The New Era of Management [7th International student ed.] 032432331X, 9780324323313

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INTERNATIONAL EDITION

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RICHARD

L.

DAFT

S

Vanderbilt University

RICHARD

DAFT

L.

\

Va nderbi It University

NINTH EDITION

SOUTH-WESTERN /t%, CENGAGE LearningAustralia

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CENGAGE New

Era of

Richard

Learning

Management, Ninth

Edition

Daft, with the assistance of

L.

Patricia G.

Lane

2008 South Western. Cengage Learning

€> 2010.

ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon

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With deep appreciation to Dorothy, and partner in my life,

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to

my parents, who

toward outcomes that

I

started

my life

could not understand at the time.

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About the Author Richard L. Daft, PhD, is the Brownlee O. Currey, Jr., Professor of Management in the Owen Graduate School of Management at Vanderbilt University. Professor Daft specializes in the study of organization theory and leadership. Dr. Daft is a Fellow of the Academy of Management and has served on the editorial boards of Academy of Management Journal, Administrative Science Quarterly, and Journal of Management Education.

He was Science

the associate editor-in-chief of Organization

and served

for three years as associate editor

of Administrative Science Quarterly.

Professor Daft has authored or co-authored 12 books,

includingOrgflmzaf ion Theory andDesign (South-Western, 2007), The Leadership Experience (South-Western, 2008),

and What

to

Study: Generating and Developing Research

Questions (Sage, 1982).

He

published Fusion Leadership:

Unlocking the Subtle Forces That Change People and Organizations (Berrett-Koehler, 2000,

with Robert Lengel).

He

has also authored dozens of

and chapters. His work has been published in AdministraAcademy of Management Journal, Academy of Management Review,

scholarly articles, papers, tive Science Quarterly,

Management Journal, Journal of Management, Accounting Organizations and Management Science, MIS Quarterly, California Management Review, and Organizational Behavior Teaching Review. Professor Daft is currently working on a new book, The Executive and the Elephant. He also is an active teacher and consultant. He has taught management, leadership, organizational change, organizational theory, and Strategic Society,

organizational behavior.

Professor Daft served as associate dean, produced for-profit theatrical produc-

and helped manage a start-up enterprise. He has been involved in management development and consulting for many companies and government organizations, including the American Banking Association, Bridgestone, Bell Canada, the National Transportation Research Board, Nortel, TVA, Pratt & Whitney, State Farm Insurance, Tenneco, the United States Air Force, the United States Army, J. C. Bradford & Co., Central Parking System, Entergy Sales and Service, Bristol-Myers Squibb, First American National Bank, and the Vanderbilt University Medical Center. tions,

VII

Preface

Managing for Innovation

in

a Changing World

by massive and far-reaching social, and economic changes. Any manager who still believed in the myth of stability was rocked out of complacency when, one after another, large financial institutions in the United States began to fail. Business schools, as well as managers and businesses, were scrambling to keep up with the fast-changing story and evaluate its impact. This edition of New Era of Management addresses themes and issues that In recent years, organizations have been buffeted technological,

are directly relevant to the current, fast-shifting business environment.

I

revised

New

Era of Management with a goal of helping current and future managers find innovawhether they are tive solutions to the problems that plague today's organizations everyday challenges or once-in-a-lifetime crises. The world in which most students will work as managers is undergoing a tremendous upheaval. Ethical turmoil, the need for crisis management skills, e-business, rapidly changing technologies, globalization, outsourcing, global virtual teams, knowledge management, global supply chains, the Wall Street meltdown, and other changes place demands on managers that go beyond the techniques and ideas traditionally taught in management courses. Managing today requires the full breadth of management skills and capabilities. This text provides comprehensive coverage of both traditional management skills and the new competencies needed in a turbulent environment characterized by economic turmoil, political confusion, and general uncertainty. In the traditional world of work, management was to control and limit people, enforce rules and regulations, seek stability and efficiency, design a top-down hierarchy, and achieve bottom-line results. To spur innovation and achieve high performance, however, managers need different skills to engage workers' hearts and minds as well as take advantage of their physical labor. The new workplace asks that managers focus on leading change, harnessing people's creativity and enthusiasm, finding shared visions and values, and sharing information and power. Teamwork, collaboration, participation, and learning are guiding principles that help managers and employees maneuver the difficult terrain of today's turbulent business environment. Managers focus on developing, not controlling, people to adapt to new technologies and extraordinary environmental shifts, and thus achieve high performance and total corporate effectiveness. My vision for the ninth edition of Neiv Era of Management is to present the newest management ideas for turbulent times in a way that is interesting and valuable to students while retaining the best of traditional management thinking. To achieve this vision, I have included the most recent management concepts and research and have shown the contemporary application of management ideas in organizations. I have added a questionnaire at the beginning of each chapter that draws students personally into the topic and gives them some insight into their own management skills. A chapter feature for new managers, called the New Manager Self-Test, gives students a sense of what will be expected when they become managers. The combination of established scholarship, new ideas, and real-life applications gives students a taste of the energy, challenge, and adventure inherent in the dynamic field of management. The Southwestern /Cengage Learning staff and I have worked together to provide a textbook better than any other at capturing the excitement of organizational management. I revised New Era of Management to provide a book of utmost quality that will create in students both respect for the changing field of management and confidence

—

IX

Preface

ind

that d

and master

it

enhanced through the

rhe textual portion of this book has been '^d writing st\ le and the many in-

short exercises that

students.

I

make

he graphic component has been enhanced w

come

the

ith se> era!

new

alive for

exhibits

and

a

management concepts. The well-chosen glimpses of management h and intimate illustrations

that illustrate specific

photographs pro\ ide \ i\ id that explain how a speevents, and people rhe photos are combined withbn. graphic portions or the and the textual looks and Both feels. cific management concept world distant of management. and abstract often the textbook help students grasp I

Focus on Innovation:

New

to the Ninth Edition

edally focused on the future of manHie ninth edition ol ideas and examples of innoemerging describing and identifying agement education by ati\ e

\

organizations and In pro\ iding enhanced learning opportunities tor students.

Learning Opportunities he ninth edition has taken a leap forward in pedagogical features to help students understand their own management capabilities and learn w hat it is like to man.: an organization today New to this edition is an opening questionnaire that direct!) relates to the topic of the chapter and enables students to see how they respond to situations and challenges typically faced by real-lite managers. \ew Manager Selfin each chapter provide further opportunity for Students to understand their I

management abilities hese short feedback questionnaires gh e Students insight into how they would function in the real world of management. End-ot-chapter questions I

have been carefully Mcepts

1

re\ ised to

encourage

critical

thinking and application of chap-

nd-ot-chapter cases and ethical dilemmas help students sharpen their

diagnostic skills tor

management problem

solving.

Chapter Content Within each chapter, main topics have been added or expanded to address the current issues managers face- At the same time, chapter text has been tightened and sharpened to pro\ ide greater focus on the ke\ topics that count for management chapters. today. his tightening has resulted in a shortening of the text from 21 to essential elements about operations and been combined into one have technology he chapter. An appendix on entrepreneUTship and small business has been provided for students who want more information on managing in small businesses start-ups.

W

I

I

includes a section on making the leap from being an individual contribuorganization to becoming a new manager and getting work done primarily through others he chapter introduces the skills and competencies needed to manage

Chapter

I

tor in the

I

nizatk>ns effectively; including issues such as

managing diversity coping with gloand managing crises. In addition, the chapter discusses today s emphasis within organizations on mno\ ation as a response' to a rapidly changing environment

balization,

Chapter 2 continues its solid coverage of the historical development of management and organisations. It also examines new management thinking for turbulent times. he chapter includes a new section on systemic thinking and an expanded discussion ot post-World War II management techniques. The final part of the chapter looks at I

managing

the technology-driven workplace, including simply chain manstomer relationship management, and outsourcu

contains an updated look at current issues related to the environment and C hmpter corporate culture, indudil on on issues related to the natural environnse to environmental advocates. The chapter also illusment and mai >

trates

how managers shape

a shifting

en\ ironment

a

high-performance culture as an inno\

ati\ e

response

to

Preface

Chapter 4 takes a look at the growing power of China and India in today's global business environment and what this means for managers around the world. The intelligence, and a new section looks at understanding communication differences as an important aspect of learning to manage internationally or work with people from different cultures. In addition, the complex issues surrounding globalization are discussed, including a consideration of the current globalization backlash. A new section on human resources points out the need for evaluating whether people are suitable for foreign assignments.

chapter discusses the need for cultural

Chapter 5 makes the business case for incorporating ethical values in the organi-

The chapter includes a new discussion of the bottom-of-the-pyramid business concept and how managers are successfully applying this new thinking. The chapter also has an expanded discussion of ethical challenges managers face today, includzation.

ing responses to recent financial scandals.

It

considers global ethical issues, as well,

including a discussion of corruption rankings of various countries.

Chapter 6 provides a more focused discussion of the overall planning process and new discussion of using strategy maps for aligning goals. This chapter also takes a close look at crisis planning and how to use scenarios. The chapter's final section on planning for high performance has been enhanced by a new discussion of intelligence teams and an expanded look at using performance dashboards to help managers plan in a fast-changing environment. a

Chapter 7 continues It

includes a

new

its

focus on the basics of formulating and implementing strategy.

section

on

diversification strategy, looking at

how managers

use

unrelated diversification, related diversification, or vertical integration as strategic

approaches in shifting environments. This chapter also looks at new trends in dynamic capabilities approach and partnership strategies.

strat-

egy, including the

Chapter 8 gives an overview of managerial decision making with an expanded dishow conflicting interests among managers can create uncertainty regard-

cussion of

ing decisions.

A new section on why managers often make bad decisions looks at the

The chapter also includes a new section on innovagroup decision making and the dangers of groupthink.

biases that can cloud judgment. tive

Chapter 9 discusses basic principles of organizing and describes both traditional and contemporary organizational structures in detail. The chapter includes a discussion of organic versus mechanistic structures and when each is more effective. Chapter 9 also provides a description of the virtual network organization form. Chapter 10 includes a more focused discussion of the critical role of managing change and innovation today. The chapter includes a new discussion of the ambidextrous approach for both creating and using innovations and has expanded material on exploration and creativity, the importance of internal and external cooperation, and the growing trend toward open innovation.

HRM

Chapter 11 includes an expanded discussion of the strategic role of in building sections on coaching and mentoring and the trend toward part-time and contingent employment. New ways of doing background checks on applicants, such as checking their pages on social networks, are discussed, and the chapter also looks at the changing social contract between employers and employees.

human capital. The chapter has new

Chapter 12 has been revised and updated tional diversity issues.

The chapter looks

to reflect the at

most recent thinking on organiza-

how diversity is changing the domestic and

and includes a new section on the traditional versus inclusive models managing diversity. This chapter also contains new coverage of the dividends of diversity; an expanded discussion of prejudice, discrimination, and stereotypes; and a new look at the difference between stereotyping and valuing cultural differences. The global workforce for

chapter includes a

new five-step process

for achieving cultural

competence.

Chapter 13 provides an overview of financial and quality control, including Six Sigma, ISO certification, and a new application of the balanced scorecard, which

Preface

The disbeen updated and expanded. alsoaddn es current concerns about corporate governance and finding trol and autonomy for emplov th

.is

the foundation of high performance.

tralized control has

;

tei

hapter 14 ha-> been thoroughly res ised to discuss recent trends in operations manhe chapter begins bv looking at nent, information technology, and e-business. rganization as a value chain and includes an expanded discussion of supply chain management and new technologies such a radio frequency identification (RFID). The L

I

discussion of information technology has been updated to include the trend toward he chapter ontenl through wikis, hlogs, and social networking. I

explores how these new technologies are being applied within organizations along with traditional information systems. he chapter also diftfUSSPfi e-COmmerce strate>>f business intelligence software, and knowledge management. I

Chapter 15 continues its solid coverage of the basics of organizational behavior, indudality \ alues ^nd attitudes, perception, emotional intelligence, learning and problem-solving stvles, and stress management. Manx exercises and questionnaires throughout this chapter enhance students understanding oi organizational behavior

And

topics

their

own

personalities

and

attitudes.

Chapter lb has been enriched with a discussion of follow ership. The chapter empha^ood leaders and good followers share common characteristics. Good leadership can make a difference, often through subtle, everyday actions. The discussion of power And influence has been expanded to include the sources of power that are sizes that

available to followers as well as leaders. tional,

and

interactive leadership

have

The discussions of charismatic, transformabeen revised and refocused.

all

Chapter 17 covers the foundations oi motivation and also incorporates recent thinking about motivational tools for today including an expanded treatment of employee engagement. The chapter looks at new motivational ideas such as the importance of helping employees achieve work-life balance, incorporating fun and learning into the workplace, giving people a chance to fully participate, and helping people find meaning in their work. a discussion of how managers facilitate strategic conversausing communication to direct everyone's attention to the vision, values, and goals oi the organization. The chapter explores the foundations of good com-

Chapter IS begins with

tions bv

munication and includes a new section on gender differences in communication, an enriched discussion oi dialogue, and a refocused look at the importance oi effective written communication in today's technologically connected workplace, including the use of new forms oi manager communication such as blogs.

Chapter 19 includes a new section on the dilemma oi teams, acknowledging that teams are sometimes ineffective and looking at the reasons for this, including such problems as free riders, lack of trust among team members, and so forth. The chapter then looks at how to make teams effective, including a significantly Devised discussion of what makes ,m effective team leader. The chapter covers the tv pes of teams and includes a new look at ettectiv elv using technology in virtual teams. The chapter also includes a section on managing conflict, including the use of negotiation. In

addition to the topics listed above, this text integrates coverage oi the Internet

and new technology

into the

\

arious topics

u >\ ered

in

each and

ev erv chapter.

Organization quence

tive!)

Part

One introduces -

persj

New

is organized around the management and controlling. These four functions effecencompass both management research and characteristics of the manager's job.

functions of plannil

Era of Management

nizing, leading,

the world of

management, including the nature oi management, aotk environment, the learning organization, historical management, and the technologv -driven workplace.

related to >n

In

fa

Preface

Part

Two examines

xiii

management and organizations. This secon the business environment and corporate culture, the global and social responsibility, and the natural environment. the environments of

tion includes material

environment, ethics

Part Three presents three chapters on planning, including organizational goal setting and planning, strategy formulation and implementation, and the decision-making process.

Part Four focuses on organizing processes. These chapters describe dimensions of structural design, the design alternatives managers can use to achieve strategic objectives, structural designs for promoting innovation and change, the design and use of the

human resource function, and

ways managing diverse employees

the

are signifi-

cant to the organizing function.

Part Five describes the controlling function of management, including basic principles of total quality management, the design of control systems, information technology, and techniques for control of operations management.

Part Six is devoted to leadership. The section begins with a chapter on organizational behavior, providing grounding in understanding people in organizations. This foun-

way for subsequent discussion of leadership, motivation of employcommunication, and team management.

dation paves the ees,

Innovative Features

A major goal of this book is to offer better ways of using the textbook medium to convey management knowledge to the reader. To this end, the book includes several innovative features that draw students in and help them contemplate, absorb, and comprehend management concepts. South-Western has brought together a team of experts to create and coordinate color photographs, video cases, beautiful artwork, and supplemental materials for the best management textbook and package on the market. Chapter Outline and Objectives. Each chapter begins with a clear statement of its its contents. These devices provide an overview of what is to come and can also be used by students to guide their study and test their understanding and retention of important points. learning objectives and an outline of

Opening Questionnaire. The

text grabs student attention

immediately by giving the

student a chance to participate in the chapter content actively by completing a short questionnaire related to the topic.

Take a Moment. At strategic places through the chapter, students are invited to Take Moment to apply a particular concept or think about how they would apply it as a practicing manager. This call to action further engages students in the chapter content. Some of the Take a Moment features also refer students to the associated New Manager Self-Test, or direct students from the chapter content to relevant end-ofchapter materials, such as an experiential exercise or an ethical dilemma. a

New Manager Self-Test. A New Manager Self-Test in each chapter of the text provides opportunities for self-assessment as a

way

for students to experience

management

The change from individual performer to new manager is dramatic, and these self-tests provide insight into what to expect and how students might perform in the world of the new manager. issues in a personal way.

Concept Connection Photo Essays. A key feature of the book is the use of photographs accompanied by detailed photo essay captions that enhance learning. Each caption highlights and illustrates one or more specific concepts from the text to reinforce student understanding of the concepts. Although the photos are beautiful to look at, they also convey the vividness, immediacy, and concreteness of management events in today's business world.

Contemporary Examples. Every chapter of the text contains several written examples management incidents. They are placed at strategic points in the chapter and are

of

Preface

ned to

mpaniea. These in-text Is and inter-

pptication oi

illustra

in the

i

margin— include well-known

Google; Inilever, UPS, U did not-for-profit organiwell-known companies IS. federal the d As, Value! ienmab camples put students in touch with the real world -

Siemens, and zations Mich t

i

estigation (FBI

hi ot lnv

Eanizabons BO thai the) can appreciate the value of management concepts optalk box in each chapter addres Manager's Shoptatk Eton . Ihesiv parts ot the text

in that part.

eral questions that can be

used

gested answers are pro\ ided

n

to

I

launch classroom discussion or as homework. Sug-

in the

Media Lase

Library.

enhance and some student understanding Mam exhibits throughout this The many book concepts tend to be abstract ,\nd theoretical. understanding These exhibits conenhance students' awareness ^no\ of these concepts. illustrate consolidate key points, indicate relationships among concepts, and visually cepts he) also make effective use ot color to enhance their imagery and appeal. thibits.

/

have been added or revised

vera! exhibits

aspects ot

management

in the ninth edition to

are research based,

I

earning the management vocabularv

understanding conin three ways. First, key concepts first appear in the text. Second, set out in the margin tor eaS) review and follow-up. Third, a brief definitions are glossarv summari/mg all key terms and definitions appears at the end of the book tor hand) referent Glossaries.

I

is

essential to

temporary management. This process is facilitated are boldfaced M\d completely defined where the)

\

MetUlger

man

$

M

s

I

>;/;

l(

/s

and DiSi ussion Questions. Each chapter closes with a sumstudents should retain. The discussion questions are

of the essential points that

complementary learning tool that will enable students to check their understandbeyond basic concepts, and to determine areas that require further study. he summar) and discussion questions help students discriminate between main and supporting points and provide mechanisms tor self-teaching a

ing of ke\ issues, to think I

Management in Practice

provide issues

a

m

a

xercises. End-of-chapter exercises called "Management xerdse" and "Management in Practice: Ethical Dilemma" self-test for students and ,m opportunity to experience management personal wav. hese exercises take the form of questionnaires, scenarI

in

Practice

KperienuaJ

i

.nd activities,

teams

I

I

I

he e»

and man) also provide an opportunitv tor students to work in re tied into the chapter through the Take a Moment feature

that refers students to the end-ot-chapter exercises at the appropriate point in the

chapter content ( set tor c ntiail \nabfsis, \ so appearing at the end of each chapter is a brief but Substantive case that provides an opportunitv tor student analysis and class discussion Some ot these- cases are about companies whose names students will recog-

nize; others arc

managers ha\ tic

skills tor

e

based on real management events but the identities of companies and been disguised he illow students to sharpen their diagnosI

management problem

solving.

Preface

Continuing Case. Located at the end of each part, the Continuing Case is a running discussion of management topics appropriate to that part as experienced by General Motors Company. Focusing on one company allows students to follow the managers' and the organization's long-term problems and solutions in a sustained manner.

Supplementary Materials Instructor's

Manual. Designed

to

provide support for instructors

new to the course,

as well as innovative materials for experienced professors, the Instructor's

Man-

ual includes Chapter Outlines, annotated learning objectives, Lecture Notes, and

sample Lecture Outlines. Additionally, the Instructor's Manual includes answers and teaching notes to end-of-chapter materials, including the video cases and the continuing case. The files for the Instructor's Manual can be found at www.cengage .com /international. Test Bank. Scrutinized for accuracy, the Test false,

multiple-choice, short-answer,

Bank includes more than 2,000 true/

and essay questions. Page references are

indi-

cated for every question, as are designations of either factual or application so that instructors can provide a balanced set of questions for student exams. is

also tagged based

on AACSB

Each question

guidelines.

ExamView. Available on www.cengage.com/international, ExamView contains all of the questions in the printed Test Bank. This program is an easy-to-use test creation software compatible with Microsoft Windows. Instructors can add or edit questions, instructions, and answers, and select questions (randomly or numerically) by previewing them on the screen. Instructors can also create and administer quizzes online, whether over the Internet, a local area network (LAN), or a wide area network (WAN).

PowerPoint Lecture Presentation. Available on the Web site (www. cengage.com/ international), the PowerPoint Lecture Presentation enables instructors to customize their own multimedia classroom presentation. Containing an average of 27 slides per chapter, the package includes figures and tables from the text, as well as outside materials to supplement chapter concepts. Material is organized by chapter and can be modified or expanded for individual classroom use. PowerPoint slides are also easily printed to create

customized Transparency Masters.

Study Guide. Packed with real-world examples and additional applications for helping students master management concepts, this learning supplement is an excellent resource. For each chapter of the text, the Study Guide includes a summary and completion exercise; a review with multiple-choice, true /false, and short-answer questions; a mini case with multiple-choice questions; management applications; and an experiential exercise that can be assigned as homework or

used

in class.

Video Package. The video package for New Era of Management ninth edition, contains options: On the Job videos and BizFlix videos. On the Job videos use real-world ,

two

companies to illustrate management concepts as outlined in the text. Focusing on both small and large business, the videos give students an inside perspective on the

and issues that corporations face. BizFlix are film clips taken from popular Hollywood movies such as 8 Mile, Backdraft, and The Bourne Identity, and integrated into the ninth edition of Daft. Clips are supported by short cases and discussion questions at the end of each chapter. situations

Web Site (www.cengage.coml international). Discover a rich array of online teaching and learning management resources that you won't find anywhere else. Resources include interactive learning tools, links to critical management Web sites, and password-protected teaching resources available for download.

,

Preface

Acknowledgments •

.

-

.

nig with the

team

ot

dedicated professionals

won of producing the best manage -ive editor, whose enthusiasm, nt alive. Emma Newsom, b -

nu nt .

n kept this

iperb project coordination and ottered

lental editor, pr

suggestions

edtue Kemen, marketing

ardu

.

tor instru


demanding and sometimes

ecutive marketing manager, and Clint led keen market know ledge and inno\ ative ideas

Kan

Martha ( onwaj senior content project manager, cheerfully

uded me through the production process Hop) Mcintosh contributed kills to

create a visually

dynamic design. Ruth Belanger,

editorial

marketing coordinator, skillfully pitched in to help keep a special thank you for his layout expertise the project on track Iih.- De> ine .\nd commitment to producing an attractive, high-quality textbook. Additionally, BJ Parker, c opj shop, I SA contributed the Continuing t want to extend special appreciation to my assistant, Barbara lere al Vanderbilt Haselton. Barbara provided excellent support and assistance on a variety of projalso want to acknowledge an intellectual debt to ects that gave me time to write riedman, Neta Move. Rich Oliver, David Owens, Barrj Raj Ranga Ramanujam, Bart Victor, and Tim Vogus. Thanks also to Deans Jim Bradford and Bill Christie who have supported m\ writing projects and maintained a positive scholarly atmosphere in the school. Another group oi people who made a major contribution to this textbook are the management experts who provided ad\ ice, rev lew s, answers to questions, and suggestions tor changes, insertions, and clarifications. want to thank each of these colleagues tor their valuable feedback and suggestions 1

1

I

1

1

on the ninth

i

edition:

Alexander

nan

Broth

rsity

Reginald

Burrell

EweU

M

Marv

I

University

Paul

Audibert

— Long Beach

A Brown

rnia University of

Pennsylvania

ColU\

e

Dame of

Sal

ku kalis

California State

Mendeth Ferguson Baylor University

University

— Long Beach

FeMav

foyce

Bethel University Fritz

Bridgewater College

Paula Buchanan Hie State

Western Carolina University

Fanning

Maryland

Karen

Kinard

lerrv

Bridgewater College

Yezdi H. Godhvalla onsin-

•

Wade McCutcheon East Texas Baptist Calk

Tom

Miller

I

Diaj

Whitewater

Concordia University

lames Halloran yan Colh

Bladen

ino hell

Community Cc

Bruce Charnov

Stephen

R. Hiatt

John Okpara Bloomsburg University

Gloria Cockerel] Bettv IF

Lori liege

trton University

lodv

|oi

I

Oklahoma Chris

A

Peterson

sburg

CoL

Michael Provitera Barry University

Preface

xvii

Abe Qastin

Thomas Sy

Noemy Watchel

Lakeland College

California State

Kean University

Holly Caldwell Ratwani Bridgezvater College

Terry L. Riddle

University

—Long Beach

Kevin A. Van Dewark Humphreys College

Peter Wachtel Kean University

Commu-

Central Virginia nity College

I would also like to continue to acknowledge those reviewers uted comments, suggestions and feedback on previous editions:

David C. Adams

Richard

Manhattanville College

William Paterson

Erin M. Alexander

De Luca

who have

contrib-

Dennis Heaton

University

Maharishi University of Management, Iowa

University of Houston-

Robert DeDominic

Jeffrey D.

Clear Lake

Montana Tech

Davenport College

Hal Babson Columbus State Community

Linn Van Dyne Michigan State University

Bob Hoerber

College

John C. Edwards

James N. Holly

Reuel Barksdale Columbus State Community

East Carolina University

University of Wisconsin-

Mary Ann Edwards College of Mount St. Joseph

Green Bay

College

Bemben

Gloria

Finger Lakes

Community

Pat Bernson

County College of Morris

Daryl Fortin Upper Iowa University

Ohio Valley College

Art Bethke Northeast Louisiana

Technical College

University

Richard H. Gayor

Thomas

Antelope Valley College

Butte State University

Xavier University, Ohio

Diane Caggiano

Joliet

Fitchburg State College

Peter Gibson

E.

Cathon

Augustine's College

Jim Ciminskie Bay de Noc Community College

Dan Connaughton Un ivers ity of Florida Bruce Conwers Kaskaskia College L.

David

The- City College

York

Sheryl Kae

J.

Michael Keenan

University

Junior College

Gloria

Komer

Stark State College

Becker College

Carol R. Graham Western Kentucky

Paula C. Kougl Western Oregon University

Cynthia

University

Gary Greene Manatee Community

Mount

Krom

St.

Mary

College

Mukta Kulkarni

College

University of Texas-San

Ken

Antonio

Harris

Indiana University

William

Southeast

Millsaps College

Paul Hayes ofNezv

Jordan J. Kaplan Long Island University

Western Michigan

James Genseal

Byron

Kathleen Jones University of North Dakota

Dan Geeding

Xavier University, Ohio

St.

C. Joy Jones

Lynchburg College

Peter Bycio

Douglas

Genelle Jacobson Ridgewater College

Michael P. Gagnon Neiv Hampshire Community

Humboldt

Westminster College

M. Feldbauer Austin Community College Janice

College

Hines

Coastal Carolina nity College

Commu-

B.

Lamb

Robert E. Ledman Morehouse College

\ Preface

William A.

Lehma Lengnick-Hall

ithia

Um

S(

Hall University

n

Mar) Studer Michigan

tern Coll-

land t

uke

1

James

Bruce

Philli

I

C Walker :nsiana

fenna

undbi

I

an

Wall

Un

University

Linda Putchinski 'til Un: Fhr

Mark Weber

Kenneth ulle

M\ ma R Mandell

University of

Emilia

ColL

Stan Williamson theast Louisiana

Indiana University

Mann

B.

-ity

Market

York

Terrv Riddle

-ity

W

inia

\K

State

Technk

V

ColL

Meir Ri

James Swenson Moorhead State University.

University of W'isconsin-

Minnesota Irvvin Talbot

rsity

Marc) Satterwhite Like Land Col.

St. Peter's Col.

