, “The Visionary Leader,” in Charismatic Leadership, eds. J. A. Conger and R. N. Kanungo (San Francisco: Jossey-Bass, 1988), pp. 128–30; and J. R. Baum, E. A. Locke, and S. A. Kirkpatrick, “A Longitudinal Study of the Relation of Vision and Vision Communication to Venture Growth in Entrepreneurial Firms,” Journal of Applied Psychology, February 1998, pp. 43–54. “The 100 Most Creative People in Business 2010,” Fast Company, June 2010, pp. 70–119; and G. Colvin, “The FedEx Edge,” Fortune, April 3, 2006, pp. 77–84. J. Fabre, “The Importance of Empowering Front-Line Staff,” Supervision, December 2010, pp. 6–7; S. Raub and C. Robert, “Differential Effects of Empowering Leadership on In-Role and Extra-Role Employee Behaviors: Exploring the Role of Psychological Empowerment and Power Values,” Human Relations, November 2010, pp. 1743–70; N. D. Cakar and A. Erturk, “Comparing Innovation Capability of Small and Medium-Sized Enterprises: Examining the Effects of Organizational Culture and Empowerment,” Journal of Small Business Management, July 2010, pp. 325–59; A. Srivastava, K. M. Bartol, and E. A. Locke, “Empowering Leadership in Management Teams: Effects on Knowledge Sharing, Efficacy, and Performance,” Academy of Management Journal, December 2006, pp. 1239–51; P. K. Mills and G. R. Ungson, “Reassessing the Limits of Structural Empowerment: Organizational Constitution and Trust as Controls,” Academy of Management Review, January 2003, pp. 143–53; W. A. Rudolph and M. Sashkin, “Can Organizational Empowerment Work in Multinational Settings?” Academy of Management Executive, February 2002, pp. 102–15; C. Gomez and B. Rosen, “The Leader-Member Link between Managerial Trust and Employee Empowerment,” Group & Organization Management, March 2001, pp. 53–69; C. Robert and T. M. Probst, “Empowerment and Continuous Improvement in the United States, Mexico, Poland, and India,” Journal of Applied Psychology, October 2000, pp. 643–58; R. C. Herrenkohl, G. T. Judson, and J. A. Heffner, “­Defining and

430 Endnotes Measuring Employee Empowerment,” Journal of Applied Behavioral Science, September 1999, pp. 373; R. C. Ford and M. D. Fottler, “Empowerment: A Matter of Degree,” Academy of Management Executive, August 1995, pp. 21–31; and W. A. Rudolph, “Navigating the Journey to Empowerment,” Organizational Dynamics, Spring 1995, pp. 19–32. 57. T. A. Stewart, “Just Think: No Permission Needed,” Fortune, January 8, 2001, pp. 190–92. 58. See J. R. P. French Jr. and B. Raven, “The Bases of Social Power,” in Group Dynamics: Research and Theory, eds. D. Cartwright and A. F. Zander (New York: Harper & Row, 1960), pp. 607–23; P. M. Podsakoff and C. A. Schriesheim, “Field Studies of French and Raven’s Bases of Power: Critique, Reanalysis, and Suggestions for Future Research,” Psychological Bulletin, May 1985, pp. 387–411; R. K. Shukla, “Influence of Power Bases in Organizational Decision Making: A Contingency Model,” Decision Sciences, July 1982, pp. 450–70; D. E. Frost and A. J. Stahelski, “The Systematic Measurement of French and Raven’s Bases of Social Power in Workgroups,” Journal of Applied Social Psychology, April 1988, pp. 375–89; and T. R. Hinkin and C. A. Schriesheim, “Development and Application of New Scales to Measure the French and Raven (1959) Bases of Social Power,” Journal of ­Applied ­Psychology, August 1989, pp. 561–67. 59. S. Caminiti, “What Team Leaders Need to Know,” ­Fortune, February 20, 1995, p. 93. 60. D. S. DeRue, C. M. Barnes, and F. M. Morgeson, “Understanding the Motivational Contingencies of Team Leadership,” Small Group Research, October 2010, pp. 621–51; B. Meredith, “Leader Characteristics: Is There a Shift in Requirements?” Leadership Excellence, September 2010, p. 19; B. Neal, “Heroes and Sidekicks: Ensuring Proper Followership,” T&D, September 2010, pp. 76–77; R. D. Ramsey, “Preparing to Be Tomorrow’s Leader Today,” Supervision, January 2010, p. 79; N. Steckler and N. Fondas, “Building Team Leader Effectiveness: A Diagnostic Tool,” Organizational Dynamics, Winter 1995, p. 20. 61. R. S. Wellins, W. C. Byham, and G. R. Dixon, Inside Teams (San Francisco: Jossey-Bass, 1994), p. 318. 62. N. Steckler and N. Fondas, “Building Team Leader Effectiveness: A Diagnostic Tool,” Organizational Dynamics, Winter 1995, p. 21. 63. See J. R. P. French Jr. and B. Raven, “The Bases of Social Power,” in Group Dynamics: Research and Theory, eds. D. Cartwright and A. F. Zander (New York: Harper & Row, 1960), pp. 607–23; P. M. Podsakoff and C. A. Schriesheim, “Field Studies of French and Raven’s Bases of Power: Critique, Reanalysis, and Suggestions for Future Research,” Psychological Bulletin, May 1985, pp. 387–411; R. K. Shukla, “Influence of Power Bases in Organizational Decision Making: A Contingency Model,” Decision Sciences, July 1982, pp. 450–70; D. E. Frost and A. J. Stahelski, “The Systematic Measurement of French and Raven’s Bases of Social Power in Workgroups,” Journal of Applied Social Psychology, April 1988, pp. 375–89; and T. R. Hinkin and C. A. Schriesheim, “Development and Application of New Scales to Measure the French and Raven (1959) Bases of Social Power,” Journal of ­Applied Psychology, August 1989, pp. 561–67. 64. This section is based on R. B. Morgan, “Self- and CoWorker Perceptions of Ethics and Their Relationships to Leadership and Salary,” Academy of Management Journal,

65. 66. 67.

68. 69. 70.

71.

72. 73.

74.

February 1993, pp. 200–14; E. P. Hollander, “Ethical Challenges in the Leader–Follower Relationship,” Business Ethics Quarterly, January 1995, pp. 55–65; J. C. Rost, “Leadership: A Discussion about Ethics,” Business Ethics Quarterly, January 1995, pp. 129–42; R. N. Kanungo and M. Mendonca, Ethical Dimensions of Leadership (Thousand Oaks, CA: Sage Publications, 1996); J. B. Ciulla, ed., Ethics: The Heart of Leadership (New York: Praeger Publications, 1998); J. D. Costa, The Ethical Imperative: Why Moral Leadership Is Good Business (Cambridge, MA: Perseus Press, 1999); and N. M. Tichy and A. McGill, eds., The Ethical Challenge: How to Build Honest Business Leaders (New York: John Wiley & Sons, 2003). J. M. Burns, Leadership (New York: Harper & Row, 1978). J. M. Avolio, S. Kahai, and G. E. Dodge, “The Ethics of Charismatic Leadership: Submission or Liberation?” Academy of Management Executive, May 1992, pp. 43–55. L. K. Trevino, M. Brown, and L. P. Hartman, “A Qualitative Investigation of Perceived Executive Ethical Leadership: Perceptions from Inside and Outside the Executive Suite,” Human Relations, January 2003, pp. 5–37. I. Wanasika, J. P. Howell, R. Littrell, and P. Dorfman, “Managerial Leadership and Culture in Sub-Saharan Africa,” Journal of World Business, April 2011, pp. 234–41. F. W. Swierczek, “Leadership and Culture: Comparing Asian Managers,” Leadership & Organization Development Journal, December 1991, pp. 3–10. House, “Leadership in the Twenty-First Century,” p. 443; M. F. Peterson and J. G. Hunt, “International Perspectives on International Leadership,” Leadership Quarterly, Fall 1997, pp. 203–31; and J. R. Schermerhorn and M. H. Bond, “Cross-Cultural Leadership in Collectivism and High Power Distance Settings,” Leadership & Organization Development Journal 18, no. 4/5, 1997, pp. 187–93. Wanasika, Howell, Littrell, and Dorfman, “Managerial Leadership and Culture in Sub-Saharan Africa”; R. J. House, P. J. Hanges, S. A. Ruiz-Quintanilla, P. W. Dorfman, et al., “Culture Specific and Cross-Culturally Generalizable Implicit Leadership Theories: Are the Attributes of Charismatic/Transformational Leadership Universally Endorsed?” Leadership Quarterly, Summer 1999, pp. 219–56; and D. E. Carl and M. Javidan, “Universality of Charismatic Leadership: A Multi-Nation Study,” paper presented at the National Academy of Management Conference, Washington, DC, August 2001. D. E. Carl and M. Javidan, “Universality of Charismatic Leadership,” p. 29. This section is based on D. Goleman, R. E. Boyatzis, and A. McKee, Primal Leadership: Realizing the Power of Emotional Intelligence (Boston: Harvard Business School Press, 2002); D. R. Caruso, J. D. Mayer, and P. Salovey, “Emotional Intelligence and Emotional Leadership,” in R. E. Riggio, S. E. Murphy, and F. J. Pirozzolo (eds.), Multiple Intelligences and Leadership (Mahwah, NJ: Lawrence Erlbaum, 2002), pp. 55–74; J. M. George, “Emotions and Leadership: The Role of Emotional Intelligence,” Human Relations, August 2000, pp. 1027–55; D. Goleman, “What Makes a Leader?” Harvard Business Review, November– December 1998, pp. 93–102; and D. Goleman, Working with Emotional Intelligence (New York: Bantam, 1998). F. Walter, M. S. Cole, and R. H. Humphrey, “Emotional Intelligence: Sine Qua Non of Leadership or Folderol?” Academy of Management Perspectives, February 2011, pp. 45–59.

Endnotes  431

75. See Walter, Cole, and Humphrey, “Emotional Intelligence: Sine Qua Non of Leadership or Folderol”; L. A. Zampetakis and V. Moustakis, “Managers’ Trait Emotional Intelligence and Group Outcomes: The Case of Group Job Satisfaction,” Small Group Research, February 2011, pp. 77–102; H.-W. Vivian Tang, M.-S. Yin, and D. B. Nelson, “The Relationship between Emotional Intelligence and Leadership Practices,” Journal of Managerial Psychology 25, no. 8, 2010, pp. 899–926; P. K. Chopra and G. K. Kanji, “Emotional Intelligence: A Catalyst for Inspirational Leadership and Management Excellence,” Total Quality Management & Business Excellence, October 2010, pp. 971–1004; R. Boyatzis and A. McKee, “Intentional Change,” Journal of Organizational Excellence, Summer 2006, pp. 49– 60, and R. Kerr; J. Garvin, N. Heaton, and E. Boyle, “Emotional Intelligence and Leadership Effectiveness,” Leadership and Organizational Development Journal, April 2006, pp. 265–79. 76. Technology and the Manager’s Job box based on K. D. Strang, “Leadership Substitutes and Personality Impact on Time and Quality in Virtual New Product Development Projects,” Project Management Journal, February 2011, pp. 73–90; A. Rapp, M. Ahearne, J. Mathieu, and T. Rapp, “Managing Sales Teams in a Virtual Environment,” International Journal of Research in Marketing, September 2010, pp. 13–24; M. Muethel and M. Hoegl, “Cultural and Societal Influences on Shared Leadership in Globally Dispersed Teams,” Journal of International Management, September 2010, pp. 234–56; J. Grenny, “Virtual Teams,” Leadership Excellence, May 2010, p. 20; L. A. Hambley, T. A. O’Neill, and T. J. B. Kline, “Virtual Team Leadership: The Effects of Leadership Style and Communication Medium on Team Interaction Styles and Outcomes,” Organizational Behavior and Human Decision Processes, May 2007, pp. 1–20; and B. J. Avolio and S. S. Kahai, “Adding the ‘E’ to E-Leadership: How It May Impact Your Leadership,” Organizational Dynamics, January 2003, pp. 325–38. 77. S. Simsarian, “Leadership and Trust Facilitating CrossFunctional Team Success,” Journal of Management Development, March–April 2002, pp. 201–15. 78. J. M. Kouzes and B. Z. Posner, Credibility: How Leaders Gain and Lose It, and Why People Demand It (San Francisco: Jossey-Bass, 1993), p. 14. 79. Based on F. D. Schoorman, R. C. Mayer, and J. H. Davis, “An Integrative Model of Organizational Trust: Past, Present, and Future,” Academy of Management Review, April 2007, pp. 344–54; G. M. Spreitzer and A. K. Mishra, “Giving Up Control without Losing Control,” Group & Organization Management, June 1999, pp. 155–87; R. C. Mayer, J. H. Davis, and F. D. Schoorman, “An Integrative Model of Organizational Trust,” Academy of Management Review, July 1995, p. 712; and L. T. Hosmer, “Trust: The Connecting Link between Organizational Theory and Philosophical Ethics,” Academy of Management Review, April 1995, p. 393. 80. P. L. Schindler and C. C. Thomas, “The Structure of Interpersonal Trust in the Workplace,” Psychological Reports, October 1993, pp. 563–73. 81. H. H. Tan and C. S. F. Tan, “Toward the Differentiation of Trust in Supervisor and Trust in Organization,” Genetic, Social, and General Psychology Monographs, May 2000, pp. 241–60. 82. J. H. Cho and E. J. Ringquist, “Managerial Trustworthiness and Organizational Outcomes,” Journal of Public

83.

84. 85.

86.

87.

88.

89. 90. 91.

92.

Administration Research and Theory, January 2011, pp. 53–86; R. C. Mayer and M. B. Gavin, “Trust in Management and Performance: Who Minds the Shop While the Employees Watch the Boss?” Academy of Management Journal, October 2005, pp. 874–88; and K. T. Dirks and D. L. Ferrin, “Trust in Leadership: Meta-Analytic Findings and Implications for Research and Practice,” Journal of Applied Psychology, August 2002, pp. 611–28. R. Zemke, “The Confidence Crisis,” Training, June 2004, pp. 22–30; J. A. Byrne, “Restoring Trust in Corporate America,” BusinessWeek, June 24, 2002, pp. 30–35; S. Armour, “Employees’ New Motto: Trust No One,” USA Today, February 5, 2002, p. 1B; J. Scott, “Once Bitten, Twice Shy: A World of Eroding Trust,” New York Times, April 21, 2002, p. WK5; J. Brockner, P. A. Siegel, J. P. Daly, T. Tyler, and C. Martin, “When Trust Matters: The Moderating Effect of Outcome Favorability,” Administrative Science Quarterly, September 1997, p. 558. “Weathering the Storm: A Study of Employee Attitudes and Opinions,” WorkUSA 2002 Study, Watson Wyatt, www.watsonwyatt.com. S. Kerr and J. M. Jermier, “Substitutes for Leadership: Their Meaning and Measurement,” Organizational Behavior and Human Performance, December 1978, pp. 375–403; J. P. Howell, P. W. Dorfman, and S. Kerr, “Leadership and Substitutes for Leadership,” Journal of Applied Behavioral Science 22, no. 1, 1986, pp. 29–46; J. P. Howell, D. E. Bowen, P. W. Dorfman, S. Kerr, and P. M. Podsakoff, “Substitutes for Leadership: Effective Alternatives to Ineffective Leadership,” Organizational Dynamics, Summer 1990, pp. 21–38; and P. M. Podsakoff, B. P. Niehoff, S. B. MacKenzie, and M. L. Williams, “Do Substitutes for Leadership Really Substitute for Leadership? An Empirical Examination of Kerr and Jermier’s Situational Leadership Model,” Organizational Behavior and Human Decision Processes, February 1993, pp. 1–44. Based on R. J. House and R. N. Aditya, “The Social Scientific Study of Leadership: Quo Vadis?” Journal of Management, June 1997, pp. 409–73; and G. A. Yukl, Leadership in Organizations, 7th ed. (Upper Saddle River, NJ: Prentice Hall, 2010). L. M. Fisher, “Ricardo Semler Won’t Take Control,” Strategy+Business, Winter 2005, pp. 78–88; R. Semler, The Seven-Day Weekend: Changing the Way Work Works (New York: Penguin Group, 2004); A. J. Vogl, “The Anti-CEO,” Across the Board, May–June 2004, pp. 30–36; G. Colvin, “The Anti-Control Freak,” Fortune, November 26, 2001, p. 22; and R. Semler, “Managing without Managers,” Harvard Business Review, September–October 1989, pp. 76–84. Laura Quinn and Jessica Baltes, “Leadership and the Triple Bottom Line” (white paper for the Centre for Creative Leadership, 2007), http://www.ccl.org/­ leadership/pdf/research/tripleBottomLine.pdf. L. Patel, “Preparing Tomorrow’s Executives,” T&D, March 2014, p. 20. A. Harjani, “From Brats to Bosses—Gen Y to Dominate by 2025,” www.cnbc.com/id/101353573, January 22, 2014. Best Companies for Leadership 2014, Hay Group, http://www.haygroup.com/bestcompaniesforleadership/downloads/Best_Companies_for_Leadership_2014_Executive_summary.pdf, 2014. L. Lykins and A. Pace, “Mastering Millennial Leadership Development,” T&D, May 2013, pp. 42–45.

432 Endnotes 93. H. Stevens, “How Top-Ranked Companies Develop Leaders,” http://www.clomedia.com/articles/5749how-top-ranked-companies-develop-leaders, August 6, 2014. 94. D. Livermore, “What Facebook Tells Us about the Future of Leadership,” http://www.management-issues.com/ opinion/6776/what-facebook-tells-us-about-the-futureof-leadership/, October 15, 2013. 95. S. Kessler, “Take a Peek Inside Starbucks’s $35 Million Leadership Lab,” fastcompany.com, March 6, 2013; L. Sinclair, “Fast Company Goes Inside Starbucks’ Leadership Lab,” sprudge.com, November 5, 2012; and J. Jennings, “Successful Reinventors,” Leadership Excellence, August 2012, p. 13. 96. “Out of Office? Out of luck,” Maclean’s, November 18, 2013, pp. 54–57. 97. Ibid. 98. Ibid. 99. “Give Staff Freedom without Creating Chaos,” Canadian Business, April 2014, p.16.

