Principles of Management Exam 1

Organization

A group of people working together and coordinating their actions to achieve specific goals.

Management

The process of using organizational resources to efficiently and effectively accomplish organizational goals by … Planning, Organizing, Leading, and Controlling.

Four Functions of Management

Planning, Organizing, Leading, and Controlling

Efficiency

means to use resources (people, money, raw materials, etc.) wisely and cost-effectively

Effectiveness

means to achieve results, to make the right decisions and successfully carry them out, so that they achieve the organization’s goals

Resources

Financial, Physical, and Human Capital

Levels of Management

• Top managers make long-term decisions.

• Middle managers implement the policies and plans of the top managers above them. Supervise/coordinate activities below them.

• First-line managers make short-term operating decisions/daily tasks.

• Team leader is responsible for facilitating team activities.

• Nonmanagerial employees either work alone on tasks or with others on a variety of teams.

Functional Manager

They are responsible for just one organizational activity.

General Manager

They are responsible for several organizational activities and typically supervise other managers.

Types of Organizations

• For-Profit Organizations

  • For making money

• Nonprofit Organizations

  • For offering services

• Mutual-Benefit Organizations

  • For aiding members

Managerial Skills

Conceptual, Human, and Technical

• Conceptual Skills

  • ability to analyze and diagnose a situation

• Human Skills

  • ability to understand, alter, lead, and control people’s behavior

• Technical Skills

  • job-specific knowledge required to perform a task (e.g., marketing, accounting, etc.)

Mintzberg’s Managerial Roles - Interpersonal roles

Managers interact with people inside and outside their work units (e.g., figurehead, leader, liaison)

Mintzberg’s Managerial Roles - Informational roles

Managers receive and communicate information (e.g., monitor, disseminator, spokesperson)

Mintzberg’s Managerial Roles - Decisional roles

Managers use information to make decisions to solve problems or take advantage of opportunities (e.g., entrepreneur, disturbance handler, resource allocator, negotiator)

Management Viewpoints - Classical

Emphasized finding ways to manage work more efficiently, and assumed that people are rational. It had two branches: scientific and administrative

Management Viewpoints - Behavioral

Emphasizes the importance of understanding human behavior and of motivating employees toward achievement

Management Viewpoints - Quantitative

The application to management of quantitative techniques, such as statistics and computer simulations. Two branches of quantitative management are management science and operations management

Management Viewpoints - Systems

Perspective that regards the organization as a system of interrelated parts

Management Viewpoints - Contingency

The belief that a manager’s approach should vary according to-that is, be contingent on-the individual and the environmental situation

Management Viewpoints - Contemporary

Emphasizes adapting to change, continuous improvement, and balancing business success with social responsibility.

• Learning Organization: encourages continuous learning, knowledge sharing, and adaptability.

• High-Performance Work Practices: uses employee involvement, training, and rewards to boost productivity and commitment.

• Shared Value & Sustainable Development: aligns business goals with social and environmental needs, creating long-term value for both companies and society.

Scientific Management

A management approach that emphasizes the scientific study of work methods to improve the productivity of individual workers (Frederick Taylor & Frank and Lillian Gilbreth)

Job Specialization

Breaking tasks into smaller jobs so workers master specific tasks.

Frederick Taylor

Known as “the father of scientific management,” Taylor was an engineer from Philadelphia who believed managers could improve workers’ productivity by applying four principles of science:

1. Evaluate a task by scientifically studying each part of it (not by using old rule-of-thumb methods). This leads to the establishment of realistic performance goals for a job.

2. Carefully select workers with the right abilities for the task.

3. Give workers the training and incentives to do the task with the proper work methods.

4. Use scientific principles to plan the work methods and ease the way for workers to do their jobs.

The Gilbreths

• Identified 17 basic motions workers can perform.

• Helped workers eliminate unnecessary motions and reduce their fatigue.

• Reinforced the link between studying the physical movements in a job and workers’ efficiency.