Don

Lourdes Colli

Schreiber

W Murphv munity

ColL

Kilmon Shin

St.

Ferris State University

Coll.

Daniel G. Spencer Un:

John Todd

\urre

fom.b

I

(

.

Frank G. Titlow

unty ColL

U

Andrew Timothy

Baylor University

Micah Mukabi

Upper Iowa

Petersburg junior

University ofArka Philip Varca

-:ty

i

tgazon

University of

Sprencz

Dennis

L.

Wyoming

Varin

Southern Oregon Allen Ogheni

Milk

Colli

Unrversity

Shai \e

I

Polytechnic

Pomona

land Hill

Coll.

.

Mksei

I

Zimmerman

Pima Community

Creen Bay

\hern lllin

id

Rohrs

Millet

bene A Miller

[J)a\

F.

:>ier

Un:

James

Jersey

Vic

Walter

Alan

Commu-

nity Coll,

Colli

Yacomb

Loma Linda University

Imad Jim Zbib Riimapo Collegi

Iroy

State

Dennis

Ignatius

John's University-

NKI

University of Wisconsm-

Green Bay

William Reisel

University i.

Redmond

Barbara

Briar Cli~

-

lames

University Alia L. Wilson

LlHi

Mklick'l

Westnev

S.

Texas Tech University

Ka,'

Gerald D. Ran

Daniel

Mmn

munity

Jeffrey Stauffer

Gina Vega Merrimack Col

George

S.

Vozilris

rsityofTi

— Preface

Bruce C. Walker

Stan Williamson

Imad Jim Zbib

Northeast Louisiana

Northeast Louisiana

Ramapo College ofNeiv Jersey

University

University

Mark Weber

Alia L. Wilson

Vic University of Minnesota

Emilia

S.

University of Wisconsin-

Green Bay

Westney

Ignatius

Texas Tech University

Yacomb

Loma Linda

I'd like to

pay

Zimmerman

Pima Community College

special tribute to

University

my long-time editorial

associate, Pat Lane.

I

can't

imagine how I would ever complete such a comprehensive revision on my own. Pat provided truly outstanding help throughout every step of writing the ninth edition of New Era of Management She skillfully drafted materials for a wide range .

when new sources were lackand did an absolutely superb job with the copyedited manuscript and page proofs. Her commitment to this text enabled us to achieve our dream for its excellence. I also want to pay tribute to Mary Draper, who stepped in to help with the research and revision of this edition. Mary also did a superb job with the copyedited manuscript and page proofs. We could not have completed this revision of chapter topics, boxes,

and

cases; researched topics

ing;

without Mary's excellent assistance. Finally, I want to acknowledge the love and contributions of my wife, Dorothy Marcic. Dorothy has been very supportive during this revision as we share our lives together. I also want to acknowledge the love and support^rom my five daughters Danielle, Amy, Roxanne, Solange, and Elizabeth who make my life special during our precious time together. Thanks also to B. J. and Kaitlyn and Kaci and Matthew for their warmth and smiles that brighten my life, especially during our days together skiing and on the beach.

—

Richard

L.

Daft

Nashville, Tennessee

December 2008

Brief Contents Part

1

INTRODUCTION TO MANAGEMENT 1

2

Management

Innovative

for Turbulent

Times

The Evolution of Management Thinking

2

32

Part 2 THE ENVIRONMENT OF MANAGEMENT 3

The Environment and Corporate Culture

4

Managing

in

5

Managing

Ethics

a Global Environment

62

94

and Social Responsibility

128

Part 3 PLANNING 6

Managerial Planning and Goal Setting

7

Strategy Formulation and Implementation

8

Managerial Decision Making

158

184

212

Part 4 ORGANIZING 9

Designing Adaptive Organizations

242

10

Managing Change and Innovation

276

11

Managing Human Resources

12

Managing

Diversity

306

340

Part 5 CONTROLLING 13

Managing Quality and Performance

14

Managing the Value Chain, Information Technology, and E-Business 408

376

Part_6 LEADING 15

Dynamics of Behavior

16

Leadership

17

Motivating Employees

18

Managing Communication

19

Leading Teams

Indexes

Organizations

440

472

APPENDIX Glossary

in

A:

504 534

566

MANAGING SMALL BUSINESS START-UPS

601

625 639

XXI

Contents

Part

1

INTRODUCTION TO MANAGEMENT Innovative

Times

Management

for Turbulent

2

Are You Ready to Be a Manager?

Why

The Evolution of Management Thinking

Definition of

Planning

Organizing

5

Controlling

7

9

|

9 10

Humanistic Perspective

Human

Like to

13

Making the Leap: Becoming a New Manager 13 New Manager Self-Test: Manager Achievement 14 Manager's Shoptalk: Do You Really Want To Be A Manager? 16 Manager Activities 17 Manager Roles 18 Managing in Small Businesses and Nonprofit Organizations 20 Management and the New Workplace 21

New Workplace

Essentials:

Discussion Questions

Management

23

What Have We 24

in Practice:

Management

in

Experiential

Practice: Ethical

Critical Analysis

Times

23

Dilemma

26

Contingency

47

Total Quality

50

The Learning Organization

50

Managing the Technology-Driven Workplace 50 A Manager's Essentials: What Have We Learned? 52

Management Management

52

in

Practice: Experiential Exercise

in

Practice: Ethical

Critical Analysis

BIZ FLIX VI DEO

CASE

Dilemma

53

54

54

ON THEJOB VIDEO CASE Endnotes

27

46

47

Management 49 ManagementThinking ForTurbulent

48

Innovative

44

45

Science Perspective

Systems Theory

View

Human

42

Evolution of Style

Recent Historical Trends

Case for

26

ON THEJOB VIDEO CASE

Management

40

43

Behavioral Sciences Approach

Discussion Questions

Learned?

25

Exercise

Case for

New

21

Characteristics

Management Competencies

A Manager's

Movement

New Manager Self-Test:

Be a Manager?

Bureaucratic

41

Resources Perspective

12

Differences

Relations

37

Administrative Principles

38

Organizations

Horizontal

11

36

Management

Scientific

10

Vertical Differences

33

35

Classical Perspective

Human Skills When Skills Fail

8

Skills

Management Types

Is It

6

8

Technical Skills

What

Leading

6

32

Management and Organization 34 Manager's Shoptalk: Contemporary Management Tools

Skills

Conceptual

Are You a New-Style or an Old-Style Manager? 5

7

Organizational Performance

Management

28

29

3

4

Innovation Matters

Management 4 The Four Management Functions The

VIDEO CASE

BIZ FLIX

Endnotes

55

56

57

Continuing Case

60

Part 2 THE ENVIRONTMENT OF MANAGEMENT The Environment and Corporate Culture Are You

The

Manager's Shoptalk: Creating Guanxi Task Environment

62

Fit for

Managerial Uncertainty?

External Environment

General Environment

64

63

Environmental Uncertainty 73

67

China

The Organization-Environment Relationship Environment

65

in

69

72

72

Adapting

to the

9

1

Con

The

New Manager

75

Corporate Culture

Internal Environment:

A Manager's 78 ilturr

Management Management

S«-

82

Prrterrnce

82

Shaping Corporate Culture for Innovative Response

,e

ON BIZ

A Managt in

87

I'-

in Pr

•

ical

Dilemma

5

87

89

IHl JOBVIDI

BIZ FUX VIDEO Endnotes 91

in Practice: Ethical

CASE

Managing Will

and Social

Ethics

128

You Be a Courageous Manager? 1 30 Is Managerial Ethics?

in

a Global Environment

Work

A

Borderless

World

94

Making

Approach

96 98

100

101

102

the Pyramid

104

Manager's Shoptalk: Culture

Game?

How

Well

The

104 105

Ethic

of Sustainability

Do You

Play

The

Code of Ethics

pean

113

Multinational Corporations in a

114

Global Environment iltural

ilturallv

Tart

Case for

Intelligence

Ethical

and

BIZ

115

Practice: Experiential Exercise

in

Practice: Ethical 1

FUX VIDEO CASE

Dilemma

149

150

50 151

152

153

156

11*

:;

PLANNING 6

Managerial Planning and Goal Setting Does Goal Setting

Fit

Your Management Style?

Overview of Goals and Plans

1

1

1

58

59

Goals

in

Studying

60 PuT|

Organizations

New Manager 1

Self-Test:

162

Your Approach to

63

anizational Mission

1M Planning Process

148

148

in

Continuing Case

The

|

What Have We Learned?

Critical Analysis

Endnotes

115

146

Social

147

ON THE JOB VIDEO CASE

3

142

and Social

i

|

Essentials:

Management Management

12

1 1

The Bottom of

Whistle-Blowing

Discussion Questions

The Globalization Backlash

Managing

144

for Ethics

Busi:

A Manager's

1 1

Jl and the World Ti 112

138

141

Ethics

145

Structures

Responsibility

1

133

140

Managing Company Responsibility 144

Other Cultural

ition

Approach

Evaluating Corporate Social Responsibility

108

International Trade Alliances

Moral-Rights

132

nzational Stakeholders .ind

The Legal-Political Environment The Sociocultural Environment

132

Justice

i

131

132

134 Manager Ethical Choices Manager's Shoptalk: How to Challenge the Boss on 136 Ethical Issues New Manager Self-Test: Self and Others 1 37 What Is Corporate Social Responsibility? 1 38

I

The International Business Environment The Economic Environment 103

Approach

Individualism Approach

95

Internationally?

ting Started Internationally

tf

29

Dilemmas: What Would You Do?

Eth.cal

Are You Ready To

1

What

90

Utilitarian

Managing

120

121

THE JOB VIDEO CASE 123 124 FLIX VIDEO CASE

Criteria for Ethical Decision

4

Dilemma

122

for Critical Analysis

Responsibility

88

ON

Experiential Exercise

in Practice:

86

>ns

Management Management

1 1

120

Endnot.

85

Div

Are You Culturally

What Have We Learned?

Essentials:

Discussion Questions

Environment and Culture

New Manager

Self-Test:

117

Intelligent?

|

Aligning Goals with

Contents

XXV

Goals

Criteria for Effective

by Objectives Plans

A Manager's

167

Operational Planning

Management

168

171

Manager's Shoptalk: Regulating E-Mail

Workplace

in

171 172

Contingency Planning 173

Scenarios

Planning

Crisis

Traditional

Approaches

to

72

1

Essentials:

High-

175 175

Learned?

178

Dilemma

8

VIDEO CASE

214 Programmed and Nonprogrammed

Is

The

Ideal, Rational

What

Is

Requirement

85

1

The

Management?

1

188

Management

Strategic

191

88

Levels of Strategy

194

194

Matrix

The

|

in

Globalization

202

in

Manager's

229

Management Management

Strategic

230

Essentials:

in

Know When

|

Transnational Strategy

202

What Have We

231

CASE

Dilemma

232

233

234

Critical Analysis

Endnotes

Learned?

232

in Practice: Ethical

235

236

237 240

Continuing Case

203

231

to Bail

Practice: Experiential Exercise

BIZ FLIX VI DEO

Multidomestic

Avoid

230

Rigorous Debate

Discussion Questions

Case for

Manager's Shoptalk: Tips for

227

228

229

ON THEJOB VIDEO CASE

201

Strategy Execution

Execution

198

200

Global Strategy

Strategy

196

A

200

Group Decision Making

Groupthink

200

Partnerships

225

226

Managers Make Bad Decisions?

Engage

195

199

Innovation from Within

Evaluation and Feedback

Start with Brainstorming

Competitive Strategies

Strategy

224

Management

Competitive

196

Forces

New Trends

Alternative

Personal Decision Framework

BCG

Formulating Business-Level Strategy Porter's Five

Implementation of Chosen

Manager's Shoptalk: Evidence-Based

192

194

Diversification Strategy

of

224

Innovative

Formulating Corporate-Level Strategy Portfolio Strategy

190

Development

Selection of Desired

Alternative

Why Do

191

Process

SWOT Analysis

|

Diagnosis and

222

223

Alternatives

to Studying,

Strategy Formulation Versus

Execution

222

222

Analysis of Causes

87

Strategic

221

Recognition of Decision

186

Purpose of Strategy

Model

Decision-Making Steps

New Manager Self-Test: Your Approach 1

How Managers

Make Decisions 218 New Manager Self-Test: Making Important Decisions 220 Actually

182

Your Strategy Strength?

Part 2

217 Model 217

Decision-Making Models

181

184

Thinking Strategically

215

Uncertainty

Strategy Formulation and

What

Facing Certainty and

214

Decisions

179

182

Implementation

212

213

Decisions?

Types of Decisions and Problems

Political

7

208

209

Managerial Decision Making

179

180

Critical Analysis

Endnotes

207

210

How Do You Make

Experiential Exercise

Practice: Ethical

ON THE JOB VIDEO CASE

Dilemma

175

Planning

What Have We

in Practice: in

Practice: Ethical

VIDEO CASE

Endnotes

178

Discussion Questions

Management Management

Practice: Experiential Exercise

in

173

Performance Approaches to Planning

A Manager's

206 207

in

Critical Analysis

BIZ FLIX

Building

Planning for High Performance

BIZ FLIX

Case for

the

205

Learned?

206

ON THEJOB VIDEO CASE

Planning for a Turbulent Environment

Case for

Management Management

Single-Use and Standing

168

What Have We

Essentials:

Discussion Questions

Effective Strategy

204

P art 4 ORGANIZING 9

Designing Adaptive Organizations

What

Are Your Leadership Beliefs?

Organizing the Vertical Structure

Work

Specialization

Command

245

244

Span

242

Centralization

243 244

Vertical Functional

Management

247

Approach

How to

Delegate

and Decentralization

Departmentalization

Chain of of

Manager's Shoptalk:

252

248 250

250 Approach

252

Matrix Approach

Divisional

254

Team

4

.

1

img the

316

Right People

arming

Coofdinatton

r

.al

318

Recruiting

317

Manager's Shoptalk: What Makes a Good Interview

260

Go Bad?

323 Managing Talent

324 Performance

264

egw

thorny Role Models

*

A M

What H

itials ..

Management Management

ON THE JOB VII

Management Management

.71

VIDEO

BIZ FLIX

What Have We Learned?

Essentials:

-72

Case

Experiential Exercise

in Practice:

Ethical

VIDEO CASE

Are You Inno.

2

77

Innovation and the Changing Workplace

340

12 Managing Diversity

278

Changing Things: New Products and Technologies

279

335

336

336

Endnotes

276

10 Managing Change and Innovation

Dilemma

334

for Critical Analysis

BIZ FLIX

Do You Know Your Biases? 341 The Changing Workplace 342 343

Diversity in the United States

New Manager

America 346 Managing Diversity 346 What Is Diversity?

in

287

Dividends of Workplace

Diw

291

350

Factors Shaping Personal Bias

and

Prejudice, Discrimination,

Manager's Shoptalk: Making Change Stick

Ethnocentrism

292 Factors Affecting

Implementation

Women's

Glass CeilinEssentials:

Case for

What Have We Learned'

Dilemma

VIDEO CASE

Self-Test:

Competence 356 and Programs

Mentor

301

306

358

Strategic Role

Performance

of HRM

Is

307 Dnve Organizational

to

commodating Providing Diversity Skills

Increasing Aware:

-ual

New

362

Diversity Initiatives

Multicultural

Emp

Teams

308 .ich

308

A Manager's

Buik •

The Impact of Federal

Legislation

New Manager

Self Test:

Orientation?

313

What

Is

The Changing Nature of Careers The C hangu

M

Expanding Establishing

|

Harassment

Getting the Right People on the Bus

The

358

Pol;

Relationship.

Training

Managing Human Resources

Gender

The Female Advantage Cultural

Recruitment Efforts

301

3!

Into

355

60 1 1

-Out Trend Are You Tuned

Changing Structures and

300

353

Careers

Diversity Initiatives

299

ON TH E JOB VI DEO CASE Endnotes

297 298

Experiential Exercise

in Practice:

New Manager's Differences?

in Practice: Ethical

Critical Analysis

BIZ FLIX

296

296

Discussion Questions

Management Management

a

Manager's Shoptalk: A Guide for Expatriate Managers

Implementing Change

s

on

Taking Charge of

Self-Test:

anging People and Culture

A Manager

Diversity

-

286

m

Self- Test:

Management

iership Traits

477

Interpersonal Patterns

479

for Critical Analysis

BIZ FLIX

479

Behavioral Approaches

VIDEO CASE

Endnotes

529

530

531

532

534

18 Managing Communication

482

Contingency Approaches

Situational

tingency

Matching

i

Are You Building a Personal Network?

535

Communication

536

Is

the Manager's Job

What Is Communication? Communication Pro

the

Charismatic and Transformational Leadership

486

Manager's Shoptalk: Are You a Charism.r Leader?

Case

ON THE JOB VIDEO CASE

478

to Leadership

487

The

537

Communicating Among People 539 Manager's Shoptalk: Breaking Down Language Barriers 539 mmunication Channels

Communicating

540

ersuade and Influence Others

488

Followership

Differences in

Power and Influence

490

mmunication

491

491

A Manager's

Essentials:

Discussion Questions

Management Management Case

What Have We Learned'

547

495

mmunication Channels

550

•mmunication Channels

551

Innovations

in Practice: Ethical

501

546

496 497

in

344

Your Social

Is

547

Team

Personal

Organizational Communication

553

Experiential Exercise

Dilemma

m

554

498

ON THE JOB VIDEO CASE Endnotes

Disposition?

Listening

What

•mmunication Channels

496

in Practice:

VIDEO CASE

Self-Test:

493

for Critical Analysis

BIZ FLIX

544

New Manager

Gender Nonverbal

543

Organizational Communication

Int.

Leadership as Service

Communication

542

500

Iback

and

Climate of Trust and

499

A Manager's

Essentials:

Discussion Questions

What Have We Learned? 557

556

Contents

Management Management Case for

in Practice:

ON THEJOB VIDEO CASE CASE

Dilemma

560

Critical Analysis

BIZ FLIX VI DEO

558 559

Experiential Exercise

Practice: Ethical

in

577

Processes

Stages of Team Development

Cohesiveness

578

Team Norms

580

|

584

Negotiation

New Manager Self-Test: Managing 19 Leading Teams

566

Work Team

How Do You Like to Work? 567 Why Teams at Work? 568 What Is a Team? Teams

568

Effective

of Team Effectiveness

Types ofTeams

Teams

Self-Directed

571

Teams

572

Essentials:

Diversity

Management Management

576

Member

Critical Analysis

Endnotes

Name Index 639 Company Index 653 657

601

CASE

595 598

Learned?

589

589 Experiential Exercise

Practice: Ethical

in

Continuing Case

625

Run a Great

What Have We

in Practice:

BIZ FLIX VI DEO

576

577

Subject Index

A Manager's

Case for

to

Dilemma

592

ON THEJOB VIDEO CASE

575

Appendix A: Managing Small Business Start-Ups Glossary

Team

573 Global Teams

573

Characteristics

576

Effective

How

588

Meeting

570

Satisfaction of

587

Discussion Questions

ofTeams

Innovative Uses

Size

570

571

Formal Teams

Virtual

587

Capacity to Adapt and

Learn

571

Leadership

Roles

of

Productive Output

Members

587

586

Conflict

586

Effectiveness

Manager's Shoptalk:

How to Make Teams

Team

The Dilemma

569

Model

Team 581

Managing Team Conflict 581 Causes Balancing Conflict and Cooperation 582 583 of Conflict 583 Styles to Handle Conflict

561

562

563

Endnotes

Team

594

593

591

590

I RICHARD

L.

DAFT

Vanderbilt University

Are You Ready to Be a Manager? 'ZL

Why

After studying this chapter, you should be able to:

Innovation Matters 1

|^Z *Z1

~

^, l_

The Definition of Management The Four Management Functions Planning

2.

Organizing

management

functions and the type of management

associated with each.

Explain the difference between efficiency and effectiveness and importance for organizational performance.

their

Leading 3.

ntrollmg

T"

Organizational Performance

3"

Management

II

Describe the four activity

Conceptual

Human '.

•

skills

and

their relevance for

4.

Describe

management

types and the horizontal

and

vertical differences

between them.

Skills

Skills |

When

Skills

Describe conceptual, human, and technical

managers.

Skills

Skills Fail

5.

Define ten roles that managers perform

6.

Appreciate the manager's role

Management Type*

in

in

organizations.

small businesses

and nonprofit

organizations.

Vertical Differ«7.

Honzontal Dr-

What

Be a Manager? Making the Leap: Becoming a New Manager Is It

New Manager

Manager

Achievement

Manager Manager R Managing in Small Businesses and Nonprofit Organizations

Management and

the

New Workplace

NewWorkpl.:

New Management Competen,

Understand the personal challenges involved

in

becoming a new

manager.

Like to

8

D,SCl

competences needed

*

of the new workplace and the new management todays turbulent environment.

to deal with

Innovative Management tor Turbulent Times Are You Ready to Be a Manager? Welcome it?

to the world of management. Are you ready for

This questionnaire

orities align with the ers.

will

help you see whether your pri-

demands placed on

today's

manag-

Rate each of the following items based on what you

think

is

the appropriate emphasis for that task to your

success as a

new manager of a department. Your

task

"Low

the other four as

You

Prioity."

will

is

and

to rate the top four priority items as "High Priority"

have four of the

items rated high and four rated low.

1.

High

Low

Priority

Priority

Spend 50 percent or more of your time in the care and feeding of

Make

in

list

control of the

may

self

ready for

or they misjudge

management philosophy or cultural good relationships in all directions

values. Developing typically

more important than holding on

outcomes

typically will

or so

people learn that

more than

in

performance.

Spend as much time as possible and listening to

talking with

subordinates.

7.

Reach out to your boss to discuss you and your department.

sure jobs get out on time.

his expectations for

8.

Make

sure you set clear expec-

tations

and

policies for

your

department.

Many new managers

expect to have power, to be in control, and to be personally

responsible for departmental outcomes. first

step into a

management

A big

surprise for

role is that they are

much

work

occur when relationships are a managerial

solid. After a year

Implement the changes you improve department

Make

to old

or emphasizing control and task outcomes. Success-

other departments.

6.

you checked

manager discovers that a lot of time has to be spent in the care and feeding of people, including direct reports and colleagues. People who fail in new management jobs often do so because they have poor working relationships

believe will

5.

If

odd-numbered items, consider youra management position. A successful new

three or four of the

many

people

when

less in control of things

they than

they expected. Managers are dependent on subordinates more than vice-versa because

they are evaluated on the work of other people rather than on their own work. In a world of rapid change, unexpected events, and uncertainty, organizations need managers who can build networks and pull people together toward common goals. The nature of management is to motivate and coordinate others to cope with diverse and far-reaching challenges. For example, Bruce Moeller, CEO of DriveCam, begins his work day by walking around visiting managers in operations, marketing, sales, engineering, finance, and so forth. Those managers, in turn, walk around talking with their direct reports, and on down the line. Moeller believes continual, free-flowing communication keeps everyone "on the same page" and helps employees meet goals at DriveCam, a company that sells and installs video recorders that monitor the behavior of commercial drivers. 2

role, successful

half their time

working and building relationships.

in

in

more important than the even-numbered

items for long-term success as a manager.

Use lunches to meet and network with peers

items

All eight

be important, but the odd-numbered items

are considered

ful

department.

4.

the

is

sure people understand

that you are

3.

SCORING & INTERPRETATION:

skills

people. 2.

1

is

spent net-

i

Pas

'•' i

1

-

•

In

But the

field

mote with k natural, and to inspin

j

ihorative i

and produc-

>mmand and

con-

iproach ditters significantly

•

b\ impersonal

rrol employee separameasurement and anal) management and thechang-

t

rld that

and

not

d of this

fundi

mar understand how ma the skills

to

end

i't

nizing, leading,

Why

ganizatjons on track, and you will results through people. By the astonishing in achieve understand fundamental management skills tor planning, I

a

tin

B) reviewing managers, you will learn the chapter, you will ahead) recognize

ill

M\d controlling

a

department or entire organization.

Innovation Matters

innovation lb gam or keep a competitive edge, managers emphasis on innCA ation, shitting awaj from a relentless focus on controlling costs toward investing in the future. In a SUTVe) of nearly 1,000 executives u rope. South America, and Asia 86 percent agreed that "innovain \orth America, 1

theme

In

ha\

i

of this text is :

their

I

is

tion

\\

more important than

cost reduction tor long-term sue.

h\ does innoi ation matter

1

lnno\ ations in products, services, management s\ -,porate values, and other aspects of the organization

production proa what keeps companies growing, changing, and thriving Without innovation, no COmpan) can sur\ ive over the long run. The growing clout and expertise of companies in developing countries, particularly China and India, have many Western manIn a h\ percompetith e global environment, companies must innovate more and more quickl) than ever. Throughout this text, we will spotlight various companies that reflect this new innovation imperative. In addition, Chapter 10 dis- inno\ ation .\nd d^n^' in detail. First, let 's begin our adventure into the world of management b\ learning some basics about what it means to be a manager are

I

—

—

The Definition of Management soke difficult problems, turn organizations around, and achieve astonishing performances, lb be successful, ever) organization needs good mat

W hat charo

managers have in common 1 They get things done through their organizations. Managers are the executive function of the organization, r building and coordinating an entire system rather than performing hat is. rather than doing all the work themseh es, good managers create tt that enable others to perform those tasks As a boy. Mart founder Sam Walton made $4,000 a year at his paper route. How? Walton had a natural talent tor management, and he created a system whereby he hired and coordinated others to help deliver papers rather than simply delivering what he could im his oi •mg the right s\ stems and en\ ironment. managers ensure that the department or organization w ill sur\ i\e .\nd thrive beyond the tenure of any specific superider that lack Welch 01 man. )of < .eneral Electric through 20 id

I

i

angl) successful years, but the leadership transition to left lmmelt in 2001 was •'^ »nd d at or near the top of lists such as Fortune mag'

*

1/m

'

"most respected" survey,

Management for Turbulent Times

Chapter

1

and

most admired companies. People who have GE aren't surprised. The company has thrived for

Innovative

Barron's

studied

more than a century because managers created the right environment and systems. In the late 1800s, CEO Charles Coffin emphasized that GE's most important product was not lightbulbs or transformers, but managerial talent. Managers at GE spend a huge amount of time on human

—

recruiting, training, appraising, menand developing leadership talent for the future. 5 Recognizing the role and importance of other people is a key aspect of good management. Early twentieth-century management scholar Mary Parker Follett defined management as "the art of getting things done through people." 6 More recently, noted management theorist Peter E>rucker stated that the job of managers is to give direction to their organizations, provide leadership, and decide how to use

resources issues toring,

organizational

resources

to

accomplish goals. Getting

Schmidt of Google or Indra Nooyi of PepsiCo, but also to the manager of a restaurant in your home town, the leader of an airport security team, a supervisor of an accounting department, or a director of sales and marketing. Thus, our

management is

Management cient

is

the next

level.

Tattoo

artists

7

things done through people and other resources and providing leadership and direction are what managers do. These activities apply not only to top executives such as Eric

definition of

Concept O^^wvv&cVt^vu A business may develop from founder's talent, but good management and vision can take started the business

Miami

Ami James Ink,

which

Discovery reality television program

a it

to

and Chris Nunez (right) the namesake of theTLC/

(left) is

in its

fourth season

in

2008.

The partners pitched the concept for the show with a friend and turned their business into the most well-known tattoo design studio in the United States. Planning for life after reality TV, James and Nunez are creating another Miami tattoo studio, Love Hate Tattoo, because TLC/ Discovery will own the rights to the name Miami Ink

when

the series ends.

as follows:

and effiand controlling organizational

the attainment of organizational goals in an effective

manner through planning, organizing,

leading,

resources.

This definition holds two important ideas: nizing, leading, effective

and

and

controlling,

efficient

and

manner. Let's

(2)

first

(1)

the four functions of plarLning, orga-

the attainment of organizational goals in an

take a look at the four primary

functions. Later in the chapter, we'll discuss organizational effectiveness

as well as the multitude of skills

managers use

to successfully

perform

management

and

efficiency,

their jobs.