Chapter 11 1. “Our story,,” http://info.minimioche.com/our-story. 2. C. Lazure-Guinard, “Meet Alyssa Kerbel from Mini Mioche,”,” October 15, 2014, retrieved from https://­ nordicdesign.ca/spotlight-alyssa-kerbel-mini-mioche/. 3. Ibid. 4. QuickBooks Canada Team, “5 Canadian Companies That Excel at Social Media Marketing,” n.d., retrieved from https://quickbooks.intuit.com/ca/resources/social-media/canadian-companies-excel-social-media-marketing/. 5. Ibid. 6. T. Kostiw, “Trend Alert: Social Shoppable Content,” December 17, 2014, retrieved from http://strategyonline. ca/2014/12/17/trend-alert-social-shoppable-content/. 7. Ibid. 8. D. L. Berchelmann, “You’re Doing It Wrong,” https:// texasceomagazine.com/departments/leadership-feedback/, December 13, 2014. 9. D. K. Berlo, The Process of Communication (New York: Holt, Rinehart & Winston, 1960), pp. 30–32. 10. Ibid., p. 54. 11. See, for instance, “Get the Message: Communication Is Key in Managing Change within Organizations—Yet Ensuring Its Effectiveness at Times of High Concerns Can Be Tricky,” Employee Benefits, February 2002, pp. 58–60. 12. Ibid., p. 103. 13. L. R. Birkner and R. K. Birkner, “Communication Feedback: Putting It All Together,” Occupational Hazards, August 2001, 9. 14. L. Hilton, “They Heard It through the Grapevine,” South Florida Business Journal, August 18, 2000, p. 53. 15. L. Talley, “Body Language: Read It or Weep,” HR Magazine, July 2010, pp. 64–65; and M. Fulfer, “Nonverbal Communication: How to Read What’s Plain as the Nose . . . Or Eyelid . . . Or Chin . . . On Their Faces,” Journal of Occupational Excellence, Spring 2001, pp.19–38. 16. Ibid.; and T. Fernsler, “The Secrets and Science of Body Language,” Nonprofit World, p. 25. 17. P. Mornell, “The Sounds of Silence,” Inc., February 2001, p. 117. 18. A. Warfield, “Do You Speak Body Language?” Training and Development, April 2001, p. 60.

19. S. Begley, “I Can’t Think,” Newsweek, March 7, 2011, pp. 28–33; D. Dean and C. Webb, “Recovering from Information Overload,” McKinsey Quarterly, Issue 1, 2011, pp. 80–88; and “Information Overload,” Australian Business Intelligence, April 16, 2002. 20. S. I. Hayakawa, Language in Thought and Action (New York: Harcourt Brace Jovanovich, 1949), pp. 292. 21. SmartPulse, “How Prevalent Is the Use of Buzzwords in Your Organization?” Smart Brief on Leadership, www. smartbrief.com/leadership, July 29, 2014. 22. “Jargon Leaves Us Lost for Words,” Australian Business Intelligence, August 23, 2002; and W. S. Mossberg, “A Guide to the Lingo You’ll Want to Learn for Wireless Technology,” Wall Street Journal, March 28, 2002, p. B1. 23. “Gobbledygook Begone,” Workforce, February 2002, 12; and “Business-Speak,” Training and Development, January 2002, pp. 50–52. 24. J. Langdon, “Differences between Males and Females at Work,” USA Today, www.usatoday.com, February 5, 2001; J. Manion,“ He Said, She Said,” Materials Management in Health Care, November 1998, pp. 52–62; G. Franzwa and C. Lockhart, “The Social Origins and Maintenance of Gender Communication Styles, Personality Types, and Grid-Group Theory,” Sociological Perspectives 41, no. 1, 1998, pp. 185–208; and D. Tannen, Talking From 9 to 5: Women and Men in the Workplace (New York: Avon Books, 1995). 25. J. Langdon, “Differences between Males and Females at Work,” USA Today, February 5, 2001, www.usatoday.com; J. Manion, “He Said, She Said,” Materials Management in Health Care, November 1998, pp. 52–62; G. Franzwa and C. Lockhart, “The Social Origins and Maintenance of Gender Communication Styles, Personality Types, and Grid-Group Theory,” Sociological Perspectives, vol. 41, no. 1, 1998, pp. 185–208; and D. Tannen, Talking from 9 to 5: Women and Men in the Workplace (New York: Avon Books, 1995). 26. See, for example, M. K. Kozan, “Subcultures and Conflict Management Styles,” Management International Review, January 2002, pp. 89–106. 27. A. Mehrabian, “Communication without Words,” Psychology Today, September 1968, pp. 53–55. 28. See also W. L. Adair, T. Okumura, and J. M. Brett, “Negotiation Behavior when Cultures Collide: The United States and Japan,” Journal of Applied Psychology, June 2001, pp. 371. 29. C. H. Tinsley, “How Negotiators Get to Yes: Predicting the Constellation of Strategies Used across Cultures to Negotiate Conflict,” Journal of Applied Psychology, August 2001, pp. 583. 30. See, for instance, S. P. Robbins and P. L. Hunsaker, Training in Interpersonal Skills, 4th ed. (Upper Saddle River, NJ: Prentice Hall, 2006); M. Young and J. E. Post, “Managing to Communicate, Communicating to Manage: How Leading Companies Communicate with Employees,” Organizational Dynamics, Summer 1993, pp. 31–43; J. A. DeVito, The Interpersonal Communication Book, 6th ed. (New York: HarperCollins, 1992); and A. G. Athos and J. J. Gabarro, Interpersonal Behavior (Upper Saddle River, NJ: Prentice Hall, 1978). 31. M. Vallis, “Nasty E-mail from the Boss May Mean More Sick Days,” National Post, January 9, 2004, pp. A1, A9. Study was done by George Fieldman, a psychologist at Buckinghamshire Chilterns University College, and

Endnotes  433

32. 33.

34. 35. 36. 37.

38. 39. 40. 41. 42.

43. 44. 45. 46. 47. 48. 49.

presented at the 2004 Annual Occupational Psychology Conference of the British Psychological Society. Derived from P. Kuitenbrouwer, “Office E-Mail Runs Amok,” Financial Post, October 18, 2001, p. FP11. See, for example, Jabra, GenM: Defining the Workforce of Tomorrow, 2012, http://campaigns.jabra.com/eCards/ UK/6339_4_Jabra_GenM_Study_Booklet_final.pdf; Contact Centre Live, “Research Identifies Growing Mobile Work Culture & Frustration with Solutions Provided by IT Depts,” March 13, 2012, http://www. callcentreclinic.com/news/market-research/researchidentifies-­growing-mobile-work-culture—frustrationwith-­solutions-provided-by-it-depts—46575.htm. Information on Second Life based on A. Athavaley, “A Job Interview You Don’t Have to Show Up For,” Wall Street Journal, June 20, 2007, p. D1. See, for example, R. R. Panko, Business Data Networks and Communications, 4th ed. (Upper Saddle River, NJ: Prentice Hall, 2003). “Virtual Paper Cuts,” Workforce, July 2000, pp. 16–18. See, for instance, A. Cohen, “Wireless Summer,” Time, May 29, 2000, pp. 58–65; and K. Hafner, “For the Well Connected, All the World’s an Office,” New York Times, March 30, 2000, p. D1. K. Hafner, “For the Well Connected, All the World’s an Office,” New York Times, March 30, 2000, p. D11. B. McCrea, “A New Kind of Hookup,” Black Enterprise, July 2007, p. 52. K. Cukier and V. Mayer-Schönberger, “The Financial Bonanza of Big Data,” Wall Street Journal, March 8, 2013, p. A15. Debbie Dimoff, “Connecting with Social Media” PricewaterhouseCoopers LLP, 2011, http://www.pwc.com/ ca/en/private-company/lets-talk/social-media.jhtml. Jennifer Vivian, “Molson Coors Canada Incorporates Social Media into Its Employee Engagement Approach to Drive Performance, Productivity and Bottom Line Results,” Social Media for Business Performance, February 6, 2012, http://smbp.uwaterloo.ca/2012/02/ molson-­coors-canada-incorporates-social-media-into-itsemployee-engagement-approach-to-drive-performanceproductivity-and-bottom-line-results/. “Pros and Cons of Social Media,” Canadian Business Network, http://www.canadabusiness.ca/eng/page/2655/. Ibid. “Workplace Communication Protocol, 2011 edition,” Canadian Business, November 21, 2011. S. Luh, “Pulse Lunches at Asian Citibanks Feed Workers’ Morale, Lower Job Turnover,” Wall Street Journal, May 22, 2001, p. B11. S. Shellenbager, “Backlash against Email Builds,” Wall Street Journal, April 29, 2010, p. D6. H. Green, “The Water Cooler Is Now on the Web,” BusinessWeek, October 1, 2007, pp. 78–79. C. Tunney, “RCMP’s sexual harassment suit bigger and more expensive than predicted,” CBC, November 20, 2018, https://www.cbc.ca/news/politics/rcmp-merlodavidson-settlement-money-1.4905758; The Associated Press, “Whole Foods Chief Apologizes for Posts,” New York Times Online, July 18, 2007; E. White, J. S. Lublin, and D. Kesmodel, “Executives Get the Blogging Bug,” Wall Street Journal, July 13, 2007, p. B1+; C. Alldred, “U.K. Libel Case Slows E-Mail Delivery,” Business Insurance, August 4, 1997, pp. 51–53; and T. Lewin, “Chevron

50. 51. 52. 53.

54. 55. 56.

57. 58. 59.

60.

61. 62. 63.

64.

65. 66.

67. 68. 69.

Settles Sexual Harassment Charges,” New York Times Online, February 22, 1995. J. Eckberg, “E-mail: Messages Are Evidence,” Cincinnati Enquirer, July 27, 2004, www.enquirer.com. M. Scott, “Worker E-Mail and Blog Misuse Seen as Growing Risk for Companies,” Workforce Management, July 20, 2007, www.workforce.com. K. Byron, “Carrying Too Heavy a Load? The Communication and Miscommunication of Emotion by Email,” Academy of Management Review, April 2008, pp. 09–27. J. Marquez, “Virtual Work Spaces Ease Collaboration, Debate among Scattered Employees,” Workforce Management, May 22, 2006, p. 38; and M. Conlin, “E-Mail Is So Five Minutes Ago,” BusinessWeek, November 28, 2005, pp. 111–12. S. Castellano, “The Social Media Skills Gap,” T&D, July 2014, p. 14. Debbie Dimoff, “Connecting with Social Media” PricewaterhouseCoopers LLP, 2011, http://www.pwc.com/ ca/en/private-company/lets-talk/social-media.jhtml. J. S. Brown and P. Duguid, “Balancing Act: How to Capture Knowledge without Killing It,” Harvard Business Review, May–June 2000, pp. 73–80; and J. Torsilieri and C. Lucier, “How to Change the World,” Strategy and Business, October 2000, pp. 17–20. J. Scanlon, “Woman of Substance,” Wired, July 2002, p. 27. H. Dolezalek, “Collaborating in Cyberspace,” Training, April 2003, p. 33. Derek Sankey, “Employers, Unions Making More Use of Social Media,” Postmedia News, May 8, 2012, http:// www.canada.com/business/Employers+unions+making +more+social+media/6547875/story.html. B. A. Gutek, M. Groth, and B. Cherry, “Achieving Service Success through Relationship and Enhanced Encounters,” Academy of Management Executive, November 2002, pp. 132–44. R. C. Ford and C. P. Heaton, “Lessons from Hospitality That Can Serve Anyone,” Organizational Dynamics, Summer 2001, pp. 30–47. M. J. Bitner, B. H. Booms, and L. A. Mohr, “Critical Service Encounters: The Employee’s Viewpoint,” Journal of Marketing, October 1994, pp. 95–106. S. D. Pugh, J. Dietz, J. W. Wiley, and S. M. Brooks, “Driving Service Effectiveness through Employee-Customer Linkages,” Academy of Management Executive, November 2002, pp. 73–84. J. Mahler, “Who Spewed That Abuse? Anonymous Yik Yak App Isn’t Telling,” New York Times Online, March 8, 2015; L. Gellman, “App Lets Workers Vent Anonymously,” Wall Street Journal, January 21, 2015, p. B7; and K. Whitehouse, “Workplace Gossip App Draws Ire from Firms,” USA Today, January 19, 2015, p. 3B. J. Ewing, “Nokia: Bring on the Employee Rants,” BusinessWeek, June 22, 2009, p. 50. S. Vozza, “5 Things Your Employees Wish They Could Tell You,” http://www.fastcompany.com/3045282/ hit-the-ground-running/5-things-your-employees-wishthey-could-tell-you, April 27, 2015. J. V. Thill and C. L. Bovee, Excellence in Business Communication, 9th ed. (Upper Saddle River, NJ: Prentice Hall, 2011), pp. 24–25. Ibid. Ibid.

434 Endnotes 70. Ibid. 71. Ibid. 72. Twitter Usage, Company Facts, https://about.twitter. com/company, March 31, 2015; E. Sherman, “Many Twitter Users Don’t Tweet, Finds Report,” http://www. cbsnews.com/news/many-twitter-users-dont-tweetfinds-report/, April 14, 2014; R. W. Ahrens, “Tweets Per Day,” USA Today, March 20, 2013, p. 2A; M. Lopresti, “Elimination by Twitter,” USA Today, July 26, 2012, p. 1C; K. Paulson, “College Athlete Tweet Ban? Free Speech Sacks That Idea,” USA Today, April 16, 2012, p. A; L. East, “Les Miles’ Tweets Entertain CWS Fans,” theadvocate.com/sports, July 12, 2012; P. Thamel, “Tracking Twitter, Raising Red Flags,” New York Times Online, March 30, 2012; L. Dugan, “Twitter to Surpass 500 Million Registered Users on Wednesday,” www.mediabistro. com, February 21, 2012; C. Ho, “Companies Tracking College Athletes’ Tweets, Facebook Posts Go After Local Universities,” Washington Post Online, October 16, 2011; D. Rovell, “Coaches Ban of Twitter Proves College Sports Isn’t about Education,” CNBC Sports Business Online, August 8, 2011; Staff of Corporate Executive Board, “Corporate Confidential: How Twitter Changes Everything,” BusinessWeek Online, September 4, 2009; S. Johnson, “How Twitter Will Change the Way We Live,” Time, June 15, 2009, pp. 30–37; J. Swartz, “A World That’s All aTwitter,” USA Today, May 26, 2009, pp. 1B+; and K. Whiteside, “College Coaches Are Chirping about Twitter!” USA Today, April 29, 2009, pp. 1C+. http://statistica. com/statistics/303875/number-of-twitter-users-Canada; https://www.omnicoreagency.com/twitterstatistics. 73. G. Schroeder, “Coaches Using Twitter from Recruiting Trail,” USA Today, February 2, 2015, p. 10C. 74. M. Gollom, “Canada-Saudi Spat Highlights Perils of Twitter Diplomacy,” August 8, 2018, CBC News, retrieved from https://www.cbc.ca/news/politics/saudiarabia-tweet-sanctions-canada-twitter-1.4777825. 75. L. Payton, “‘Diplomacy by Tweet’ Cost Canada in Saudi Dispute, Former Diplomat Says,” August 8, 2018, CTV News, retrieved from https://www.ctvnews.ca/politics/diplomacy-by-tweet-cost-canada-in-saudi-disputeformer-diplomat-says-1.4044633. 76. Ibid. 77. J. Grasz, “CareerBuilder Study Reveals Top Ten Productivity Killers at Work,” CareerBuilder, June 12, 2014, http://www.careerbuilder.com/share/aboutus/ pressreleasesdetail.aspx?sd=6/12/2014&id=pr827& ed=12/31/2014. 78. Executive Summary, “Email Statistics Report, 20152019,” The Radicati Group Inc.,March 2015, http://www. radicati.com/wp/wp-content/uploads/2015/02/EmailStatistics-Report-2015-2019-Executive-Summary.pdf. 79. P. Kozicka, “After-Work Emails: Banned in France, ‘A National Epidemic’ in Canada,” May 27, 2016, Global News, retrieved from https://globalnews.ca/ news/2725886/after-work-emails-banned-in-france-anational-epidemic-in-canada/. 80. Ibid. 81. April Fong, “How the ‘Right To Disconnect’ Could Affect Canadian Businesses’ Productivity,” BNN Bloomberg, November 9, 2018, retrieved from https:// www.­bnnbloomberg.ca/how-the-right-to-disconnectcould-affect-canadian-businesses-productivity-1.1166049 82. Ibid.

83. A. Gallo, “How to Deliver Bad News to Your Employees,” https://hbr.org/2015/03/how-to-deliverbad-news-to-your-employees, March 30, 2015; and C. Suddath, “I’m Sorry to Have to Say This,” Bloomberg BusinessWeek, May 13, 2013, p. 80. 84. C. Suddath, “I’m Sorry to Have to Say This”; S. E. Ante, “IBM’s Chief to Employees: Think Fast, Move Faster,” Wall Street Journal Online, April 24, 2011. 85. G. Kratsas, “AOL Firestorm Grows Despite CEO Apology,” USA Today, February 10, 2014, p. 1B; N. Singer, “Revelations by AOL Boss Raise Fears over Privacy,” New York Times Online, February 10, 2014; L. Kaufman, “Facing Criticism after Remarks, AOL Chief Reverses 401(k) Changes,” New York Times Online, February 9, 2014; and A.-M. Squeo, “AOL 401K Blow-Up: Worst Way to Deliver Bad News to Employees,” www.forbes.com, February 9, 2014. 86. M. Martinez, “Ford Lays Off 90 at Chicago Assembly with Robocall,” www.detroitnews.com, November 4, 2014. 87. Amy Gallo, “How to Deliver Bad News to Your Employees” Harvard Business Review, March 30, 2015, retrieved from https://hbr.org/2015/03/how-to-deliver-badnews-to-your-employees.

Chapter 12 1. J. Barlow, “Comptoir Agricole Ste-Anne: Fix Your Pain Points by Taking Control of the Process,” Canadian Business: Canada’s Best Managed Companies 2019, March 7, 2019. 2. Ibid. 3. Ibid. 4. Ibid. 5. Ibid. 6. Ibid. 7. J. R. Emshwiller, “Managers Blamed in Nuclear Leak,” Wall Street Journal, April 25, 2014, p. A6. 8. Reuters, “McDonald’s Japan Apologizes after Tooth, Plastic Found in Food,” New York Times Online, January 7, 2015. 9. M. Murphy and S. Chaudhuri, “Carnival to Step Up Maintenance after Mishaps,” Wall Street Journal, March 16–17, 2013, p. B3. 10. E. A. Harris, “Error Creates Deals Too Good to Be True on Walmart’s Site,” New York Times Online, November 6, 2013. 11. C. Timberlake, R. Dudley, and C. Burritt, “Don’t Even Think about Returning This Dress,” Bloomberg BusinessWeek, September 30–October 6, 2013, pp. 29–31. 12. B. Horovitz, “Gross Photo with Wendy’s Frosty Is Latest to Go Viral,” USA Today, June 14, 2013, p. 2B; and S. Clifford, “Video Prank at Domino’s Taints Brand,” New York Times Online, April 16, 2009. 13. H. Peterson, “Target Workers Claim ‘Walk of Shame’ That Allegedly Led to a Suicide Is a Widespread Practice,” http://www.businessinsider.com/target-workers-claimwalk-of-shame-is-widespread-2015-2, February 6, 2015; H. Peterson, “Target Cashier Jumped to His Death after Managers Allegedly Subjected Him to ‘Walk of Shame,’” http://www.businessinsider.com/mother-blames-targetfor-sons-suicide-2015-1, January 27, 2015; and ABC7 News Staff, “Lawsuit Claims Pasadena Target Employee Committed Suicide after Being Shamed,” http://abc7.

Endnotes  435

14. 15.

16.

17. 18. 19. 20. 21. 22. 23. 24.

25.