Administrative Management

Management concerned with managing the total organization (Henri Fayol & Max Weber)

Bureaucracy

A rational, efficient, ideal organization based on the principles of logic

1. A well-defined hierarchy of authority

2. Formal rules and procedures

3. A clear division of labor

4. Impersonality

5. Careers based on merit

Henri Fayol

– French engineer and industrialist

– First to identify the major functions of management

• Planning

• Organizing

• Leading

• Controlling

• Coordinating

Max Weber

– German sociologist and philosopher

– Introduced bureaucracy as the rational, efficient form of organization

Human Relations and Behavioral Science Approach

• Human relations movement

  • Proposed that better human relations could increase worker productivity

  • Pioneered by Abraham Maslow and Douglas McGregor

• Behavioral Science Approach

  • Relies on scientific research for developing theories about human behavior that can be used to provide practical tools for managers

  • The disciplines of behavioral science include psychology, sociology, anthropology, and economics

Elton Mayo

In the late 1920s, Mayo led a Harvard research group to conduct worker productivity studies at Western Electric’s Hawthorne (Chicago) plant.

Hawthorne Studies

Research showing that attention and social factors affect productivity.

Hawthorne Effect

Employees worked harder if they received added attention and thought that managers cared about their welfare and that supervisors paid special attention to them.

Maslow’s Hierarchy of Needs

Motivation theory—people progress from basic needs to self-actualization.

Douglas McGregor

Created Theory X and Theory Y of management styles.

McGregor’s Theory X and Theory Y

• Theory X

  • Represents a pessimistic, negative view of workers

  • Workers are irresponsible, resistant to change, lack ambition, hate work, and want to be led

• Theory Y

  • Represents an optimistic, positive view of workers

  • Workers are considered capable of accepting responsibility, self-direction, self control, and being creative

Open Systems Approach

Organizations that continually interact with their environment; have the potential to produce synergy.

Systems View and Contingency View

• Systems Viewpoint - regards organizations as a system of interrelated parts.

1. Collection of subsystems—parts making up the whole.

2. Part of the larger environment.

• Contingency viewpoint

  • Emphasizes that a manager’s approach should vary according to – that is, be contingent on – the individual and the environmental situation

  • Most practical because it addresses problems on a case- by-case basis

Learning Organization

An organization that actively creates, acquires, and transfers knowledge within itself and is able to modify its behavior to reflect new knowledge

Triple Bottom Line

representing people, planet, and profit (the 3 Ps) - measures an organization’s social, environmental, and financial performance.

Stakeholders

The people whose interests are affected by an organization’s activities.

Task Environment

Consists of 10 groups that interact with the organization on a regular basis

• Customers, competitors, suppliers, distributors, strategic allies, employee organizations, local communities, financial institutions, government regulators, special-interest groups.

General Environment

Economic, technological, sociocultural, demographic, political-legal, international

Ethics

• Standards of right and wrong that influence behavior.

• May vary among countries and cultures.

Values

The relatively permanent and deeply held underlying beliefs and attitudes that help determine a person’s behavior.

Approaches to Deciding an Ethical Dilemma - Utilitarian

– Guided by what will result in the greatest good for the greatest number of people

– Often associated with financial performance

Approaches to Deciding an Ethical Dilemma - Individual

– Guided by what will result in the individual’s best long-term interest, which ultimately is in everyone’s self-interest

– Assumes that people will act ethically in the short run to avoid harm in the long run

– Flaw is one person’s short-term gain may not be good for everyone in the long term

Approaches to Deciding an Ethical Dilemma - Moral-Rights

– Guided by respect for the fundamental rights of human beings: the right to life, liberty, privacy, health, safety, and due process

– For example, the U.S. Constitution’s Bill of Rights

Approaches to Deciding an Ethical Dilemma - Justice

– Guided by respect for impartial standards of fairness and equity

– Policies administered impartially and fairly, regardless of gender, age, sexual orientation, and the like

Whistleblower

An employee who reports unethical or illegal activities.

Social Responsibility

A business’s duty to act in ways that benefit society, not just itself.

Approaches to Social Responsibility

Philanthropic, ethical, legal, economic

Philanthropy

Charitable giving and supporting community causes.