As a new manager, remember that management means getting things done through other people. You can't do it all yourself. As a manager, your job is to create the environment and conditions that engage other people

in

TakeaMoment

goal accomplishment.

The Four Management Functions Exhibit

the process of how managers use resources to attain organizathrough the functions of planning, organizing, leading, and controlling.

1.1 illustrates

tional goals

Although some management theorists identify additional management functions, such as staffing, communicating, or decision making, those additional functions will be discussed as subsets of the four primary functions in Exhibit 1.1. Chapters of this book are devoted to the multiple activities and skills associated with each function, as well as to the environment, global competitiveness, and ethics, which influence how managers perform these functions.

management The

attainment

of organizational goals in an effective

and

efficient

manner

through planning, organizing, leading,

and controlling

organizational resources.

planning The management

Planning Planning means identifying goals

function concerned with defin-

performance and deciding on the tasks and use of resources needed to attain them. In other words, managerial planning defines where the organization wants to be in the future and how for future organizational

ing goals for future organizational

performance and decid-

ing on the tasks and resources

needed

to attain them.

g

H

EXHIBIT

1.1

The

nem

Pre.

\n example ot good planning comes from Time Warner, Inc., where \ anous di\ isions— HBO, Time Inc., Turner Broadcasting,

the marketing chiefs of the

—

ther ever) Warner Bros \oi New ine Cinema, and Time Warner Cable that' weeks to talk about future projects and how the divisions can work together to Thanks to careful planning, tor example, almost ever) make thorn n di\ ision is im oh vd in promoting major films such as The Golden Compass, Hairspray, and The Lord of the Rings trilog I

organizing

-merit

I.

wg U«kx

groupiru

Ir j ding

The manag

Organizing and reflects how the organization tri Organizing im oh es assigning tasks, grouping tasks into departting authority, and allocating resoun ss the organization. In recent \ oars companies as diverse as IBM, the Catholic Church, Motorola, and the Federal Bureau of Investigation have

•u/ing typically follows planning achievi

Otplish the plan

ments

undi

structural reorganizations to

accommodate

changing plans. At Avon Products, where sales have stalled and overhead costs have run amok, CEO Andrea their

Jung recently trimmed seven layers of management and reorganized the -ions

company

into a structure

and functions are handled on

achieve greater efl

where more

a global bt£

ale.'

Leading 1

eading

is

the use oi influence to motivate

emplo means creatcommunicating goals

/ational goals. Leading

Concept C •

airman and

*nd

midl work .

"j'

j kT'-.

B

j

(

r a

CEO

f

W\ pnonKI

I

ared culture and values,

of Google.

Larry

jl.on an J

>e*e

leading

throughout the organization, and infusing the desire to perform at a high level. ling involves motivating entire departments and -

•

emp

ith

i>>rn motivated and ene

of engineering a hi-

1

ter

gthetal

latent

lunch,

paperwork, or from aniz a tions. At 4:30, she org mmunity med ent, upper with a meetings lire a smooth transition from the da\ crew to the holdalso mentors staff members, which she conthe leather da) night c rew hroughout fer the evening rush, she usually heads 1

I

home

tor

ahout 10 p.m.. the end

ot

another 12.3-hour

Manager Roles Mintzberg'a observations and subsequent research indicate that diverse manager pectations tor a manA role is i acti\ Hies can lv organized into 10 roles role-, ot" the each (nesc roles are ides vhibit o pros examples of 5 heha\ lor '

1

«

1

divided into three conceptual categories: informational (managing by information); interpersonal (managing through people); and decisional (managing through action). role represents acth itie-> that managers undertake to ultimate!) accomplish the functions of planning, organizing, leading, and controlling. Although it is necf ib to understand the different roles parate me components ot the man.

and acth ities ot a manager, it is important to remember that the real job of management cannot be practk of independent parts; all the roles interact in the real he manager who only communicates world ot management As MmtzK or only COhceh es ne\ er gets an\ thing done, while the manager who only 'does' ends up doing it all aloni >

I

I

Informational Roles Informational roles describe the activities used to maintain and develop an information network. General managers spend about 75 percent

EXHIBIT

1.5 Category

Role

Activity

Informational

Monitor

Seek and receive information, scan periodicals and

Ten Manager Roles reports, maintain personal contacts.

Disseminator

Forward information to other organization members; send memos and reports, make phone calls.

Spokesperson

Transmit information to outsiders through speeches, reports,

Interpersonal

Figurehead

memos.

Perform ceremonial and symbolic duties such as greeting visitors, signing legal documents.

Leader

Direct and motivate subordinates; tram, counsel, and communicate with subordinates.

Liaison

Maintain information

links

organization, use e-mail,

Entrepreneur

Decisional

Initiate

improvement

both inside and outside

phone

calls,

meetings.

projects; identify

new

ideas,

delegate idea responsibility to others.

rbance handler

Take corrective action dunng disputes or resolve conflicts

environmental

Resource allocator

Decide

who

among

crises;

subordinates; adapt to

crises.

gets resources; schedule, budget, set

priorities.

Neyotiator

Represent department

dunng

negotiation of union

contracts, sales, purchases, budgets; represent

departmental

SOURCES Adapted

from

I

Henry M.nttberj. 'Managr

intert

Work (New York Harper

m Observation. - Mamymt

. it

& Row. B97-B110

Soena 18 (1971

):

and

Chapter

1

Innovative

Management for Turbulent Times

The monitor

of their time talking to other people.

involves seeking current information from

role

many sources.

The manager acquires information from others and scans written materials to stay well informed. The disseminator

and

spokesperson roles are just the opposite:

The manager

transmits current information to others, both inside and

outside the organization,

who

can use

it.

One

colorful

example of the spokesperson role is Mick Jagger of the Rolling Stones. The rock band is run like a large, multinational organization with Jagger as the CEO. Jagger surrounds himself not only with talented artists, but also with sophisticated and experienced business executives. Yet it is Jagger who typically deals with the media and packages the band's image for a worldwide audience. 49

Interpersonal Roles Interpersonal

roles pertain to rela-

Concept ^.^vuyi^cti^v^

Small business owners often assume

multiple management roles. Here on the right Susan Solovic, founder and are related to the human skills and CEO ofsbtv.com, functions as spokesperson in an interview with described earlier. The figurehead role involves handling an entrepreneur, developing new Tess Rafols of KTVK. She also ceremonial and symbolic activities for the department or ideas for the online television channel. Solovic fills the monitor role organization. The manager represents the organization in by keeping an eye on current trends that might be helpful to her evolving company as well as to the small businesses her channel serves. his or her formal managerial capacity as the head of the employee awards a division The presentation of by unit. manager at Taco Bell is an example of the figurehead role. The leader role encompasses relationships with subordinates, including motivation, communication, and influence. The liaison role pertains to the development of information sources both inside and outside the organization. Stephen Baxter, managing director of Scotland's Glasgow Airport, illustrates the liaison role. Baxter led a rapid expansion of the airport by

tionships with others

is

coordinating with executives at other organizations to find

ways

to

woo new

airlines

use Glasgow. He recently took on an extra role as president of the Glasgow chamber 50 of commerce, enabling him to develop more sources of information and support. to

Decisional Roles Decisional roles pertain to those events about which the manmake a choice and take action. These roles often require conceptual as well as human skills. The entrepreneur role involves the initiation of change. Managers are constantly thinking about the future and how to get there. 51 Managers become aware of problems and search for innovations that will correct them. Susan Whiting, Chief of Research for Nielsen Media Research, scheduled dozens of individual and group meetings with clients to talk about how to adapt the Nielsen ratings for an era in which more and more shows are being viewed on computers, video iPods, and other digital devices. 52 The disturbance handler role involves resolving conflicts among subordinates or between the manager's department and other departments. The resource allocator role pertains to decisions about how to allocate people, time, equipment, money, and other resources to attain desired outcomes. The manager must decide which projects receive budget allocations, which of several customer complaints receive priority, and even how to spend his or her own time. The negotiator role involves formal negotiations and bargaining to attain outcomes for the manager's unit of responsibility. The manager meets and formally negotiates with others a supplier about a late delivery, the controller about the need for additional budget resources, or the union about a worker grievance. The relative emphasis a manager puts on these ten roles depends on a number of factors, such as the manager's position in the hierarchy, natural skills and abilities, type of organization, or departmental goals to be achieved. For example, Exhibit 1.6 illustrates the varying importance of the leader and liaison roles as reported in a survey of top-, middle-, and lower-level managers. Note that the importance of the leader role typically declines while the importance of the liaison role increases as a ager must

—

manager moves up the organizational

hierarchy.

pA m

20

EXHIBIT

Management

tion to

;

Leader role

1.6

Liaison role

ors, a

Opportu

organizations

collaboration

ilso

and teamwork empl.

.

worked

in

hailing

from

ent

at
n roles

»i

tht

*

informational roles of

seminator, and spokesperson; the interpersonaJ rotes of figurehead, liaison, and the decisional rotes of entrepreneur, disturbance handler,

^nd

allocator

negotiator.

Rapid ^\nd dramatic change in recent years has caused significant shifts in the workplace .\nd the manager's job. Rather than managing by command and control, managers ol toda\ and tomorrow use an empowering leadership style that Ux uses on \ ision, values. mu\ communication, ream-building skills are crucial. Instead oi |Ust directing tasks, managers focus on building relationships, which Ola) include customers, partners, and suppli*

DISCUSSION QUESTIONS l

H sibiht\

in

I

sponu reel about having a maru world characterized b\ uncer-

ambiguity; and sudden changes or threats trom the environment? Describe some skills and qualities that are important to managers under

5

I

6

at a biotech-

nolog) Company, working with managers from h, production, and marketing on a major

product modification You notice that ever) memo from the marketing manager has been co;

enior

management At ever) company

7.

function, She spends time talking to the big shots,

is playing golf W ith senior managyouf evaluation of her behavioi what d^ you

the project, she

What

is

H Immelt of

(

said that the

.1

most

\

I

w hat l

an

I

win dn some i

1

I

the

|.h

g 1 I

k

hilly

intends to rise

managerial work

is

characterized bv variety, frag-

how do managers perform management functions such as planning, which would seem to require reflection and analysis?

s

\ college professor told her students, "The purpose of a management course is to teach students about management, not to teach them to be man-

Do \ou

agers."

ment 1 9

agree or disagree with this state-

I

tisi uss some of the w changed over the past I

av s

organizations and jobs

10 years

What changes do

drawba

How

these changes affect the manager's job

organizations seem to have a new or two whereas others have top

Welch

W hat

If

a bright,

who

anticipate over the next 10 vears?

leaders who sta) with the compan) form.. trie

hard-working entry-level manup through the ranks. Your performance evaluation gives you high marks for \ our technical skills but low marks when it comes to people skills. Do you think people skills can be learned, or do you need te> rethink your career path 7 If people skills can be learned, how would you go about it?

You are

basic

aluable thing

he learned in busin. there .in ol was that 24 hours m a d.w,, and you can use- all oi th« )>> you agree or di some of the advantages to this approach to being a mana.

is

mentation, and brevity

ion are also jw are that sometimes W hen \ou and the other project members are slaving awa) over ers

the difference

is

eneS6?V\ hich

aged

these condit:

manager

between efficiency and effecmore important for performance? an managers improve both simultaneously ?

tiv

tainty,

project

W hat

s 2>

factors about the

tnpanv might account tor

c

l

(

>

.it c

leneral

I

manager or about this dift-

the

skills a

manager needs

to

be successful

might and the

1

low might the teaching of a management course be designed to prepare future managers to deal with globalization and workforce diversity? What

problems and opportunities do vou think globaltzation M\d diversit) present tor manage-

Chapter

Innovative

1

Management for Turbulent Times

MANAGEMENT

chl

25

PRACTICE: EXPERIENTIAL EXERCISE

IN

Management Aptitude Questionnaire

11.

Rate each of the following questions according to the following scale:

am never like this. rarely like this. am (2) (3) I am sometimes like this. (4) I am often like this. (5) I am always like this. (T)

I

think

when

better to be efficient with

it is

my time

talking with someone, rather than

about the other person's needs, so that with my real work.

I

12

4

3

worry can get on

I

5

I

1.

12

4

3

12 as a

good

listener.

14.

5

guages to study, which job to take, special projects to be involved in), I typically consider the longterm (three years or more) implications of what I would choose to do.

4. I

4

5.

5

15.

one,

4

3

hang

16.

6.

The type of management course for which book is used is really a waste of time. 4

3

I

think

better to be polite

it is

this

5

and not

12

serious disagreement with some-

in there

and

talk

it

out until

it is

com-

to hurt peo-

5

Data or things

12

5

4

3

4

3

interest

me more than people.

5

get into the details rather than the "big picture"

Scoring and Interpretation

issues.

Subtract your scores for questions

7. I

3

would

4

from the number

5

rather

sit

in front of

spend

a lot of time

12

3

8. I

4

my computer than

3

When I

4

5

take a course,

ing to other courses

I

I

relate

what I am

took or concepts

I

learn-

learned

elsewhere.

12

3

4

5

When somebody makes

person and let her or him answer or approach.

rect the

12

I

want

know

to cor-

4

5

skills total score

18

Technical skills total score

These skills are three abilities needed to be a good manager. Ideally, a manager should be strong (though not necessarily equal) in all three. Anyone noticeably weaker in any of the skills should take courses and read to build up that skill. For further background pages

skills,

please refer to the explanation on

8-9.

the proper

NOTE: This 3

and 17

total points for

Human skills total score

17

4, 7, 11, 13, 16,

on the three a mistake,

6, 10, 14,

and then add the

Conceptual

15

2, 5, 8, 10, 14,

5

6,

the following sections: 1, 3, 6, 9, 12,

with people.

try to include others in activities or discussions.

12

10.

5

When I have a project or assignment, I really

12

9.

4

me really

ple's feelings.

pletely resolved. 3

5

4

3

12

18.

12

my friends rather than con-

Talking about ideas or concepts can get

12

17.

I

to

enthused or excited.

5

When I have a

than meet with a

5

complain

sociology.

4

statistics

When I am working on a group project and someone doesn't pull a fair share of the load, I am more

12

than those involving literature, psychology, or

3

and

carefully.

front the slacker.

prefer technical or quantitative courses rather

12

over

5

4

3

likely to

action for myself (such as hobbies to pursue, lan-

3

4

3

it

group of people.

When I am deciding on a particular course of

12

vision of career, family,

When solving problems, I would much rather analyze some data or

5

Most people would describe me

12 3.

4

know my long-term

12 13.

and organize the work around deadlines.

3

I

other activities and have thought

When I have a number of casks or homework to do, I set priorities

2.

12.

exercise

was contributed bv Dorothy Marcic.

Past

26

MANAGEMENT Management Afford

to

Introduction to

Pharmaceuti-

handle th

Harry met briefly

n

>nd reminded hin

with

UK .

let

men!

.:

I

called to

v.

'

supei

lunch

>

aid l

about

emplo)

znoce the problem. Jacobs contributions to new product de\ elopment are too valuable to risk losing him, and the problems over the past ten years

speak to someHarr\ did

to

I

\rter lunch,

rmance r.

hut his personnel

number

file

have

sequently dropped chai

SOial thai the

also contained a

unch

lad increased

w

as well as ith

the

v

each of

these things slide

histor) over the past ten years has ice.

to try to

current issue, then start working with

and other senior managers

Sally Barton

develop

to

stronger policies regarding sexual harassment

questioned the company president jue, he was told, "Yeah, he's had some blems, hut you can't just replace someone with r new products You're a bottom-line guv; let

im estigation of employee comand make Jacobs aware that

Meet with [acobs and the employee >>l\e the

When Han)

whv we

documented

put him on thin

lington

nd

a full-scale

plaints about Jacobs,

remarks" to subharassment What

amount

rked themseh es out anyway. No mething that could make you k>ok

al

bad.

r
n

1

and

treatment of employees, including clear-cut proce-

dures for handling complaints. \ Talent tor

\ot

Mismanagement: What

ber- December

1^2

1:

3-4.

CASE FOR CRITICAL ANALYSIS Elektra Products, Inc.

manufacturing \ ice president, d into the monthlv compam wide meeting with a light step and a hopefulness she hadn't felt in a long ew, dynamic ( time involvement and II.

a

•

I

i

empowerment at Elektra Products public K held company that had once been manufacturer and

retailer of electrical

supplies In recent years,

id,

a

leading

products and

thecompan) experieno

gnandd

company you

great.

And

under the new empowerment campaign, emplov-uld be getting more information about how the company was run and would be able to work with their fellow employees in new and creative wa\ s Martin proclaimed a new era of trust and cooperation i

at Elektra Pnxiucts.

Barbara

felt

the excitement

she saw

been hired b the brisk!) opened the meeting with i

this

—each one of you." He then went on to explain

many

stir-

around the room,

of the other employees, including her

friend Simon, rolling their eyes. "Just another pile of

corporate crap,

Simon

said later.

"One minute

thev

downsizing, the next reengineering. Then th. dabble in restructuring. Now Martin wants to push trv

empowerment Garbage

who had

we

make

that

ompetit:

yone needed Martin (.nftin,

spirit to

the source for this chang

ring within her; but as she looked

s

company

increasing competition,

need new ideas, new energv. new

ining in the

new product and tar be! partments Muh as manufacturing and sales barer) s\ ne another, morale M as at an all-time low, and many employees were active!) seeking othi

tailing

e face

challenge

substitute tor hard

who have

been w

like

work and

ith this

empowerment

isn't a

a little faith in the

company

tor years.

people

We made

Chapter

Innovative

1

Management for Turbulent Times

great once, and we can do it again. Just get out of our way." Simon had been a manufacturing engineer with Elektra Products for more than 20 years. Barbara knew he was extremely loyal to the company, but he and a lot of others like him were going to be an it

—

—

empowerment efforts. Top management assigned selected managers to several problem-solving teams to come up with ideas for implementing the empowerment campaign. Barbara loved her assignment as team leader of the manobstacle to the

how when

ufacturing team, working on ideas to improve retail stores

got the merchandise they needed

it. The team thrived, and trust blossomed members. They even spent nights and weekends working to complete their report. They were proud of their ideas, which they believed were innovative but easily achievable: permit a manager to follow a product from design through sales to customers; allow salespeople to refund up to $500 worth of merchandise on the spot; make information available to salespeople about future products; and swap sales and manufacturing personnel for short periods to let them get to know one another's jobs. When the team presented its report to department

they needed

among

the

heads, Martin Griffin into the

was

meeting he had

27

had just been completed. The finance department argued that allowing salespeople to make

categories that

$500 refunds would create a gold mine for unethicustomers and salespeople. The legal department warned that providing information to salespeople about future products would invite industrial spying. The team members were stunned. As Barbara mulled over the latest turn of events, she considered her options: keep her mouth shut; take a chance and confront Martin about her sincerity in making empowerment work; push slowly for reform and work for gradual support from the other teams; or look for another job and leave a company she really cares about. Barbara realized she was looking at no easy choices and no easy answers. cal

Questions

How might top management have done a better job

1.

changing Elektra Products into a new kind of organization? What might they do now to get the empowerment process back on track?

Can you

2.

because of a

3.

If

late-breaking deal with a major hardware store chain.

With Martin absent, the department heads rapidly formed a wall of resistance. The director of human resources complained that the ideas for personnel changes

would destroy

the carefully crafted job

ways Barbara could have avoided

team faced department heads?

enthusiastic. But shortly

to excuse himself

think of

the problems her

you were Barbara

in the

Russell,

meeting with

what would you do

now? Why? SOURCE: Based on Lawrence R. Rothstein/The Empowerment That Came Undone," Harvard Business Review (January-

Effort

February 1995): 20-31.

chl Original Penguin Rides

Out

Turbulence cool. But golf shirts with a little flapping bird printed on them experienced a lull in coolness. In fact, their popularity remained frozen for two decades largely because they were worn by aging golfers. Now the penguins are back, flapping furiously and, many would argue, coolly not just on golf shirts but also on a wide array of men's and

—

—

clothing

and

accessories, including shirts,

and even bathing suits. These items represent the extreme makeover of a 50-year-old brand of clothing called Original shoes, hats, belts, neckties, handbags,

Penguin.

Now owned by Perry Ellis International, the

Original Penguin brand of clothing rejuvenation

—thanks largely

dent, Chris Kolbe.

knows

to

is

experiencing

Penguin's vice presi-

that

thawing out an old brand

a daunting task under the best circumstances. But

the fashion industry

Penguins have always been

women's

Chris Kolbe is

is

particularly difficult

—the pace

and the turbulence is sometimes terrifying. Kolbe's activities as a manager are clearly characterized by variety, fragmentation, and brevity. For example, in a single day, Kolbe may be expecting several hundred samples from sources around the globe to arrive in time for a fashion show. He may have to decide whether to extend credit to a retailer or whether to drop one retailer in favor of another. He may have to review ad copy, return calls from fashion magazines, thumb through swatches of fabric, welcome sales reps arriving for a meeting, and fix his own computer. "We are always way behind and scrambling," he says with a chuckle. But Kolbe thrives on these activities because is

dizzying,

he

is

convinced that the time

is

regain their place in the market

right for his

penguins

to

among other legendary

Pa«i

28

Introduction to Management

1

ind or running a

m

intends to mal is

ot the riu. all

His

mg,

for that

and has the Penguin nsibilit)

luntabilit) tor r\

Kolbe

Kolbe also

t-r\

thing that

nicating constantly

w

hands on

ith

/

M\

work well together

empli l

n »b is reall)

I

in

isions his

c

ustomers as comfortable

suburbanites who want high-quality, fashionable asual lothing. Hut he doesn't w orr\ too much

you think Chris

ptual skills tor his [ob as

\

president of Original

ice

guin.

»uppo6e those flip-flops—or other components don't arrive in ol tlu- upcoming fashion show time.

I

W

—

ribe

how Chris Kolbe might manage

the

situation.

V

hat do \ OU think Kolbe'sjob?Why?

\\

is

the

most

difficult part of

».

j

about dire
t all si/es throughout the country and, increasingly, to multinational corporations throughout the world the years u had diversified into various ty Of insurance b\ absorbing smaller companies until his

I.

i

c

now consisted ot more than separate busil units Each had its own hierarchy berized by strong top-down administration and the well">(»

it

defined rules and procedures typical ot the insurance industry; virtually every employ* ialized

the Civil

CASE FOR CRITICAL ANALYSIS

ch2

•

make enemies on

employees.

use

was deemed qualified to results came hack, she was

to

—

•

that the entire clerical force

the- job.

\ isor\ experience, ability to motivate employees, M\d knowledge ot agency procedures that can be explained mu\ justified to the board and to

he board w anted the candidate \\ ith the job but allowed Karen as

ot H

and

ice Board, and, after all, it is an objective m to select a permanent placement.

uld sign

St

C harlotte has pro\ ed herself

.

criteria

the highest

test.

e the job to the candidate with the highest

I

I

clerk the per-

wonders whether it is nonly on the results of a writ-

What Would You Do?

il

it

new

e the

ten b

ith tru

and had shown herself to be a true leader l harlotte worked hard at being a good supen isor |ust as she had always worked hard at being a top-notch clerk She paid attention to the human aspec ts oi empli ems and introduced modem management b niques that strengthened tlu- entire agen( \ However, the c w ser\ ke Hoard decided that a notional exam should be given to find a perma-

up and take

held oJ

tren

su.

ha

tair to

in the

hired clerks placed

impressed b\ the high

d, .

quk

ly

in llln

ty

to Management

knowledge about

market niche

a

narrowly defined

ter

L pper-level management had given the matconsiderable attention and concluded that SIA's

refined division oi labor into technical specialists

needed zation,

to give way to a collaborative learning organione where employee empowerment and open

information

made

it

possible for a single underwriter

be knowledgeable about a variety oi products. [erry S know ledge management department, housed

to

within

human

toward [erry

himself.

resources, could

make

a contribution

this goal.

de\ ised an elegant solution,

He oversaw

if

men

the develop

t

he did

say so

of software that

allowed any SIA employee

to post a query, have that question directed only to those employees with relevant expertise, and then receive an answer, often in a

matter ot minutes and usually before the day was out. he only hitch was that hardly anyone was posting I

queries on the easy -to-use system.

Why writer, clued

Greenwell,

him

in.

a

veteran SIA under-

Especially after weathering a

turbulent period, one that had seen plenty of layoffs

— Chapter 2 The Evolution of Management Thinking

insurance industry,

in the

the restructuring as the

would lead

55

many employees viewed

first

landing on their desks. saw their own highly specialized knowledge as a kind of job insurance policy. "I know that's not what your knowledge-sharing efforts are about and that their fears are unfounded," she reassured him. "But you've got about 9,999 other to

pink

Some employees,

who

employees

you were a specialist at SIA, how and why would you respond to the proposed changes? What steps would you suggest Jerry take to increase employee

2. If

step in a process that

slips

utilization of the

in fact,

are at least willing to entertain the

possibility that sharing

what they know

isn't in their

best interests."

ticular?

knowledge-sharing system

share information? 3.

What general obstacles would you foresee in a company such as SIA trying to make the transition from a

hierarchical, or bureaucratic, to a learning

organization?

What are some

managers can take

to

SOURCES: Based on Megan

Questions

What are some nomic become

of the social, political,

and eco-

forces that are influencing SIA's decision to a learning organization?

general measures

smooth the way?

Santosus/'Case

Knowledge," CIO Magazine (September 1.

in par-

How can he encourage SIA employees to

1,

Files:

CNA Underwriting

2002): http://www.cio.com/

archive/090102/underwriting.html; and Eric Lesser and Laurence

Prusak/Treserving Knowledge

Management Review

(Fall

in

an Uncertain World/'M/T Sloan

2001): 101-102.

ch2 Original Penguin

Perry Ellis has made a strategy of acquiring languishing brands, such as Jantzen bathing suits and Penguin golf wear, and breathing new life into them.

Becomes a

Learning Organization company is both a challenge any young manager. Chris Kolbe,

Taking charge of a

and

a

dream

for

vice president of Original Penguin, a division of

Perry

Ellis International, is

Penguin

no exception. Original

experiencing a total makeover, courtesy of Chris Kolbe and a small staff of designers, maris

and finance managers. Once the domain of golfers, the penguin logo now graces hats, neckties, shoes, and an entire line of fashionable women's clothing and accessories ranging from T-shirts and skirts to belts, shoes, handbags, and bathing suits. Original Penguin clothing now keters,

middle-aged

appears in such upscale department stores as Barney's and Saks as well as its own retail store in midtown Manhattan. This hip new brand of clothing has come a long way from the golf courses of

—

half a century ago.

Remaking

brand involves remaking an organiMunsingwear Penguin approached celebrities such as Bing Crosby and Bob Hope with the request to provide shirts for their golf a

zation. In 1955, marketers for

tournaments. Then they contacted the Golf Association, asking for a list of its members all men to whom they sent sample golf shirts. The penguin logo quickly became associated with the men's pro golf tour. The company was run as a traditional organization, manufacturing a traditional product. But not any more.

—

—

When Chris Kolbe was hired by the company to turn was given a small New There was no way he

Original Penguin around, he

York

office

and two

could run the

staffers.

company

as a traditional large corpora-

Original Penguin was about to become a learning organization, complete with teams, empowered employees, and a free flow of information. Kolbe relies on collaboration and communication tion,

nor did he want

across departments

to.

—usually just across cubicles

among team members. He helps them set goals, makes sure they have the information they need, and then allows them to take responsibility for their own performance. "If you have a team, you have to give them ownership of what they do," Kolbe explains. He communicates regularly with the design team and marketing team but says that he prefers to limit the time everyone spends in meetings. "I'm a one-on-one guy. I try not to schedule a lot of meetings because meetings can be stifling." Kolbe believes firmly in empowering employees with the freedom and resources to initiate their own ideas, make their own decisions, and perform their best. "Chris is easy to work with," says marketing manager Laura Bellafronto. "He makes you feel comfortable and secure ... he makes you want to be here and be working with him." Kolbe is happy that he inspires that kind of loyalty. "I try to respect and treat everybody as I wish to be treated, but also I'm very

PA«T

S6

1

K

T

*ODi_CTiON TO

K'

Questions then

n from just three -

temore ml

is this !

transi-

earning

in.

u think

•

tt

nowledge among

u resource?

h,.