26. 27. 28. 29. 30. 31.

com/news/lawsuit-pasadena-target-employee-killedself-after-being-shamed/488247/, January 23, 2015. SmartPulse, “Where Does the Biggest Threat to Your Organizations Come From?” www.smartbrief.com/leadership, May 12, 2015. J. F. Van Niekerk and R. Von Solms, “Information Security Culture: A Management Perspective,” Computers & Security, June 2010, pp. 476–86; T. Vinas and J. Jusko “5 Threats That Could Sink Your Company,” Industry Week, September 2004, pp. 52–61; “Workplace Security: How Vulnerable Are You?” special section in Wall Street Journal, September 29, 2003, pp. R1–R8; P. Magnusson, “Your Jitters Are Their Lifeblood,” Business Week, April 14, 2003, p. 41; and T. Purdum, “Preparing for the Worst,” Industry Week, January 2003, pp. 53–55. “Top 1000: Ranking Canada’s Top 1000 Public Companies by Profit,” Globe and Mail: Report on Business Magazine, June 28, 2012, http://www.theglobeandmail. com/report-on-business/rob-magazine/top-1000/2012-­ rankings-of-canadas-top-1000-public-companies-byprofit/article4371923. S. Kerr, “On the Folly of Rewarding A, While Hoping for B,” Academy of Management Journal, December 1975, pp. 769–83. Y. F. Jarrar and M. Zairi, “Future Trends in Benchmarking for Competitive Advantage: A Global Survey,” Total Quality Management, December 2001, pp. 906–12. M. Simpson and D. Kondouli, “A Practical Approach to Benchmarking in Three Service Industries,” Total Quality Management, July 2000, pp. S623–30. K. N. Dervitsiotis, “Benchmarking and Paradigm Shifts,” Total Quality Management, July 2000, pp. S641–46. See “Entrepreneur: BouClair,” Roynat Capital Business Profiles, National Post, www.canada.com/nationalpost/ entrepreneur/bouclair.html. T. Leahy, “Extracting Diamonds in the Rough,” Business Finance, August 2000, pp. 33–37. “Recognizing Commitment to Diversity,” Canadian HR Reporter, November 3, 2003, p. 12. B. Bruzina, B. Jessop, R. Plourde, B. Whitlock, and L. Rubin, “Ameren Embraces Benchmarking as a Core Business Strategy,” Power Engineering, November 2002, pp. 121–24; and T. Leahy, “Extracting Diamonds in the Rough,” Business Finance, August 2000, pp. 33–37. Celestica.com; E. Alini, “The Future of Manufacturing in Canada,” Maclean’s, http://www.macleans.ca/ economy/business/economy-up-off-the-factory-floor; and “Powering Prosperity Award Nominations 2015,” Ontario Sustainable Energy Association, http://www. ontario-sea.org/Page.asp?PageID=924&ContentID=4726. H. Koontz and R. W. Bradspies, “Managing through Feedforward Control,” Business Horizons, June 1972, pp. 25–36. M. Helft, “The Human Hands behind the Google Money Machine,” New York Times Online, June 2, 2008. J. Yang and S. Music, “Micromanaging,” USA Today, August 8, 2014, p. 1B. B. Caulfield, “Shoot to Kill,” Forbes, January 7, 2008, pp. 92–96. T. Laseter and L. Laseter, “See for Yourself,” Strategy+Business, November 29, 2007, www.strategybusiness.com. F. Hansen, “The Value-Based Management Commitment,” Business Finance, September 2001, pp. 2–5.

32. M. Acharya and T. Yew, “A New Kind of Top 10,” Toronto Star, June 30, 2002, p. C01. 33. K. Lehn and A. K. Makhija, “EVA and MVA as Performance Measures and Signals for Strategic Change,” Strategy & Leadership, May–June 1996, pp. 34–38. 34. B. Grow, K. Epstein, and C.-C. Tschang, “The New E-Spionage Threat,” Business Week, April 21, 2008, pp. 32–41; S. Leibs, “Firewall of Silence,” CFO, April 2008, pp. 31–35; J. Pereira, “How Credit-Card Data Went out Wireless Door,” Wall Street Journal, May 4, 2007, pp. A1+; and B. Stone, “Firms Fret as Office E-Mail Jumps Security Walls,” New York Times Online, January 11, 2007. 35. SmartPulse, “How Well Do You Give Difficult Feedback?” Smart Brief on Leadership, www.smartbrief.com/ leadership, December 3, 2014. 36. Based on P. L. Hunsaker, Training in Management Skills (Upper Saddle River, NJ: Prentice Hall, 2001), pp. 60–61. 37. Based on N. Pelusi, “Dealing with Difficult People,” Psychology Today, September–October 2006, pp. 68–69; and R. I. Sutton, The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t (New York: Business Plus, 2007). 38. R. Counter, “Quails’ Gate Winery: Canada’s Best Managed Companies 2017,” Canadian Business, March 9, 2017. 39. Steve MacNaull, “B.C. Wine of the Year,” The Daily Courier, September 29, 2018, http://www.kelownadailycourier. ca/business_news/article_f3f253ee-c33d-11e8-874e-079 ceb342efc.html. 40. T. Leahy, “Tailoring the Balanced Scorecard,” Business Finance, August 2000, pp. 53–56. 41. “Hospital Reports,” Ontario Hospital Association (OHA), http://www.oha.com/KnowledgeCentre/Library/HospitalReports/Pages/HospitalReports.aspx; and T. Leahy, “Tailoring the Balanced Scorecard,” Business Finance, August 2000, pp. 53–56. 42. W. H. Newman, Constructive Control: Design and Use of Control Systems (Upper Saddle River, NJ: Prentice Hall, 1975), p. 33. 43. R. Ilies and T. A. Judge, “Goal Regulation across Time: The Effects of Feedback and Affect,” Journal of Applied Psychology, vol. 90, no. 3, May 2005, pp. 453–67. 44. H. A. MacDonald, D. J. Brown, and L. M. Sulsky, A CrossCultural Examination of the Motivational Differences in Feedback Seeking, August 2008, Academy of Management Annual Meeting Proceedings. 45. Ibid. 46. J. Yaukey and C. L. Romero, “Arizona Firm Pays Big for Workers’ Digital Downloads,” Springfield News-Leader, May 6, 2002, p. 6B. 47. “A Revolution Where Everyone Wins: Worldwide Movement to Improve Corporate-Governance Standards,” BusinessWeek, May 19, 2003, p. 72. 48. J. S. McClenahen, “Executives Expect More Board Input,” IndustryWeek, October 2002, p. 12. 49. D. Salierno, “Boards Face Increased Responsibility,” Internal Auditor, June 2003, pp. 14–15. 50. R. Corbett, “Sport Canada Introduces Governance Principles for Sport Organizations,” Sport Law & Strategy Group, November 8, 2011, http://www.sportlaw. ca/2011/11/sport-canada-to-introduce-governanceprinciples-for-sport-organizations/. 51. N. Shirouzu and J. Bigness, “7-Eleven Operators Resist System to Monitor Managers,” Wall Street Journal, June 16, 1997, p. B1.

436 Endnotes 52. Based on C. A. Ciocchetti, “The Eavesdropping Employer: A Twenty-First-Framework for Employee Monitoring,” American Business Law Journal, Summer 2011, pp. 285–369; G. M. Amsler, H. M. Findley, and E. Ingram, “Performance Monitoring: Guidance for the Modern Workplace,” Supervision, January 2011, pp. 16–22; T. Harbert, “When IT Is Asked to Spy”; D. Searcey, “Employers Watching Workers Online Spurs Privacy Debate,” Wall Street Journal, April 23, 2009, p. A13; D. Darlin, “Software That Monitors Your Work, Wherever You Are,” New York Times Online, April 12, 2009; S. Boehle, “They’re Watching You,” Training, September 2008, pp. 23+; S. Shellenbarger, “Work at Home? Your Employer May Be Watching You,” Wall Street Journal, July 30, 2008, pp. D1+; J. Jusko, “A Watchful Eye,” Industry Week, May 7, 2001, p. 9; “Big Brother Boss,” U.S. News and World Report, April 30, 2001, p. 12; and L. Guernsey, “You’ve Got Inappropriate E-Mail,” New York Times, April 5, 2000, pp. C1+. 53. See, for example, “Is It OK or Your Boss to Spy on You at Work?,” FindLaw Canada, https://constitutional.findlaw. ca/article/is-it-ok-for-your-boss-to-spy-on-you-atwork/. 54. Ibid. 55. E. O’Connor, “Pulling the Plug on Cyberslackers,” StarPhoenix, May 24, 2003, p. F22. 56. Ibid. 57. Kathryn Leger, “‘Stealing’ Time at Work on Net,” Gazette (Montreal), April 4, 2008, www2.canada.com/montrealgazette/news/business/story.html?id=32125d78-a479497a-ae19-4f461ea18060. 58. B. White, “The New Workplace Rules: No Video-­ Watching,” Wall Street Journal, March 4, 2008, B1+. 59. Ibid. 60. D. Hawkins, “Lawsuits Spur Rise in Employee Monitoring,” U.S. News & World Report, August 13, 2001, p. 53; L. Guernsey, “You’ve Got Inappropriate Mail,” New York Times, April 5, 2000, p. C11; and R. Karaim, “Setting E-Privacy Rules,” Cnnfn Online, December 15, 1999. 61. E. Bott, “Are You Safe? Privacy Special Report,” PC Computing, March 2000, pp. 87–88. 62. E. O’Connor, “Pulling the Plug on Cyberslackers,” StarPhoenix, May 24, 2003, p. F22. 63. A. Tomlinson, “Heavy-Handed Net Policies Push Privacy Boundaries,” Canadian HR Reporter, December 2, 2002, pp. 1–2. 64. C. Sorensen, “Canada Ranks High in Employee Theft: Global Survey Findings,” National Post, May 28, 2004, p. FP9. 65. A. Perry, “Back-to-School Brings Pilfering: Some Employees Raid Office for Kids,” Toronto Star, August 30, 2003, p. B01. 66. Joshua Bamfield, Global Retail Theft Barometer 2007: Monitoring the Costs of Shrinkage and Crime on the Global Retail Industry (Nottingham, UK: Centre for Retail Research, 2007), http://www.globalretailtheftbarometer.com/ pdf/Global-Retail-Theft-Barometer-2007.pdf; “Detering Employee Theft,” Watchdog Loss Prevention for Businesses, March 22, 2012, http://watchdogloss.com/blog/ detering-employee-theft/; and C. Powell, “Pro Thieves: They’re Shopping More Often,” Canadian Grocer, May 2, 2011, http://www.canadiangrocer.com/top-stories/ grocery-theft-gone-in-30-seconds-6162. 67. J. Greenberg, “The STEAL Motive: Managing the Social Determinants of Employee Theft,” in Antisocial ­Behavior

68.

69.

70.

71. 72.

73. 74.

75. 76. 77.

78.

79.

in Organizations, eds. R. Giacalone and J. Greenberg (Newbury Park, CA: Sage, 1997), pp. 85–108. “Crime Spree,” BusinessWeek, September 9, 2002, p. 8; B. P. Niehoff and R. J. Paul, “Causes of Employee Theft and Strategies That HR Managers Can Use for Prevention,” Human Resource Management, Spring 2000, pp. 51–64; and G. Winter, “Taking at the Office Reaches New Heights: Employee Larceny Is Bigger and Bolder,” New York Times, July 12, 2000, p. C11. K. Aho, “A Highly Effective, Very Low-Tech Way to Stop Fraud,” http://www.bloomberg.com/bw/­ articles/2014-08-11/to-stop-fraud-employee-tip-hotlinesare-remarkably-effective, August 11, 2014. This section is based on J. Greenberg, Behavior in Organizations: Understanding and Managing the Human Side of Work, 8th ed. (Upper Saddle River, NJ: Prentice Hall, 2003), pp. 329–30. A. H. Bell and D. M. Smith, “Why Some Employees Bite the Hand that Feeds Them,” Workforce, May 16, 2000. A. H. Bell and D. M. Smith, “Protecting the Company Against Theft and Fraud,” Workforce, May 16, 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. Statistics Canada, “Violence in the Workplace,” https:// www150.statcan.gc.ca/n1/pub/11-402-x/2008/2693/ ceb2693_002-eng.htm. R. Cribb, “Workplace violence makes nursing one of Canada’s most dangerous professions,” The Toronto Star, October 31, 2015, https://www.thestar.com/ news/­canada/2015/10/31/workplace-violence-makes-­ nursing-one-of-canadas-most-dangerous-professions. html. C. Cosh, “Keep a Close Eye Out for the Signs,” Maclean’s, December 27, 2010, p. 24; and R. McNatt, “Desk Rage,” BusinessWeek, November 27, 2000, p. 12. M. Gorkin, “Key Components of a Dangerously Dysfunctional Work Environment,” December 3, 2000, Workforce Online, www.workforce.com. L. D. Lieber, “HR’s Role in Preventing Workplace Violence”; C. Cosh, “Keep a Close Eye Out for the Signs”; “Ten Tips on Recognizing and Minimizing Violence”; M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence”; “Investigating Workplace Violence: Where Do You Start?”; and “Points to Cover in a Workplace Violence Policy”—all of these are articles from Workforce Online, December 3, 2000, www.workforce. com; A. C. Klotz and M. R. Buckley, “Where Everybody Knows Your Name: Lessons from Small Business about Preventing Workplace Violence,” Business Horizons, November 2010, pp. 571–79; See “100 Years Siemens in Canada,” http://www. siemens.com/entry/ca/en/; and Jared Mitchell, “Green Giant: Interview with Peter Loescher, President and CEO of Siemens AG,” Canadian Business, November 16, 2011, http://www.canadianbusiness.com/article/57428— green-giant. “Siemens Wind Energy Facility to Create 300 Jobs in Tillsonburg, Ontario,” The Green Pages, December 2, 2010, http://thegreenpages.ca/ca/2010/12/02/siemens_ wind_energy_facility_t.

Endnotes  437

80. Siemens Canada, “Siemens Canada Limited Signs MOU with Ontario Government,” Press Release, May 20, 2011, http://www.siemens.ca/web/portal/en/press/Pages/ MOU-signed-with-Ontario-Government.aspx. 81. Jared Mitchell, “Green Giant: Interview with Peter Loescher, President and CEO of Siemens AG,” Canadian Business, November 16, 2011, http://www.canadianbusiness.com/article/57428—green-giant. 82. City of Vancouver, Greenest City 2020 Action Plan (Vancouver, BC: City of Vancouver, 2012), http://vancouver. ca/files/cov/Greenest-city-action-plan.pdf. 83. J. Swartz, “Visa Stores Data Like Gold: In Its Own Fort Knox,” USA Today, March 26, 2012, p. 4B; M. Fitzgerald, “Visa Is Ready for Anything,” FastCompany.com, November 2011, pp. 54–58; and “Visa Launches New Operating System, Data Center,” CardLine, November 20, 2009, p. 37. 84. “Visa Inc. Corporate Overview,” May 2014, http://usa. visa.com/download/corporate/_media/visa-overview_ may2014.pdf. 85. J. Stewart, “Visa’s Test Results: Record Peak Volume and Expected Smooth Sailing for Tokens,” August 25, 2014http://digitaltransactions.net/news/story/4831. 86. Trefis Team, “Lululemon Grows on Higher-Than-Expected Men’s, ivivva Businesses, But 2015 Outlook Disappoints,” www.forbes.com, March 30, 2015; B. Kowitt and C. Leahey, “Lululemon: In an Uncomfortable Position,” Fortune, September 16, 2013, pp. 110–18; and S. Clifford, “Recall Is Expensive Setback for Maker of Yoga Pants,” New York Times Online, March 21, 2013. 87. P. R. La Monica “Lululemon Has Made a Big Comeback since Its Sheer Pants Nightmare,” CNN Business, April 25, 2018 https://money.cnn.com/2018/04/25/­ investing/lululemon-stock/index.html.

Chapter 13 1. “Maple Leaf 2017 Sustainability Report,” https://www. mapleleaffoods.com/sustainability/overview/valuechain/. 2. Ibid. 3. Ibid. 4. “Six Sigma and the Value Chain at Maple Leaf Foods,” Value Chain Innovation Forum 2012, April 4, 2012, https://vcm-international.com/wp-content/­ uploads/2013/05/Value-Chain-Innovation-Forum-­ Presentation-MLF-2012-04-04.pdf. 5. D. Hernandez, “Seven Jobs Robots Will Create —or Expand,” Wall Street Journal, April 29, 2018, https:// www.wsj.com/articles/seven-jobs-robots-will-createorexpand-1525054021?mod=searchresults&page=1&pos=2. 6. D. Eng, “Cheesecake Factory’s Winning Formula,” Fortune, May 2, 2011, pp. 19–20, and D. McGinn, “Faster Food,” Newsweek, April 19, 2004. 7. World Factbook 2011, www.cia.gov/library/publications/the-world-factbook. 8. Ibid. 9. “Canada Economy,” Economy Watch, http:// www.­economywatch.com/world_economy/ canada/?page=full. 10. B. Render, “The Humble, High-Tech Shipping Container,” March 3, 2014, retrieved from Jay and Barry’s OM Blog. 11. B. Render, “OM in the News: Services Sector Businesses Are Struggling to Get Supplies They Need,” June 6,

12. 13. 14. 15. 16. 17. 18. 19.

20.

21. 22.

23.

24. 25.

2018, retrieved from https://heizerrenderom.wordpress. com/2018/06/06/om-in-the-news-services-sector-­ businesses-are-struggling-to-get-supplies-they-need/. D. Michaels and J. L. Lunsford, “Streamlined Plane ­Making,” Wall Street Journal, April 1, 2005, pp. B1+. B. Render, “Before the Drones, Amazon Lets Loose the Robots,” December 12, 2013, retrieved from Jay and Barry’s OM Blog. B. Render, “Rise of the Robots,” March 31, 2014, retrieved from Jay and Barry’s OM Blog. B. Render, “Heinz Goes on a Diet,” February 13, 2014, retrieved from Jay and Barry’s OM Blog. B. Render, “Speeding up McDonald’s Drive-Thru,” November 30, 2013, retrieved from Jay and Barry’s OM Blog. “Double-double lanes—How Tim Hortons Aims to Tackle One of the Biggest Dilemmas in Fast Food: on Drive-through Lineups,” Macleans, July 9, 2012, p. 59. C. Fredman, “The Devil in the Details,” Executive Edge, April–May 1999, pp. 36–39. http://new.skoda-auto.com/Documents/AnnualReports/skoda_auto_annual_report_2007_%20EN_FINAL. pdf (July 8, 2008); and T. Mudd, “The Last Laugh,” IndustryWeek, September 18, 2000, pp. 38–44. Based on “Honorary Members Form Impressive Lineup of Quality Thinkers,” Quality Progress, March 2011, p. 17; “W. Edwards Deming,” Quality Progress, November 2010, p. 17; R. Aguayo, Dr. Deming: The American Who Taught the Japanese about Quality (New York: Fireside Press, 1991); M. Walton, The Deming Management Method (New York: Penguin Group, 1986); and W. E. Deming, “Improvement of Quality and Productivity through Action by Management,” National Productivity Review, Winter 1981–1982, pp. 12–22. B. Render, “Chipotle’s Operations Strategy for Faster Service,” February 9, 2014, retrieved from Jay and Barry’s OM Blog. Q. H. Soon and Z. M. Udin, “Supply Chain Management from the Perspective of Value Chain Flexibility: An Exploratory Study,” Journal of Manufacturing Technology Management, May 2011, pp. 506–26; G. Soni and R. Kodali, “A Critical Analysis of Supply Chain Management Content in Empirical Research,” Business Process Management, April 2011, pp. 238–56; and J. H. Sheridan, “Managing the Value Chain,” IndustryWeek, September 6, 1999, pp. 1–4, available online in archives at www. industryweek.com. Q. H. Soon and Z. M. Udin, “Supply Chain Management from the Perspective of Value Chain Flexibility: An Exploratory Study,” Journal of Manufacturing Technology Management (May 2011): 506–26; G. Soni and R. Kodali, “A Critical Analysis of Supply Chain Management Content in Empirical Research,” Business Process Management, April 2011, 238–56; and J. H. Sheridan, “Managing the Value Chain,” IndustryWeek, September 6, 1999, 1–4, available online in archives at www.industryweek.com. “Supply Chain Management: A New Narrative,” Strategic Direction, March 2011, pp. 18–21; and J. H. Sheridan, “Managing the Value Chain.” T. Laseter, K. Ramdas, and D. Swerdlow, “The Supply Side of Design and Development,” Strategy & Business, Summer 2003, p. 23; J. Jusko, “Not All Dollars and Cents,” IndustryWeek, April 2002, p. 58; and

438 Endnotes

26. 27. 28. 29. 30.