Why

or

•uthtul V •

ts

wall-to-wall

ent luU as

st\ le

comfortable but deri

n

made

what

I

I

58

|u

?rk Times, spnng 2004

know when

I

n the

ate

t

be serious

to

accessed

authority [really

do and

know when

dothinj

tlu-

to

with people tun and

a company employ

might Original Penguin as

he

1

tr\

to

Run Banks on Brand Resurrectii

have

:

to strike

that balai

ch2 from the tire academy, and the tire department has gned him to his brother's company. This scene

Backdraft follow in the tath.

S

ot their late

firelighter,

'

and

shows him

join the 1

\1>
mpam

t

financial

believ e

-

the Volt rep resents fur

the world's

largest

L hev rolet, Pontiac, C

Al

and Saturn, there

is

every reason to

will succeed.

rtange

auto manufai

nlike

hybrids that use elect to improve the miletsoline engines, the Volt u soline the range ol its batl elec trK drive unit According to GM, driving thi will sa\i annuall) in emi

Questions 1

Which management functions and

skills

enabled

•

it

s

no wonder company

proof

.

>t

(

,\1 s

officials

2

Identify social, political,

l

Jto industry

intention to lead the reim ention o( the

automobile. Hut the arrival oi the Vol! \1 s histor) Ripple efl mort.

60

l

s attected economies and organizations around the I mt. world Similarly economic problems in Asia and Europe had a tremendous impact on companies and the stock market in the United States. One significant recent trend in the economic environment is the frequencv ot mergers and acquisitions. C ltibank and Ira\ elers merged to form Citigroup, IBM purchased Pricewaterhouse Coopers Consulting, and Cingular acquired AT&T Hasbro, Mattel, and Wireless In the to) industry the three largest to\ makers bbled up at least a dozen smaller competitors within a tew years. At the same time, however a tremendous vitality is evident in the small business sector of the economy Entrepreneurial start-ups are a significant aspect of today S economy and will be discussed in Appendix A vample. the economu

tl

—

Legal-Political The legal-political dimension includes government regulaand federal levels, as well as political activities designed compaiu behavior 1 he U.S. political sv stem encourages capitalism, to influence and the government tries not to overregulate business. However, government rules of the game. !fv he federal government influences organizations through the Occupational Satetv and Health Administration (OSHAi. tions at the local, state,

I

Environmental Protection Agencv (EPA), eCOnomu

Jirm-riMiin

dimension

trade practices, libel statutes allow-

consumer protection legislation, product safety requirements, import and export restrictions, and information and labeling requirements Mam organizations also have to contend with government and legal issues in other countries he- European Union (EL adopted environmental and consumer protection rules that are costing American companies hundreds of millions oi dollarHewlett-Packard, Ford Motor ompany an have to pick up the bill for recycling the products I

lrgal-politu.il

fair

ing lawsuits against business,

i

t.

thev sell in

pre*»ui< i;ruup

ti

iinple

Managers must also recognizi t) of pressure groups that work within the political framework to influence companies to behave in socially responsible inion-bac ked campaign group, drums up public awareness ot Wal-Mart s business practices to force the retailer to improve worker's wages and healti ipaign director hopes smaller companies will then ists hav e boldly petitioned Home Depot, which introduced the foUov >ption brand tor its em ironmentallv friendly products, bo stop advertising on Fox d commentators dismiss global warming as ludicrous

Chapter 3

The Environment and Corporate Culture

Natural

In response to pressure

advocates, organizations have

from environmental

become

increasingly sen-

diminishing natural resources and the environmental impact of their products. As a result, the sitive to the earth's

natural dimension of the external environment

is

grow-

ing in importance. The natural dimension includes

all

elements that occur naturally on earth, including plants, animals, rocks, and natural resources such as air, water,

and climate. The natural dimension is different from other sectors of the general environment because it has no voice of its own. Influence on managers to meet needs in the natural environment may come from other sectors, such as government regulation, consumer concerns, bad press in 18 the media, competitors' actions, or even employees. For example, environmental groups advocate various action and policy goals that include reduction and clean up of man-made pollution, development of renewable energy resources, and sustainable use of scarce resources such as water, land, and air. More recently, there has been a strong concern about climate change such as global warming caused by greenhouse gases, most notably car-

bon dioxide. Concern about the environment has prompted companies to take these actions:

Eliminating nonbiodegradable plastic bags from the environment. Whole Foods will stop offering disposable, plastic grocery bags in all 270 stores, replacing them with recyclable bags. This change means roughly 100 million plastic bags will be kept out of the environment in the

program.

first

eight

months

of the

new

Concept (^d^^yv^ctl&^A^ and

Adam

(right)

High-school buddies Eric Ryan

make environmentally

(left)

friendly products

look good. Their company, Method, produces nontoxic cleaning

products with a concern for the natural environment and packages

them

19

Lowry

in

designer-looking bottles. Lowry, a chemical engineer, and

Ryan, with an advertising background, founded Method

Improving efficiency of plants and factories. Nissan's and sales grew to nearly $1 00 million Sunderland (UK) factory will use eight wind turbines to generate 6 percent of the plant's energy requirement, cutting carbon dioxide emissions by 4,000 tons per year. Toyota recycles 100,000 tons of wastewater a year in its reverse osmosis 20 facility in its Burnaston (UK) plant.

in

in

2000

2007.

Hudson River with polychlorinated biphenyls (PCBs) as it manufactured transformers, now promises that it will invest $1.5 billion annually in researching cleaner forms of technology by 2010, up from $700 million in 2004. 21 Investing in cleaner technologies. GE, which once polluted the

Task Environment As described

earlier, the task environment includes those sectors that have a direct working relationship with the organization, among them customers, competitors, suppliers, and the labor market.

natural dimension The dimension of the general envi-

ronment that includes all elements that occur naturally on

Customers Those people and

organizations in the environment that acquire goods

or services from the organization are customers.

As

recipients of the organization's

earth, including plants, animals, rocks,

and natural resources air, water, and climate.

such as

output, customers are important because they determine the organization's suc-

customers of hospitals, students the customers of schools, and travelers the customers of airlines. Many companies are searching for ways to reach the coveted teen and youth market by tying marketing messages into online social

cess. Patients are the

customers People and

organi-

zations in the environment that

acquire goods or services from the organization.

Pab

70

'Est of

2

i

Management

school and college stu-

:mg mar-

nous buamCE

I

pie BpOII-

ShufBes

in

weekly .r-old

the Internet,

•

which presents

in directly affect the

nited Airlines In this

through employees and disgrunt

em ironment,'

new information

Competitor zations in the

industrs or

t\

pe

nst the air ear-

mnon,

CEO of e-commerce

haracterizeeacri industry.

mpetiti\
.

>ur boss.

him even more was the knowledge that this kind of thing might happen again I sing this confidential

.

it

public relations nightmare waiting to happen.

a

juel did:

He

als

In addition to the question of

the legality of using the information, point out that

putation

•

them says about

n of

\

dential d tl

and let him know how the document**

privately

>

n wouldn't pass the 60 Minutt ut to

n to

.ncomfortable with

liquet thought to himself, but thi-

you

i

and had not persona 11) broken an)

•

clear to

imputer system

Still,

the

at

company

explicit

th

5

stunned After

a

few

Chapter 3

The Environment and Corporate Culture

89

Henry to take the rest of the day off, go home, and think things over. The president himself needed the afternoon to gather his wits. How should he handle this turn of events? On the one hand, Henry's immediate dismissal speechless minutes, he told

of the

1.

does Jasper need

Internet policy himself

was hypocritical,

The person charged with enforcing be held

to the highest standards.

needed

Jasper

3.

Jasper decided to keep

had no choice but

him

on, the president clearly

to cross the line

and get involved

in

life, and he would be treating Darger from the treatment the female employee

Henry's private differently

received.

beliefs,

what other sub-

flicting values present? When values are in conflict, how would you decide which ones take precedence? Assume you are Jasper. What are the first two

action steps

The company had turned a blind eye because it didn't seem worth the effort of enforcing the hard-and-fast policy for such minor infractions. Besides, Henry was a valued, if clearly troubled, employee. Replacing him would be costly and difficult.

you would take to handle the Henry How would your role as a cul-

Darger situation?

tion arrangements.

If

culture. In addition to the

conscious values and beliefs do you detect? Are con-

On the other hand,

knew that Rio Grande employees routinely used computers at their desks to check personal e-mail, do banking transactions, check the weather, or make vaca-

Analyze Rio Grande's

expressed cultural values and

to say the least.

that policy

to

factors have helped to create Hennings faces? What factors consider when deciding on his

course of action? 2.

when the operations chief was violating the

What environmental the situation Jasper

woman who'd tapped into another employee's

e-mail

to

Questions

your decision? What message your solution send to the other managers and rank-and-file employees? tural leader influence

will

SOURCES: Based onWillard Ethics

(Summer 2003):

P.

Green/Tomography

at

Work," Business

19; Patrick Marley," Porn -Viewing Parole

Regains ]ob," Milwaukee Journal Sentinel (January

24, 2006):

Agent

http://www.

jsordine.com/story/idex.aspx?id=387492;" Sample Internet Policies for

Businesses and Organizations/' Websense, http://www.websense-saJes. com/internet-access-policyhtml; and Art Lambert/'Technology in the

When he met with Henry again first thing in the morning, he needed

to

have a plan of

action.

Workplace:

A Recipe for Legal Trouble," Workforce (February 14, 2005):

http://www.workforce.com/archive/article/23/95/08.php.

ch3 Lonely Planet Creates an Adventurous Culture

their

When you think of corporate culture, the image of suits and ties, pantyhose and pumps often springs mind. But

to

Lonely Planet, the values, beliefs, understandings, and norms of the firm are expressed by staff

at

members and managers who wear

kis, soft skirts,

and sandals or clogs

to

T-shirts,

kha-

work. Lonely

is a publishing company based in Australia with offices in several other countries including the United States that produces series of travel books, guides, and language phrasebooks for people who

Planet

—

and who love books. They are happy wending way through a jungle path or along an ancient,

travel

—

cobblestone street as part of the job. They also delight in putting together the photos and text that will entice other travelers to explore. "I would say that the culture of Lonely Planet is sort of embodied in a sense of pioneering," observes Cindy Cohen of Lonely Planet's public relations department. "We like to give people a scoop on the 'inside' places to be." Lonely Planet describes trips for the curious,

nonmainstream

traveler.

who admit that they started the company as a way to fund their own travel dreams, Lonely Planet has

Lonely Planet fosters an internal culture in which employees are free to be themselves to exchange ideas and try new approaches to problems. The work space itself is informal and open, so that people can communicate easily with each other. Successes are celebrated by everyone with office parties, and employ-

grown

become a major force in the travel publishing industry. The company publishes books like

ees are naturally friends

South America on a Shoestring

Lonely Planet approach and format

want adventure. Founded in 1971 by Tony and Maureen Wheeler,

to

— —for travelers who

want to visit off-beat places, often on a budget. To do so, Lonely Planet employs people who love to

—

who socialize together

outside of work. In addition, although there

is

a

to the guides, the

voices of individual travel writers are valued, which is

unusual among travel publishers.

1

p AaT

90

rial

.'Ekt

2

tone,

(.ulh

Management

of

and the popu-

es includes

em Ironn

I

em ironmenl make

ild

such

^nations around

in

the

bj ,ar,

ere are the Rikhi

to

that signal

^

a

let

I

capture nen marki

ten path but

Iravelers

fs

Highway

lifomia

still

can drive 1;

the\

.

n

Australia]

marki

travelers tend to take longer trips

have

month

a

•»•

ie

ften

!

up the Hud

folio.

I

"nek

or they can hottest m-u guides illey;

Planet

s

through the South.

to

traveler

n long jaunts Bui Americans take short

wants

In short, just

to go,

I

onelv Planet

that thej onlj

from work

ition

;

Questions

Another factor is the American consume

n to

shou confidence

in the 1

third factor

after tin

home

e to

ike ot the terrorist attacks ot September ensuing war on terrorism

.

and

is

in

2

Americans

still

lo\ e to

drh

11, 2(H)l.

ensive than

still

has n

used

fly to

it

1

)es t

nhe

factors in the external

environment

e their

Even

to be,

it

I

(chibil

is

v. http://tPWW.Ionelypbmetxom, aoo

So, Lonel) Planet

Planet

lower's

Pub >nel\

loping a

nited Stal

that

an example of Lonely Planet's corporate culture at each of the three le\ els identified in

to drive

least for i famil)

il

than to

to i destination

it

ironment for Lonely Planet.

live

en! spike in gasoline prices. ,

em

could create uncertainty tor Loneh Planet.

tlu-

In addition,

Describe the task

the

Planet press

ks to the National Parks, including

BIZ FL,X

^1j3

VIDEO CAS Chief" (Ken lakakura), the manager of the Chunichi Dragons. This scene takes place after "The Chief"

Mr. Baseball I

New

he

V>rk Yankees trade aging baseball player Selleck) to the Chunichi Dr. fapanese team llus lighthearted corned) b

lack a

1

lh

Mliot's bungling entry into |apanese culture

almost i

thing including Hiroko

l«'

rakanashi)

stand tmali

mam

As

Elliot slowl)

culture I

examples ol

by

I

(

m here he hiyama

has removed Jack from a baseball game. The scene shows Jack dining with Hiroko and her grandmother (Mineko Yorozuya), grandfather (Jun Hamamura), Myo\ fathi

begins to under-

and Japanese baseball, he

teammates rhisfilmsh Uy their lapanese cultun

What

his

1

1

to

Watch

for

toes |ac k Elliot

and Ask Yourself

beha\ e as

if

he had had crossculjapan 1

tural training before arriving in

love tor baseball

nknown

Hiroko's father, she mu\ |a< k develop an intimate relationship Meanwhile, lav. k does not know that liroko's father is " he L

tO

1

I

2 3.

Is

he

(

ulturally sensitive or insensith

What do you propose ot his

time

in

[apan?

th.it

lack Elliot

do

for th>

-

Chapter 3

The Environment and Corporate Culture

ENDNOTES

ch3 1.

The

self- test

questions are based on

ideas from R. L. Daft

and

12.

M.

R.

Chapter

cisco: Berrett Koehler, 2000):

Bass and B. Avolio, Multifactor

Leadership Questionnaire,

2nd

mance 2.

in

15.

16.

14, 2007,

http://www

17.

(accessed February

30, 2007, http://www.

David Barboza and Louise

media/30depot.html?scp=l&sq= Environmentalists+Push%2C+but+

York Times Online, July 26,

Home+Depot&st=nyt

.com/2007/07/26/business/26toy

30, 2007).

in (accessed

February

This section

is

5,

2008).

Theory and

Design, 8th ed. (Cincinnati,

19.

OH:

J.

Bourgeois/'Strategy and Envi-

ronment:

Academy of Management Review

5

(1980): 25-39. 21.

Edwards/'WhereverYou Go,

You're

On the job," BusinessWeek

2,

2008).

29. Ibid. 30. "China's Ministry of Railways

ment," Journal of Management 33 (August 2007): 637-654.

wire, January, 29, 2008, Business

Bruce Horovitz, "Whole Foods Sacks

Company Resource Center

USA

on Organi-

timize Train Performance, "Ml Press-

Today, January 31.

Birch,"Now Companies Are Going Green Right from the Start," The Times, Green Motoring Focus

32. Ibid.

Corporate Backgrounder,

33.

January 25, 2008.

7,

Matthew L. Wald,"What's Kind to Nature Can be Kind to Profits,"

New

York Times,

and

database

(accessed February 11, 2008). Acquired from Nortel Networks

22, 2008.

The

.com. 7. Cliff

http:www.nortel

zations and the Natural Environ

Report

Google Web site. Retrieved February 7, 2008, from http://www.google

February 10, 2006.

site,

.com (accessed February

20. Stuart

A Conceptual Integration,"

Web

Chooses Nortel Mobile Network to Enable High-Speed Railway to Run Smoother GSM-R Wireless Staff Communication and Signaling Op-

Plastic Bags,"

South-Western, 2004), pp. 136-140. 5. L.

Street Journal,

(accessed July

18. Etzion, Dror. "Research

based on Richard

February 23, 2004.

John R. Wilke and Kathy Chen, "Planned Economy; As China's Trade Clout Grows, So Do Price-Fixing Accusations," The Wall

28. Nortel

.nytimes.com/2007/07/30/business/

Story,

2007, http://wwwnytimes

L. Daft, Organization

Roger

1.

O Crockett, "Finally Good

News From

Nortel," BusinessWeek

(November

6,

2007), http://www

.businessweek.com/technology/

May 17,

content/nov2007/tc2007116_

2006, http://wwwnytimes

384831. htm?chan=search (accessed

.com/2006/05/17/business/

February 12, 2008).

Olga Kharif, "Nortel's

New Lease

(June 20, 2005): 87-90.

businessspecial2/17giant.html?scp=

"Tools for Better Living," Fortune

l&sq=What%27s+Kind+to+

Life," BusinessWeek Online,

(December 11, 2006): 135. Stephen Baker and Adam Astor, "The Business of Nanotech," BusinessWeek (February 14, 2005):

Nature+Can+Be+Kind+to-i-

ary 26, 2006 (accessed February

Profits&st=nyt (accessed January

Roger O. Crockett/'Nortel: Desperately Seeking Credibility,"

30, 2008). 22. Jessi

64-71. 10.

http://www

Crimps

Adds Uncertainty," The Wall

Street Journal,

Home

db20070814_154726_page_2.htm 2008).

Profits,

Andrew Adam Newman/'EnvironDepot Refuses to Drop Ads on Fox News," The New York Times, July

5,

26. Paul Glader," Steel-Price Rise

27.

mentalists Push, but

.html?_r=l&scp=l&sq=dancing+el

9.

York Times, April 20, 2003.

st=nyt&oref=slogin (accessed

Barney Gimbel, "Attack of the Wal-

dnflash/content/aug2007/

mo+smackdown&st=nyt&oref=slog

8.

January 15, 2007).

.businessweek.com/bwdaily/

New

6.

Samuel Loewenberg," Europe Gets Tougher on U.S. Companies," The

2006): 125.

"Dancing Elmo Smackdown," T/ze

4.

Journal, June 15, 2005.

.

Street

Martyrs," Fortune (December 11,

August

York Times,

2007, http://www.

nvtimes.com/2007/01/07/business/

Christopher Palmeri," What Went Mattel" BusinessWeek On-

7,

yourmoney /0 7nile html ?_r= 1 &scp=l &sq=When+buying+a+ diamond+starts+with+a+mouse&

New

an Age of Complexity (San

January

Starts with a

New

Elders

Its

on the Job Longer," The Wall

Park,

Diamond

Moment:

Sebastian Moffett," Senior

Wrong at line,

3.

14.

Gary Rivlin,"When Buying a

Mouse," The

Fast-Aging Japan Keeps

Francisco: Jossey-Bass, 2001).

25.

Census, www.census.gov/.

13. U.S.

ed.

CA: Mind Garden, Inc., 2004); and Karl E. Weick and Kathleen M. Sutcliffe, Managing the Unexpected: Assuring High Perfor-

(MenJo

"You Raised Them, Now Manage Them," Fortune (May 28, 2007): 38-46.

Lengel, Fusion Leadership (San Fran-

4; B.

91

William B. Johnston, "Global Force 2000: The

Work

New World Labor

Market, "Harvard Business Review

(March-April 1991): 115-127. 11. U.S.

Census Bureau,"The Face

Our Population," U.S. Census

23.

Hempel,"The MySpace Gen(December

on

Janu3,

2008);

BusinessWeek (January

17, 2005):

eration," BusinessWeek

60-61; Bernard Simon, "A Bright

12, 2005): 86-94.

New Day for the Telecom Industry,

John Simons,"Stop Moaning About Gripe Sites and Log On," Fortune

New

(April 2, 2001): 181-182.

Mark

24. Jon Swartz," MySpace

Cranks

Up

Heat

in Turf War with Facebook,"

Bureau, 2008, http://factfinder

USA

Today,

-census.gov/jsp/saff/SAFFInfo

http://www.usatoday.com/tech/

.jsp?_pageld=tp9_race_ethnicity

webguide/2007-12-20-myspace_n

(accessed January 28, 2008).

.htm (accessed December 21, 2007).

of

34.

December

21, 2007,

If

the Public Will

Go Along," The

York Times, January 12, 2004; Heinzl, "Nortel's Profit of $499

Million Exceeds Forecast," The Wall Street Journal,

January 30, 2004;

Joseph Weber with

Andy Reinhardt

and Peter Burrows/'Racing Ahead at Nortel," BusinessWeek (November 8, 1999): 93-99; Ian Austen, "Hooked

on the Net," Canadian Business

I

:

p A *^

92

\in Francis

ruary

RuK

Management

OF

J

I'ratt

and Anat

Rafaeli,

'rgani-

ch 44

m

mizational Behavior 23 (2001):

R

inabou, "Here's the

ompony (February hip Jarnagin and John

W. Slocum,

'Creating Corporate Culru

Jr

-hip"

through Mythi

in

Dynamics

mizational

urnal

36, no. 3

Juinn and Cretchen id to

:lld

lining

erment: Seven Questions

The

n Product]

nuarj

Evi

Should Consider," Organi-

lei

11,

M

Emp'

ZtUional

Dynamic* (Autumn

1

.lUtU

nd+

.htn

i

Business

Rep

I

^7

Partnership Route, "hie.

Martin, Organizational Culture,

Deal and Allan

luh

.is

on Organizational

Change

ind Culture

A

Kennedy, Corporate Cultures: The Rites ami Rituals of Corporate Life (Reading, MA: Addison Weslev

>rms ot\alue

the

2008).

12,

pp. ;

cembei 1988): 143

Uong

hrtp://ww

February

Mythopoetic Leadership,"

nber

and foshua Hyatt, iter

site,

.magin and Slocum/'Creating Corporate Cultures through

lointYenti ..'

Web

con

lanuai) 3d.

and Maintenance, "Academy of Mana

Partnership

Culture: Origins

lohn :

'ing

petith e

j.

L'

Sherwood,

Com

anizationai

Brown and Ren

1

2006): 267-27 60. Patricia

and D.

Up

low the Portman

From Its People," Human Resource Management 45, no. 2 (Summer

Work Cultures with

Ad\ anl

1

Ritz-Carlton Hotel Gets the

i

Dym Andrew

tor Success:

and Weakness

Studies

mber

nurYeung/'Setting People

agement Review L3 V L\nne Meek, "Organizational

Say

It

Jones and

ami Live

It:

Lam

Rahaner,

50 Corporate Mis-

sion Statements That Hit the

Star

Mark

'

wYorJc: Currency

Organizational

I

AIL

ture

Dynam-

iniziitional

on Communication and

Information," Journal of Management

1995). 61.

m,

|r

Harrison M. Trice and Janice

M

Beyer, "Studying Organizational

•

Entei

Doubledav

The Trillion-Dollar \lliaiiic

Cultures Through Rites and Cer

Revolu-

bu*

tion Will Transform Global

emonials,' 'Academy of Management

lizational Cul-

ping the Terrain (Thousand Publicati

nan ation-

Ralph ri RjJmann, am:

Man

Review 9(198 62.

I

Saxton,

Underding and Changing Cultui i

PRWeb, November 3, 2003, http:// www.prweb.comi releases 2005/11/ prweb306461.php (accessed Februar\

mber-

Chatman and Karen nda

i

1

Van de

Smu

iltureand •nnis-

Interorganizational

Relatn mahips, At adem.

Jehi

Between Industry Characteristics and Organizational Culture: How Different of

Iden

A.

rtgthe Relationship

Can "Vbu

Be? Academy

Management journal

37, n
>it jtoiJjn

2

distance. High

I

UMMha a

[amaica t

Intltiuiiitilisin utui

I

ollri tit imi

i

Huism. Individualism

ollet

reflects a

\

alue for a loosely knit

framework in which individuals are expected to take care of themselves. C ollectri ism means a preference for a tighth knit social framework in which individuals look after one another and organizations protect their members' interountries with individualist values include the United States, Canada, teat Britain, and Australia. Countries with collectivist values are Guatemala, uador, and C hina. ial

membe jlmit\

c

1

ulinity/femininity. Masculinity stands tor preference for achievement, hero-

\/« V\

material in

of Body Language

Steven

to pick

:

period of culture shock he tlvrd component of CQ, the physical, refers to a person s ability to shift his or —ions, .md body language to be in tune with people from a her speech patten different culture. Most managers aren't equally strong in all three areas, but maximizinitial I

draw upon all three facets. In a sense, CQ and body work in concert. High CQ also requires that a manager be open and receptive to new ideas and approaches One stud\ found that people who adapt to global management most easily are those who have grown up learning how to understand, empathize, and work with others who are different from themselves. For example, Singaporeans consistentlv hear English and Chinese spoken side bv side. The Dutch have to learn Fnglish, German, and French, as well as Dutch, to interact and trade with their economicallv dominant neighbors. English Canadians must not only be well-versed in American culture and politics, but they also have to consider the views and kk French Canadians, who, in turn, must learn to think like North Americans, memlobal French community, Canadians, and Quebecois. 71 People in the United States who ha\ e grown up without this kind oi language and cultural diversity typically have more difficulties with foreign assignments, but willing managers from anv country can learn to open their minds and appreciate other viewpoint ing cultural intelligence requires that they requires that the head, heart,

Managing Cross-Culturally Which two

of the following three items go together: a panda, a banana, and a monyou said a monkey and a banana, you answered like a majority oi Asians; if you said a panda and a monkey, you answered like a majority of people in Western Europe and the United States Where Westerners see distinct categories (animals). Asians see relationships (monk bananas).71 Although this test is not definito illustrate an important fact for managers Fhe cultural differences in how people think and see the world affect working relationships. To be effective on an international level, managers need to interpret the culture of the countrv and organization in which they are working and develop the sensitivity required to avoid It

making iiilturc-

shcuk

(.ostlv cultural

In addition to I

blunder

developing cultural intelligence, mai how the countrv differs

rtments b\ understanding ultuiv

GU M>l

social

\

alius

,i

earlier in this

an prepare for foreign terms oi the Hofstede and chapter. These values greatlv influence in

.

Chapter 4 Managing

in

117

a Global Environment

SCORING AND INTERPRETATION:

Are You Culturally

question pertains to

Intelligent?

intelligence.

Each

some aspect of cultural

Questions 1-3 pertain to the head

CQ subscale), questions 4-6 to the heart (emotional CQ subscale), and questions 7-9 to behavior (physical CQ subscale). If you have suf(cognitive

The job of a manager demands long your activities will test

a

lot,

and before

include situations that

will

your knowledge and capacity for dealing

with people from other national cultures. Are you

To

about your experiences in other countries or with people from other countries. To what extent does each of the following ready?

find out, think

statements characterize your behavior? Please

answer each of the following items as Mostly True or Mostly False for you.

and CQ to have answered "Mostly True" to two of three questions

ficient international experience

for each subscale or six of nine for

all

the ques-

tions, then consider yourself at a high level

for a

new manager.

If

of CQ

you scored one or fewer

"Mostly True" on each subscale or three or fewer for

all

nine questions,

it is

time to learn more

about other national cultures. Hone your observational skills and learn to pick up on clues about how people from a different country respond to various situations.

Mostly True

Mostly False

SOURCES: Based on 1.

I

plan

how

I'm going to

relate to people

from a

different culture before

3.

I

and

reli-

understand the rules

I

other cultures.

seek out opportunities

I

cultures.

can handle the stresses

of

a different

living in

culture with relative ease. I

am

confident that

befriend locals ture that

is

in

a

I

can

cul-

unfamiliar

to me. I

my

change

speech style

(e.g., accent,

tone)

when

a cross-cultural interaction requires 8.

I

alter

my

it.

facial expres-

sions and gestures as

needed to

facilitate

a

cross-culture interaction. 9.

and

Measurement

on Cultural Judgment and Decision Making,

Organization Review 3 (2007):

I

from different

7.

Its

cultures.

to interact with people

6.

Effects

"Cultural Intelligence:

Cultural Adaptation and Task Performance," Management and

in

5.

Anand Chandrasekar,

gious beliefs of other

for nonverbal behavior

4.

Christine Koh, K. Yee Ng, Klaus J. Templer, Cheryl Tay,

N.

understand the

Christopher Earley and Elaine Intelligence," Harvard Business Review

(October 2004): 139-146; and Soon Ang, Lynn Van Dyne, I

meet them. 2.

P.

Mosakowski, "Cultural

I

am

the

quick to change

way behave when a I

cross-culture encounter

seems to require

it.

335-371

Past

118

ment of Management

2

Lnthenewasagn:h

ment |

ipan,

wl ,d

on individualism, and a s high on collectivism,

controlling to be successful to

how

live

and

some clues ful

i

gpatriai

ffl

who

than their own.

Human and

Resources N

mri\ e

ill

non, and training

v

of

in

an international assignment,

empl

-

increase

iman resource managers consider global the potential r cultural trainaddition, expatriat skills in the selection In historical orientation." and cultural provides skills and ing that develops language their families and candidates il\ important is honest self-analysit ask candidate should country, a another in Before seeking or accepting an assignment .

himselt or herself such questions as the follown C

an \ou

c

an

\

initiate

soda! contacts

OU ad|ust w

to different

ell

in a foreign culture

1

environments and changes

in

personal comfort or

quality of h\ ing, such as the lack of tele\ ision, limited hot water, varied cuisine,

and national phone hi

\

strik.

on manage \ our future reentry into the home countn

job

market by networking and main-

taining contacts in vour

working overseas nuist adjust to all of these conditions. In addition, managers going global often find that their management styles need adjustment to succeed

Take Moment

in a

countr\ other than their native one.

Complete the

ment

experiential exercise

How well do

potential.

Leading

1

20-1 21 that pertains to your global manage-

In relationship-oriented societies that •.

rab world,

doing business

in

One

reflect

a global perspective?

rank high on collectivism, such as those

and Latin America, leaders

ized approach with employees. in

on pages

your knowledge and preferences

typically use a

warm, personal-

oi the greatest difficulties U.S. leaders

China, for example,

is

encounter Chinese

failing to recognize that to the

is a personal relationship/ Managers are expected to have periodic with workers, inquiring about morale and health. Leaders should be especialh careful about how and in what context they criticize others. To Asians, Africans. Arabs, and Latin Americans, the loss of self-respect brings dishonor to themselves and

an) relationship serial visits

their families

I

he principle of saving

face is

highlv important in

some

cultures.

Decision Making In the Lnited States, mid-level managers may discuss a problem and give the boss a recommendation. On the other hand, managers in Iran, which ts South Asian cultural values, expect the boss to make a decision and issue specific instructions In Mexico, employees often don't understand participatory decision making Mexico ranks extremely high on power distance, and mam workers expect managers to exercise their power in making decisions and issuing orders. American managers working in Mexico have been ad\ ised to rarely explain a decision, lest workers perceh e tt In contrast, managers in many Arab and Afriness can nations an to use consultative decision making in the extreme. •

|

i

t

vpjtrutf,

I

Motivating Moti\ ation must

n .ntry

other than

tl

fit the incentives within the culture. Recent data from lovNersl'errm^uesonie insight into what motivates people indifferentcountries based on what potential emplf it most from thecompanv. In the Lnited States,

Chapter 4 Managing

in

a

119

Global Environment

competitive base pay is considered most important, whereas prospective employees in Brazil look for career opportunities. In China, people want chances to learn, and

employees in Spain put work-life balance at the top of their list. 86 Another study also found that intrinsic factors such as challenge, recognition, and the work itself are less effective in countries that value high power distance. It may be that workers in these cultures perceive manager recognition and support as manipulative and there87 fore demotivating. A high value for collectivism in Japan means that employees are motivated in groups. An individual bonus for a high performer would be considered humiliating, but a reward for the team could be highly motivating. Managers in Latin America, Africa, and the Middle East can improve motivation by showing respect for employees as individuals with needs and interests outside of work. 88

Controlling When things go wrong, managers in foreign countries often are unable employees who do not work out. Consider the following research finding: When asked what to do about an employee whose work had been subpar for a year after 15 years of exemplary performance, 75 percent of Americans and Canadians said fire her; only 20 percent of Singaporeans and Koreans chose that solution. 89 In Europe, Mexico, and Indonesia, as well, to hire and fire based on performance seems unnaturally brutal. In addition, workers in some countries are protected by strong labor laws and union rules. Managers also have to learn not to control the wrong things. A Sears manager in Hong Kong insisted that employees come to work on time instead of 15 minutes late. The employees did exactly as they were told, but they also left on time instead of working into the evening as they had previously. A lot of work was left unfinished. The manager eventually told the employees to go back to their old ways. His attempt at control had a negative effect. to get rid of

A MANAGER'S ESSENTIALS:

ch4

WHAT HAVE WE LEARNED?

Successful companies are expanding their business overseas and successfully

competing with foreign companies on vide

many opportunities

their

home

turf.

but are also fraught with

International markets pro-

difficulty.

Major alternatives for entering foreign markets are outsourcing exporting, licensing, and direct investing through joint ventures or wholly owned subsidiaries. Business in the global arena involves special risks and difficulties because of com-

and sociocultural forces. Moreover, the global environment changes rapidly, as illustrated by the emergence of the World Trade Organization, the European Union, and the North American Free Trade Agreement. plicated economic, legal-political,

The expansion people

of free-trade policies has sparked a globalization backlash

who are fearful of losing their jobs and economic

among

security.

Much of the growth in international business has been carried

out by large busi-

nesses called multinational corporations (MNC). These large companies exist in

an almost borderless world, encouraging the free flow of ideas, products, manufacturing, and marketing among countries to achieve the greatest efficiencies.

Managers

in

MNCs as well as those in much smaller companies doing business

many challenges and must develop a high level of cultural intelbe successful. CQ, which involves a cognitive component (head), an emotional component (heart), and a physical component (body), helps managers internationally face

ligence

(CQ

)

to

interpret unfamiliar situations

Social

and

and devise

culturally appropriate responses.

and influence appropriate and managerial control.

cultural values differ widely across cultures

patterns of leadership, decision making, motivation,

'

pA « T

120

DISCUSSION QUESTIONS

ch4

would

Wh.it specifically

l

iment of Management

2

,|j

of living

th.

it

be

mon

el

each national sub-

lutonomously?

ibutetoy and working in another coui kills and effectiveness as a manager in your

7

W hat

diK-s

it

n

ty

that the

What might be some long-term

J

the

war

in Iraq

ti>r

ramificatio]

s

w hat

our strongest component oi »ur weakest? How would ou go about shoring up your w eaknes

do \ ou think

is \

What

take to avoid

mak-

ing product design ana marketing mistakes

when

4

steps could a

company 1

introducing new products into

I

asl

lermany

«-

?

I

I

a

would you consider when should

a

company

?

unpare tin- advantages associated with the market entry strategies oi exporting, licensing, and wholly owned subsidiaries What information would you need to collect and what factors

9

multinational corporation operate as a worldwide business system, or

tighth integrated,

MANAGEMENT

ch4

IN

meant by the cultural values of individu1 alism and power distance How might these Nairn's afreet organization design and management

5.

A global

environment requires that managers learn to w ith people ^nd ideas from a \ ariety ot ultures tow well-prepared are you to be a global managei Read tin- follow ing statements and cut le the number on me response scale that most closely re tie*, ts how well the statement desc nbes you deal effectively

think trade alliances such as

the EU, and manager 1

ASEAN

I

987654321

6.

I

rea< h

10 7.

Poor Description

2

I

4

3

2

2

1

team

s

987654321

can speak

I

a foreign

language.

'654321

K-lie\ e

female expatriates can be equally as

9

•

I

effe


mu« tl

The International Olympic Committee

respond to numerui.

Olympic Committees that make up its membership, the cities at which various Olympic events will be held, the

numerous sponsors, and an international The symbolic running

that will cater to attendees,

media organizations, the participating public that has varying

and

athletes,

conflicting interests

of the torch for the 2008 Oh/mptcs was plagued by protests over China's alleged

human

nghts violations

socially responsible

behavior hard to define.

stakeholder* including the 205

countnes and

community

make

In this

as the torch passes through San Fran,

Organizational Stakeholders son tor the difficulty understanding and applying

CSR

managers must confront the question, whom?" Recall from Chapter 3 that organization's environment consists of several is

that

5ponsibility to

photo. Ross Lahrve protests

the

Chapter 5 Managing

139

Ethics and Social Responsibility

sectors in both the task

and general environment. From a social responsibility perview the internal and external environment as a

spective, enlightened organizations

variety of stakeholders.

A stakeholder is any group within or outside the organization that has a stake performance. Each stakeholder has a different criterion of responsiveness because it has a different interest in the organization. 26 For example, Wal-Mart uses aggressive bargaining tactics with suppliers so that it is able to provide low prices for customers. Some stakeholders see this type of corporate behavior as responsible because it benefits customers and forces suppliers to be more efficient. Others, however, argue that the aggressive tactics are unethical and socially irresponsible because they force U.S. manufacturers to lay off workers, close factories, and outsource from low-wage countries. One supplier said clothing is being sold so cheaply at Wal-Mart that many U.S. companies could not compete even if they paid their employees nothing. 27 The organization's performance affects stakeholders, but stakeholders can also have a tremendous effect on the organization's performance and success. Consider the case of Monsanto, a leading competitor in the life sciences industry. in the organization's

Over the past decade or

so,

Monsanto has been transformed from a chemicals

firm into

Monsanto

a biotechnology company. The organization's vast array of stakeholders around the world includes customers, investors, suppliers, partners, health and agricultural organizations,

regulatory agencies, research institutes, and governments.

Monsanto experienced some

big

problems

in

recent years because of its failure to satisfy

various stakeholder groups. For example, the company's genetic seed business has been the target of controversy

that might arise for

and

protest. Small farmers

them with using the new

were concerned about new dependencies

seeds.

European consumers rebelled against

a perceived imposition of unlabeled, genetically modified food ingredients. Research tutes

insti-

and other organizations took offense at what they perceived as Monsanto's arrogant

approach to the new business. stein foods."

Activist

groups accused the company of creating "Franken-

To make matters even worse,

in

seeking to

sell

genetically modified seeds

Indonesia, managers allegedly bribed government officials, which got

Monsanto

in

into hot

water with the SEC. In light

of these stakeholder

issues,

CEO

stakeholders at a Farm Journal Conference

so blinded by

its

enthusiasm for

technology raised for

many

in

this great

Hendrik

Verfaillie offered

new technology

cal

it

missed the concerns the

commitments

requires an ongoing

Monsanto managers and various stakeholder constituencies. The company

paid $1.5 million to settle the investigators.

that

people." Verfaillie also announced a five-part pledge that aims to

restore positive stakeholder relationships. Each of the five

dialogue between

an apology to some

Washington, D.C., saying that Monsanto "was

SEC charges and

Monsanto managers understand

is

voluntarily cooperating with regulatory

the importance of effectively

managing

criti-

stakeholder relationships. 28

Exhibit 5.4 illustrates important stakeholders for Monsanto. are similarly influenced

by

Most organizations and share-

a variety of stakeholder groups. Investors

and suppliers are considered primary stakeholdand suppliers' interests are served by managerial efficiency that is, use of resources to achieve profits. Employees expect work satisfaction, pay, and good supervision. Customers are concerned with decisions about the quality, safety, and availability of goods and services. When any primary stakeholder group becomes seriously holders, employees, customers, ers,

without

whom

the organization cannot survive. Investors, shareholders,

—

dissatisfied, the organization's viability is threatened. 29

Other important stakeholders are the government and the community, which have become increasingly important in recent years. Most corporations exist only under the proper charter and licenses and operate within the limits of safety laws, environmental protection requirements, antitrust regulations, antibribery legislation, and other laws and regulations in the government sector. The community includes local government, the natural and physical environments, and the quality of life

stakeholder Any group within or outside the organization that has a stake in the organization's performance.

p ART

140

EXHIBIT

5.4

.into

ent of

2

Management

Com;

Regulatory

and t

Authorities

Communities Stockholders

SOUR'

Mition

in

D

•

'

Ibert.

Stikrholdcr Approj

and R trot

E Freeman.

Focusing on Value Reconciling Corporate Social Responsibility. Sustamability, and a

Management 28, no

rma Management

R,st sav

product

mgs because

What Would You Do? talk to the manufacturing vice president and emphasize the responsibility Chem-Tech has as an

1

recent

i>t

changes in environmental regulations Regulator) agencies loosened requirements on reducing and recycling ah means C hem-Tech can now release waste *lv into the Dutch valley Rivet is at anyone to see C hem- Lech sureconomic downturn, hut he doesn't think this route in the- u,u to do it He expressed his opposition ding the waste dumping to hoth the plant manaid his din-vt supen isi>r. Martin eldman. Martin

industry leader to set an example. Present her with recommendation that Chem-Tech participate in

a

voluntary pollution reduction as a marketing tool, positioning itself as the environmentally friendly

Nathan

\

choice.

ive this

Mind v our own business and just do your job. The companv isn't breaking any laws, and if ChemTech's

2.

economic situation doesn't improve, a will be thrown out of work.

I

Jways supported Nathan, but ent

I

In-

plant mat

turned

time was differ"We're

this

a deal ear

meeting government standards/ he'd them to protect the water It's up to us and sta\ in hii

said. "It's to

make

up

group and stage a protest of the company.

get

to

them

to

a profit

M >l KCE: Adapted from Janet Q. Evans,"What Do You Do: What Is

Legal?" Business Ethics

(Fall

Empress Luxury Lines

Phil looked so deflated.

n>m what computer technician Kev in Pteitter just told him, It looked to Antonio Melende/ as it top management at mpress Luxury lines finally found a wav to tund the computer svstem upgrade he'd been requesting ever since he'd taken the job two

area.

to call Roger," Phil

to

CFO— and

I

I

j

bc-gan innocently enough, Kev in said

i

When he

reported to the luvurv cruise tine's corporate headquar-

informed him that the compute! s\sh-m had been hit bv a power surge during the fierce thunderstorms that rolled through southern ters, his supt-rv isor Phil Bailey

I

lorida the night before "C heck out the

damage, ,md

report direct!) back tome," Phfl instructed

u hen

Kev

m

delivered what he thought would damaged underground win-s

the

and com] ot

If

2002): 20.

CASE FOR CRITICAL ANALYSIS

ch5

all

people

Call the local environmental advocacy

3.

fblluting

It

lot of

about SI^.ihio

could be repaired to the tune he couldn't understand m

nits

Ive got Empress's

"Go out

to the reception

snapped, referring

Antonio's boss. In a few

minutes, Phil called Kevin back into the office and

him to dig up nearly all the underground and cable and then haul it all off before the insurance ad|ustor appeared. It Kevin carried out Phil's instructed

w

ire

knew the costs would balloon astronomiabout a half-million dollars, a tidv sum that would go a long way toward covering the costs of a computer system upgrade, as Phil pointed out. Kev in took a deep breath and refused, even though as a new hire he was still on probation. When Antonio congratulated Kev in on his integritv, the orders, he callv to

technician shook his head. "Didn't really matter," he said.

on

"On my way back to my way to do the deed."

his

cubicle,

Matt passed

me

.

Chapter 5 Managing

Ethics and Social Responsibility

Antonio could guess at the motivation behind the scam. During the 1990s, Empress increased its fleet of ships in response to the healthy demand for its luxury cruises during the stock market bubble. But the bubble burst, the nation was traumatized by September 11,

and some of the vacationers who did venture onto were felled by an outbreak of the Norwalk

cruises

Bookings fell off precipitously. To top it all off, the 2005 hurricanes hit, forcing Empress to write piles of refund checks for their Caribbean and Gulf cruises while coping with steep increases in fuel costs. Seriously sagging earnings explained why Antonio's requests for that system upgrade went unheeded. He could also guess at the likely consequences if he chose to do the right thing. Since taking the job, he'd heard rumors that Empress successfully defrauded insurance companies before he arrived. He dismissed them at the time, but now he wasn't

151

own job

himself, in effect putting only his

ardy?

And

really,

in jeop-

considering the high degree of per-

sonal risk and the low probability that the problem

would

actually be addressed, should he just

sweep

the problem under the rug?

Questions

virus.

so sure.

1.

subordinate, Kevin Pfeiffer,

obligations are to his

what decision would

Antonio Melendez most likely reach if he applied the utilitarian approach to decision making? What conclusions would probably result if he employed the individualism approach? 2.

No confidential mechanism was in place for

employees to report wrong-doing internally, and no protections were available for whistle-blowers. Shaken, Antonio wasn't feeling at all confident that, even if he bypassed the CFO, he would find upperlevel management all that eager to thwart the scheme. He had a hunch that the person most likely to be

When determining what his

Put yourself in Antonio's position and decide realistically what you would do. Is your response at a preconventional, conventional, or postconventional level of moral development? How do you feel about your response?

3. If

Antonio or Kevin were

because they

fired

would they be justified their employment at the

reported Empress's fraud,

removing all traces of cruise line from their resumes so they don't have to explain to a prospective employer why they were in

fired?

Why or why not?

penalized was the whistle-blower.

debated about just calling the insurance comI decided to come to you first." So what should Antonio do? Should he advise Kevin to go ahead and report Empress to the insurance company? Or should he treat Kevin's communication as confidential and deal with the situation "I

pany," Kevin said, "but

Organic Valley Plants the Seeds of Social Responsibility Many organizations treat social responsibility as if were

a separate division

—the department of good

among employees, use environmentally friendly packaging, and spondeeds. They support volunteerism

programs

in the community. All of these be commended. But very few commercial organizations can actually claim to be based on the principles of social responsibility. The Organic Valley Cooperative is an exception. Based in Wisconsin, Organic Valley is a cooperative of small farmers whose products are certified to be produced without pesticides, synthetic hormones, or antibiotics, including organic

sor special

activities are to

milk, cheese, butter, spreads, creams, eggs, vegetables, juice,

Ethics

(Summer

2004): 14;

Amy Tao, "Have

Fraud/' Business

Cruise Lines Weathered

the Storm?" BusinessWeek Online (September 11, 2003), hrtp://www.

businessweek.com/bwdaily/dnflash/sep2003/nf2003091 l_6693_db014 htm; and Joan Dubinsky,"A Word to the Whistle - Blower, "Workforce (July 2002): 28.

THE JOB VIDEO CASE

ch5

it

SOURCES: Based on Don Soeken,"On Witnessing a

and meat.

Nearly two decades ago, a few farmers who believed strongly in the value to society of practicing organic agriculture and saving family farms got together to

form

a cooperative.

By

acting together, these farm-

ers could better control their fate.

They could control and reach

supply, negotiate with larger customers,

more consumers who wanted

their products.

And

they could set their own milk prices. Instead of being forced to accept prices subject to wild fluctuations

open marketplace, these farmers began to set own. This practice alone may be the single most

in the their

important factor in the ability of family farms to survive. In one recent year, the milk price paid to Organic Valley farmers was 60 percent higher than the price paid to conventional dairy farmers. Organic Valley has actually received criticism for this practice, particularly from its creditors. But the cooperative holds

.

Part

152

.

ronment of Management

-eatbelts in a

their kici

the milk

firm

2

| ,ic

Vallev's direc-

ory I

r

our the

•

r

and organic

ent,

am

driving

!h. is I

ships

an.*

the most important mi

I

:

he implementation of

am

in the U.S.

.

li&hed the organic market as one that

irming iiting 1)

million per sear and grow ing

upwards

Member Iders

i

ink Valle)

's

ice a

oneoi mecoopera-

da) and allowed

to

proj-

land,

structure

•arms. operated in Paul Deutsch in Wes -ws that are Wisconsin Deutsch owns twa

milked tw

dam

a large federal

urm-

farms and sustainable, organic agriculture

Ridge Organi

When

ird

it will be able to sustain itself from one generation to the next, ensuring the sur\ ival of family

»-et

rural areas

ral

has helped the economies of

n southwestern Wisconsin was cancelled after displacing more than 140 local farmers from their

With

i

and executive commirt

Ie\

tarm-

em|

\a!le\

further

here to

ink."

II

re hitting

lis!

.

is

BT pas-

time— unlike cows in main conventional dairy farms, which are kept in stalls 24 hours a da) and may be given hormones or antibiotics It ..osts more to run an organic dairy farm, where in addition to grass the cow 5 are ted organic

many

ganic Valley

lost their livelihood

.me established, it created employment opportunities—both on the farms and in the cooperative offices

— for hundreds of residents

in the area.

"Going

ink sa\ ed our farm," says cooperative farmer Mike t.ehl, whose family has operated a Wisconsin

farm

^nd five generations. him can look forward to

for 154 years

and others

like

Now Gehl the next

generation of farming.

ture-land the rest ot the larger,

and other

corn, alfalfa,

grains,

and the cow s need spending money

Questions 1

2.

zing land. But Deutsch isn't

on chemicals or

\

et bills

1

le

estimates that he

Mam

Describe at least one ethical challenge that Organic may face during turbulent times.

Vallev

profit

Company Web ~cd August

tional

Academy

ot Science reports

2,

site,

iily

lie \allev

and

httpjApww.organicvaney.CHpxom,

2004; Judy Ertenhofer." Organic Valley a Big

Succi

parents have read the Consumer Rt'port> stud.

who are Organic Valley's

1

makes

each vear because consumto more for products they know happ\ pay ire are more healthful tor themselves and their families

about 30 percent

In addition to the farmers,

other stakeholders

1

:

13,

2^, 2004. http://wwu\madison.,

Lewd Fay

Price to Farmers, "OFARM,

http://irwic.ofarTri.org;

Organic Valley press

kit.

ch5 The Bourne

Identity

novel,

was previously filmed

in 1988 as a television

miniseries starring Richard Chamberlain. fason bourne (Matt is,

Damon) cannot remember who he

but others believe he

is

w ith the help oi his and lover Marie (Franks I'otente). Meanwhile, while c LA agents pursue him across Europe trying to kill him bourne slow k d that he is ,\n extremely well-trained and lethal agent I he stor\, which is looselv based on Robert l.udlum'bourne

new

tries to learn his identity

friend

is an edited version oi the "Bour sequence near the end oi the film. Jason

This scene

an international assassin,

bourne the dav oi

kills

the hired assassin

after Jason

Eamon (Tim

who

tried to kill

and Marie arrived

Dutton).

Eamon

is

at the

him

home

Marie's friend

dead m. apartment in Pai France. He presses the redial button, which con:

but

is

cell

phone

a stranger to Jason. Jason uses the after returning to his

Chapter 5 Managing

him

to

153

Ethics and Social Responsibility

Conklin (Chris Cooper), the CIA manager

who

Does Bourne assess the plan's execution to determine if it conforms to his goal? If so, what does he

looking for him. Listen carefully to Jason's conversation with Conklin as he walks along the right bank is

do?

of the Seine River in Paris.

Was Bourne's plan

What 1.

to

Watch

for and

successfully carried out?

Why

why not? How

does this scene relate to organizational strategic planning? or

Ask Yourself

Does Jason Bourne describe a plan to Conklin? he does, what are the plan's elements? What is

If

Bourne's goal?

ENDNOTES

ch5 1.

comes from Susan

Without Selling Your Soul (Louisville,

Joseph A. McKinney, and Carlos

KY: Westminster John Knox Press,

W. Moore, "Egoism and Indepen-

2003), for a cogent discussion of

dence: Entrepreneurial Ethics,"

Sees Life Unravel," The Wall Street

some

Organizational Dynamics (Winter

March 24, 2005; and S. Pulliam, "Over the Line: A Staffer

ated with Enron's collapse.

1988): 64-72; Carolyn Wiley, "The

Rushworth M. Kidder, "The Three

ABCs

This example

Pulliam, "Crossing the Line; At

Center of Fraud,

WorldCom

Official

Journal,

Ordered

to

Commit Fraud

Then Caved," The Wall 2.

3.

Street Jour-

nal, June 23, 2003. Bethany McLean, "Why Enron Went Bust," Fortune (December 24, 2001):

10.

13.

of Management Education (August 1997): 411-417. 18.

p. 4.

Michael

J.

McCarthy, "Now the Boss

Knows Where You're

Decision Making by

"Virtual Morality:

Based on a question from a General Electric employee ethics guide, reported in Kathryn Kranhold,"U.S. Firms Raise Ethics Focus," The Wall

Quandary," The Wall

November

Based on information E.

in

Constance

Street Journal,

and Jeffrey L. Seglin/'Who's Snooping on You?"

October

21, 1999;

Business 2.0 (August

8,

2000):

202-203.

28, 2005.

Bagley,"The Ethical Leader's

Clicking," and

A New Workplace

Individuals in Organizations."

Street Journal,

A Person- Situation

19.

John Kekes,"Self-Direction: The Core of Ethical In divi dualism, "in

Interactionist Model," Academy

Decision Tree," Harvard Business

Organizations and Ethical Individu-

Review (February 2003): 18-19. Based on information inVadim

alism, ed.

14.

Thomas M. Jones, "Ethical Decision Making by Individuals in Organiza-

An

Liberman," Scoring on the Job," Across the Board (November-

Issue-Contingent Model,"

Academy of Management Review

15.

16(1991): 366-395.

Shelby D. Hunt and Jared M. Hansen,

"Understanding Ethical Diversity in

Dynamics 36, no 2 (2007): 202-216. John R. Emshwiller and Alexei Indictment Against Skilling,"77ze Wall Street Journal,

February 20, 2004.

See Clinton W. McLemore, StreetSmart Ethics: Succeeding in Business

December 2003): 46-50. From Jeffrey Kluger/'What Makes Us Moral? Time (December 3, 2007): 54-60.

16.

"The Morality Quiz," at http://www

17.

February 19, 2008). This discussion is based on Gerald F. Cavanagh, Dennis J. Moberg, and

Organizations," Organizational

Barrionuevo,"U.S. Prosecutors File

8.

About How to Do It (New York: John Wiley &

Exercise Us-

of Management Review 11 (1986):

tions:

7.

ing Ethical Frameworks,"/oi/r7w/

11. Jones, "Ethical

12.

An

Decision Making:

Nelson, Managing Business Ethics:

Sons, Inc. 1995),

601-617.

6.

and Mark Mallinger, "Decisive

CIO (March

March 4, 2008. Gordon F. Shea, Practical Ethics (New York: American Management Association, 1988); and Linda K. Treviho, "Ethical Decision Making in

and lmplemen-

30, 1990.

Straight Talk

Esterl, "Executive Derision: In

of Business Ethics: Defini-

tions, Philosophies,

Linda K. Trevino and Katherine A.

Right

15, 2003): 41-42.

Human Action,"

tation,"7M (February 1995): 22-27;

Patricia Wallington, "Honestly?!"

Mike

legal issues associ-

Christian Science Monitor, January

58-68; survey results reported in

Organizations;

5.

and

Great Domains of

Balked,

Germany, Scandals Tarnish Business Elite," The Wall Street Journal, 4.

9.

ethical

.time.com/morality (accessed

Konstanian Kolenda (New

York: Praeger, 1988), pp. 1-18. 20. TadTulega,

Beyond

the

Bottom Line

(New York: Penguin Books, 21. L.

1987).

Kohlberg," Moral Stages and

The CognitiveDevelopmental Approach," in Moral Development and Behavior: Theory, Research, and Social Issues, ed.T. Lickona (New York: Holt, Rinehart Moralization:

& Winston,

1976), pp. 31-83; L.