31. 32. 33. 34.

35. 36. 37. 38.

39. 40. 41.

42.

43.

44. 45. 46.

D. ­Drickhamer, “Medical Marvel,” IndustryWeek, March 2002, pp. 47–49. See, for example, J. Jusko, “Procurement—Not All Dollars and Cents, IndustryWeek, April 4, 2002, www.­ industryweek.com. D. Bartholomew, “The Infrastructure,” IndustryWeek, September 6, 1999, p. 1. G. Taninecz, “Forging the Chain,” IndustryWeek, May 15, 2000, pp. 40–46. T. Vinas, “A Map of the World: IW Value-Chain Survey,” IndustryWeek, September 2005, pp. 27–34. “Global Risk Management Survey 2017”https:// www.aon.com/getmedia/d95563c6-a3b8-4ff1-bb450ed511c78f72/2017-Global-Risk-Management-SurveyReport-rev-120318.aspx. B. Render, “Creating More Resilient Supply Chains,” August 10, 2014, retrieved from Jay and Barry’s OM Blog. B. Render, “Reducing the Risk of Supply Chain Disruptions,” April 19, 2014, retrieved from Jay and Barry’s OM Blog. See J. H. Sheridan, “Now It’s a Job for the CEO,” IndustryWeek, March 20, 2000, pp. 22–30. R. Norman and R. Ramirez, “From Value Chain to Value Constellation,” Harvard Business Review on Managing the Value Chain (Boston: Harvard Business School Press, 2000), pp. 185–219. S. Leibs, “Getting Ready: Your Customers,” IndustryWeek, September 6, 1999, p. 4. See, for example, C. Lunan, “Workers Doing More in Less Time,” Charlotte Observer, June 1, 2002, p. D1. S. Leibs, “Getting Ready: Your Customers,” p. 3. See, for instance, L. Harrington, “The Accelerated Value Chain: Supply Chain Management Just Got Smarter, Faster, and More Cost-Effective, Thanks to a Groundbreaking Alliance between Intel and Technologies,” IndustryWeek, April 2002, pp. 45–51. Ibid. B. Render, “The Case of the Vanishing Drugs,” February 24, 2014, retrieved from Jay and Barry’s OM Blog. B. Render, “OM in the News: The Blockchain Chicken,” April 21, 2018, retrieved from https://heizerrenderom. wordpress.com/2018/04/21/om-in-the-news-the-blockchain-chicken/. Based on “Innovation Nation,” IndustryWeek, November 2010, p. 15; “First-Hand Accounts,” IndustryWeek, July 2008, p. 28; “State of the Workforce Report,” IndustryWeek, November 2008, p. 18; “Sustainable Supply Chains,” IndustryWeek, December 2008, p. 57; “Taking Charge of Mobile Workforce Costs,” IndustryWeek, August 2009, p. 47; and “The Future of Manufacturing,” IndustryWeek, November 2008, pp. 51–57. See, for instance, L. Harrington, “The Accelerated Value Chain: Supply Chain Management Just Got Smarter, Faster, and More Cost-Effective, Thanks to a Groundbreaking Alliance between Intel and Technologies,” IndustryWeek, April 2002, pp. 45–51; and J. H. Sheridan, “Managing the Value Chain.” J. H. Sheriden, “Managing the Value Chain,” p. 3. B. Render, “Speeding Up the Airline Boarding Process,” January 27, 2014, retrieved from Jay and Barry’s OM Blog. “Guide to Airline Boarding Procedures,” Seat Guru by TripAdvisor, http://www.seatguru.com/articles/­ boarding_procedures.php.

47. W. J. Stevenson, and M. Hojati, Operations Management, 2nd Canadian edition (Toronto: McGraw-Hill Ryerson, 2004), p. 279. 48. See, for example, “First Canadian Tesla Destination Charging Network Rolled Out at Le Germain and Alt Hotels Across Canada”, November 25, 2014; “Christiane Germain, co-president of Group Germain Hotels, Named One of Women’s Executive Network 2018 Canada’s Most Powerful Women: Top 100 Award Winner,” November 22, 2018; “Alt Hotels Celebrate 10 Un-Conventional Years!,” September 11, 2017—all news releases from https://www.groupegermain.ca/en/mediaroom. 49. G. Taninecz, “Forging the Chain,” IndustryWeek, May 15, 2000, pp. 40–46. 50. Ibid. 51. Ibid. 52. M. Gooderham, “At These Companies, the Training Never Stops,” Globe and Mail, October 14, 2010, http:// www.theglobeandmail.com/report-on-business/careers/top-employers/at-these-companies-the-trainingnever-stops/article1215132. 53. D. Drickhamer, “On Target,” IndustryWeek, October 16, 2000, pp. 111–12. 54. Based on C. Hausman, “Ethics of Using Store’s Parking Lot Fuels Lively Debate in Newspaper Series,” Ethics Newsline Online, April 25, 2011; J. Rose, “Ethics of Customer Parking in Portland: Circling the Block One More Time,” Oregonian Online, April 21, 2011; and J. Rose, “The Ethics of ‘Customer Only’ Parking in the Pearl—and Beyond,” Oregonian Online, April 16, 2011. 55. “Top Security Threats and Management Issues Facing Corporate America: 2003 Survey of Fortune 1000 Companies,” ASIS International and Pinkerton, www.asisonline. org. 56. J. H. Sheridan, “Managing the Value Chain,” p. 4. 57. S. Rosenbloom, “Solution, or Mess? A Milk Jug for a Green Earth,” New York Times Online, June 30, 2008. 58. K. T. Greenfeld, “Taco Bell and the Golden Age of DriveThru,” Bloomberg BusinessWeek Online, May 5, 2011; and S. Anderson, Associated Press, “Restaurants Gear Up for Window Wars,” Springfield, Missouri, News-Leader, January 27, 2006, p. 5B. 59. B. Render, “Wal-Mart Ramps Up Global E-Commerce,” February 22, 2014, retrieved from Jay and Barry’s OM Blog. 60. Based on S. Minter, “What Is Advanced Manufacturing?” IndustryWeek, August 2009, p. 7; J. Bush, “Russia’s Factories Shift Gears,” BusinessWeek, May 18, 2009, pp. 50–51; D. Blanchard, “A Manufacturer for All Seasons,” IndustryWeek, December 2008, p. 7; J. Teresko, “Planning the Factory of the Future,” IndustryWeek, December 2008, pp. 22–24; and J. Teresko, “Winning with Digital Manufacturing,” IndustryWeek, July 2008, pp. 45–47. 61. E. Segran, “Levi’s Invented A Laser-Wielding Robot That Makes Ethical Jeans” Fast Company, February 27, 2018, https://www.fastcompany.com/40533097/levis-invented-a-laser-wielding-robot-that-makes-ethical-jeans. 62. B. Render, “The Downside of Increasing Productivity,” July 16, 2014, retrieved from Jay and Barry’s OM Blog. 63. B. Render, “Productivity and Technology Down on the Farm,” February 27, 2014, retrieved from Jay and Barry’s OM Blog. 64. D. Bartholomew, “Quality Takes a Beating,” IndustryWeek, March 2006, pp. 46–54; J. Carey and M. Arndt,

Endnotes  439

65. 66. 67. 68.

69. 70. 71. 72. 73. 74. 75. 76. 77.

78.

79. 80.

81. 82.

83.

“Making Pills the Smart Way,” BusinessWeek, May 3, 2004, pp. 102–03; and A. Barrett, “Schering’s Dr. Feelbetter?” BusinessWeek, June 23, 2003, pp. 55–56. T. Vinas, “Six Sigma Rescue,” IndustryWeek, March 2004, p. 12. J. S. McClenahen, “Prairie Home Companion,” IndustryWeek, October 2005, pp. 45–46. “Women Matter. Gender diversity, a corporate performance driver,” McKinsey and Company, 2007. “Best Managed: Congratulations to Canada’s 50 Best Managed Companies of 2011,” Financial Post, February 21, 2012, http://business.financialpost. com/2012/02/21/congratulations-to-canadas-50-bestmanaged-companies-of-2011. W. Royal, “Spotlight Shines on Maquiladora,” IndustryWeek, October 16, 2000, pp. 91–92. See B. Whitford and R. Andrew (eds.), The Pursuit of Quality (Perth: Beaumont Publishing, 1994). D. Drickhamer, “Road to Excellence,” IndustryWeek, October 16, 2000, pp. 117–18. “ISO Survey,” ISO, http://www.iso.org/iso/home/standards/certification/iso-survey.htm. “Customer Feedback Commitment,” Town of Ajax, http://www.ajax.ca/en/insidetownhall/qualitymanagement.asp. G. Hasek, “Merger Marries Quality Efforts,” IndustryWeek, August 21, 2000, pp. 89–92. J. Jusko, “An Elite Crew,” IndustryWeek, March 2011, pp. 17–18; and M. Arndt, “Quality Isn’t Just for Widgets,” BusinessWeek, July 22, 2002, pp. 72–73. “Lean Six Sigma Success Stories by Industry,” ­GoLeanSigma.com, http://www.goleansixsigma.com/ lean-six-sigma-industry-success-stories. “Helping Staples Use Lean Six Sigma to Drive Process Improvements that Enable High Performance,” Accenture, 2009, http://www.accenture.com/sitecollectiondocuments/pdf/accenture_retail_staples_lean_six_­ sigma.pdf. V. Galt, “Canadian Tire Applies Its ‘Lean’ Ideals to Hiring Process” Globe and Mail, February 23, 2012, http:// www.-theglobeandmail.com/report-on-business/ careers/management/-canadian-tire-applies-its-leanideals-to-hiring-process/article548381. Ibid. For a thorough overview of project management, see S. Berkun, The Art of Project Management (Upper Saddle River, NJ: Prentice Hall, 2005); or J. K. Pinto, Project Management: Achieving Competitive Advantage and MS Project (Upper Saddle River, NJ: Prentice Hall, 2007). H. Maylor, “Beyond the Gantt Chart: Project Management Moving On,” European Management Journal, February 2001, pp. 92–101. Based on R. Fisher and W. Ury, Getting to Yes: Negotiating Agreement without Giving In (New York: Penguin Books, 1986); J. A. Wall, Jr. and M. W. Blum, “Negotiations,” Journal of Management, June 1991, pp. 273–303; and M. E. Roloff, L. L. Putnam, and L. Anastasiou, “Negotiation Skills,” in J. O. Greene and B. R. Burleson (eds.), Handbook of Communication and Social Interaction Skills (Mahwah, NJ: Lawrence Erlbaum, 2003), pp. 801–33. For additional information on CPM, see W. A. Haga and K. A. Marold, “A Simulation Approach to the PERT/ CPM Time-Cost Trade-Off Problem,” Project Management Journal, June 2004, pp. 31–37.

84. B. Render, “Keeping Some Slack in the Operating Room,” March 27, 2014, retrieved from Jay and Barry’s OM Blog. 85. B. Render, “Lean Also Works in the Mining Industry,” August 4, 2014, retrieved from Jay and Barry’s OM Blog. 86. B. Render, “Making the Decision to Reshore,” August 26, 2014, retrieved from Jay and Barry’s OM Blog. 87. B. Render, “Otis Finds Reshoring Manufacturing Is Not Easy,” May 6, 2014, retrieved from Jay and Barry’s OM Blog. 88. Based on S. P. Robbins, Managing Organizational Conflict (Englewood Cliffs, NJ: Prentice Hall, 1974); K. W. Thomas, “Conflict and Conflict Management,” in Marvin Dunnette (ed.), Handbook of Industrial and Organizational Psychology (Chicago: Rand McNally, 1976), pp. 889–935; and K. Cloke and J. Goldsmith, Resolving Conflicts at Work: Eight Strategies for Everyone on the Job, rev. ed. (San Francisco: Jossey-Bass, 2006). 89. S. Banjoy and C. Passariello, “Promises in Bangladesh,” Wall Street Journal, May 14, 2013, pp. B1+; S. Greenhouse and J. Yardley, “Global Retailers Join Safety Plan for Bangladesh,” New York Times Online, May 13, 2013; A. Zimmerman and N. Shah, “Taste for Cheap Clothes Fed Bangladesh Boom,” Wall Street Journal, May 13, 2013, pp. B1+; S. Zain Al-Mahmood, “Bangladesh to Raise Workers’ Pay,” Wall Street Journal, May 13, 2013, pp. B4; J. Ali Manik and J. Yardley, “17 Days in Darkness, A Cry of ‘Save Me,’ and Joy,” New York Times Online, May 10, 2013; S. Greenhouse, “Retailers Are Pressed on Safety at Factories,” New York Times Online, May 10, 2013; J. O’Donnell and C. Macleod, “Bangladesh Fire Adds Pressure on Retailers,” USA Today, May 10, 2013, pp. 1B+; S. Zain Al-Mahmood, K. Chu, and S. Banjo, “Bangladesh Shuts 3 Factories of Top Exporter,” Wall Street Journal, May 10, 2013, p. A8; S. Clifford, “Some Retailers Say More about Their Clothing’s Origins,” New York Times Online, May 8, 2013; K. Chu, “Tough Options for Apparel Retailers,” Wall Street Journal, May 8, 2013, pp. B1+; “Clothing Retailers Evaluate Moral Choices in Contracting Work to Bangladesh,” www.globalethics.org, May 6, 2013; S. Wright and F. Hossain, “Pressure on Bangladesh, Retailers to Fix Factories,” www.sfgate​.com, May 4, 2013; S. Zain Al-Mahmood, C. Passariello, and P. Rana, “The Global Garment Trail: From Bangladesh to a Mall Near You,” Wall Street Journal, May 4/5, 2013, A1+; M. Mosk, “Big Retailers Reassess Practices after Bangladesh Building Collapse,” abcnews.go.com, May 3, 2013; H. Malcolm, “Worker Safety Gains Steam,” USA Today, May 2, 2013, 2B; E. L. Cline, “Ethical Fashion: Is the Tragedy in Bangladesh A Final Straw?” www.npr.org, May 2, 2013; M. Davies, “Can Bangladesh Clothing Factory Disasters Be Prevented? www.bbc.co.uk, May 2, 1013; S. Greenhouse, “Bangladesh Fears an Exodus of Apparel Firms,” New York Times Online, May 2, 2013; D. Bobkoff, “Would You Pay a Higher Price for Ethical Clothing?” www. npr.org, May 1, 2013; S. Zain Al-Mahmood, “Doomed Factories Raced to Fill Orders,” Wall Street Journal, April 30, 2013, pp. A1+; “Deadly Bangladesh Collapse Focuses Spotlight on Ethics & Demand for Cheap Goods,” www.globalethics.org, April 29, 2013; M. T. Anderson, “Clothed in Misery,” New York Times Online, April 29, 2013; R. L. Brown, “Q&A: Who Ultimately Bears Responsibility for Bangladesh Factory Disasters,” www.csmonitor.com, April 25, 2013; and J. Ali Manik, S. Greenhouse,

440 Endnotes

90.

91.

92.

93.

94. 95. 96.

and J. Yardley, “Western Firms Feel Pressure as Toll Rises in Bangladesh,” New York Times Online, April 25, 2013. A. D’innocenzio, “Gap, Walmart, Target Agree to Bangladesh Factory Safety Pact,” http://www.mercurynews.com/ci_23634246/gap-walmart-target-agree-­ bangladesh-factory-safety-pact, July 10, 2013. C.Delorme, “Yes, These Cows Actually Milk Themselves,” Huffington Post, May 3, 2018, retrieved from https://www.huffingtonpost.ca/entry/milking-robotsfarm_us_5ae8341be4b055fd7fcf51b6. B.Render, “OM in the News: Japan’s Cow-Milking Robots,” May 9, 2018, retrieved from https://heizerrenderom.wordpress.com/2018/05/09/om-in-the-newsjapans-cow-milking-robots. C. Delorme, “Yes, These Cows Actually Milk Themselves,” Huffington Post, May 3, 2018, retrieved from https://www.huffingtonpost.ca/entry/milking-robotsfarm_us_5ae8341be4b055fd7fcf51b6. Ibid. Ibid. J. Ostrower and H. Kachi, “Boeing’s 787 Resumes Service,” Wall Street Journal, April 29, 2013, p. B3; J. Ostrower and T. Stynes, “Boeing Steers Past 787 Woes,” Wall Street Journal, April 25, 2013, p. B2; S. Jakab, “Dreamliner’s Woes Fail to Ground Boeing,” Wall Street

Journal, April 24, 2013, p. C1; N. Clark, “Boeing Begins Modifying 787 Batteries,” New York Times Online, April 22, 2013; A. Pasztor, “How Boeing Rescued the 787,” Wall Street Journal, April 20/21, 2013, pp. B1+; C. Drew and J. Mouawad, “Boeing Fix for Battery Is Approved by F.A.A.,” New York Times Online, April 19, 2013; H. Tabuchi, “Boeing Presents Solution for Dreamliner Problems,” New York Times Online, March 15, 2013; S. Mayerowitz, “Former Workers: Boeing Rushed Dreamliner Project,” Springfield, Missouri, News-Leader, January 26, 2013, p. 7A; D. Michaels, “Innovation Is Messy Business,” Wall Street Journal, January 24, 2013, pp. B1+; S. Dubois, “Boeing’s Dreamliner Mess: Simply Inevitable?” management. fortune.com, January 22, 2013; P. Kavilanz, “Dreamliner: Where in the World Its Parts Come From,” money.cnn. com, January 18, 2013; “Boeing’s Dreamliner Takes to the Skies,” USA Today, October 21, 2011, p. 3B; P. Jonsson, “787 Dreamliner Takes Off at Last. When Can You Jump Aboard?” www.csmonitor.com, September 27, 2011; and W. J. Hennigan, “Boeing Delivers First 787 Dreamliner,” LA Times, September 26, 2011. 97. V. Gupta and M. V. Kumar, “The Making of Boeing’s 787 Dreamliner,” IBS Center for Management Research, 2006, retrieved from each case collection, doi: 606-016-1. 98. Ibid.

Name/Organization Index A

Aariak, Eva, 290 Academy of Management Executive, 77, 222, 276, 291 Accenture, 154, 155, 259 Adams, John Stacey, 253 Aditya, R. N., 291n AIG, 90 Airbnb, 48, 49, 154, 207 Airbus, 359, 384 Air Canada, 58, 117, 348 Alberta barley commission, 367 Alcoa, 373 Algonquin College, 216 Alibaba, 305 Allana Potash, 195 All Nippon Airways Co., 384 Allon, Gad, 360 Amazon.com, 88, 156, 258, 286, 287 American Airlines, 220 American Express, 374 Anderson, Dave, 286 Anderson, Ian, 198 Angry Birds, 21 Annaert, Rick, 192 Apple, 3, 8, 15, 50, 82, 85, 88, 162, 172, 180, 207, 210, 287, 333, 371 Applegate, L. M., 384n Armstrong, Tim, 327 Ascend Group, 2 Ash, Mary Kay, 287 ATCO Structures & Logistics, 267 Aviva Canada, 134

B

Back in Motion Rehab, 255 Bad Axe Throwing, 326 Bakan, Joel, 95 Banana Republic, 2, 162 Banco Santander, 311 Banga, Ajay, 207 Bank of Canada, 9, 48, 92, 273 Bank of Montreal, 128, 140, 348 Bard on the Beach, 9 Barnard, Chester, 28 Bartolome, F., 295n Bayer, Lew, 192 Bazerman, M. H., 77n Beatty, Perrin, 47 Beersma, B., 233n Belbin, Meredith, 225 Bell Canada, 54 Benimadhu, Prem, 263 Bennett, Chris, 149 Bespoke, Garrison, 211 Best Buy, 301 Best Western, 127 Bezos, Jeff, 79, 232, 286, 287

BHP Billiton, 267 Birks, 48 Bishop, S., 190 Bissett School of Business, 2 BlackBerry, 151 Black & Decker, 361 Blanchard, Ken, 280 Blogger, 316 Bloomberg BusinessWeek, 101 BMW, 17, 45, 73, 373, 374 Bock, Laszlo, 22 Boeing, 359, 371, 384, 385 Bombardier, 169 Bono, J. E., 222n, 276n Boone, Garret, 288 Boston Pizza, 55 Boston Pizza International, 178 Botin, Ana, 311 BouClair, 335 Branson, Richard, 240, 279, 82 Brayer, Jean-Paul, 55 Brearton, S., 150n BreconRidge, 149 Brenner, Melissa, 139 Brin, Sergey, 146 British Petroleum (BP), 322 Brodbeck, F. C., 291n Burke, L. A., 77n Business Development Bank of Canada, 9 Business Finance, 336n Butler Jr., J. K., 295n

C

CAE Aviation, 366 Calgary Chamber of Charities, 34 Canada Post, 9 Canada Revenue Agency, 145 Canadian Association of Petroleum Producers, 51 Canadian Blood Services, 122 Canadian Business, 150n, 162, 194 Canadian Chamber of Commerce, 47, 164 Canadian Curling Association (CCA), 344 Canadian Federation of Independent Businesses (CFIB), 34 Canadian Food Inspection Agency (CFIA), 356 Canadian Imperial Bank of Commerce, 360 Canadian Institute of Diversity and Inclusion (CIDI), 108 Canadian Internet Registration Authority (CIRA), 320n Canadian Management Centre, 20 Canadian Restaurant and Foodservices Association, 166 Canadian Tire, 3, 131, 201, 202, 374 Carleton University, 181 Carlton and United Breweries, 373 Carpenter, M., 118n, 123n Carrefour, 365 Carroll, S. J., 8n Carswell, 368 Carter, Rob, 288

441

442  Name/Organization Index Cartwright, D., 298n Cascades, 140 Caterpillar, 372 Cavanagh, Christina, 313 Celestial Aerospace Company (CAP), 217 Celestica, 336 Centre for Construction Excellence, 216 Chachula, Michael, 303 Chambers, John, 15 Chandler, Alfred, 143 Chapters, 48 Chapters Indigo, 48 Cheesecake Factory, 358 Chipotle, 195, 360 Chrétien, Jean, 94 Christensen, Clayton, 213 Christensen, Karen, 6n, 76n Chugh, D., 76n, 77n Cisco Systems, 15, 77, 149, 250, 363 City of Vancouver, 347 Clarkson University, 366 Coca-Cola Company (Coke), 101–102, 116 Cogeco, 339 Cohen, Jordan, 159 Cole, Nina, 192 Conference Board of Canada, 166, 263, 264 Continental Airlines, 111 Cook, Scott, 212 Coolbrands Yogen Früz, 55 Corporate Travel Management Solutions (CTMS), 142 Costco, 370 Coulter, M., 97n, 170n, 248n Cronin, David, 269

D

Daft, R. L., 283n Dale, Sarah-Harris, 149 Dane, E., 77n Darcy, Lemon, 149 Davis LLP, 149 Dean, J. W., 372n De Dreu, C. K. W., 233n Deere & Company, 366 Delcan, 373 Dell Canada, 133 Dell Inc., 365, 368 Dell, Michael, 287 Deloitte, 222, 300 Delphi, 373 Deming, W. Edwards, 27, 360 DePree, Max, 41 DevFacto, 269, 270 DIRTT (Doing It Right This Time), 286 Domtar, 140, 339 Donely, Christina, 92 Dorsey, Jack, 88, 325 Dow Chemical, 374 Drucker, Peter, 4, 34 Drum Associates, 315 Drum, Brian, 315 Dunnette, M. D., 233n DuPont, 186 Duxbury, Linda, 181

E

Earth First, 118 Easton’s Group of Hotels, 12 eBay, 50, 144 Ecotrust Canada, 119 Edelman, 326 Edison, Thomas, 209 Edmonton Oilers, 101 Electronic Arts, 259 EllisDon, 259 Empire Company Limited, 130, 157 Enron, 60, 318, 344, 345 Entrepreneur, 35, 191, 208 Ericsson Canada, 274 Ernst & Young, 156, 191, 300, 320 Estée Lauder, 133 EthicScan Canada, 93 E*TRADE, 63 Evans, J. R., 372n Evans, Martin, 283 Evers, A., 233n Ezzedeen, Souha, 301

F

Facebook, 16, 21, 66, 85, 121, 122, 139, 159, 192, 193, 207, 210, 243, 273, 300, 313, 314, 315, 316, 317, 324, 326 Fadiman, J., 247n Fast Company, 21 Fastow, Andrew, 344 Fayol, Henri, 10, 25, 29, 131 FedEx, 10, 288 Ferrari, 125, 372 Fiedler, Fred, 29, 278 Finkelstein, Harley, 21 Fisher, R., 381n Foo Fighters, 21 Ford Canada, 144 Ford, Henry, 24, 132 Ford Motor Company, 9, 27, 327 Forest Products Association of Canada, 166 Forest Stewardship Council, 119 Fortune, 181, 229, 300, 354 Foursquare, 207 Frager, R. D., 247n French, Jr., J. R. P., 298n Frese, M., 291n FreshCo, 131, 162, 170, 187 Frito-Lay, 49, 50 Furon Company, 364 Future Workplace, 20 FXR Racing, 56

G

Gadbois, Ben, 44 Gallup Organization, 5 Gantt, Henry, 25, 376 Gartner, 48, 106 Garvin, D., 372n Gates, Bill, 40 GE Energy, 148 GE Money, 148 General Cable Corporation, 5 General Electric (GE), 148

Name/Organization Index  443

General Mills, 186 General Motors, 9, 45, 336 Gensler, 150 Georgetown University, 309 Georgia Tech, 371 GestureTek Health, 244 GE Water & Process Technologies, 148 Gilbreth, Lillian, 25 Globe and Mail, 131 GLOBE research program, 292 GlobeScan, 96 Goad, Gracie, 51n Goldberg, Gerry, 335 Good Earth Café, 367 Google, 3, 15, 21, 22, 49, 50, 52, 53, 60, 61, 68, 146, 159, 160, 192, 193, 209, 210, 243, 314, 324, 338 GoPro Inc., 208 Gorkin, M., 350n Government of Canada, 164 GreatCanadianHotels, 127 Great Little Box Company, 260, 261 Green investments, 70 Greenpeace, 118 Groupaction Marketing, 94 Groupe Robert, 268 Grupo VIPS, 56 GS Yuasa, 384 Guay, Marc, 49 Gupta, Reetu, 12 Guzman, Pablo, 149

H

Hackman, J. Richard, 251, 252 Hackman, Judith D., 252n Hall, Ted, 6 Hallwood, Kim, 273 Hamilton’s Milling, 367 Harary, Ronnen, 44 Haribhai’s Spice Emporium, 55 Harley-Davidson, 134 Harrah’s Entertainment, 118 Harvard Business Review, 77n, 94n, 274n, 295n, 343n Harvard Business School, 202, 213, 252 Harvard University, 2 Hasbro, 63 Health Net Inc., 151 Heart and Stroke Foundation, 48 Heath, R. L., 291n Henderson, Mark, 274 Herman Miller, Inc., 41 Hersey, Paul, 280, 281, 296 Herzberg, Frederick, 247, 248, 259, 262 Hewitt Associates, 262 Hewlett-Packard (HP), 56, 184, 193, 210, 314, 320 Higgins, Chris, 181 Hill, Matt, 35 Hilton Hotels, 126 Hitachi, 56 Hitt, M. A., 372n H.J. Heinz Company, 359 Hofstede, Geert, 56, 57 Home Depot, 7, 370 Hootsuite, 169

Hoskisson, R. E., 372n Hotel Association of Canada (HAC), 114, 128 Hough, L. M., 233n House, R. J., 291n House, Robert, 283, 296 Hsieh, Tony, 22, 23, 258 Huang, Jen-Hsun, 338 Human Resources and Skills Development Canada, 21 Human Rights Tribunal, 185 Hunsaker, P. L., 312n Hunt, J. G., 291n Husky Injection Molding Systems, 133

I

IBM, 192, 193, 319, 327 Idezawa, Takeshi, 78 IGA, 130, 157 iGEN Knowledge Solutions, 149 Iger, Bob, 6 Iiies, R., 222n, 276n Iisaak Forest Resources, 119 IKEA, 48, 56, 166, 194, 364 IMAX Corporation, 68 Immelt, Jeff, 338 Indigo, 48 Insights survey, 150 Instagram, 16, 85, 139, 302, 326 Institute for Competitiveness and Prosperity, 374 Interbrand, 101 International Association of Business Communicators, 323 International Organization for Standardization (ISO), 374–375 Intuit, 212–213 Ipsos-Reid, 5, 347 Ireland, R. D., 77n, 372n Isla, Pablo, 129 Izquerdo, Chris, 269

J

Jago, Arthur, 282 Javidan, M., 291n Jaw, Moose, 372 Jazz, Leadership, 41 JCPenney, 67 JDS Uniphase, 261 Jerdee, T. H., 8n Jobs, Steve, 287 Joe Fresh, 67 John Deere, 53 Johnson & Johnson, 374 Johnson, Kara, 320 Joly, Hubert, 301 Jones, Darrell, 15 Journal of Applied Psychology, 222n, 276n Juarez, Ciudad, 91 Judge, S. A., 276n Judge, T.A., 222n, 229n, 276n, 282n Juran, Joseph M., 27

K

Kaplan, R. S., 343n Kennedy, J. C., 291n Kenner Toys, 63 Kerbel, Alyssa, 302

444  Name/Organization Index

Lawn Troopers, 35 Lawrence, Paul, 252 Leadon Investments, 128 Leahy, T., 336n Lee, J., 291n Lee, Leonard, 117 Lee, Robin, 264 Lee Valley Tools, 117, 263 Lemon, Dani, 149 Levi-Strauss, 186 Levitt, Bruce, 159 Levitt, Heidi, 159 Levitt-Safety Limited, 159 Lewin, Kurt, 197, 201, 214 Lewin, Kurt, 214 LinkedIn, 16, 66, 210, 313, 315, 316, 317, 324 Linton, Roxann, 175 Loblaw Companies Ltd., 67 Locke, E. A., 222n, 276n Lockheed Martin Aeronautics Company, 235 Logan International Airport, 384 Lowe, Graham, 265 Lowe’s, 370 Lululemon, 338, 354 Lütke, Tobias, 21

McDonald’s, 55, 56, 132, 169, 195, 329, 337, 357, 360, 370 McGill Business School, 118 McGill University, 12 McGregor, Douglas, 26 McKinnell, Julia, 191 McKinsey & Company, 2, 357 McLagan, P. A., 203n McShane, S., 82n Medtech, 280 Mega Brands, 55 Meister, Jeanne, 20 Mercedes, 373 Mercy Hospital, 365 Merill, Thomas, 242 Merrill-Lynch, 90 Metcalfe, Chris, 149 Michelin, 135 Microsoft, 40, 159, 169, 192, 193, 232, 314, 338 Mill, C. R., 190 Miller, C. C., 77n Miller, Herman, 41, 150 Miller, J. K., 77n Mimran, Joe, 67 Mini Mioche, 302, 303 Mintzberg, Henry, 11, 12, 13, 28, 22, 118 Mioche, Mini, 303 Miovision Technologies Inc., 68–69 Mitel Networks, 149 Mitsubishi, 185 MLS® Home Price Index (HPI), 48 Monster, 167 Montoyo, Charlie, 101 Morreale, S. P, 295n Motorola, 147, 374 Mount Royal University, 2 Munsterberg, Hugo, 26 Murray, A., 180n Muskoseepi Park, 222 MySpace, 315

M

N

KFC, 346 KickStarter, 48 King, Martin Luther Jr., 284 Kingsey Falls, 140 Kirkpatrick, S. A., 222n, 276n Kitsplit, 49 Kiva Systems, 359 Kluwer, E. S., 233n Knight, Rick, 353 Kopfensteiner, Dean, 244 Kotter, John P., 202, 274n KPMG/Ipsos-Reid, 5, 155 Kraft, 374

L

Maastricht University, 56 MAC Cosmetics, 133 Mackey, John P., 318 Maclean’s, 191 MacPherson Leslie and Tyerman LLP, 321 Magna International, 286 Mahoney, T. A., 8n Manufacturing Research Center, 371 Manulife Financial, 191 Manulife Securities, 192 Maple Leaf Foods, 113, 356 Maple Leaf Sports & Entertainment, 145 Marriott International Inc., 127 Mary Kay Cosmetics, 287 Maslow, Abraham, 26, 246, 247n Mastercard, 184, 207 Mattel, 55, 63, 156, 208 Mayer, Marissa, 159, 273, 301 Mayo, Elton, 26 McCain Foods, 144 McClelland, David, 248

Nahum, Bertin, 280 NASA, 375 Nash, L. L., 94n National Bank Financial, 191 National Basketball Association, 139 National Quality Institute (NQI), 374 Nauta, A., 233n NBC Universal Studios, 148 Negotiation Journal, 381n Neil Huffman Auto Group, 179 Nenshi, Naheed, 2, 4, 8, 10 Nestlé, 6, 139 Netflix, 68, 213 Neto, João Vendramin, 299 New Society Publishers, 20n Nichols, Ray, 338 Nike, 3, 149, 162, 218 Nike Grind, 216 Nissan, 45, 73, 207 Nitkin, David, 93 NL Technologies, 159

Name/Organization Index  445

Nohria, Nitin, 252 Nokia Corporation, 322, 374 Nooyi, Indra, 294 Norton, D. P., 343n Nova Scotia Association of Social Workers (NSASW), 158 Nova Scotia Business Inc., 222

O

Oculus, 49 Ohio State University, 223 Oldham, Greg R., 251 Old Navy, 2 O’Leary, Kevin, 35 Onex, 58 Ontario Hospital Association, 343 Ontario Municipal Employees Retirement System (OMERS Ventures), 21 Oticon A/S, 148 Otis Elevator, 380 Ottawa Citizen, 191 Owen, Robert, 26

P

Page, Larry, 146 Palaniappan, Jambu, 236 Palmer, James, 261 Parker Brothers, 63 Patel, Keyur, 154 PepsiCo, 101, 166, 294 PETA, 118 Peter Drucker Canadian Foundation, 34 Peterson, M. F., 291n Pfizer, 159 Pfizer Consumer Healthcare, 366 Pixar, 21 PK-35, 71 Plank, Kevin, 218 Polsky, Len, 321 Porter, L., 190 Porter, M. E., 123, 124n, 125 Prairie General Hospital, 217–218 Pratt, M. G., 77n PricewaterhouseCoopers (PwC), 150, 273, 324n Procter & Gamble, 144, 184 Procter & Gamble Canada, 56 Provenzano, Liza, 374 Puroclean, 55

Q

Queen’s School of Business Centre for Business Venturing, 270 Queen’s University, 35, 67

R

Rabie, Anton, 44 Racine, Mathieu, 329 Radialpoint, 268 Radisson, 127 Ramada, 127 Raven, B. H., 298n Raven, B. J., 298n

Raven, B., 298n RCMP, 318 Recording Industry Association of America, 344 Reebok, 149 Reimer, Milt, 56 Reisman, Heather, 48 Rennehan, Mandy, 170 Report on Business Magazine, 331 Retail Arabia International, 67 Retail Council of Canada, 67, 348 Revlon, 145 Rhind, Jay, 194 Richard Ivey School of Business, 313 Rio Tinto Alcan, 116, 339 Robbins, S. P., 97n, 170n, 229n, 248n, 282n Roberts, H. V., 372n Rogers, Ron, 128 Rolex, 46 Rometty, Ginni, 327 Roots, 48 Rotman Magazine, 76n Royal Bank of Canada (RBC), 185, 273 Royal Dutch Shell (Shell), 112 Royal Ontario Museum, 9 Ryerson University, 192

S

Sadler-Smith, E., 77n Safeway, 9, 130, 131, 157 Salacuse, J. W., 381n Samsung Electronics, 6 Sandberg, Sheryl, 273, 275 Sanders, G., 118n, 123n Sankey, Derek, 191 SCAN Health Plan, 155 Scarborough, 134 Schering-Plough, 371 Schneider, C., 384n Schrage, Elliot, 52 Schultz, Howard, 369 Schwab, Charles, 111 Schwartz, Gerry, 48 S. C. Johnson & Son, 268 Scooper Troopers, 35 Scotiabank, 175 Sears Canada, 67 Second Life, 149, 314 Seed, Paul, 164 Semco Group, 298 Semler, Ricardo, 298 Senge, P. M., 152n Sergesketter, B. F., 372n 7-Eleven, 345 Seven & i Holdings, 345 ShareGreen.ca, 216 Shefy, E., 77n Shell, 112, 157 Shin, J.-H., 291n Shockley-Zalabak, P. S., 295n Shopify, 9, 21, 144 Siemens AG, 361 SilverBirch Hotels & Resorts, 127 Simply Orange, 101