Kohlberg, "Stage and Sequence: The

Cognitive-Developmental Approach

Manuel Velasquez, "The Ethics of Organizational Politics, "Academy of Management Review 6 (1981):

ed. D. A. Goslin (Chicago:

363-374; Justin G. Longenecker,

Nally, 1969);

to Socialization," in

Socialization Theory

Handbook of and Research,

Rand Mc-

Linda K. Treviho, Gary

9

Part

154

2

evaluating corporate social perfor-

R V

man.

e

;mg

:ig

Diane

L.

Swanson, Problem

a Theoretical

by Reorienting the Corporate Social Performance WodA," Academy 20, no. 1

ton Friedman, Capitalism and

(Chicago: L'nr.

able

Chi

lour-

n Friedman to .

Zi. p 133; and and Rose Friedman,

Harcourt

Choose

Brace jovanovich,

and

1

Organizama: e

tional Illegality. Theoretical Integra-

:

.

f

momic Develop-

thi

ment, Our

Common

and

':

Gun ther, "Tree Hue Lovers,

Paula

and

Profits

"Fortune (June

Litive

mizational

Pul

Dynam-

rig

Preferred Lender; Student Loan

Xpress Puts Three Managers on

Amid

on

Multiple Inquiries," The

Wall Street Journal, April

6,

2007, http:

.usatodav.com

a

money

pora-

Hugging the Tree March Huggers,"Busi

43. O'Sullivan, "Virtue 12,

ted in Kate O'Sullivan,

and i

aging and

"Virtue Rj

>ber

200'

H.

lark Borden, Jeff

Hugp

Hafner and Claudi H.

Times,

September

Company

[ichael

and

am

Approach,"

Quarterly

13,

E Brown and Linda "

no

,nd

4

.iershtp

Quarterly 1"

Gary R. Weaver, Linda Klebe Treririo, and Bradley A. d) Look Up To': Ethical Role Models in Organizatio 1

onal

mizational a

u-ral

Dyr

no. 4

Mho. men:

Approach

K.

Ethical Leadership

Review and Future Directions, "The

.Arch

ponsi-

md

www

reen

I

bilit.

2003,

W. Gellerman," Managing Top Down,"S/iwi Management Review (Winter

Ireviho,

Fishman,"The

14,

Ethics from the

and

Danielle s

:nd Charles

2007).

Saul

Chu, Charles

Fishman, Mich V>ur Husi'

tie

b,

Rewarded."

nytimes.com. Jging the Tree

I^irtner-

ing with External Stakehold.

www

industries/

Deutsch/'WTien Good Will Is Also Good Business, "The Neiv York

and Impli unit

2007;

banking/2007-04-06-loans-usat_\

the Planet," The

.htm (accessed April

"The

10,

and Kathy Chu, "3 University Financial Aid Chiefs Suspended," USA Today, April

104.

J

John Hechinger," Financial -Aid Directors Received Payments from

Leave

Futui

rd Univers

:

44.

G. R Weaver, David G. Gibson,

and Barbara Ley Toffler," Managing

Chapter 5 Managing

Ethics and Legal Compliance: What Works and What Hurts?" California Management Review 41, no. 2

(Winter 1999): 131-151.

687-705. 60.

al.,"Managing Ethics and

Legal Compliance." 51.

Carolyn Wiley, "The ABC's of Busi-

and Implementation," IM

Ganuary-February 1995): 22-27; Joseph L. Badaracco and Allen P. Webb, "Business Ethics: A View from

50 (2007): 247-254;

of Whistle-Blowing/'/ourna/ of Man-

Collaborative Social Initiatives";

agement Inquiry 3, no. 4 (December 1994): 369-374; Marcia P. Miceli

Curtis C.Verschoor and Elizabeth A. Murphy, "The Financial Performance of Large U.S. Firms and Those with

P.

J.

A. Pearce

II

Doh,"The High Impact

Global Prominence:

of

How Do the

Best Corporate Citizens Rate?" Business and Society Review 107, no. 3 (Fall 2002): 371-381; Johnson,

1995): 8-28;

"Self-

Despite Law," USA Today, July 31,

Ethics (March-April 1996): 20-23.

2005, www.usatoday.com.

Also see studies reported in Lori

37, no. 2 (Winter

62.

and Ronald B. Morgan, and Co- Worker Perceptions of Ethics and Their Relationships to Leadership and S alary, "Academy of Management Journal 36, no. 1 (February 1993): 200-214. 52. Journal

Ethics,

for the

63.

Homer H. Johnson/'Does

It

"Does

Study of Ethics

2003): 34-40; Jennifer

John

F.

J.

Pay to

Griffin

Ioannou," Corporate America's Social Conscience," Fortune (May 26, 2003): S1-S10. 65.

and

Mahon,"The Corporate and Corporate

Pay to Be Good?"; Dale

ness Creates Fatter Profits," Business

Be Good? Social Responsibility and Horizons (November-December

It

Kurschner,"5 Ways Ethical Busi-

Financial Performance, "Business

—

Communications Code of from Codes of Ethics Online,

The Center

Verschoor and Murphy, "The Firms."

Phred Dvorak, "Finding the Best Measure of'Corporate Citizen-

Social Performance

of Technology, www.iit.edu/

Financial Performance Debate:

departments/csep/PublicWWW/

Twenty-Five Years of Incomparable

ship,'"

The Wall

codes/index. html.

Research," Business and Society

July

2007.

Cheryl Rosen,"A Measure of Suc-

36, no. 1

cess? Ethics after Enron," Business

Bernadette M. Ruf, Krishnamurty

Ethics

(Summer

2006): 22-26.

(March 1997): 5-31;

CIO (August 1, 2000): 56-58. in Rosen/A Measure

cal Investigation of the Relation-

55.

Reported

of

Geber,"The Right and

Wrong of Ethics

Change in Corporate and Financial

ship between

Offices," Training

(October 1995): 102-118.

Performance:

Street Journal,

McGuire, Alison Sundgren,

and Thomas Schneeweis/'Corporate Social Responsibility and Firm Financial Performance," Academy of Management Journal 31 (1988): 854-872; and Falck and Heblich,

Social Performance

Success? Ethics after Enron."

2,

67. Jean B.

M. Brown, Jay J. and Karen Paul/An Empiri-

Janney,

56. Beverly

66.

Muralidar, Robert

AlanYuspeh,"Do the Right Thing,"

Fi-

nancial Performance of Large U.S.

in the Professions, Illinois Institute

54.

Corporate Social Responsibility:

A Stakeholder Theory

Doing Well by Doing Good."

Perspective/'/ountfl/ of Business

68. Vogel," Is

Ethics 32, no. 2 Quly 2001): 143;

69.

There a Market for Virtue?"

Daniel W. Greening and Daniel

B.

Turban, "Corporate Social Perfor-

Citizenship Report," General Electric

Cochran and Robert A. Wood, "Corporate Social Responsibility and Financial Performance,"

Company, 2005.

Academy of Management Journal 27

Business and Society 39, no. 3

Amy Zipkin," Getting Religion on

(1984): 42-56.

57. Kranhold,"U.S.

Firms Raise Ethics

Focus" and"Our Actions:

Corporate Ethics," The

GE

New

2005

York

Times, October 18, 2000. 59.

J.

Reported in Rosen/A Measure of Success? Ethics after Enron." Jayne O'Donnell, "Blowing the Whistle Can Lead to Harsh Aftermath,

ment Review

58.

and

(1994): 65-74. 61.

the Trenches," California Manage-

53.

Eugene Garaventa,"An Enemy of the People by Henrik Ibsen: The Politics

and Janet P. Near,"Whistleblowing: Reaping the Benefits," Academy of Management Executive 8, no. 3

ness Ethics: Definitions, Philosophies,

and Stephan Heblich," Corporate Social Responsibility: Doing Well by Doing Good," Business Horizons

Discriminant Analysis," Academy of Management Journal 27 (1984):

49. Ibid. 50. Trevino et

155

Ethics and Social Responsibility

Marcia Parmarlee Miceli and Janet P.

Near/The Relationship among

Beliefs,

Organizational Positions,

and Whistle-Blowing

Status:

A

Philip L.

mance

Advantage

(September 2000): 254; and

64. Paul C. Godfrey, "The Relationship

Between Corporate Philanthropy and Shareholder Wealth: A Risk

as a Competitive

in Attracting a Quality Workforce,"

70.

O' Sullivan, "Virtue Rewarded." "The Socially Correct Corporate Business," in Leslie Holstrom and

Management Perspective, "Academy of Management Review 30, no.

Simon

4 (2005): 777-798; Oliver Falck

2000): S1-S38.

Brady, "The

Changing Face of

Global Business," Fortune (July 24,

mimCase fluctuating gas pric

General Motors Part Two: The Environment of

2008—run

such

and Si rnment regula-

ibits

Management mtrolled

The Volt: GM's Ultimate Green Machine

whelminglv passed

dependence and

t

shich in addition to banning ent light bulbs,

r

n

Imagine thai you than 40 miles

-

autor

round

trip

md

Each morning! you hop

in a sleek

tinahon. At night plug your vehicle into a standard household electrk MH.kd tor bedtime. After ting this pattern tor months, sou never missions \]> liiirgdriv


ers in

:

mpg.

Many

lead-

nment see environmental

bu

dean

inability:

striking a balance

techn

development needs and of future generations. Another pressure comes unding the alarm from lobbyists: Powerful catastrophe demanded that global have impending on to save the brakes on industry put the manufacturers between toda

>mic

v

planet. Finally, there's the competition: "Gn.

important buzzword

business today, and vehicles like Toyota Prius and the Tesla Roadster that le< to small carbon footprint are putting pressure on in

GM

get out in front.

)

e

In a

move

than 200 million licensed drivi

to reinvent the

of the twenty-first century,

automobile

GM

tor the n.

unveiled

Whatever the economic,

etec-

during the company's historic 2(His centennial he Volt with its emissions-tree drivcelebration ind 2010 deli\er\ date, promisc-s to become the ultimate green machine tor eco-minded consumers

Whether

political,

and

social n

determined new culture of innovation and change.

to create a its first

GM,

driving big changes at

it's

leadership

the emissions-tree

is

promise of the

Volt,

ir

gravity-defying

fuel

oi

efficiency

the

Chevy

I

Iahoe Hvbrid, or the next-generation thinking of the

hydrogen-powered Cadillac Provoq, the

pi

exciting alternative-fuel vehicles sends a m
»f a dip I

lu-

is

operating the aerodvnamic roughlv equivalent to the price the driving experience

is

hour Drivers who make longer trips than the batter\ s 40-mile range get an automatic recharge from Vblfs gas-powered generator. And although it runs on batteries, the Volt is no golt cart environmentally rriendl) tour-door vehick

tures a sporty-yet-sophisticated stance,

and more

aerodynamic

he futuristic design trei the metallic-white center control console- could pass tor a next-generation il How did (Al go from being the world's larj manufacture! guzzling Hummers and to .\n el> ipan\ produ one Observer has called a A ipc-r tor the dramatic shift is related to multiple threats in the ni/ation s external em ironment. I

COCkpit takes

k

front grille,

lies

from the

i-

in Detroit.

price-

drive unit delivers 150 horsepower ration in nine seconds, and top S|

electric

of 100 miles per

["he

stakeholders that the future of the automobile

Questions 1

What management

strategies

effective in helping

GM adapt to uncertainty and

change

obstacles does

bring

its

environment?

GM

face as it attempts to corporate culture into alignment with the needs and challenges of the twenty-first century?

1

latest in

in its external

What

might be most

-

c

Al continues

>d

its attempts to demonstrate corporate citizenship, what complex

and obstacles may

fru

>rts^

I

foul-

t

I

156

i

October

insideline (accessed

Second Century by September

17, 2008,

2008); U.S.

Department

Drivers

11, 2008);

Finally Taking

Robert Snell/'GM Enters

Wraps

off Volt,"

Its

The Detroit News,

http://www.detnews.com (accessed October

11,

of Transportation, "Distribution of Licensed

—2006,'Tederal Highway Administration, Highway

Statistics

2006 Table DL-20, http://www.fhwa.dot.gov/policy/ohim/hs06/htm/

dl20.htm; David

Welch,"GM Charges Up

the Electric

Chevy Volt— GM

Introduces the Chevy Volt, a Sleek Electric Car Capable of 40

mpg on

Single Charge," BusinessWeek, September, 17, 2008, http://www

.businessweek.com/lifestyle/content/sep2008/bw20080916_356100

.htm (accessed October

11, 2008).

a

Does Goal Setting

Fit

Your Management

After studying this chapter, you should be able to:

Style?

1.

Define goals and plans and explain the relationship between them.

Overview of Goals and Plans Levels

2.

of Goals and Plans

Purposes of Goals and Plans

The Organizational Planning Process

New Manager to

Self -Test:

Explain the concept of organizational mission setting

4-3 3.

Your Approach

and how

it

influences goal

and planning.

Describe the types of goals an organization should have and

managers use strategy maps to

how

align goals.

Studying

Goals

in

4.

Organizations

Organizational Mission 5.

Goals and Plans Aligning Goals with Strategy

Maps

ria

for Effective

6.

essential steps in the

management by

objectives

process.

Explain the difference between single-use plans

and standing

plans.

Goals 7.

Management by Objectives Single-Use and Standing Plans

Planning for a Turbulent Environment

Contingency Planning Building Scenanos

Cnsis Planning

Planning for High Performance

Approaches to Planning High-Performance Approaches to Planning

Traditional

Descnbe the four

(MBO)

"Z.

Operational Planning

Define the characteristics of effective goals.

Descnbe and explain the importance of contingency planning, scenano and cnsis planning in today's environment.

building,

wmmm

8.

Summarize the guidelines changing environment

for high-performance planning in a fast-

—

Managerial Planning an Goal Setting Does Goal Setting Are you a good planner?

Do you

Fit

set goals

Your Management

and

ways to accomplish them? This questionnaire you understand

how your work

habits

fit

SCORING AND INTERPRETATION:

identify will

items 3 and 4. For items 3 and 4 give yourself one point

with making

as they apply to your

work or study

whether each item

Mostly True or Mostly False for you.

habits. Please indicate

Mostly True 1.

I

have

several areas of 2.

1

4.

my

Mostly False

in life

6.

1

work

1

results,

is

and reviewing progress

setting goals,

for the depart-

day or week

have achieved

1

in

your

life

if

and review systems that new managers use. Not everyone thrives under a disciplined goal-setting system, but as a new manager, setting goals and assessing results are tools that will enhance your impact. Research indicates that setting clear, specific, and challenging goals in key areas will produce better performance.

about the measures

when

important part of a new manager's job

you scored low, don't despair. Goal setting can be learned. Most organizations have goal setting

my work.

clear

score of 5 or

and good preparation for a new manager role in an organization. If you scored 4 or less you might want to evaluate and begin to change your goal-setting behavior. An

and work. But

better without specific

set aside time each

am

A

These questions indicate the extent to which you have

achieve.

that indicate

False.

of goal-setting behavior

already adopted the disciplined use of goals

prefer general to specific goals.

1

level

1

1

to plan

one you marked Mostly

higher suggests a positive

ment and subordinates.

deadlines. 5.

for each

measuring

in

life.

have a definite outcome

want to ^

goals

clear, specific

Give yourself one

point for each item you marked as Mostly True except

help

plans and setting goals. Answer the following questions

is

Style?

a goal. 7.

1

work

better

when

1

set

more

challenging goals for myself. 8.

1

help other people clarify and

define their goals.

One

of the primary responsibilities of

managers

is

to decide

where the organization

should go in the future and how to get it there. In some organizations, typically small ones, planning is informal. In others, managers follow a well-defined planning framework. The company establishes a basic mission and periodically develops formal goals and plans for carrying it out. Large organizations such as Royal Dutch /Shell, IBM, and United Way undertake a comprehensive planning exercise each year reviewing their missions, goals, and plans to meet environmental changes or the expectations of important stakeholders such as the community, owners, or customers.

—planning, organizing, leading, and controlling

Of the four management functions

planning is considered the most fundamental. Everything else stems from planning. Yet planning also is the most controversial management function. How do managers plan for the future in a constantly changing environment? The economic, political, and social turmoil of recent years has sparked a renewed interest in organizational planning, particularly planning for unexpected problems and events. Yet planning cannot read an uncertain future. Planning cannot tame a turbulent environment. A statement by General Colin Powell, former U.S. Secretary of State, offers a warning for managers: "No battle plan survives contact with the enemy." Does that mean it's useless to make plans? Of course not. No plan can be perfect, but without plans and goals, organizations and employees flounder. However, good managers understand that plans should grow and change to meet new conditions. In this chapter, we explore the process of planning and consider how managers develop effective plans. Special attention is given to goal setting, for that is where planning starts. Then, we discuss the various types of plans that managers use to help described in Chapter

1,

1

159

.

Part 3

160

the

ok at planning approaches

M

h t.|p an j

that

ianning, scenario building, |

inning that emphasize

,

nolders, in strategic think-

the in\ ol

k planning nurn

P.

t

we

depth and examine a environment. In Chap-

in

ting Proper decision-making techniques and strategic options.

loo)

Overview of Goals and Plans \

goal

red future state thai the organization attempts to realize.-

a di

ifl

Goals are

important because organizations exist for a purpose, and goals define and state that purpose A plan is a blueprint tor goal achievement and resource allocations, schedules, tasks, and other actions. Goals specif) future ends; plans he concept oi planning usually eans

specifies the necessary

I

it means determining the orgaand defining the means for achieving

incorporates both ideas; nization's goals

them

Levels of Goals

and Plans

and plans in an The planning process starts with a formal mission that defines the basic purpose of the organization, especially for external audiences. The mission is the basis tor the strategic (companv) level of goals and plans, which in turn shapes the tactical (divisional) level and the operational (departmental) level.4 Top managers are tvpicalh responsible tor establishing strategic goals and plans .bit 6.1

illustrates the levels of goals

nization.

Concept \^^ia^v^CcJU^a^ From its beginning as a seve< farm m New England to a $300 million organic yogurt bus Stonyfield Farm has incorporated environmental responsibility '

into

its

organizational planning. Today, every operational plan

encompasses Stonyfeld's goal of carbon-' •

ft

the planet at the

CEO

^tions

i

rshberg believes that businesses can be

more

profitable

that reflect a

and

commitment

to

both organizational efficiency

and effectiveness, as described In Chapter 1. Tactical goals and plans are the responsibility of middle managers, such

same time

as the heads of major di\ lsions or functional units.

A dh ision manager will formulate plans that focus on the major actions the division must take to fulfill its part in the strategic plan set by top management. Operational plans identify the specific tactical

- needed at tower le\ els of the organization, such as individual departments and employees. Front-line managers and supervisors develop operational plans that focus on specific tasks and processes and that help meet tactical and

Planning

at

each level supports the other

lex els.

Purposes of Goals and Plans about the future and the complexity oi today s environment overwhelm d cause them to focus on operational issues and short-term results rather than long-term goals and plans However, planning generally positively affects rtainty

man) «UU

plan

In

mance, explk

l

tgitimat

Jiul 111

Mnd

addition to improving financial and operational perfor-

plan,

at

important

each level illustrated in Exhibit 6.1 benefit organizato both external and internal audier

m

,

M describes

what the organization stands

tor

bolizes legitimac) to external audiences such as the local community. The mission helps them

d

'

llH,k

^\nc\

•..

ltv

minim and th< •hem

goab

lUSC the)

MB RMI

The Organizational Planning Process illustrated in Exhibit 6.2, prevents

managers from

thinking merelv in terms of dav-to-dav activities. The process begins

when managers

The overall planning process

,

de\ elop the overall plan tor the organization bv dearly defining mission and strate>>mpanv-le\

,d,

«.

defining tactical plans and objecth

the\ translate the plan into action,

es,

developing a strategic

which includes

map to align goals, formu-

and scenario plans, and identifving intelligence teams to analvze ma|or competitive issues Third, managers lav out the operational factors needed to ITus invoh es det ising operational goals and plans, selecting the meaand targets that will be used to determine if things are on track, and identifving plans that might need to be put into action. Tools for executing the plan include management by objecth es. performance dashboards, single-use lating contingency

-

plans, learn

and decentralized responsibility Finally, managers period icallv review plans alts and shift plans as needed, starting a new planning cvcle.

to

As a new manager, what approach

Take Moment

will you take to goal setting and planning? Complete the New Manager Self-Test on page 163 to get some insight into your planning approach from the way you study as a student.

Goals

in

Organizations th

>tatemeni

top n

all

planning process begins with a

mization as a wh>

.

Chapter 6 Managerial Planning and Goal Setting

163

SCORING AND INTERPRETATION.

Your Approach to

Give

yourself one point for each item you marked as

Mostly True except items 5 and

Studying

6.

For items 5 and

6 give yourself one point for each one you marked

Mostly

False.

An important

Your approach to studying may be a predictor of your planning approach as a new manager.

ager's job

Answer the questions below as they apply

metacognitive awareness,

to your

and

below

activities.

Mostly True or Mostly False for you.

part of a

new man-

to plan ahead, which involves grasp-

ing the bigger picture.

study behavior. Please answer whether each item is

is

The items above measure which means to step back

see the bigger picture of one's

own

learning

This same approach enables a manager

and see the big picture required for and evaluating an organization. If you scored 3 or fewer points you may be caught up in the details of current activities. A score of 7 or above suggests that you see yourself in a bigger picture, which is an approach to step back

Mostly True 1

Before

tackle an

I

assignment,

I

try to

work out the reasoning behind 2.

it.

Mostly False

effective planning, monitoring,

to studying that very well

When am I

reading

I

may

reflect a successful

planning aptitude.

stop occasionally to

on what

reflect

am

I

ing to get out of 3.

When I

check

see

my

finish

I

it

if it

try-

SOURCE: Adapted from

Kristin Backhaus and Joshua P. Liff, "Cognitive and Approaches to Studying in Management Education, "Journal of Management Education 31 (August 2007): 445-466; and A. Duff,

it.

Styles

work,

through to

"Learning Styles Measurement: The Revised Approaches to Studying

meets the

really

Inventory," Bristol Business School Teachingand Research Review 3 (2000).

assignment. 4.

Now and then, stand back from my studying I

to think generally successful 5.

I

how

going.

it is

frequently focus on the

and details because do not see the overall

facts I

picture. 6.

I

down

write

much

as

as

possible during lectures,

because

I

often

not sure what

am

is

really

important. 7.

I

try to relate ideas to

other topics or courses

whenever possible. 8.

When am working on a topic, try to see in my I

I

own mind how ideas 9.

It is

fit

all

the

together.

important to

me

to

see the bigger picture within which a

cept

new con-

fits.

Organizational Mission

—

At the top of the goal hierarchy is the mission the organization's reason for existence. The mission describes the organization's values, aspirations, and reason for being. A well-defined mission is the basis for development of all subsequent goals

mission The

organization's

reason for existence.

— Part

164

and plana

s

V id

PJans ma >

not take the organization

stau-i

n

arui

3

broadly stated

i

e that distinguishes the organization li

signed mission

in enhance employee motivation and organihecontentof a mission statement zational perforn ,rket and customers and ldenti-

miSSion statements orporate values, in iiut quality, location of facilities,

and attitude toward

he mission statement ot YolvoGroup is shown em i in Exhibit 6.3. Such short, straightforward mission statements describe basic husmess activities and purpose well as tlie \ allies th.it guide the company. Another example ot this t\ pe ot mission statement is that of State Farm |

Insuran .:•••

m neighbor;

who

wd

the urn

eopk

\%

ho make

built a

it

our business to be

Concept \^^>AywtcJU^iA^ cozy yellow house that feek

A candle-scented like a retreat

office in a

from the

is

"to provide a level of

Innovator of the

-

qua

who

bring di\

the State

i

Farm

built

and

e

on

a foundation of shared values

relationships,

mutual

trust, integrity,

and

ause ot mission statements such as those of Volvo up and State Farm, employees as well as customers, suppliers, and stockholders know the company's stated purpose and \ allies.

I

boom

a

strategic goals

St

imetimes called official goals, are broad statements describing where to be in the future hese goals pertain to the organization as

wants

the organization

m >m strmlar types (i orgai

whole rather than

I

to specific di\ lsions or

departments.

I

Strategic plans define the action steps by

ments

whole

semng

financial strength.

Black Enterprise "Business

Strategic goali

operat

a

our uork of

Goals and Plans

turn's b

pertain to

to

ri

minion statement

•

good

s«-'

i

well-being. That philosophy helped Locklear's business

like a

mer.

and dental care that significantly enhances the quality life." Dr Locklear takes a holistic approach, viewing dental health as linked to a person's overall physical and emotional and earned her recognition as the 2006

and experiences

sire-,

of life: Does that sound like a trip to the dentist' It's part of what sets the Washington, DC, practice of Dr Lynn Locklear apart. Her mission, she says,

dreams.

premier company by selling and keeping

promises through our marketing partnership; talents

^dav

realize their

be

in

the

strategic goals

t

I

|

u

strategic plan

and resource

is

which the company intends

to attain

the blueprint that defines the organizational

—

allocation' in the form oi cash, personnel, space, and meeting these targets Strategic planning tends to be long term and ma) define organizational action steps from two to five years in the future he purpose ot strategic plans is to turn organizational goals into realities

activities

tlv

rath'

tac

strategic plans

iiiired tor

•

ill

I

.

which an

within that time

intend-

the

Borders Group

Inc.

sider the

peri.

number two book

retailer in the

new

United

strategic goals

and plans

at

Borders.

Stal

tough environment for booksellers today A sluggish book market, combined with cornon from discounters, has put tremendous pressure on traditional book retailers to find the right approach to keep growing and thriving It's

a

Borders Croup revolutionized bookselling

andman.i.

1

with the

-

als

in

the Internet changed the rules of the game.

Now, managers are longer works Online book sales are soaring,

of Borders' online

selling

the 1990s by building huge superstores,

of building more bncks-and-mortar stores even

A

partnership with

realizing the

Amazon was

the extent

bncks-and-mortar approach no

while sales at U.S. bookstores have sagged.

Chapter 6 Managerial Planning and Goal Setting

165

EXHIBIT 6.3 Mission Statement for Volvo

Group

VOLVO GROUP MISSION STATEMENT By

creating value for our customers,

for

our shareholders.

we

create value

We

use our exertise to create transport-related products and services of superior quality, safety and environmental care for demanding customers in selected segments.

We work with

energy, passion and respect for the

individual.

SOURCE: AB

Volvo. Reprinted with permission.

Recently force

in

To

named CEO George Jones announced

new

strategic goal

of making Borders a

online bookselling.

achieve the goal, Borders

branded e-commerce online,

a

site,

is

ending

giving Borders

its

alliance with

Amazon and opening

its

own

Rewards members the chance to earn benefits

which they weren't able to do through Amazon. Managers are giving up on the idea

of expanding the book superstore concept internationally and plan to

most of Borders' 73 overseas

stores.

including nearly half of the smaller

The Borders

The plan

also calls for closing

Waldenbooks

outlets.

sell

off or franchise

some of its

U.S. stores,

11

CEO knows

that achieving the goal "won't be a slam dunk," but he keep Borders relevant in the book retailing industry. The new strategic goals and plans, he believes, will revive the company by enabling Borders to provide greater benefits to customers and partner with a variety of companies

sees

it

as the best

way

to

for innovative projects.

After strategic goals are formulated, the next step

is

defining tactical goals, which

and departments within the organization intend middle management and describe what major sub-

are the results that major divisions to achieve.

units

These goals apply

must do

to

for the organization to achieve its overall goals.

Tactical plans are designed to help execute the major strategic plans

plish a specific part of the

company's

—

strategy.