446  Name/Organization Index Sitel India, 54 Skoda, 360 Slowinski, S., 101n SMED International, 286 Smed, Mogens, 286 Smed, Mogens, 286 Smith, Adam, 24, 132 SnapGoods, 48, 49 Sobeys Inc., 130, 135, 157, 169 Sodexho Alliance SA, 314 Sony Corporation, 54, 58, 374 Spain, 55, 56, 66, 129, 311 SPCA (Society for the Prevention of Cruelty to Animals), 9 Spearhead Timberworks, 6 Spin Master, 44, 45, 56, 63 Spiring, Charlie, 191 Sport Canada, 345 Spratley, David, 149 Sprott School of Business, 181 Stantec, 104, 105, 108, 113, 115, 116, 124, 125, 316 Staples, 374 Starbucks, 7, 46, 55, 56, 212, 301, 352, 369 StarTech, 164 Starwood Hotels and Resorts Inc., 51, 126 Statistics Canada, 32, 237, 265, 349 Steen, S., 82n Stewart, Tony, 343 Stone, Biz, 325 Strategic Management, 118n, 123n Strawberry Frog, 149 Stronach, Frank, 286 Stuart, Sandra, 272 Sun Life Assurance Company of Canada (US), 147

T

Taco Bell, 330, 360 Tannen, Deborah, 309 Tanner, Chris, 335 Taylor, Frederick, 150 Taylor, Frederick W., 25 TELUS, 134, 169 Tempe, 344 Tesco, 151, 152, 383 TGI Friday, 184 The Gap, 301 ThinkFOOD! Centre, 113 Thomas, K. W., 233n Thomas, Tandy, 67 Thomson Reuters Canada, 368 3M Company, 374 Tiger Electronics, 63 Time, 190 Timex, 46 Tim Hortons, 3, 195, 241, 360 Tod’s, 77 Tonka Toys, 63 Toronto Blue Jays, 101 Toronto Maple Leafs, 101 Toyota Canada, 242 Toyota Motor Corporation, 335–336 Toys “R” Us, 56, 63

Trudeau, Justin, 326 TrunkClub, 122 Tuckman, Bruce, 223 Tumblr, 16 TurboTax, 212 Twitter, 16, 21, 66, 88, 122, 159, 258, 313, 324–327

U

Uber, 48, 49, 236, 243 Ubisoft, 270 United Air, 111, 366 United Way, 6, 48 University of Alberta, 265 University of Iowa, 296 University of Michigan, 277, 296, 298 University of Toronto, 283, 301 University of Western Ontario, 181, 313 Ury, W., 381n

V

Valacich, J. S., 384n Valeo Klimasystemme GmbH, 373 Valle, Diego Della, 77 Vandebroek, Sophie, 207 Vatz, M. E., 384n Verizon, 235, 314 Verizon Communications, 235 Virgin Atlantic, 220 Virgin Galactic, 220 Virgin Group, 82, 220, 228, 238, 239, 240, 279 Virgin Mobile, 220, 239 Virgin Records, 220 Virgin United, 240 Volkswagen AG, 360 Voortman Cookies, 50 Voortman, Harry, 50 Vroom, Victor, 255, 282

W

Wall Street Journal, 180n Walmart, 16, 17, 51, 67, 113, 114, 122, 124, 128, 216, 316, 329, 366, 370, 382, 383 Walmart Canada, 67, 216 Walt Disney Co., 6 Ward, E. A., 298n Washbrook, Shannon, 178 Watsa, Prem, 56 Watson Wyatt Worldwide, 5, 163 Weber, Max, 25, 131 Welch, Jack, 148 Wellington West, 191, 192 Wellington West Financial Services, 191 Wendy’s, 330, 360, 370 Werner, M., 222n, 276n Westerlund, Einar, 270 Western Compensation and Benefits Consultants, 265 WestJet Airlines, 58, 116, 117 Weston, Galen G., 67 Westport Innovations, 216 Wharton School of Business, 283 Whole Foods Market, 146, 241, 318 Willard, B., 20n

Name/Organization Index  447

Williams, Evan, 325 Williams-Sonoma, 48 Wilson Sporting Goods, 132 Wizards of the Coast, 63 Woodman, Nick, 208 WorkSafeBC, 187, 286 Wormald Security, 373 Wyatt, Watson, 166

X

Xerox, 147 Xerox Innovation Group, 207

Y

Yahoo, 159, 160, 273, 301, 314 Yale School of Management, 255 Yanke Group, 335 Yetton, Phillip, 282 YouTube, 68, 124, 199, 313, 316, 324, 347

Z

Zappos, 22–23, 258 Zelaya, Mario, 326 Zellers, 113 Zipcar, 48

Subject Index Note: The letter ‘n’ following locators refers to notes.

A

Access to Information Act, 319 accountability, 135 achievement-oriented leader, 283 achievement-oriented leadership, 284 active listening, 311–312 adjective rating scales, 183 alternatives analysis of, 73–74 development of, 73 implementation of, 74–75 selection of alternative, 74 analytical skills, 189 anonymous mentoring, 20 approaches, 76 authority, 134–135 line, 136 staff, 136 authority vs. power, 137–138 autocratic style, 277

B

Baby Boomers, 50, 259 balanced scorecard approach, 342–343 Bank of Canada’s commodity price index (BCPI), 48 basic corrective action, 336 behaviourally anchored rating scales (BARS), 183 behavioural theories of leadership, 277 benchmark, 335 benchmarking, 112, 335 biases confirmation bias, 83 in decision-making, 82–84 hindsight bias, 84 overconfidence bias, 83 selective perception bias, 83 self-serving bias, 84 big data, 89 Black Book model, 102 blogs, 313 Bloomberg BusinessWeek, 101 boards of directors, 345 body language, 306–307 boundaries, 148 boundaryless organizations, 148 bounded awareness, 76n bounded decision making, 76 bounded rationality, 76 bounded rationality, 76 bounded self-interest, 76n bounded willpower, 76n brainstorming technique, 209 breadth, 110

448

break-even analysis, 90 British Columbia Voluntary Organizations Coalition, 34 budget analysis, 339 bullying, 186–187 Bureau of Competition Policy, 48 business cards, 317 business cases Banning E-mail. Banning Voice Mail, 326 Building a Better Boss, 21–22 Coca-Cola and the Science of OJ, 101–102 Cow-Milking Robots, 383 Credit Valley Hospital, 102 Dealing with Romance in the Workplace, 192 Delivering Bad News, 327 Developing Gen Y Leaders, 300 DevFacto Technologies, 269–270 Dreamliner Nightmare, 384–385 Fast Fashion, 128–129 Innovation in Wastewater, 219 Joe Fresh, 67 Levitt-Safety Limited, 159 Miovision Technologies Inc., 68–69 One for the Money..., 270–271 Pfizer: A New Kind of Structure, 159 Prairie General Hospital, 217–218 Prince Edward County, 128 Serving up Leaders, 300–301 Shopify, 21 SilverBirch Hotels & Resorts, 127–128 Social Benefit or Social Disaster?, 325–326 Spotting Talent, 192–193 The Business of Blue Jays Baseball, 101 The Go Game—Team Building, 242–243 The Next Big Thing, 218–219 Too Relaxed, 354 Top Secret, 353 Toyota Canada, 242 Tragedy in Fashion, 382–383 Ubisoft Entertainment SA, 270 Wellington West, 191–192 Whole Foods Canada, 241–242 Who Needs a Boss?, 22–23 You Work Where, 159–160 business intelligence, 365 business model, 113, 364 business plan, 37–38 analysis of opportunity, 37 analysis of the context, 37 components of, 38 description of the business, 37 executive summary, 37 financial data, 37 projections, 37 supporting documentation, 38

Subject Index  449

C

calm waters metaphor, 197–198 Canada Labour Code, 164, 348 Canada Pension Plan, 181 Canadian Business, 194 Canadian Charter of Rights and Freedoms, 165 Canadian economy, 358 Canadian Human Rights Act, 51–52, 164 capabilities, 116 career, 183 career development, 183–181 cases. See business cases castle moat, 353 centrality, 137 centralization, 139–140 chain of command, 134–138 change agents, 196 change action research, 201 appreciative inquiry, 201–202 calm waters metaphor, 197 categories of organizational change, 195 change agent, 196 characteristics of, 203 common approaches, 201–202 effective communication, 203–204 external forces, 195–196 internal forces, 196 mistakes when leading change, 203 reducing resistance to change, 201 resistance to change, 199–204 successful change, 202 three-step change process, 197 white-water rapids metaphor, 198 charismatic leader, 286–287 charismatic leadership, 286–287 charismatic-visionary leadership, 284 Charter of Rights and Freedoms, 164–165 civil servants, 9 classical theorists, 25 classical view, 95 climate change, 45 clinical ethical decisions, 102 coaching, 22, 183, 234, 289, 368, 373 code of ethics, 93–94, 98 coercive power, 290, 298 collaboration, 142, 364 collaborative consumption, 49 collectivism, 228, 310 commitment concept, 111 communication active listening, 311–312 and knowledge management, 319–320 barriers, 307–310 body language, 306–307 constrain emotions, 312 contemporary issues in, 317 effective, 303–312 emotions, 308 ethical communication, 322–323 filtering, 307–308 gender, 310 grapevine, 305–306

information overload, 308 in an internet world, 318–319 jargon, 308–309 language, 308 national culture, 310 nonverbal cues, 306–307, 312 overcoming barriers, 310 role in customer service, 321 selective perception, 308 styles of men and women, 309 verbal intonation, 307 workplace communication protocols, 316 written communications, 305 communication process, 303 channel, 304 decoding, 304 encoding, 303 feedback, 304 message, 304 communities of practice, 320–321 community organization, 31 compensation benefits, 181 pay-for-performance programs, 262–264 skill-based pay, 180 strategic compensation, 179–181 total rewards, 179–184 variable pay, 180 Competition Act, 48 Competition Bureau, 48 competitive advantage, 120 competitive intelligence, 126 competitive strategy, 120–121, 123 cost leadership strategy, 120 differentiation strategy, 121 focus strategy, 121 role of, 120 success Factors for, 124 types of, 120–121 complementors, 123–124 compressed workweek, 155–156, 264 compromise, 300 concurrent control, 337–338 confirmation bias, 98 conflict management, 233, 237, 381 conflict resolution techniques, 233 conformity, 81, 226, 236 consideration, 277 consumer price index (CPI), 48 contemporary issues, 317 contemporary motivation theories, 249–257 equity theory, 253–255 expectancy theory, 255–256 four-drive theory, 252–253 goal-setting theory, 249–252 contemporary organizational designs, 145–150 boundaryless organization, 148 challenges, 157 matrix structure, 147 network organization, 149–150 project structure, 148 team structure, 146–147 virtual organization, 148–149

450  Subject Index contingency approach, 29 contingency planning, 112 contingency theories of leadership, 278–284 Fiedler contingency model, 278 leader-participation model, 282 least-preferred co-worker (LPC) questionnaire, 278 path-goal theory, 282–284 situational leadership® (SL), 280–282 contingent workers, 156–157, 260 control, 329 balanced scorecard, 342–343 clan control, 60 concurrent control, 338 contemporary issues, 351 employee theft, 348–349 empowering employees, 330 feedforward control, 337–338 financial controls, 338–340 importance of, 329–31 issues in, 344–350 managerial decisions in, 332 nature and importance of, 351 performance standards, 331 planning, 330 controlling budget analysis, 339 planning–controlling Link, 331 protecting the workplace, 331 for quality, 373 types of, 337–344, 351 value of the control function, 330–331 when to introduce control, 337–338 workplace concerns, 347–350 workplace privacy, 347–348 See also control control process, 331–337 basic corrective action, 336 benchmarking of best practices, 335–336 control criteria, 333 corrective actions, 336 defining, 331–332 immediate corrective action, 336 management by walking around (MBWA), 332–333 managerial action, 337–338 measuring, 322–323 performance to planned goals, 334–336 range of variation, 334 core competencies, 116 corporate governance, 344–345 corporate social responsibility, 94–97 approaches to, 96 arguments for and against, 97 dimension of, 96 and economic performance, 95–96 importance of, 96 social obligation, 94 social responsiveness, 94 See also social responsibility corporate strategy, 119–120 growth strategy, 119, 119 renewal strategy, 120 stability strategy, 120

corporate wellness initiatives, 187 cost leadership strategy, 120 creative process, 208–209, 213, 270 creative-thinking skills, 86 creativity, 86, 208 organizational factors, 87 solving problems, 87 credibility, 293 See also trust Criminal Code, 348 critical incidents, 183 critical service encounters, 321 cross-cultural differences, 345–347 cross-cultural leadership, 291–292 cross-functional teams, 42, 133–134, 366 crowdfunding, 16 Crown corporations, 9 cube farm, 150 cultural attitudes, 368–369 cultural awareness, 65 customer departmentalization, 133 customer relationship management systems, 364 customer service representative, 167 cut-and-dried leadership, 279

D

debt financing, 30 decentralization, 139–140 decision criteria, 71–72, 74, 78 decision making autocratic, 84 biases and errors, 82–84 contemporary issues, 98 creativity and design thinking in, 85–88 decision criteria, identification, 72 decision-making approaches. See decision-making approaches decision-making conditions, 79–80 decision trees, 90 develop-the-alternatives stage, 78 employee involvement in, 82 and ethics, 98 factors affecting decision making, 75 group decision making, 80–81 individual vs. group decision making, 81–82 managerial decision making, 84–90 payoff matrices, 89 quantitative decision-making aids, 89 rational decision making, 76 social responsibility and, 98 decision-making approaches bounded decision making, 76 intuitive decision making, 77 rational decision making, 76 decision-making conditions, 79–80 certainty, 80 risk, 80 uncertainty, 80 decision-making process, 71–75 problem identification, 72 steps, 97

Subject Index  451

decision rules, 92, 94 decisions, 71 in the management functions, 75 nonprogrammed decisions, 79 programmed decision, 78 types of problems, 77–79 defensiveness, 307, 321, 323 delegation, 135 demand patterns, 371 democratic style, 277 departmentalization, 133–134 customer departmentalization, 133 functional departmentalization, 133 geographical departmentalization, 133 process departmentalization, 133 product departmentalization, 133 types of, 133 design thinking, 88 diagnostic skills, 189 differentiation strategy, 121 digital communication, 293, 305 directional plans, 111, 125 directive leader, 283 directive leadership, 284 directive style, 284 disruptive innovation, 213 distributive justice, 255 diversification, 113, 120 diversity, 19 acquired diversity, 19, 216 cross-cultural differences, 259 cultural differences, 344 in decision making, 99 “diversity blueprint,” 273 goal of, 158 handling of, 65 inherent diversity, 19 motivating of diverse workforce, 259 in teams, 232 temporary foreign workers, 185 2-D diversity, 216 divisional structure, 144–145, 147, 157 division of labour, 29, 132 downsizing, 169 drive to acquire, 252–253 drive to bond, 252 drive to defend, 253 drive to learn, 253 driving forces, 197, 214 dual chain of command, 147 dynamic environment, 62

E

early motivation theories, 246–249 hierarchy of needs theory, 246 Theory X, 246 Theory Y, 246 three-needs theory, 248–249 two-factor theory, 247–248 economic changes, 196 economic conditions, 3, 96, 164, 168, 188 economic order quantity, 90 economic value added (EVA), 339

e-enabled supply chain, 384 effective meetings, 241 effective teams, 228–233 See also group behaviour effort-performance linkage, 256 e-learning, 166 electronic data interchange (EDI), 314 electronic surveillance, 348 email, 85, 317, 326 employee assistance programs (EAPs), 207 employee counselling, 184 employee discipline, 340 employee empowerment, 140, 146 employee involvement, 82 employee oriented, 296 employee-oriented leaders, 277 employee performance, 340 employee recognition programs, 262–264 employee relations, 92, 96 employees contingent workers, 156 decision making, involvement in, 82 keeping employees connected, 151 minimum-wage employees, 267 monitoring, 346 motivation. See motivation nonmanagerial employees, 5, 7 stress. See stress technical employees, 259–260 temporary workers, 260 track of employee performance, 340–342 and value chain management, 367–368 Employees’ Global Aptitudes, 66 employee theft, 348–349 employee training, 177 employee wellness, 187 Employment Equity Achievement Awards, 272 Employment Equity Act, 52 empowerment, 288 entrepreneurial ventures issues faced by entrepreneurs, 40 issues involved, 38 legal forms, 38 organizational structure, 38–39 entrepreneurs controlling issues faced, 42–43 employees motivation, 41 entrepreneurship, 35–43 planning by, 36–37 human resource management (HRM), 39–40 type of personality, 40 environmental complexity, 63 environmental conditions, 51 environmental constraints environment, effect of, 62–63 external environment, 45–52 global environment, 52–53 environmental uncertainty, 62–63 environment effect of, 62–63 external environment, 45–52 general environment, 47–52

452  Subject Index environment (continued) global environment, 52–53 specific environment, 46–47 stakeholders, 46 equity theory, 253–255 escalation of commitment, 83 ethical communication, 322–323 ethical competitive intelligence, 126 ethical culture, 60 ethical leaders, 299–300 ethical leadership, 290–291, 300 ethics, 90–94 code of ethics, 92–94 definition, 90 ethical behaviour, 92–94 integrative social contracts theory, 91 rights view, 91 theory of justice view, 91 utilitarian view, 91 views of, 90–91 exchange-traded funds (ETF), 70 expectancy theory, 255–256 expected monetary value (EMV), 89 expert power, 290 exporting, 55 external analysis, 116–117 external environment, 45–52 general environment, 47–52 importance of, 63 specific environment, 46–47 extreme pricing, 67 extroversion, 276

F

face-to-face communication, 204, 293, 310, 317 family-friendly benefits, 181 feedback, constructive feedback, 187 giving feedback, 189 good feedback, 189 negative feedback, 250, 341 performance feedback, 109 survey feedback, 199 360-degree appraisal, 183 feedback control, 338, 352 advantages, 343–344 feedforward control, 337 Fiedler contingency model, 278–279 50 Best Employers in Canada, 191 filtering, 307 financial controls, 380–340 budget analysis, 339 economic value added (EVA), 339 market value added (MVA), 339 ratio analysis, 338–339 financial globalization, 53 financial performance, 5, 96, 343, 372 financial ratios, 339, 351 financial reporting, 195, 345 firing, 206, 279, 301 first-line managers, 5, 8 flexible work arrangements, 154 flexible work hours (flextime), 156, 264 focus strategy, 121

forecasting, 112 foreign subsidiary, 56 formal communication, 158, 199 formalization, 140–141 formal planning, 106–107 See also planning “Four-D” model of appreciative inquiry, 202 four-drive theory, 252–253 organizational implication, 254 franchising, 55 fraud, 79, 126, 330, 348–349 free-market democracies, 10 functional departmentalization, 133 functional strategy, 121–123 examples of, 121 functional structure, 144–145 functions approach, 10–11, 13, 18 Future Entrepreneurial Leaders (FuEL) Awards, 21