12

Tactical plans typically

and to accomhave a shorter

over the next year or so. The word tactical originally comes from the military. In a business or nonprofit organization, tactical plans define what major departments and organizational subunits will do to implement the organization's strategic plan. For example, the overall strategic plan of a large florist might involve becoming the number one telephone and Internet-based purveyor of flowers, which requires high-volume sales during peak seasons such as Valentine's Day and Mother's Day. Human resource managers will develop tactical plans to ensure that the company has the dedicated order takers and customer sendee representatives it needs during these critical periods. Tactical plans might include cross-training employees so they can switch time horizon than strategic plans

to different jobs as at

departmental needs change, allowing order takers to transfer to jobs

headquarters during off-peak times to prevent burnout, and using regular order takers 13

and supervise temporary workers during peak seasons. These actions help top managers implement their overall strategic plan. Normally, it is the middle manager's job to take the broad strategic plan and identify specific tactical plans. The results expected from departments, work groups, and individuals are the to train

operational goals. They are precise and measurable. "Process 150 sales applications

tactical goals Goals that define the outcomes that major

and departments must achieve for the organiza-

divisions

tion to reach

its

overall goals.

tactical plans Plans designed to help execute

major

strategic

plans and to accomplish a specific part of the

company's

strategy.

operational goals

Specific,

measurable results expected from departments, work groups, and individuals within the organization.

Part 3 P

166

percent of deliver-

ing overtime by

10 per-

month," and "develop two new online ».oursos m accounting" are examples t

of

Managers at the

op

MS

Inter-

an operaresponses accurate providing goal of tional

Revenue

nal

set

14 Iyer questions. (

)perational plans arc de\ eloped at the

lower levels oi the organization to specif) toward achieving operational gt»als m^\ to support tactical plans. The operational plan >>l

the department manand weekly operations. quantitative terms, and

is

for daily ited in

department plan describes how goals Operational planning will be achieved managers. department ties plans tor individual emplo\ supervisors, and Schedules are an important component ot operational planning. Schedules define precise time frames tor the completion ot the

i

Concept Ct^wlcti***, Group was

In

2001 California fashion house

facing possible bankrupt-

NntMi

.

Ma* A^na

expansion had gone awry Urn'

Together they formulated a

and got to work.

BCBC

dramatically increased the

and by opening new for the first time.

number of retail

stores In 2006,

Here Azna and

acknowledge applause

lines,

at a

New

TakeaMoment

its

$53 million

each operational goal required tor the orga-

financing,

in

concluded licensing agreements, and

expected to realize SI billion

Lubov,

York fashion

Co

But,

Malka as president

who

is

a

BCBC

and

Opermust be coordinated with the budget, because resources must be nization's tactical

out'ets worldwide through acquisitions

BCBC

his wife

>th

hired Ben

plan, obtained

n.

introduced new

BCBC Max Azna

goal

strategic goals.

ational planning also

in sales

creative designer,

allocated tor desired activities.

si

to the experiential exercise

on page 179 that pertains to developing action plans

for accomplishing strategic goals.

Aligning Goals with Strategy

Maps

ttei tiv el) designed organizational goals are aligned; that is, they are consistent and mutually supportive so that the achiev ement ot goals at low lev els permits the attainment ot high-level goals Organizational performance is an outcome of how well these interdependent elements are aligned, so that individuals, teams, departments, I

and so

forth are

working

in

concert to attain specific goals that ultimately help the

performance and fulfill its mission. An increasingly popular technique tor achieving goal alignment is the stra: map \ strategy map is a \ isual representation oi the kev driv ers of an organization's siuiess and shows how specific goals and plans in each area are linked. " The strategv map prov ides a powerful wav tor managers to see the cause-and-effect relationships .nization achieve high

1

among areas

goals ^\nd plans

th.it

contribute to t

operational plans Plant developed

lowei levels that

goals scrvt-

s

he simplified strategv map long-term success

each area link foundation

.is

in Exhibit h.4 illustrates

four kev

— learning and growth, internal and financial performance— and how the various goals

a firm's

UStom

.\nd plans in

at the 01

I

.1

The idea is that learning and growth help achieve goals for excellent internal business pro-

to the other areas. to

Meeting busni, tional goals il

and

planning

strategy

map

resentation

an organs showing thr

ot

relationships

plans

that

si.;

goals tor finaTM

\

ial

roals, in turn, enables the organization to meet and satisfaction, which helps the organization achieve its goals and optimize its v alue to all stakeholders. ^

UStomei

map shown in Exhibit 6.4, the organization has learning and growth goals that indude developing employees, enabling continuous learning and knowledge sharing, and building a culture of innovation Achieving these w ill help the organizaIn the strategv

tion build internal business processes that

and partners improve the

quality

and

promote good relationships with suppliers operations, ,md excel at developing

flexibilitv of

Chapter 6 Managerial Planning and Goal Setting

167

EXHIBIT 6.4 Accomplish Mission; Create Optimal Value

A

I

I Increase revenues

Financial

existing

ir

markets

increase productivity

Increase revenues

and efficiency

new markets and

Performance

in

products

Goals:

Customer

Build and maintain good customer

Service

relationships

Provide innovative solutions to quality

Goals:

and

customer needs

reliability

i

I

f 1

good

Improve cost, and flexibility

Internal

Build

Business Process

ships with suppliers

quality,

and partners

of operations

relation-

Goals:

Promote employee development via ongoing training

Learning and

Growth

Excel at innovative

product development and next-generation market opportunities

I

I

Enable continuous

Cultivate a culture

learning and

of innovation

knowledge-sharing

high performance

and

Goals:

SOURCE: Based on Robert

S.

(January 2008): 63-77; and R.

Kaplan and David

P.

Norton, "Mastering the Management System," Harvard Business Review

Kaplan and D.

P.

Norton, "Having Trouble with Your Strategy? Then

S.

Review (September-October 2000):

1

Map

It,"

Harvard Business

67-1 76.

innovative products and services. Accomplishing internal process goals, in turn, enables the organization to maintain strong relationships with customers, be a leader in quality

and

reliability,

and provide innovation solutions

to

emerging customer needs. At the

top of the strategy map, the accomplishment of these lower-level goals helps the orga-

and efficiency, and and serving new markets segments. In a real-life organization, the strategy map would typically be more complex and would state concrete, specific goals relevant to the particular business. However, the generic map in Exhibit 6.4 gives an idea of how managers can map goals and plans so that they are mutually supportive. The strategy map is also a good way to communicate goals, because everyone in the organization can see what part they play in nization increase revenues in existing markets, increase productivity

grow through selling new products and

helping the organization accomplish

services

its

mission.

Operational Planning Managers use operational goals to direct employees and resources toward achieving specific outcomes that enable the organization to perform efficiently and effectively. One consideration is how to establish effective goals. Then managers use a number of planning approaches, including management by objectives, single-use plans, and standing plans.

Strategy

Goals

Map

for Aligning

-

Pakt 3

168

P.

EXHIBIT 6.5 Char^ Goal Setting

epcno Cover

•

Goals

Criteria for Effective irch

listed in

has identified certain

goals

iist

l

and

sible operational goals

profits In

t.

tea< her effecti\

cal terms, but

\

1

vhibit 6.5, that characterize effec-

When

f


se known as its rmssiow—the within the organization begin with strategic and plans Goals -rum.il goals. Plans an? denned rimflvfjfr with sta-

and operational plans used to achieve the goals Managers can usestratorganization. \ align goals and communicate them throughout the

Managers formulate goals are challenging but

and measurable, cover ke\ result areas, have a denned time period, and are linked to reward-.

thai

realistic,

ifk

d

operational plans, including management rhe chapter described several types plans, standing and contingency plans. Two extenIn objectives, single-use and And crisis planning. Scenarbuilding are planning scenario sions ot contingency be like. The) pro\ ide a might future w tures ot hat \ i\ the id pk ios are alternate e

framework

tor

managers

to cope with

unexpected or unpredictable events, c rMs

planning involves the stages ot prevention and preparation. planning was almost always done entirely by top managers, conplanning departments. During turbulent times, planning is and people throughout the organization are invoked in establishdecentralized ing dynamic plans that can meet rapidh changing needs in the environment. In the past,

sultants, or central

Some

guidelines tor high-pertormance planning in a turbulent environment

include setting stretch goals tor excellence, using performance dashboards, and

organi/ing intelligence teams

DISCUSSION QUESTIONS

ch6 1

ompanies such as Wal-Mart and Valero nergs \l.\ m responding to orp wen- days ahead ot relief operations after Katrina ^nd Rita devastated the Gulf Coast in the fall of 2005. Whj doyou think the) were able to respond more quickly? What types ot planning would help federal, state and local governments prepare tor unexpected events?

c

2

orporation sa\ they did not follow the original plan closely. Does that mean that developing the

c

I

t

1

1

plan was 5sful 6.

Write a brief mission statement tor a local business with which you are familiar How might having a clear,

written mission statement benefit a small

organization? i

w hat strategic

plans could the college or university

which sou .ire taking this management course adopt to compete tor students in tin- marketpl Would these plans depend OT the school's goals' 1

It

you were

a

top

manager ot a medium-sized real would you use MBO? h so. goals you might set tor managers

estate s.iles agency, i'

And 5.

examples

ot

sales agents

A new

business venture must develop a comprehensive business plan to borrow mone\ to get

started

C

for these eventually suc-

W hen using MBO as a manager, how would you go about achieving mutual agreement between you and your employees to create strong commitment toward achieving the goals 1 What would you do it a fundamental disagreement between you and your emplovees arose about achievement? il

at

\

a waste of time companies?

ompanies sw

h as

I

edl

v \ike. And Kolm

7

How do you tions

think planning in today's organiza-

planning 25 vears ago? Do you becomes more important or less world where everything is changing

compares

to

think planning

important tasl

and

life?

Why?

in a

arises are a regular part of organizational

lUthem I rm ersit) decides to raise its admission standards, And i2) initiate a business fair to which local townspeople will be invited. W hat types ot plans might it use to carry out these two (

activitu

1

)

Chapter 6 Managerial Planning and Goal Setting

In

9.

what types

of organizations

179

do you think event-

based planning would be most useful? What about scenario planning? Why?

MANAGEMENT

ch6

IN

10.

Come up own

with a stretch goal for some aspect of life. How do you determine whether it makes sense to pursue a stretch goal?

your

PRACTICE: EXPERIENTIAL EXERCISE

Company Crime Wave

Fakes injury to receive workers' compensation?

Senior managers in your organization are concerned

Takes care of personal business on company time?

about internal theft. Your department has been assigned the task of writing an ethics policy that

Occasionally uses

defines

employee

ing goods

is

theft

and prescribes

company copying machines or makes long-distance telephone calls for personal

penalties. Steal-

purposes?

easily classified as theft, but other activi-

more ambiguous. Before writing the policy, go through the following list and decide which behaviors should be defined as stealing and whether penalties

Takes a few stamps, pens, or other supplies for personal use?

should apply. Discuss the items with your department members until agreement is reached. Classify each item as an example of (1) theft, (2) acceptable behavior, or (3) in between with respect to written policy. Is it theft when an employee

Uses company vehicles

ties

are

Takes

money from

or tools for

own purposes

but returns them?

Damages merchandise

so a cohort can purchase

it

at a discount?

Accepts a

Gets paid for overtime not worked?

the petty cash drawer?

gift

from a supplier?

Takes a longer lunch or coffee break than authorized?

Now consider those items rated

Punches a time card

Chapter 5? How should these items be handled in the company's written policy?

Comes

for another?

in late or leaves early?

MANAGEMENT

ch6

IN

occurred to her, it seemed like such a win-win situation. Now she wasn't so sure. first

Marge Brygay was

a hard-working sales rep for

Inspire Learning Corporation, a company intent on becoming the top educational software provider in five years. That newly adopted strategic goal translated into an ambitious million-dollar sales target for each of Inspire's sales reps. At the beginning of the fiscal year,

her share of the sales department's opera-

tional goal

seemed

entirely reasonable to

believed in Inspire's products. The

Marge. She

company had

developed innovative, highly regarded math, language, science, and social studies programs for the

K-12 market. What

was a founMarge had seen programs could engage whole

set the software apart

dation in truly cutting-edge research. for herself

how Inspire

classrooms of normally unmotivated kids; the significant rise in test scores on those increasingly important standardized

tests

Do

PRACTICE: ETHICAL DILEMMA

Inspire Learning Corp.

When the idea

"in between."

these items represent ethical issues as defined in

bore out her subjective impressions.

But now, just days before the end of the year, Marwere $1,000 short of her million-dollar goal. The sale that would have put her comfortably over the top fell through due to last-minute cuts in one large school system's budget. At first, she was nearly overwhelmed with frustration, but then it occurred to her that if she contributed $1,000 to Central High, the inner-city high school in her territory probably most in need of what she had for sale, they could purchase the software and put her over the top. ge's sales

Her scheme would

certainly benefit Central

students. Achieving her sales goal Inspire happy,

and

it

High

would make

wouldn't do her any harm,

either professionally or financially.

Making

the goal

would earn her a $10,000 bonus check that would come in handy when the time came to write out that first tuition check for her oldest child, who had just been accepted to a well-known, private university. Initially, it seemed like the perfect solution all the way around. The more she thought about it, though, the

Part 3

180

more it didn'l quite was running oul Sr

e the

well with hei

sit

n

t

make

your

of achieving

the donation, but investigate

What Would You Do?

whether

High

available to help Central e the funds that

Donate the $1,000 to Central High, and consid bonu ifl d return o

l

odds

P

the

would allow them

to

purchase

much-needed educational software.

the $10,000 |

;

the

t.iv

you didn't quite make your

t

goal this yeai

it

I

ways

to

sales

work smarter

CASE FOR CRITICAL ANALYSIS

ch6

Keith asked tor reactions. After an uncomfort-

H.I.D. i

onsultanl Keith

mum

I

low

k strode into the

conference

wake. Bill, the president of had hired Keith to help the hotel compan) 's management team \n h their strategic planning. Wasting no time, Hill introduced Keith to human resources dun tor Karen Set/, marketing head Ion) Briggs, hotel operations hief lave King, and accountant \rt Johnson \lready written m large block letters on ^\n easel in the front ol the room was the cornin Hill c ollins's

MM),

i

t

(

I

pan) s LO-year-old mission statement: "H.I.D. stm es tn exceed the expectations of our guests b\ providing excellent value in well-run hotels located ott the beaten track In this way, we will meet our profit, quality,

all

the

compan)

in

(

the

I

currentl)

\

tn e years

even though

II

I

21 properties

and 2 Quality Inns, all c anada and a property

aribbean, acquired since

(.

bill

assumed

I

)

was

a

in

the presi-

ago Keith was also well aware

)a\ e

I

already

Maybe we should

look into building another

there."

c lose to home?" asked Bill. "You know, we're already looking at the possibility of going to Jacksonville. But why stop there? We've got

lolida\ Inns

Georgia, plui 8 hotels in

de!*

owned

I

can't build

\\ h\ stick

of the back-

ground materials the president had sent him, so he

knew

We

One

and growth goals."

Keith, of course, had digested

the original 10

w as the first to jump into the tray. something like five hotels a year. We would outpace our income. And we couldn't run them, certainl) not gi\ en our current staffing. don't see how we could afford to hire the people we'd need." Art nodded in agreement. "You know, w e'\ e alw ays concentrated on medium-priced hotels in smaller towns where we don't have much competition," pointed out Tom. Karen jumped in. "Well, do we need to think about mo\ ing to bigger towns now, like maybe [acksom ille? We've got one property in Atlanta able silence.

that

reasonabl) profitable com-

pany

bill wasn't satisfied. he consultant started tlu- ball rolling b\ asking ea< h person in tin- room to describe his or her \ ision tor domestic operations over the next 10 years How main hotels should III ). ow n ' \\ here should the) I

so

an interesting opportunity out in California, and might have another one in New Jers

we

Keith was beginning to fully appreciate the breadth and depth oi the job he had on his hands.

He

mission statement reviewed the list ol current properties, and realized as he listened to the managers that nothing really matched up. So, now what should he do 7

looked

at the

Questions

I

be located, and what should the target market be? \the managers shared their \ lew s, Keith summarized their

answers on the

flip

i

I

2.

I

an intermediate goal of adding 27 properties in five he other years and a long-term goal ot 50 in 10 years I

managers didn't come lose, calling for onl) 5 hotels tit he added in ti\e years and no more than 20ov< I.D senior managers |ust sat and stared decade he 1

at the figures

1

Houck?

plan?

I

1

are the causes of the confusion confronting

Keith

hart

he consultant w asn't at all surprised that Bill's le ad\ oc ated tor goals were the most ambitious

I

1'

The BCG Matrix jd\ai\'

BCG oped

matrix

EXHIBIT

BCG

(tor Boston Consulting Croup) matrix is illustrated in Exhibit 7.4. The matrix organizes businesses along two dimensions business growth rate and market share. Business growth rati' pertains to how rapidly the entire industry is rrfcrt >}mrc defines whether a business unit has a larger or smaller share than competitors 1 he combinations oi high and low market share and high and low business growth provide four categories for a corporate portfolio. I

-ultmg

k'

he

—

BCG

7.4

Market Share

Hieh

Low

High

The

BCG

Matrix

Stars Rapid growth and

Question Marks

expansion.

become

New

ventures. Risky

— a few

stars, others are

divested.

o^ Business Growth Rate

? o

o Cash Cows Milk to finance question

marks and

stars.

o Low

o

Dogs No investment. Keep if some profit. Consider divestment.

° Tt-

-n

Chapter 7 Strategy Formulation and Implementation

The

195

has a large market share in a rapidly growing industry. The star is imporit has additional growth potential, and profits should be plowed into this business as investment for future growth and profits. The star is visible and attractive and will generate profits and a positive cash flow even as the industry matures and star

tant because

market growth slows. The cash cow exists in a mature, slow-growth industry but is a dominant business in the industry, with a large market share. Because heavy investments in advertising and plant expansion are no longer required, the corporation earns a positive cash flow. It can milk the cash cow to invest in other, riskier businesses. The question mark exists in a new, rapidly growing industry, but has only a small market share. The question mark business is risky: It could become a star, or it could fail. The corporation can invest the cash earned from cash cows in question marks with the goal of nurturing them into future stars. The dog is a poor performer. It has only a small share of a slow-growth market. The dog provides little profit for the corporation and may be targeted for divestment or liquidation if turnaround is not possible. The circles in Exhibit 7.4 represent the business portfolio for a hypothetical corporation. Circle size represents the relative size of each business in the company's portfolio. Most large organizations, such as General Electric (GE), have businesses in more than one quadrant, thereby representing different market shares and growth rates. Since he took over as General Electric's

CEO, Jeff Immelt has been

way that he

believes will better position

tion's is

mix of businesses

investing heavily in

include cash

cows

in

its

in

a

stars

and question marks to ensure that

for the long term.

portfolio will continue to

in

General

Electric's portfolio are the

appliance division and

which hold a large share of a stable market and account for a big portion of

profits.

The GE

Security division has star status,

opment of new products security.

GE

a leader

in

General Electric

GE

a future that might be very different from today's world.

The most famous cash cows lighting,

and

its

reshuffling the corpora-

CE

Healthcare

and GE

is

pumping money

for hot areas such as fire safety, industrial security,

is

also a star,

hit

and homeland

and managers are investing research dollars to become

the growing business of biosciences and personalized medicine.

under development might not

sales

into devel-

Some products

the marketplace for a decade but hold the promise of huge

returns.

GE's renewable energy business

is still

a question mark.

The company moved

into

and solar power and biogas with acquisitions such as Enron Wind. Managers hope the sion can

become a

star,

but the potential

demand

for renewable energy

is

wind divi-

uncertain at this

point.

GE's consumer finance division

is

also a question mark.

Top

executives are currently over-

hauling the brand image of consumer finance to see whether

it

to keep

GE will

it

the portfolio.

in

less profitable

If they

decide the division

is

a dog,

will revive

the division

sell it

enough

off as they did the

and slow-growing insurance business. 28

Diversification Strategy The strategy

moving into new lines and alternative forms of

of

care, finance,

of business, as

energy,

is

GE

did by getting into health-

examphone business with

called diversification. Other

ples of diversification include Apple's entry into the mobile

move by News Corporation into online social networking with the MySpace, and Nestle's entry into the pet food business with the pur-

the iPhone, the

diversification

acquisition of

of

chase of Ralston.

The purpose of diversification is to expand the firm's business operations to produce

moving

into

A strategy

new

lines of

business.

related diversification

new kinds of valuable products and services. When thenewbusiness is related to the com-

Moving

pany 's existingbusiness activities, the organization is implementing a strategy of related diversification. For example, GE's move into renewable energy and Nestle's move into pet foods are linked to these firms' existing energy and nutrition businesses. Unrelated diversification occurs when an organization expands into a totally new line of

that

is

into a

new

business

related to the

company's

existing business activities.

unrelated diversification Expanding into a totally new line of business.

1

Part 3

196

San •h

mother; therefore,

-

move

company's

it

can be

dif-

up on unrelated on core an

iving

hcll |,

pursue d

mnn

Bf

l

«, the

unrelated di\
eived

m

the firm's produ

u^-

1

summarized

reative ad\

I

to adue\ have benefited from a differentiation strategy include riarley-Davidson motorSnapper law n equipment, and lore- Rex fabrics, all of which are perceived distincth e in their markets Sen ice companies such as Starbucks, Whole Foods Market, and Ikl A also use a differentiation strategy. \ differentiation strategy can reduce rivalry with competitors if buyers are ful ditterentiation can also reduce the barloyal to a compan) 's brand ning power ot large buyers because other products are less attractive, which (

differentiation

BO helps the firm fight off threats ot substitute products. In addition, differentiation

into the

co*t leadership competit

.
>nvbusiness_summarv.asp 7 Symbofc=SS

or nine-hour shift in blazing sun, pouring rain,

stinging sleet, or even blow ing snow. This

weav ing in and out of itv as fast as traffic, pedaling you can through a ma/e of streets, dodging taxfcabs and pedestrians your cargo on your back Now picture yourself making do/ens of deliveries in a d.w. pedaling an I'k

ture yourself

on

a bike,

c

21

and Solid Fiber Boxes. " E?iq/clopt\:

Allied/Corru gated Solid Fiber- Boxes. html," Ffcper

1

Timbuk2: The Message

Stodghill," Boxed •

of the surviv ors either

I

Internet to play in the

I

and

Opening overseas facilities abn ad he surv iv ing manutac turers w ere inv esting in higher cjualitv machines that broke dow n less frequently thus requiring fewer ot dmunds' S parts still, he had

SWOT analysis look like for this

the

growth?

to

or entering into joint ventua*s

the

?

hat role

much dent the) d make in worr\ ing, consolidation in the paper indusMore tr\ had wiped out hundreds ot the Is plants that ot a

He thought about

corrugated box industry? What are some ways that dmunds could better use the Internet to foster

be seen how the demand tor boxes

remained

?

Questions

I

reusable plastic containers

partnership opportunitv

companv S rudimentary Web page, one that did little le give a bask description of the company, and wondered whether he could find ways of making bet1 ter use ot the Internet Was it feasible tor Edmunds to 1 find new markets bv exporting its parts globally All he knew tor sure was that once he decided where to take the company from here, he would sleep better.

concern stemmed

their appearance, tnosti) flexible plastic films

Larr)

I

I

l

It

steady growth he'd assumed he could

is

the

life

oi

messenger. Timbuk2, founded in San Franmore than 15 years ago bv former bicycle messenger Rob Honevcutt, manufactures what seems to

a bic

v c

le

specialized product:

who make

their

liv

messenger bags tor cyclists documents door to

ing delivering

.

Chapter 7 Strategy Formulation and Implementation

209

door. Today, Timbuk2 still manufactures professional bags for bike messengers. But the firm has expanded its offerings to include fashion bags for other consumers and its goals and plans are much broader than they were fifteen years ago. "Our goal for the future is to remain faithful to our working-class urban roots, while expanding our unique qualities and design sensibilities to a broader range of products and a wider audience," states Timbuk2's Web site. Mark Dwight, CEO of the firm, echoes this sentiment. Dwight's job as CEO is to focus on the big picture overall goals and how to achieve them. "The

—

—

difference

between strategy and goals

is,

goals are the

endpoint and strategy is the way to get there. The actual steps you take would be the tactics," Dwight explains. Timbuk2's current goal is to move from a tiny, specialized market into a broader market. "Our roots are in the bicycle messenger market ... a subculture that is very interesting. However, it isn't really a market; there's no growth there. So what we're trying to do is build from that heritage, that authenticity that gives value to our brand as a lifestyle brand," says Dwight. .

.

.

Formulating the strategies to achieve the goals requires careful planning.

brand;

we are

"We are building a lifestyle

[also] trying to

that ultimately

is

Dwight. "Then,

build brand equity because

the value of this company," notes

when we go to sell the company or take

public, there's value there." So every effort, from the development of new products to the marketing of existing ones, focuses on strengthening the Timbuk2 brand in consumers' minds. Dwight and his staff plan to "develop a product portfolio that asserts our position in existing markets, moves into new markets, and really creates a it

among today's consumers, he does not back down. He wants Timbuk2's bags to have a look that is distinctive. So far, they have managed to offer a variety of bags for a variety of needs without chrome hardware. Consumers can pick up a water-resistant bag with quickrelease buckles that allow yoga followers to snap out their practice mats with ease, weather-proof travel bags with destination stickers superimposed on the flaps, and colorful, messenger-style laptop computer bags for commuters who want to blend durability with style. The bags don't come cheap; with the addition of custom features, consumers can pay $100 or more for their Timbuk2 bags. But a good purse or travel bag from another maker can cost just as much or more. Timbuk2 hasn't forgotten bicycle messengers, even with its new focus. The professionals can still visit the Timbuk2 Web site and "build" customized professional bags selecting from four different sizes, several fabrics, and an array of colors. In addition, as part of a celebration of the firm's heritage, Timbuk2 has planned to collaborate with loe Urich, San Francisco bike messenger and design student at the California College of Arts (CCA), to design two new, industrial-strength messenger bags for his colleagues. These new bags will be designed specifically to meet requirements of working messengers. "I hope it goes well," says Urich. The proj-

—

—

—

should succeed after all, who knows better how to design a messenger bag than the messenger himself ?

ect

Questions 1.

Do Timbuk2's

goals have the characteristics of

effective goals?

Why or why not?

Does Timbuk2 represents

a high performance

... so when you think of Timbuk2 you think of an emotional concept, a brand, a lifestyle." Timbuk2 is already moving rapidly toward its goals. Sit in on a Timbuk2 planning meeting, and you'll hear lots of ideas and opinions flying back and forth how to design a new bag, how to market it, how to offer it over the Web. "I don't want to see any

August

of this hardware," says Dwight, pointing to a sketch in

2004, http://ivzviv.yogajournal com; Larry Armstrong/'Green with

sense of lifestyle

.

.

—

one design meeting. "That's Coach. We're not Coach." that chrome hardware is popular

When reminded

Dr. Seuss'

How the Grinch

Stole Christmas Readers and lovers of Dr. Seuss's original tale may be put off by Ron Howard's loose adaptation of the story.

2.

approach 3.

to planning?

Why or why not?

Using what you know about Timbuk2, write a brief mission statement for the organization.

SOURCES: Company Web

site,

13, 2004; "Timbuk2's

Envy," BusinessWeek, [no

http://www.tumbuk2. com, accessed

Groovy Bag,"Yoga

pub

info],

Style Every Mile/'Organic Style,

Journal, July/August

http://imvw.businessweek.com;"ln

May 2004,

ivwiv.organicstyle.com.

Whoville, a magical, mythical land that exists inside a snowflake, features

two types

of

life:

the

Whos who

love Christmas and the Grinch (Jim Carrey) who hates it. Cindy Lou Who (Taylor Momsen) tries to bring the

Grinch back

to Yuletide celebrations,

an

effort that

1

1

Part 3

210

•

the invitation.

Pi

The him contin

nli

What n

for

and Ask Yourself

him

to

n alternative

be the Hoi

W hobilation t >ne-thoi •

who

sion criteria

al

pulls the tra;

rhe Grinch

street

does the Grinch u^

from the alternatr.

niousl) slides out ot his

u

snowy Whoville

a

Watch

to

the film

lair to

teps in the Grinch's decision-making

land

now must

pro

di

ENDNOTES 1

Thi!

and

(Hi

and A

Lmagement. "

S

Wanaganent

ith

16.

omk Ana

Da>

WW

liam Miller Inn

York Times

pring

IK).

17.

[ack Welch, "Ifs All in the Si

Wmnmg,

oerpt trom his book, -

Forhotf (April

-

in

44;

I

Is

2007.

Journal (August 30, 2005): .

A

2005 by P-

right

& Company, Inc.. Reproduced with

Review

permission of

What

'

Adamy/'Bare Essentia!Find Growth. No- Frills Grocer Goes Where Other Chains Won't," I Vail

and

(Spring 19 iant

Cute Boys,

Janet

Strategic Intent

"OMG! L.

Magazines Find a Niche," 77u

Califor-

Rei

Elizabeth Olson,

kissing Tips and

Dow Jones & Com-

pany, Inc. in the format Textbook \ia

Strat-

Copyright Clearance Center. Wall

Stmt /i»Mnw/.janujI

I

V*ter

ecember Bun

18.

l

61 1

Diversification

Arthur

A

Thompson. Idand

lian

111.

od

H-:

and

Jr.,

Cases,

wh ed.

Strategic

and

Irwin 1^2);

Jamil,

"Pvnar.

ompetenaes in

Milk-ran,:

ind

:nmx)n

Rim reribrma

Multinational

Leading

mer

jounuil 3

12

Michael V.Copdand "Stit.hu

I

.

Special Report 2006,

Bus

Gune

www

5,

2006), http:

bus-

Tanning

Dom/hotLgrowth/2006

company 20.htm; Christopher

54. :

H Han

Growth

triSystem profile, "Hot

anAppai

UN

by

How

Falmen,

the

Fat

and

NutriSystem

lout

lb-

suit

.ite-ir.net

phoenix^tml?c=66836&p-irol

ruber ii.:

mi

-

ne\

d and

An

highlight2

1

•

March

3.

2008).

Milton Leontiades. "The Contusing

Words mutation, and In

and

Announces Fourth Quarter and lear End 2007 Re I

mai

(

li

temberL im.

ship hetv.

New

«nber2005):62

\>rnui

1998): 117

i

to In

Brown, 1979), pp. 11-14. "Fbwerboatings

Powerhouse," Business 2.0

Sumkatagement

Menagemen

-eorgia Right,

Compi

E.

W Hofa

Business Policy and Planning ("Boston: Little,

''

ami Change (Boston: and Pan

1


•

Brown.

Little.

Strategi

napts and

jounuil, Jul

Milton Leontiades, Strategies for

ot

Busin

demy of -

Chapter 7 Strategy Formulation and Implementation

22.

Lawrence G. Hrebiniak and William F.

Joyce, Implementing Strategy

35.

(New

25.

Bruce Roberson, "What Really

"Facebook Expands Into MySpace's Territory," Tlte Nezv York Times, May

2003): 43-52. 37. This discussion

J.

1985): 4-19.

(Fall

Lift

A Powerful

from Elevators," The Wall

Thompson and

38.

39.

41.

cited in

Gareth R. Jones and

30. Steve Lohr, "Apple, a

Stores, Bets Big

Capabilities

Dragoon, "A Travel Guide to

CIO (November 15,

Missions: Effective Strategic, Struc-

Don Tapscott, "Rethinking Strategy Networked World," Strategy

Ohmae, "Managing in a

Reviezv (May-June 1990):

on

Fifth

Theodore

Levitt,

of Markets,"

Gerstner, quoted in Harreld et

"Dynamic

"The Globalization

Hanwd Business Review

44. Cesare Mainardi,

45.

"The Five CompetiForces That Shape Strategy" Har-

Martin Salva, and

Guru

Street Journal,

Michael

"Changing Patterns

of International Competition," Cali-

7993; Michael E. Porter, Competitive

fornia

Porter's Business Strategies to Envi-

ronment and

Structure: Analysis

and

Performance Implementations," Acad-

emy of Management Journal 31

(1988):

48.

280-308; and Michael E. Porter, "From

Competitive Advantage to Corporate Strategy,"

Harvard Business Review

(May-June 1987): 43-59. E. Porter, "Strategy

Internet,"

Harvard Business Review

"Dell, the

24, 2001): 92-102;

Thompson and

and

Strickland, Strategic

"The Wal-Mart

of Wall Street," Fortune (October 13, 1997): 128-130.

51.

Thomas

Manage-

Hrebin-

Hamm, "Beyond Blue,"

BusinessWeek (April 58.

18, 2005): 68-76.

Gupta and Govindarajan, "Business Unit Strategy"; and Bourgeois and Brodwin, "Strategic Implementation."

59.

Obasi Akan, Richard

S.

Allen, Marilyn

M. Helms, and Samuel A. "Critical Tactics for

238.

Porter's

Spralls HI,

Implementing

Generic Strategies," Journal

of Business Strategy 27, no. 1 (2006):

43-53. 60. Nitin Nohria, William Joyce,

and

Bruce Roberson, "What Really

Works," Harvard Business Reviezv

2 (2001): 45-56.

Bateman and Carl P. Zeithaml, Management: Function and Strategy, 2nd ed. (Homewood, IL:

61.

Irwin, 1993), p. 231.

62. Ibid.

(July

2003): 43-52.

S.

Lawrence G.Hrebiniak, "Obstacles to Effective Strategy Implementa-

in

"Obstacles to Effective Strategy

Implementation."

"Converting Global Presence

tive 15, no.

50.

Management. 34. Richard Teitelbaum,

p.

Advantage," Academy of Management Execu-

Conqueror," BusinessWeek

(September

Survey results reported iak,

Gupta andVijay Govindara-

into Global Competitive

Peter Burrows,

56.

A

jan,

(March 2001): 63-78.

Andrew Park and

Mohanbir Sawhney and Sumant Mandal, "What Kind of Global Organization ShouldYou Build?" Business 2.0 (May 2000): 213. Based on Michael Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management: Competitiveness and Globalization (St. Paul, MN:

49. Anil K.

(St.

ment Journal 10 (1989): 145-161. Spencer E. Ante, "The New

57. Steve

West, 1995),

and the

MN: West, 1986); and Paul C

Blue," BusinessWeek (March 17, 2003):

Management Review 28 (Winter

1986): 40. 47.

Systems and Process, 2nd ed.

Paul,

80-88. E. Porter,

vard Business Review (January 2008):

(New York: Free Press, 1980), 36-46; Danny Miller, "Relating

55.

May

12, 1988.

46.

Strategy Implementation: Struc-

ture,

Strategic Plans," Strategic

Joanne Lipman, "Marketers Turn Sour Pitch Harvard

R Galbraith and Robert K. Kazan-

jian,

Nutt," Selecting Tactics to Implement

15 (Second Quarter, 1999).

on Global Sales

E. Porter,

and Hult, "The Im-

Strategy Implementation." 54. Jay

Muir Sanderson, "Label of Origin: Made on Earth," strategy + business, no.

al.,

Capabilities at IBM."

53. Olson, Slater,

(May-June 1983): 92-102.

Avenue," The

Based on a statement by Louis

portance of Structure and Process to

Makes," The Wall

Michael

481-505. 52.

(February 21, 2005): 66-76.

pp.

tural, and Tactical Choices," Journal of Management Studies 31, no. 4 (1994):

&

Borderless World," Harvard Business

Strategy

33.

"Dynamic

Get?" Fortune

tive

32.

al.,

Effectiveness at Strategy

IBM."

42. Kenichi

York Times,

Michael

and Business Unit Implementation," Academy of Management Journal (1984): 25-41; and Jeffrey G. Covin, Dennis P. Slevin, and Randall L. Schultz, "Implementing Strategic Characteristics,

Business, no. 24 (Third Quarter 2001):

43.

an Elusive

"Business Unit Strategy, Managerial

"The Immelt Revolution,"

34-41.

Success at

May 19, 2006; and Brent Schlender, "How Big Can Apple

31.

Brad}-,

Harreld et

in a

M. George, Contemporary

Management, 4th ed. (Boston, MA: McGraw-Hill Irwin, 2006), p. 283.

New

Diane

49, no. 4 (2007).

152-161.

Example

to

Gupta and V Govindarajan,

Management

2004): 68-75.

Strickland, Strategic

Approaches

Journal 5 (1984): 241-264; Anil K.

Collaboration,"

BusinessWeek (March 28, 2005):

Jennifer

tion: Five

Capabilities at IBM: Driving Strategy

40. Alice

64-73. 29.

and

Phenomenon," Strategic Management

at

Diane Brady, "The Immelt Revolution,"

Bruce

BusinessWeek (March 28, 2005): 64-73.

Street

Management; and William L. Shanklin and John K. Ryans, Jr., "Is the International Cash Cow Really a Prize Heifer?" Business Horizons 24 (1981): 10-16. 28.

J.

(July

Michael L.Tushman, "Dynamic

Review

Journal, July 2, 2003.

27.

based on

into Action," California

Lynn Lunsford, "Going Up; United

Technologies' Formula:

is

Harreld, Charles A. O'Reilly HI,

F. Slater,

"The Importance of Structure and Process to Strategy Implementation," Business Horizons 48 (2005): 47-54; L. J. Bourgeois HI and David R. Brodwin, "Strategic ImplementaHult,

Works," Harvard Business Review

Business Strategy 6 26.

and

(June 11, 2007): 127-130; Brad Stone,

and Vauhini Vara, "Facebook CEO Seeks Help as Site Suffers Growing Pains," The Wall Street Journal, March 5, 2008. Vara, "Facebook CEO Seeks Help." Frederick W. Gluck, "A Fresh Look at Strategic Management," Journal of

35,

M. Olson, and G.Tomas M.

no. 1 (2006): 12-31; Eric

Stanley

36. Nitin Nohria, William Joyce,

Dynamics

tion," Organizational

New Key," The Wall Street

for a

Journal, February 11, 1998.

David Kirkpatrick, "Facebook's Plan To Hook Up the World," Fortune

25, 2007;

24.

Joshua Rosenbaum, "Guitar Maker

Looks

York: Macmillan, 1984). 23.

211

Akan

et

al.,

"Critical Tactics for

menting Porter's Generic

Imple-

Strategies."

How Do

You Make

/

I

Types of Decisions and Problems ~ZL

"

^ ,

_-

•^

why

decision

making

is

an important component of good

-ions

Ideal, Rational

2.

^—

Decision-Making Models

Model

How Managers Actually MakiNew Manager's Self lest: Making The

Political

Discuss the difference between

programmed and nonprogrammed and uncertainty.

decisions and the decision characteristics of certainty 3.

Describe the ideal, rational model of decision making and the political

model of decision making.

Important Decisions

2

Explain

management.

ng Certainty and Uncertainty

The

V

1-

Programmed and Nonprogrammed

»» .

After studying this chapter, you should be able to:

•

Model

,>lain il

the process by which managers actually

make

decisions

in

the

world.

Decision-Making Steps

—

'

5.

Recognition of Decision Requirement Diagnosis and Ana Development of Alternat

6.

Identify the six steps used in managerial decision

making.

Describe four personal decision styles used by managers, and explain biases that frequently cause

managers to make bad decisions.

red Alternat

Implementation of Chosen lation

and

AK

Feeii

Personal Decision Framework

Why Do Managers Make Bad Inno^ m Making 1

•

with Brainstorming

Engage

in

Rigorous Deb

Avoid Groupthmk

Know When

to Bail

7.

Identify

and explain techniques

for innovative

group decision making.

Managerial Decision

Making How Do You Make

Decisions?

Most of us make decisions automatically and

SCORING AND INTERPRETATION:

with-

out realizing that people have diverse decision-making behaviors, which they bring to management positions.

Think back to

how you make

decisions

in

your personal,

work

life, especially where other people are answer whether each of the following Mostly True or Mostly False for you.

student, or

the

list

reflect

items 1-4 are

more

typical

Item 9

ing.

nine items

manager decision mak-

considered part of good decision making at

you checked Mostly True for three or four of

involved. Please

all levels. If

items

items 1-4 and 9, consider yourself typical of a

is

ager. If you

1.

I

like

to decide quickly and

on to the next 2.

Mostly

Mostly

True

False

move

thing.

4.

I

is

usually

cessful

I

sions

one correct

identify everyone

be involved 6.

I

explicitly

in

If you

CEO may be almost the

supervisor.

and

The

who needs

difference

is

partly to learning

managers often

solution to a problem. 5.

you are using behavior consistent with top checked a similar number of both sets of items, your behavior is probably flexible and balanced. 9,

managers.

a different decision behavior

than seasoned executives. The decision behavior of a suc-

appreciate decisiveness.

There

new man-

checked Mostly True for three or four of items

New managers typically use

would use my authority to make the decision if certain was right. I

I

3.

5-8 and

in

of new managers. Items 5-8

are typical of successful senior is

All

appropriate decision-making behavior, but

start

opposite of a

due

first-level

partly to the types of deci-

what works

out with a more

at each level.

New

directive, decisive,

command-oriented behavior and gradually move toward

to

more openness,

the decision.

diversity

with others as they

seek conflicting

of viewpoints, and interactions

move up

the hierarchy.

1

perspectives. 7.

I

use discussion strategies to

reach a solution. 8.

I

look for different meanings

when faced with a great

deal of

data. 9.

I

take time to reason things

through and use systematic

Managers often are

logic.

strategic,

and every organization grows, prosmanagers. Many manager decisions are

referred to as decision makers,

pers, or fails as a result of decisions

such as whether to build a

by

its

new

factory,

move

into a

new

line of business,

make decisions about every other aspect an organization, including structure, control systems, responses to the environment, and human resources. Managers scout for problems, make decisions for solving them, and monitor the consequences to see whether additional decisions are required. Good decision making is a vital part of good management because decisions determine how the organization solves its problems, allocates resources, and or

sell off a division.

Yet managers also

of

accomplishes its goals. The business world is full of evidence of both good and bad decisions. Apple, which seemed all but dead in the mid-1990s, became the world's most admired company in 2008 based on decisions made by CEO Steve Jobs and other top managers. No longer just a maker of computers, Apple is now in the music player business, the cell phone business, and the retailing business, among others. iTunes is now the second-largest seller of music behind Wal-Mart. 2 Cadillac's sales made a comeback after managers ditched stuffy golf and yachting sponsorships and instead 213

Part 3

214

Ma>

the other hand.

laundry, but

tl

ring laui

|

..

ind rather depressing

world It

c

I

dernize their company's image led m/ahle advertising slogans in the

.

|th

mu

I

onsider the decision of Timex k king and keeps on ticking,"

l

,

VN

lag's decision to intro-

he new si ,200 product was (Mali Drying Center wouldn't

ptetefiop. in

P.

must

i

I

ants ol

\

hapten

6

hanging

ne* one

Decision making

factors, unclear information,

and

is

not

conflict-

iew

and

7 des< ribed strategic

planning

I

his

chapter explores the deci-

that underlies strategu planning. Plans and strategies are arrived at sion through decision making; the better the decision making, the better the strategic we look at decisionplanum-.; irst, we examine decision characteristics. Then |

I

the Steps executives should take when making important he chapter also explores some biases that can cause- managers to make

making models M\d decisions

i

bad decisions. Finally we examine some techniques sion

for innovative

group

deci-

making

Types of Decisions and Problems A decision is a choice made from available alternatives. For example, an accounting manager's selection among Colin, Iasha, and Carlos for the position of junior auditor is a dec isiOTL Many people assume that making a choice is the major part of decision making, but it is only a part. Decision making is the process of identifying problems and opportunities and then resolving them. Decision making involves effort both before and after the actual choice. Thus, the decision as to whether to select Colin, Tasha, or Carlos requires the accounting manager to ascertain whether a new junior auditor is needed, determine the availability ol potential job candidates, interview candidates to acquire necessar) information, select one candidate, and follow up with the socialization ol the new employee into the organization to ensure the decidecision

sion's success

nakiag

them. liiiimci

I

decision

sion ru

d

in

the

ten

nonpru^rammrd

decision

Programmed and Nonprogrammed Decisions Management decisions typically tall into one of two categories: programmed and nonprogrammed. Programmed decisions involve situations that have occurred often enough to enable- decision rules to be developed and applied in the future." Programmed dec isions are made in response to recurring organizational problems, lhe decision to reorder paper and other office supplies when inventories drop to certain level is a programmed decision. Other programmed decisions concern ,i

the t\pes of .kills required to

till

inventory exception reporting

certain |obs. the reorder point for

manufacturing

expenditures ten percent or more over budget, and selection of treiglr routes tor product deliveries. Once managers formulate decision rules, subordinates and others can make the decision, freeing managers tor other tasks

'akeaMoment

Go

to the ethical

tor

dilemma on pages 233-234 that pertains to making nonprogrammed

ons.

Nonprogrammed poor!) defined

dec isions

and

largel)

made m response to situations that are unique, unstructured, and have important consequences

.ire

Chapter 8 Managerial Decision Making

for

the

organization.

215

Many nonprogrammed

deci-

sions involve strategic planning because uncertainty great

and decisions are complex. Decisions

is

to build a

new factory, develop a new product or service, enter a new geographical market, or relocate headquarters to another city are all nonprogrammed decisions. One good example of a nonprogrammed decision is ExxonMobil's decision to form a consortium to drill for oil in Siberia. One of the largest foreign investments in Russia, the consortium committed $4.5 billion before pumping the first barrel and expects a total capital cost of $12 billion-plus. The venture could produce 250,000 barrels a day, about 10 percent of ExxonMobil's global production. But if things go wrong, the oil giant will take a crippling

hit.

Facing Certainty and Uncertainty One primary programmed

difference

between programmed and non-

decisions relates to the degree of certainty

managers deal with in making the managers would have all the information necessary for making decisions. In reality, however, some things are unknowable; thus, some decisions will fail to solve the problem or attain the desired outcome. Managers try to obtain information about or uncertainty that

decision. In a perfect world,

decision alternatives that will reduce decision uncertainty.

Every decision situation can be organized on a

and the The four positions on the scale are uncertainty, and ambiguity, as illustrated Whereas programmed decisions can be

scale according to the availability of information

possibility of failure. certainty, risk,

in Exhibit 8.1.

made

in situations involving certainty,

many

situations

When Martha Stewart, shown here was found guilty of lying to federal investigators and sentenced to five months in prison, top managers at her company, Martha Stewart Living Omnimedia, also felt the sting. CEO Sharon

Concept

\^,6*AsYOtgle as ot March 14, 2008?"), the) overestimate their accuracy. Evidence of overconfldence is illustrated in cases in which subjects were so certain oi an

answer

that the) assigned

were managers they can successfully predict outcomes .md hence

odds

of 1,000 to

correct onl) about B5 percent oi the time.

mas

unrealistically expect that

select the

Take .Mnmrnt

wrong

1

of being correct but in fact

When

uncertainty

is

high,

alternate e

As a new manager, be aware of biases that can cloud your judgment and lead to bad decisions. The Manager's Shoptalk describes a new way of thinking about decision making that can help you avoid decision traps such as overconfldence, seeing only what you want to see, or justifying past decisions.

Innovative I

he

abilit) to

ntual

make

skill

m

Group Decision Making w

supported, high-quality decisions on a frequent basis today's fast-moving organizations. 45 In many industries, the rate fast,

idel)

competitive and technological change is so extreme that opportunities are fleeting, dear and complete information is seldom available, ,md the cost of a slow decision oi

means lost btisines pans failure. )o these factors mean managers should make the majorit) ot decisions ^n their ow n? No. he rapid pace oi the business envi1

1

ronment calls invoh ed

opposite— that is, for people throughout the organization in decision making and have the information, skills, and freedom they d immediatel) to problems Mid questions.

for

|iist

the

Chapter 8 Managerial Decision Making

229

Evidence- Based

r-JL

Management

c3

At

ft

making can help. Evidence-based decision making simply means a commitment to make more informed and intelligent decisions based on the best available facts and evidence. It means being aware of our biases and seeking and examining evidence with rigor. Managers practice evidence-based decision making by being careful and thoughtful rather than carelessly relying on assumptions, past experience,

2 HI

a time when decision making is so important, many managers do not know how to make a good choice among alternatives. Using evidence-based

for the

and potential

decision

Do

an overall counterinsurgency strategy rather than relying so much on technology.

Balance Decisiveness and Humility. The best decision makers have a healthy appreciation for

what they don't know. They're always

questioning and encouraging others to question their

knowledge and assumptions. They and

foster a culture of inquiry, observation,

experimentation.

SOURCES: Based on Jeffrey Pfeffer and (January 2006): 62-74;

and poor customer service. Real-world observations told them something that was very different from what

Decision

Joshua Klayman, Richard

to get

Sutton,

P.

Radcliffe Publishing, 2002);

Larrick,

and Chip Heath/'Orga-

nizational Repairs/'Across the Board (February 2000): 26-31;

and Peter

One simple way

I.

Rosemary Stewart, Evidence-based

Making (Abingdon, UK:

Eisler,

"Strategy That's

Practice the Five Whys.

Robert

"Evidence-Based Management," Harvard Business Review

purchasing the firm's products, citing the exces-

they assumed.

the after-action review.

gest implementation of

company kept blaming the marketing staff for the trouble the company had selling their products in retail stores. Then, members of the senior team posed as mystery shoppers and tried to buy

sive price, clunky appearance,

is

mortem reviews of decisions regarding attacks from roadside bombs in Iraq led soldiers to sug-

Many

They kept encounterthem from

to

managers evaluate what worked, what didn't, and how to do things better. Many problems are solved by trial and error. For example, post-

facts to the

ing sales clerks that tried to dissuade

Army

After implementation of any significant decision,

manager problems are uncertain, and hard facts and data aren't available, but by always asking for evidence, managers can avoid relying on faulty assumptions. Managers at one computer

the company's computers.

A technique many com-

continuous learning

Demand Evidence. Educate people throughout extent possible to inform their decisions.

a Post-Mortem.

encourage examination of the evidence and

thumb, or intuition. Here are some ideas for applying evidence-based decision making:

and

solutions.

panies have adopted from the U.S.

rules of

the organization to use data

problem, and each subsequent why

probes deeper into the causes of the problem

Blake Morrison,

Making

andTomVanden Brook, Was Snubbed for Years,"

Iraq Safer

USA Today, December 19, 2007.

people to think more broadly and deeply about

problems rather than going with a superficial understanding and a first response is called the Five Whys. For every problem, managers ask

"Why?" not just once, but five times. The first why generally produces a superficial explanation

Managers do make some decisions entirely

makers more often world rarely are made

as individuals, but decision

are part of a group. Indeed, major decisions in the business

by an individual.

Start with Brainstorming Brainstorming uses a face-to-face interactive group to spontaneously suggest a wide range of alternatives for decision making. The keys to effective brainstorming are that people can build on one another's ideas; all ideas are acceptable, no matter how crazy they seem; and criticism and evaluation are not allowed. The goal is to generate as many ideas as possible. Brainstorming has been found to be highly effective for

brainstorming

A technique

that uses a face-to-face to

group

spontaneously suggest a

broad range of alternatives decision making.

for

Part 3 Plann^

230

solutions U) a problem, but

mi fri l

group often want ipthink.

make

w

it

m hen

that ith

up

ditfu ult

;

in.

'»" ind,N Wually, they typically

what

come up

four brainstorming together. brainstorming, takes advantage ot the group

i

approach while overcoming some disadvantages times

to

may be Conmany creative

ns that limit their participation in a group session with ideas in a group setting In tact, one study found

foui

tw ice as

does have

Others

In addition,

or impr.

or

to

it

conform

'

*her in

,,,11,

lectronk brainstorming, Bomeinteractive group over a com-

propose merging their companies to survive the economic downturn. After numerous meetings, Mr Mulalh and Mr lord concluded that lord Motor Compan) could reorganize Intter on its nvvn Not willing to gi\e up on the idea, have been a moment of deciWith the world's top automaker inching ilost- to a financial pr. senior executives have begun making tough choices ^nd seeking out tnnovaI

he past

•

the

could solidify over Japanese challenged

Although

nization possible options tor saving

man)

merger Strategy

is

cM

GM's its

first

perhaps the boldest

rival

s

I

irst.

a

CM.

a

mi

position as global sales leader

[byota,

which

years has

in recent

status as the world's ti»p automaker.

position as top

portant, the bigger

any

be up tor

problem

automaker is

on the

v

r

sale.

Among GM's most difficult decisions has been what do about skv rocketing labor costs. The Lnited Auto Workers L nion, once a symbol of workforce stability and fairness, has become a financial albatross around cAl - neck. cM spends as much a on every v chicle sold to c ov er benefits for active and retired L S. workers In addition, w ith all compensation perk tored in, pay tor C Al workers adds up to S73 per hour. Iovota pays nothing for retirees and only S21 ^ per vehicle to cover active-worker benefits. Management addressed the imbalance in 2006 b\ offering 126,000 employees as much as $140,000 to sever all ties with

company. The massive buyout was part of a fourannounced in 2005 to achieve

the

illion in cost

fel

•

r

example, in July a plan to cut SKJ billion in while raising S^ billion through as Vithin months, the iconic Hummer sale Next followed a steady drumwas for up brand plant closings throughout the Midwi - Detroit headquarters was rumored to

CM

lutions

options tor performing

point restructuring plan

ner took his pitch to C hrvsler sion for

l


own reserves monthly, c N s^t out to who might circle the wagons to stave ott

its

i>t

partners

tiiul

international credit

ish tlows world** ide nable to obtain money; and burning through

SI billion

that's

r

\a the brutal common enemy global economii lump companies struggled to surv ive tlu in decades, an un« meltdown in the L s mort-

industry

impany more mo:

cash:

CM

is

age

all

reductions.

the tricks

table. In a written

GM

has up

one option

financial crisis,

its

is

its

sleeve to

man-

reportedly off the

statement to the press, management

acknowledged "unprecedented challenges" related to global financial markets. The statement firmly added, "But bankruptcy protection is not an option CM is

would not be in the interour employees, stockholders, suppliei customei considering. Bankruptcv ests

of

not unim-

doesn't have

"billion in the rhe company reported ^nd the ensuing plunge of shares to

Questions

halt of 20064

their lowest levels since 1950 left the

of

"let

Company valued

1

What planning approaches and methods might Al adopt to help manage its turbulent environ-

c

$3 billion Against that backdrop. C hrv cash horde looked especially inviting to ner and his executive management teams Mot surprisingly, analysts were divided about a merger option Van Conway, a merger .\nd acquisi|ust

at

Sll

and partner

tions expert

at

Conw

|

u ken/ie,

GM's survival instinct Ami want to be man standing here bet ause the ar mark. Merkle, an anarj come back.' Howe

cheered last

to

240

the

c

the accounting firm C the

ment and respond

billion

move

It

v

011

rowe Horwath. did not applaud

put two auto companies together,

2

what way does

In

effectively to global

a

merger solution

to

economic

i,\U

financial crisis represent strategic thinking

and

plannn

Al

managers continue making decisions that impany's ultimate sur hat preits them from making purelv rational d< and what common decision-making errors must they guard against? -

v

s

SOURCES:

Jeff

Green/'GM

Is

Said to Be in Preliminary Talks With

Chrysler," Bloomberg, October 11, 2008, http://www.bIoomberg.com

(accessed October 12, 2008); Alex Taylor III,"Deepening at

General Motors," Fortune (June

19, 2008),

Gloom

http://money.cnn

.com/2008/06/19/news/companies/taylor_gm.forrune/index.htm (accessed October 13, 2008);"Toyota

Zooms

Past

GM,"The Street

.com, April 24, 2007, http://www.thestreet.com (accessed 12, 2008); Bill Vlasic,"G.M. Said to

Chrysler," 77j