G

game theory, 89 gamification, 263 Gantt chart, 376–377 general administrative theory, 25, 29 general environment, 47–52 economic conditions, 48–49 environmental conditions, 51 legal conditions, 51–52 political conditions, 47–48 sociocultural conditions, 49–50 technological conditions, 50–51 Generally Accepted Accounting Principles (GAAP), 195 Generation X, 20 Generation Y, 20 Generation Z, 20 geographical departmentalization, 133 Global Assignment Task Force, 66 global business exporting, 55 foreign subsidiary, 56 franchising, 55 importing, 55 joint venture, 56 licensing, 55 strategic alliance, 55 global collaborative environment (GCE), 384 global company, 17, 345 global corporation, 54 global economy, 289, 350, 358, 370, 379 global environment, 52–53 global organizations, 53 global outsourcing, 54 global sourcing, 45, 54–55, 63 global structural issues, 150, 154 global teams management, 235–237 challenges, 235 cohesiveness, 237 social loafing, 237 team composition factors, 236 team processes, 237 team structure, 236–237

Subject Index  453

global trade, 52, 358 goal setting approaches, 124 management by objectives (MBO), 109 steps in, 110 traditional goal setting, 109 vision and mission, 110 well-designed goals, characteristics of, 109 goal-setting theory, 249–252 goals, types of, 108–109 government legislation, 164–165 grapevine, 305 Green Key Eco-Rating Program, 128 gross domestic product (GDP), 30–31 group, 221 defining, 221–222 examples of, 222 groups vs. team, 222–223 group behaviour, 225–228 conformity, 226 group cohesiveness, 227–228 group size, 227 norms, 226 role, 225 social loafing, 227 status systems, 227 group cohesiveness, 227–228, 234, 238–239, 262–263 group decision making, 80–81 group development, 223–225 adjourning, 224 forming, 223 norming, 223 performing, 223 storming, 223 group mentoring, 20 groupthink, 81 growth strategy, 119

H

Hawthorne studies, 29 Hersey and Blanchard’s Situational Leadership® (SL), 281 heuristics, 82, 84 hierarchy of needs theory, 246 hindsight bias, 98 home price index (HPI), 48 Horizons Global Sustainability Leaders Index ETF (ETHI), 70 human resource inventory, 166 human resource management, 162 balancing supply and demand, 168 career development, 183–184 contemporary human resource management issues, 184–187 downsizing, 169 economic conditions, 164 environmental factors, 165–167 factors, 162 human resource inventory, 166 job analysis, 167 job description, 167 job specification, 167 labour-market issues, 164

layoff-survivor sickness, 169 organizational culture, 164 organizations plan for, 166–170 orientation, 176 performance appraisal methods, 182–183 performance management system, 182 performance-simulation tests, 172 realistic job preview (RJP), 175 recruitment, 170 selection, 170–172 technology, 165 training, 177–178 human resources information system (HRIS), 165 human resources in SMEs and SMOs, 33 Human Rights Code, 185 Husky Injection Molding Systems, 133 hygiene factors, 248

I

idea champions, 212, 214 immediate corrective action, 336 importing, 55, 63 incubation, 209 indigenous peoples, 52 individualism, 26, 242, 310 industrial revolution, 29 informal planning, 106, 125 information controls, 340 information overload, 307–308 information technology blogs, 313 email, 85, 317, 326 instant messaging, 313, 317 social media. See social media social networking websites, 313–314 telephone, 317 texting, 317 voice mail, 314, 317 wikis, 313 inherent diversity, 19 initiating structure, 277, 296 innovation, 208–212 brainstorming technique, 209 creativity, 208 disruptive innovation, 213 idea champions, 212 incubation, 209 influence of design thinking, 212–213 innovative work environment creation, 212 inspiration, 209 managers encouragement, 207 organization’s culture, 211–212 perception, 209 in SMEs and SMOs, 33–34 structural variables, 210–211 techniques for stimulating, 207–208 insourcing, 378–379 instant messaging, 313, 317 integrative social contracts theory, 90–91, 98 internal analysis, 116 internal forces for change, 214 international business. See global business

454  Subject Index International Financial Reporting Standards (IFRS), 195 Internet of Things (IoT), 48, 68 interview, 172–175 group interviews, 269 intrinsic task motivation, 86 intuition, 77 intuitive decision making, 77 investigative journalism, 99 Ipsos-Reid poll, 347 island water technologies (IWT), 219 ISO 9000, 373–375

J

job analysis, 167 job characteristics model (JCM), 251–252 job description, 167 job design, 250–252 guidelines for job redesign, 252 job characteristics model (JCM), 251–252 job enrichment, 251 job enrichment, 251 job-relevant knowledge, 292 job sharing, 156, 156 job specification, 167 joint venture, 56 just-in-time (JIT) production, 379

K

karoshi, 204 See also stress knowledge management, 319–320

L

labour market, 164, 170, 196 labour surplus, solutions for, 168 labour unions, 383 laissez-faire style, 277 laptop hobos, 155 large groups, 101, 227 layoff-survivor sickness, 169 leader-member exchange (LMX) theory, 285 leader-participation model, 282 leaders, 274 achievement-oriented leader, 283 behaviour of, 277–278 charismatic leader, 286, 291 defining, 274 directive leader, 283 effectiveness, 279 employee-oriented leaders, 277 hiring ethical leaders, 299–300 participative leader, 283 supportive leader, 283 task-oriented leaders, 280 team leaders, 289–290 tips for future leaders, 296 traits, 275 transactional leaders, 285–286 vs. managers, 274 women leaders, 272 leadership, 274 achievement-oriented leadership, 284 associated traits, 276

behavioural theories of leadership, 277 charismatic leadership, 286–287 contemporary views, 284–288 contingency theories of leadership, 278–280 cross-cultural leadership, 291–292 current issues, 288–293 cut-and-dried leadership, 279 defining, 274 directive leadership, 284 ethical leadership, 290–291, 300 and emotional intelligence, 292 Fiedler contingency model, 278–279 Hersey and Blanchard’s situational leadership, 281 Leader–Member exchange (LMX) theory, 285 leader-participation model, 282 leadership assessment, 299 leadership dimensions, 281 leadership theories, 275 least-preferred co-worker (LPC) questionnaire, 278 modern views, 284–285 moral leadership, 291 and national culture, 291–292 path-goal theory, 282–283 radical leadership, 298 situational leadership® (SL), 280–282 supportive leadership, 284 task-oriented leadership, 280 team leadership, 289–290 trait theories of leadership, 275 trust, development of, 293–294 virtual leadership, 293 visionary leadership, 287 Lean In: Women, Work, and the Will to Lead (Sandberg), 273 lean manufacturing, 379 learning organization, 152 building a, 151–152 characteristics of, 152 characteristics of, 152–153 least-preferred co-worker (LPC) questionnaire, 278 legitimate power, 290 LGBTQ rights organizations, 184 liaisons with external constituencies, 289 licensing, 55 linear programming, 90 line managers, 136 long-term plans, 110 lower-level managers, 8

M

management, 4 activities by organizational level, 8 behavioural approach, 26 classical approaches, 25 contemporary approaches, 28 defining, 4 developing management skills, 381 early management, 24 effectiveness, 4 efficiency, 4 functions vs. roles, 13

Subject Index  455

history of, 24–29 management functions, 10–11 management roles approach, 12–13 open-book management, 261–262 operations management. See operations management principles of management, 25 quantitative approach, 27 reason to study, 3–4 in small and medium-sized enterprises, 33 universality of management, 10 management by objectives (MBO), 109 management by walking around (MBWA), 332 management functions, 10–11 controlling, 11 leading, 11 organizing, 11 planning, 11 top managers, 7–8 management information system (MIS), 340 management roles, 11–13 management skills, 13–14, 64–66 conceptual skills, 14 interpersonal skills, 14 political skills, 14 technical skills, 14 managerial communication, 312–317 business cards, 317 contemporary issues, 317 electronic data interchange (EDI), 314 e-mail, 313, 317 ethical communication, 322–323 face to face communication, 317 instant messaging, 313, 317 internet-based voice/video communication, 314 networked communication, 313–314 networked communication applications, 314 role in customer service, 321–322 social media, 315, 317 social networking websites, 313–314 and technology, 312–315 teleconference and videoconference, 314 telephone, 317 texting, 317 voice mail, 314, 317 wikis and blogs, 313 wireless communication, 315–317 See also communication managerial grid, 296 managers, 6 environmental effects, 62–63 first-line managers, 5, 8 importance of customers, 15 importance of innovation, 15 importance of sustainability, 17 level in the organization, 8 line managers, 136 lower-level managers, 8 middle managers, 8 vs. nonmanagerial employees, 7 social media and, 16–17 staff managers, 136 strategies used, 125

team leaders, 8 technology and, 16 “mantrap portal,” 353 manufacturing organizations, 55, 180, 358 market economy, 53 market value added (MVA), 339 Maslow’s hierarchy of needs, 247 mass production, 29, 157 matching people to jobs, 265–266 matrix structure, 147–148 maximax choice, 80 mechanistic organization, 142 mental models, 70, 307 #MeToo movement, 192 middle managers, 8 minimax choice, 80 minimum-wage employees, 267 minority domination, 81 MLS® Home Price Index (HPI), 48 moral leadership, 291 motivation contemporary theories of motivation, 249–250 current issues, 257–258 defining, 245 early theories of motivation, 246–249 employees motivation when the economy stinks, 258–259 eployees, 264 equity theory, 253–255 expectancy theory, 255–256 four-drive theory, 252–253 integrating contemporary theories, 257 job design influence, 250–252 motivating contingent workers, 260 motivating employees, 248 need, 245 open-book management, 261 professional and technical employees, 259–260 rewards programs for employees, 261 role of money, 261 motivation-hygiene theory, 247, 259 motivators, 248 multidomestic corporation, 53, 63 multinational corporation (MNC), 53 multiperson comparisons, 183

N

nAch (need for achievement), 248 nAff (need for affiliation), 248 NAFTA. See North American Free Trade Agreement (NAFTA) national culture, 56 nearshoring, 379–380 negotiation style, 381–382 networked communication, 313–314 networking, 190–191 network organization, 148–149, 151 neural networks, 79 nongovernmental organizations (NGOs), 9 nonprofit sector, 9 nonprogrammed decisions, 79

456  Subject Index nonverbal cues, 306, 311–312 normative, 282 norming, 223–224, 238 North American Free Trade Agreement (NAFTA), 52 nPow (need for power), 248

O

occupational health, 187 occupational health and safety, 184, 187 Occupational Health and Safety Act, 164–165 office styles, 150 offshoring, 379 Ohio State, 223, 296 online communication, 230, 318 onshoring, 378–380 on-the-job training, 178 open-book management, 262 open system, 28–29 operational plans, 110 operations management contemporary issues, 370 defining, 357–358 goods vs. services, 359 importance of, 357 manufacturing organizations, 358 pillars of, 360 role of technology, 370–371 service organizations, 358 transformation process, 358 value chain management. See value chain management operations variables, 360, 380 organic organization, 142 organization, 6 organizational barriers, 368, 380 organizational behaviour, 29 organizational change action research process, 202 calm waters metaphor, 197–198 catalyst’s need, 196 categories of, 195 common approaches, 201–202 defining, 195 employees’ reaction, 204 resistance, 200 techniques for reducing resistance, 201 “white-water rapids” metaphor, 198–199 See also change organizational commitment, 294 organizational communication. See communication organizational culture, 57–61, 164 defining, 57–58 development of, 60 dimensions, 58 importance, 64 managerial decisions affected by, 61 strong cultures, 59 weak cultures, 59 organizational designs, 131, 144–156 boundaryless organization, 148 building a learning organization, 151–152

challenges, 150–156 contemporary, 146 contemporary organizations design, 145–150 designing office space, 150 divisional structure, 145 functional structure, 145 keeping employees connected, 151 matrix structure, 147 network organization, 149–150 project structure, 148 simple structure, 145 sustainability integration, 153–154 team structure, 146–147 traditional organizational designs, 144–145 virtual organization, 148 organizational development (OD), 198 intergroup development, 199 process consultation, 199 survey feedback, 199 team-building, 199 organizational performance, 331 organizational processes, 366 organizational strategy. See strategic management; strategies organizational structure, 131 centralization, 139–140 chain of command, 134–138 contingency variables affect structural choice, 141–144 decentralization, 139–140 departmentalization, 133–134 and environment, 144 factors, 157 formalization, 140–141 key elements, 131, 157 and size, 143 span of control, 138–139 and strategy, 143 and technology, 143 work specialization, 132–133 See also organizational designs organizations characteristics of, 6 size of, 10 nongovernmental organization (NGO), 9 nonprofit sector, 9 privately held organizations, 9 private sector, 9 publicly held organization, 9 orientation, 176 job orientation, 176 organization orientation, 176 work unit orientation, 176 outsourcing, 378–379 overconfidence bias, 98

P

participative leader, 282–283 path-goal theory, 282–283 pay-for-performance programs, 262–264 payoff matrix, 89 people-oriented roles, 226 performance, 182–183

Subject Index  457

adjective rating scales, 183 behaviourally anchored rating scales (BARS), 183 critical incidents, 183 goal setting, management by objectives (MBO), 183 multiperson comparisons, 183 performance appraisal methods, 182–183 performance management system, 182 360-degree appraisal, 183 performance appraisal methods, 182–183 adjective rating scales, 183 behaviourally anchored rating scales (BARS), 183 critical incidents, 183 management by objectives (MBO), 183 multiperson comparison, 183 360-degree appraisal, 183 performance management system, 182 performance-reward linkage, 256 performance-simulation tests, 172 performance standards, 182, 331 Personal Information Protection and Electronic Documents Act, 348 PERT charts, 377 PERT network analysis, 377–380 PESTEL, 52–53, 118–119, 125 physical examinations, 171, 188 physical goods, 358, 380 planned economy, 53 planning benchmarking, 112 contingency planning, 112 criticisms of, 107 defining, 105–106 forecasting, 112 foundation of planning, 108 goal setting and, 108 goal setting approaches, 124 key reasons, 106–107 nature and purposes, 105–107 nature of planning, purposes of, 124 and performance, 107 planning tools and techniques, 112 reasons for planning, 106–107 scenario planning, 112 plans commitment concept, 111 contingency factors, 111 developing, 111 directional plans, 111 long-term plans, 110 operational plans, 110 short-term plans, 110 single-use plans, 111 specific plans, 110 standing plans, 111 strategic plans, 110 types of, 110–112 political conditions, 47 political corruption, 94 power, 137 coercive power, 290 expert power, 290 legitimate power, 290 referent power, 290

reward power, 290 types of, 290 power distance, 84, 250 primary management function, 106 primary stakeholders, 47, 96 principles of management, 29 Privacy Act, 318–319 privately held organizations, 9 problems, 77–79 structured problems, 78 unstructured problems, 78 procedural justice, 255 process departmentalization, 133 process planning, 113 process production, 157 product departmentalization, 133, 147 productivity, 359–360 product quality dimensions, 372 programmed decisions, 78–79 project management, 375 project structure, 146–148 publicly held organization, 9 push decisions, 84

Q

quality, 371–375 controlling, for quality, 373 ISO 9000, 373–375 organizing for quality, 373–374 planning for quality, 372 product quality dimensions, 372 quality goals, 373 service quality dimensions, 372 Six Sigma, 374 total quality management (TQM), 27, 29, 212 quality control, 371–385 how is quality achieved, 372–373 quality management, 116 quantitative approach, 29 Quebec Privacy Act, 319 queuing theory, 90

R

radical leadership, 298 Rana Plaza disaster (Bangladesh), 382 range of variation, 334–335, 351, 381 ratio analysis, 90 rational decision making, 76 readiness, 280 realistic job preview (RJP), 175 recognition, 182 recruitment, 170 interview, 172–173 performance-simulation tests, 172 reliability, 171 selection, 170–72 selection devices, 172 tests, 172–173 validity, 171 written tests, 172 referent, 138, 254–255, 290, 298 referent power, 290

458  Subject Index relationship conflict, 233 reliability, 171 renewal strategy, 120 reshoring, 380 responsibility, 135 restraining forces, 197, 214 “results-only work environment” (ROWE), 301 Retail Council of Canada, 348 reverse mentoring, 20 reward power, 290 rewards, 263 rights view of ethics, 91, 98 robots, advent of, 360 role ambiguity, 205 role conflicts, 205 role demands, 239 role overload, 205

S

Sarbanes-Oxley Act, 92, 345 satisfice, 76 scenario planning, 112 scheduling, 375 scientific management, 29 selection devices, 171–172 selective perception, 307–308 selective perception bias, 98 self-efficacy, 250 self-managed teams, 147, 230 self-service applications, 166 self-serving bias, 98 service economies, 359 service organizations, 55, 180, 321, 358, 381 service quality dimensions, 372 sexual harassment, 185–186 sexual intimidation, 99 sharing economy, 48 short-term plans, 110 single-use plans, 111 Situational Leadership® (SL), 280–282 Six Sigma, 374–375 skill-based pay, 180 skill basics, 189 slack time, 378–379 small and medium-sized enterprises, 30 characteristics, 32 financing in, 33 human resources in, 33 innovation in, 33–34 management in, 33 networks in, 34 partnerships in, 34 primary source of financing, 30 Small Business Achievement Awards, 35 small groups, 127 “smart” traffic company, 68 social contracts theory, 90 social HR, 176 social loafing, 227 social media, 121, 319 information exchange, 122 and manager, 16–17

platforms, 320 as a strategic weapon, 121 strategies, 121 social networking websites, 313–314 social responsibility, 94 social striving, 237 sociocultural conditions, 49–50 socioeconomic view, 95 span of control, 138 specific environment, 46–47 specific plans, 110 stability strategy, 120 stable environment, 62–63 staff authority, 136 staff managers, 136 stakeholders, 46 primary stakeholders, 47 relationship management, 47 secondary stakeholders, 47 standing plans, 111 Staples’s Lean Six Sigma program, 374 statistical analysis, 101, 112 stealing, 348–349 stockholders, 9 stock options, 245 storming, 223–224, 238 strategic alliance, 55 strategic business units (SBUs), 120 strategic compensation, 179, 188 strategic management, 113 importance of, 113–114 steps in, 125 strategic management process, 114–119 external analysis, 116–117 internal analysis, 116 organization’s current vision, mission, goals, 114–115 PESTEL analysis, 118 results evaluation, 119 strategies formulation, 118 strategies implementation, 119 SWOT analysis, 117 strategic plans, 110 strategies competitive strategy, 120–121, 123 corporate strategy, 119–120 cost leadership strategy, 120 differentiation strategy, 121 focus strategy, 121 functional strategy, 121–123 growth strategy, 119 organizational strategy, 113–119 renewal strategy, 120 social media strategies, 121 stability strategy, 120 See also strategic management stress, 204–206 causes, 205–206 job-related factors, 205–206 personal factors, 206 reduction of, 206 symptoms of, 204–205

Subject Index  459

stress management, 215–216 personal goals setting, 215 physical exercise, 215 relaxation training, 216 social support network, 216 time-management techniques, 215 stressors, 205–206 strong cultures, 59–60 structured problems, 78 subsidiaries, 9, 56 succession planning, 166 sunk-costs error, 83 supervisors, 8 supply chain management, 363–364 elements of, 363 quality control, 371–375 supportive leader, 283 supportive leadership, 284 sustainability, 17 SWOT analysis, 117–118 systems approach, 29

T

task conflict, 233 task-oriented leaders, 280 task-oriented leadership, 280 team behaviour shaping, 233–235 group cohesiveness, 234 rewards, 235 selection, 234 training, 234–235 team effectiveness characteristics of, 229 conflict, 233 contextual factors, 230 relationship conflict, 233 task conflict, 233 team composition factors, 231 team effectiveness model, 229 team processes, 232 trust, 230 work design, 232 team leaders, 8, 289–290 coaches, 290 conflict managers, 290 liaisons with external constituencies, 289 troubleshooters, 289 team leadership, 230, 288–290, 297 roles, 289 team structure, 146–147, 157, 223 technical employees, 259–260, 267 technological conditions, 50 telecommuting, 155 telework, 264 telling, 281 temporary foreign workers, 185 texting, 317 theory of employee motivation, 26 theory of justice, 90 theory of scientific management, 25 Theory X, 26, 246 Theory Y, 26, 246–247 thought-oriented roles, 226

three-needs theory, 248 360-degree appraisal, 183 time frame, 110 tips for managing downsizing, 169 tolerance for ambiguity, 86 top-level managers, 5, 14, 131 top managers, 7 total quality management (TQM), 27, 29, 212 traditional goal setting, 109 traditional organizational designs, 144 training, 177–178 employee training, 177 technology-based methods, 178 traditional methods, 178 trait theories of leadership, 40, 275 transactional leaders, 284–286 transfers, 269 transformational leader, 286 transformation process, 210, 357–358, 371, 380 transnational (borderless) organization (TNC), 54 trans-pacific partnership (TPP), 52 triple constraint, 375 troubleshooting, 289 trust, 293–295 building trust, 295 dimensions, 293–294 turnaround strategy, 119–120 two-factor theory, 247–248 Type A personality, 206 Type B personality, 206

U

uncertainty avoidance, 84, 236, 250 uncertainty environmental uncertainty, 62–63 environmental uncertainty matrix, 62 unconscious reasoning, 77 unit production, 157 unity of command, 135 universality of management, 10 University of Iowa, 296 University of Michigan, 277, 296, 298 unstructured problems, 78 USMCA (the United States–Canada–Mexico Agreement), 52 utilitarian view of ethics, 91, 98

V

validity, 171 value chain management benefit to businesses, 362 coordination and collaboration, 364 cultural attitudes, 369 employees/human resources, 367–368 goals of, 362 how it is done, 362–363 importance of, 361–362 leadership, 367 nature and purpose, 380 obstacles to, 368–70 organizational barriers, 368–369 organizational culture and attitudes, 368 organizational processes, 366–367

460  Subject Index value chain management (continued) people, 369 required capabilities, 369 requirements for, 364–368 supply chain management, 363–364 technology investment, 364–365 variable pay, 180 verbal intonation, 307 vertical integration, 119, 357 virtual leadership, 293 virtual organizations, 148 virtual teams, 237, 239, 294 visible minorities, 52, 355 visionary leadership, 286–287 voice mail, 15, 314, 317–318, 326

W

weak cultures, 59, 116 well-designed goals, 109 wellness programs, 207 whistle-blower protection, 93 white-water rapids metaphor, 198 wikis, 313 “WilMA” (Window, Middle, Aisle), 366

wireless communication, 315–317 social media, 315–316 women leaders, 272 workforce diversity, 184 work–life balance, 181–182, 264 flexible work schedules, 264 job sharing, 264 telework, 264 workplace concerns, 347–350 employee theft, 348–349 workplace privacy, 347–348, 351 workplace violence, 349–350 workplace monitoring, 348 workplace privacy, 347–348, 351 workplace surveys, 182 workplace violence, 349–350 WorkSafeBC, 187 work specialization, 132–133 written communications, 305 advantages, 305 drawbacks, 305 written tests, 172

Z

zero inventory warehousing, 361

List of Canadian Companies, by Province ALBERTA

MANITOBA

Alberta Barley Commission, 357 Ascend Group, 2 Bissett School of Business, 2 Canadian Association of Petroleum Producers, 51 Canadian Pacific Railway (CPR), 222 City of Calgary, 9 DevFacto, 269, 270 DIRTT (Doing It Right This Time), 286 Edmonton Oilers, 101 Good Earth Café, 367 Hamilton’s Milling, 367 Ipsos-Reid, 347 MacPherson Leslie and Tyerman LLP, 321 Mount Royal University, 2 Muskoseepi Park, 222 SMED International, 286 University of Alberta, 265 WestJet Airlines, 58, 116, 117

FXR Racing, 56 Prairie General Hospital, 217 Wellington West, 191, 192 Wellington West Financial Services, 191

BRITISH COLUMBIA Article, 195, 204, 210, 213 Back in Motion Rehab, 255 Bard on the Beach, 9 Betty Baguette, 204 Boston Pizza, 55 Boston Pizza College, 178 Boston Pizza International, 178 City of Vancouver, 347 Davis LLP, 149 Ecotrust Canada, 119 Electronic Arts, 259 Forest Stewardship Council, 119 Great Little Box Company, 260, 261 GreatCanadianHotels, 127 Hootsuite, 169 HSBC Canada, 272–273 iGEN Knowledge Solutions, 149 Iisaak Forest Resources, 119 Lululemon, 338, 354 Luppolo, 204 Meet2Eat, 204 New Society Publishers, 20n Off the Rail, 204 SilverBirch Hotels & Resorts, 127–128 Spearhead Timberworks, 6 Strange Fellow, 204 TELUS, 134, 169 University of British Columbia (UBC), 45, 111 Western Compensation and Benefits Consultants, 265 Westport Innovations, 216 WorkSafeBC, 187, 286

NEW BRUNSWICK McCain Foods, 144

NOVA SCOTIA Empire Company Limited, 130, 157 Nova Scotia Association of Social Workers (NSASW), 158 Nova Scotia Business Inc., 222 Sobeys Inc., 130, 135, 157, 169

ONTARIO Algonquin College, 216 Allana Potash, 195 Aviva Canada, 134 Bank of Canada, 48, 92, 273 Birks, 48 BlackBerry, 151 BreconRidge, 149 Bureau of Competition Policy (Canada), 48 Business Development Bank of Canada, 9 CAE Aviation, 366 Canada Post, 9 Canada Revenue Agency, 145 Canadian Business, 150, 194 Canadian Chamber of Commerce, 47, 164 Canadian Curling Association (CCA), 344 Canadian Food Inspection Agency (CFIA), 356 Canadian Imperial Bank of Commerce, 360 Canadian Institute of Diversity and Inclusion (CIDI), 108 Canadian Internet Registration Authority (CIRA), 320n Canadian Management Centre, 20 Canadian Restaurant and Foodservices Association, 166 Canadian Tire, 3, 131, 201, 202, 374 Carleton University, 181 CBC Television (CBC), 9, 36, 47, 190 Celestica, 336 Centre for Construction Excellence, 216 Chapters Indigo, 48 Chapters, 48 Competition Bureau (Canada), 48 Conference Board of Canada, 166, 263, 264 Coolbrands’ Yogen Früz, 55 Credit Valley Hospital, 102 Delcan, 373 Dell Canada, 133 DuPont, 186

461

462  List of Canadian Companies, by Province Easton’s Group of Hotels, 12 EllisDon, 259 EthicScan Canada, 93 Ford Canada, 144 Forest Products Association of Canada, 166 FreshCo, 131, 162, 170, 187 Frito-Lay Canada, 49, 50 Gartner Canada, 48, 116 GE Canada, 148 General Motors Canada, 9, 336 GestureTek Health, 244 Globe and Mail, 131 GlobeScan, 96 Government of Canada, 164 Heart and Stroke Foundation, 48 Hotel Association of Canada (HAC), 114, 128 Human Resources and Skills Development Canada, 21 Husky Injection Molding Systems, 133 IMAX Corporation, 68 Indigo, 48 Institute for Competitiveness and Prosperity, 374 Interbrand, 101 JDS Uniphase, 261 Joe Fresh, 67 Keint-He Winery & Vineyards, 128 KPMG/Ipsos-Reid, 5 Lawn Troopers, 35 Lee Valley Tools, 117, 263 Levitt-Safety Limited, 159 Loblaw Companies Ltd., 67 Maclean’s, 191 Magna International, 286 Manulife Financial, 191 Manulife Securities, 192 Maple Leaf Foods, 113, 356 Maple Leaf Sports & Entertainment, 145 McDonald’s Canada, 55, 56, 132, 169, 337 McKinsey & Company, 2 Mini Mioche, 302, 303 Miovision Technologies Inc., 68 Mitel Networks, 149 MLS® Home Price Index (HPI), 48 National Bank Financial, 191 National Quality Institute (NQI), 374 NL Technologies, 159 Onex, 58 Ontario Hospital Association, 343 Ontario Municipal Employees Retirement System (OMERS Ventures), 21 Otis Elevator, 380 Ottawa Citizen, 191 Procter & Gamble Canada, 56 Queen’s School of Business Centre for Business Venturing, 270 Queen’s University, 35, 67 Radialpoint, 268 Radisson, 127 Ramada, 127 RCMP, 222, 318 Report on Business Magazine, 331 Retail Council of Canada, 67, 348 Richard Ivey School of Business, 313 Roots, 48 Rotman Magazine, 76n Royal Bank of Canada (RBC), 185, 273

Royal Ontario Museum, 9 Ryerson University, 192 S. C. Johnson & Son, 268 Samsung Electronics Canada, 6 Scarborough, 134 Scooper Troopers, 35 Scotiabank, 175 Sears Canada, 67 ShareGreen.ca, 216 Shopify, 9, 21, 144 SPCA (Society for the Prevention of Cruelty to Animals), 9 Spin Master, 44, 45, 56, 63#C# Sport Canada, 345 Sprott School of Business, 181 Stantec, 104, 105, 108, 113, 115, 116, 124, 125, 316 Staples, 374 StarTech, 164 Statistics Canada, 32, 237, 265, 349 ThinkFOOD! Centre, 113 Thomson Reuters Canada, 368 Tim Hortons, 3, 195, 241, 360 Toronto Blue Jays, 101 Toronto Maple Leafs, 101 Toyota Canada, 242 University of Toronto, 283, 301 University of Western Ontario, 181, 313 Virgin Mobile Canada, 220, 239 Voortman Cookies, 50 Walmart Canada, 67, 216 Whole Foods Canada, 241–242 Xerox Canada, 147 York University, 301 Zellers, 113 Zippo Canada, 62

PRINCE EDWARD ISLAND Island Water Technologies, 219

QUEBEC Air Canada, 58, 117, 348 Bank of Montreal, 128, 140, 348 Bell Canada, 54 Bombardier, 169 BouClair, 335 Cascades, 140 Cogeco, 339 Comptoir Agricole Ste Anne, 328 Domtar, 140, 339 Ericsson Canada, 274 Go Game, 242–243 Groupaction Marketing, 94 Groupe Robert, 268 Kingsey Falls, 140 McGill Business School, 118 McGill University, 12 Mega Brands, 55 Rio Tinto Alcan, 116, 339 TELUS Québec, 134

SASKATCHEWAN ATCO Structures & Logistics, 267 General Cable Corporation, 5 Yanke Group, 335

List of International Companies, by Country AUSTRALIA

HONG KONG

Alcoa, 373 BHP Billiton, 267 Carlton and United Breweries, 373 Wormald Security, 373

Leadon Investments, 128

BRAZIL Semco Group, 298

CHINA

INDIA Sitel India, 54

IRELAND Accenture, 154, 155, 259 Delphi, 373

Alibaba, 305

ITALY

DENMARK Oticon A/S, 148

Ferrari, 125, 372 Rollerblade, 364 Tod’s, 77

FINLAND

JAPAN

Nokia Corporation, 322, 374 PK-35, 71

All Nippon Airways Co., 384 GS Yuasa, 384 Hitachi, 56 Mitsubishi, 185 Nissan, 45, 73, 207 Seven & i Holdings, 345 Sony Corporation, 54, 58, 374 Toyota Motor Corporation, 335

FRANCE Airbus, 359, 384 Carrefour, 365 Medtech, 280 Michelin, 135 Sodexho Alliance SA, 314 Ubisoft, 270

GERMANY BMW, 17, 45, 73, 373, 374 Mercedes, 373 Siemens AG, 361 Valeo Klimasystemme GmbH, 373 Volkswagen AG, 360

GREAT BRITAIN British Petroleum (BP), 322 Ernst & Young, 156, 191, 300, 320 Green investments, 70 PricewaterhouseCoopers (PwC), 150, 324 Tesco, 151, 152, 383 Virgin Atlantic, 220 Virgin Galactic, 220 Virgin Group, 82, 220, 228, 238, 239, 240, 279 Virgin Mobile, 220, 239 Virgin Records, 220 Virgin Unite, 240

NETHERLANDS Maastricht University, 56 Royal Dutch Shell (Shell), 112 Strawberry Frog, 149

SOUTH AFRICA Haribhai’s Spice Emporium, 55

SPAIN Banco Santander, 311 Grupo VIPS, 56

SWEDEN IKEA, 48, 56, 166, 194, 364

SWITZERLAND International Organization for Standardization (ISO), 374–375 KPMG International, 5, 155 Nestlé, 6, 139

463

464  List of International Companies, by Country

UNITED ARAB EMIRATES Retail Arabia International, 67

UNITED STATES Academy of Management Executive, 77, 222, 276, 291 AIG, 90 Airbnb, 48, 49, 154, 207 Amazon, 9, 22, 68, 79, 88, 116, 117, 156, 194, 232, 241, 258, 286, 287, 322, 359, 360, 370 American Airlines, 220 American Express, 374 American Standard, 368 Angry Birds, 21 Apple, 3, 8, 15, 50, 82, 85, 88, 162, 172, 180, 207, 210, 287, 333, 371 Bad Axe Throwing, 326 Banana Republic, 2, 162 Best Buy, 301 Best Western, 127 Black & Decker, 361 Blogger, 316 Bloomberg BusinessWeek, 101 Boeing, 359, 371, 384, 385 Business Finance, 336 Caterpillar, 372 Celestial Aerospace Company (CAP), 217 Center for Creative Leadership, 299 Cheesecake Factory, 358 Chipotle, 195, 360 Cisco Systems, 15, 77, 149, 250, 363 Clarkson University, 366 Coca-Cola Company (Coke), 101 Continental Airlines, 111 Costco, 370 Deere & Company, 366 Dell Inc., 365, 368 Deloitte, 222, 300 Dow Chemical, 374 Drum Associates, 315 E*TRADE, 63 Earth First, 118 eBay, 50, 144 Edelman, 326 Enron, 60, 318, 344, 345 Entrepreneur, 35, 191, 208 Estée Lauder, 133 Facebook, 16, 21, 66, 85, 121, 122, 139, 159, 192, 193, 207, 210, 243, 273, 300, 313, 314, 315, 316, 317, 324, 326 Fast Company, 21 FedEx, 10, 288 Foo Fighters, 21 Ford Motor Company, 9, 27, 327 Fortune, 181, 229, 300, 354 Foursquare, 207 Frito-Lay, 49, 50 Furon Company, 364 Future Workplace, 20 Gallup Organization, 5 The Gap, 301

GE Energy, 148 GE Money, 148 GE Water & Process Technologies, 148 General Electric (GE), 148 General Mills, 186 General Motors, 9, 45, 336 Gensler, 150 Georgetown University, 309 Georgia Tech, 371 GoPro Inc., 208 Google, 3, 15, 21, 22, 49, 50, 52, 53, 60, 61, 68, 146, 159, 160, 192, 193, 209, 210, 243, 314, 324, 338 Greenpeace, 118 H.J. Heinz Company, 359 Harley-Davidson, 134 Harrah’s Entertainment, 118 Harvard Business Review, 77, 94, 274, 295, 343 Harvard Business School, 202, 213, 252 Hasbro, 63 Health Net Inc., 151 Herman Miller, Inc., 41 Hewitt Associates, 262 Hewlett-Packard (HP), 56, 193 Hilton Hotels, 126 Home Depot, 7, 370 IBM, 192, 193, 319, 327 IGA, 130, 157 Instagram, 16, 85, 139, 302, 326 Intuit, 212, 213 JCPenney, 67 John Deere, 53 Johnson & Johnson, 374 Journal of Applied Psychology, 222, 276 Kenner Toys, 63 KFC, 346 KickStarter, 48 Kitsplit, 49 Kiva Systems, 359 Kraft, 374 Levi-Strauss, 186 LinkedIn, 16, 66, 210, 313, 315, 316, 317, 324 Lockheed Martin Aeronautics Company, 235 Logan International Airport, 384 MAC Cosmetics, 133 Manufacturing Research Center, 371 Marriott International Inc., 127 Mary Kay Cosmetics, 287 Mastercard, 184, 207 Mattel, 55, 63, 156, 208 McDonald’s, 55, 132, 169, 357 Mercy Hospital, 365 Merrill-Lynch, 90 Microsoft, 40, 159, 169, 192, 193, 232, 314, 338 Monster, 167 Motorola, 147, 374 MySpace, 315 NASA, 375 NBC Universal Studios, 148 Negotiation Journal, 381 Neil Huffman Auto Group, 179 Netflix, 68, 213 Nike Grind, 216

List of International Companies, by Country  465

Nike, 3, 149, 162, 218 Oculus, 49 Ohio State University, 223 Old Navy, 2 Parker Brothers, 63 PepsiCo, 101, 166, 294 PETA, 118 Pfizer Consumer Healthcare, 366 Pfizer, 159, 366 Pixar, 21 Procter & Gamble (P&G), 56, 144, 184 PROFIT, 9, 190 Puroclean, 55 Recording Industry Association of America, 344 Reebok, 149 Revlon, 145 Rolex, 46 Safeway, 9, 130, 131, 157 Schering-Plough, 371 Second Life, 149, 314 7-Eleven, 345 Simply Orange, 101 SnapGoods, 48, 49 Spain, 55, 56, 66, 129, 311 Starbucks, 7, 46, 55, 56, 212, 301, 352, 369 Starwood Hotels and Resorts Inc., 51, 126 Sun Life Assurance Company of Canada (US), 147 Taco Bell, 330, 360 Target, 113, 124, 128, 330, 383 Tempe, 344 TGI Friday, 184 3M Company, 374 Tiger Electronics, 63

Time, 190 Timex, 46 Tonka Toys, 63 Toys “R” Us, 56, 63 TrunkClub, 122 Tumblr, 16 TurboTax, 212 Twitter, 16, 21, 66, 88, 122, 159, 258, 313, 324, 325, 326, 327 Uber, 48, 49, 236, 243 United Air, 111, 366 United Way, 6, 48 University of Iowa, 296 University of Michigan, 277, 296, 298 Verizon Communications, 235 Wall Street Journal, 180 Walmart, 16, 17, 51, 67, 113, 114, 122, 124, 128, 216, 316, 329, 366, 370, 382, 383 Walt Disney Co., 6 Watson Wyatt Worldwide, 5, 163 Wendy’s, 330, 360, 370 Wharton School of Business, 283 Whole Foods Market, 146, 241, 318 Williams-Sonoma, 48 Wilson Sporting Goods, 132 Wizards of the Coast, 63 Xerox Innovation Group, 207 Xerox, 147 Yahoo, 159, 160, 273, 301, 314 Yale School of Management, 255 YouTube, 68, 124, 199, 313, 316, 324, 347 Zappos, 22–23, 258 Zipcar, 48