Globalization

The trend of the world economy toward becoming a more interdependent system

Global village

refers to the “shrinking” of time and space as air travel and electronic media make worldwide communications easier

Ethnocentric managers

“We know best”

– Believe that their native country, culture, language, and behavior are superior to all others

– Related to parochialism, a narrow view in which people see things solely through their own perspective

Polycentric managers

“They know best”

Take the view that native managers in the foreign offices best understand native personnel and practices, and so the home office should leave them alone

Geocentric managers

“What’s best is what’s effective, regardless of origin”

Accept that there are differences and similarities between home and foreign personnel and practices and that they should use whatever techniques are most effective.

Ways of Expanding Internationally - Global Outsourcing

Using suppliers outside the United States to provide labor, goods, or services.

Ways of Expanding Internationally - Importing, Exporting, & Countertrading

• When importing, a company buys goods outside the country and resells them domestically.

• When exporting, a company produces goods domestically and sells them outside the country.

• Sometimes other countries may wish to import U.S. goods but lack the currency to pay for them. In that case, the exporting U.S. company may resort to countertrading—that is, bartering goods for goods.

Ways of Expanding Internationally - Licensing & Franchising

• In licensing, a company allows a foreign company to pay it a fee to make or distribute the first company’s product or service.

• Franchising is a form of licensing in which a company allows a foreign company to pay it a fee and a share of the profit in return for using the first company’s brand name and a package of materials and services.

Ways of Expanding Internationally - Joint Ventures

A U.S. firm may form a joint venture, also known as a strategic alliance, with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country.

Ways of Expanding Internationally - Wholly Owned Subsidiaries

a foreign subsidiary that is totally owned and controlled by an organization. The foreign subsidiary may be an existing company that is purchased outright.

Barriers to International Trade - Tariff

A trade barrier in the form of a customs duty, or tax, levied mainly on imports.

Barriers to International Trade - Import Quota

A trade barrier in the form of a limit on the quantity of a product that can be imported.

Barriers to International Trade - Sanction

The trade prohibition on certain types of products, services, or technology to another country for specific reasons, including nuclear nonproliferation, terrorism, and humanitarian concerns.

Barriers to International Trade - Embargo

A complete ban or prohibition of trade of one country with another so that no goods or services can be imported or exported.

WTO

• Designed to monitor and enforce trade agreements.

• Agreements based on the General Agreement on Tariffs and Trade (GATT), an international accord first signed by 23 nations in 1947.

• Currently consists of 164 countries.

• Headquartered in Geneva, Switzerland.

World Bank

• It was founded after WWII to help European countries rebuild.

• Today, the purpose is to provide low-interest loans to developing nations for improving transportation, education, health, and telecommunications.

• It has 189 member nations, with most contributions coming from Britain, the U.S., Japan, and Germany.

IMF

• Designed to assist in smoothing the flow of money between nations.

• Founded in 1945 and now affiliated with the United Nations.

• Operates as a last-resort lender that makes short-term loans to countries suffering from unfavorable balance of payments (example: Greece).

Trading Blocs

a group of nations within a geographical region that have agreed to remove trade barriers with one another.

• United States-Mexico-Canada Agreement (USMCA)

• EU - The 27 Countries of the European Union

BRICS

stands for the five major emerging economies of: Brazil, Russia, India, China, and South Africa

National culture

Shared values, beliefs, and behaviors of a nation.

Low-context culture

shared meanings are primarily derived from written and spoken words

High-context culture

people rely heavily on situational and nonverbal cues for meaning when communicating with others.

The Globe Project’s Nine Cultural Dimensions

❖ Power distance

❖ Uncertainty avoidance

❖ Institutional collectivism

❖ In-group collectivism

❖ Gender egalitarianism

❖ Assertiveness

❖ Future orientation

❖ Performance orientation

❖ Humane orientation

Expatriate

people living or working in a foreign country. It can be very costly to support expatriates and their families

Planning

setting goals and deciding how to achieve them , coping with uncertainty by

formulating future courses of action to achieve specified results.

• A plan is a document that outlines how goals are going to be met.

Business Plan

a document that outlines a proposed firm’s goals, the strategy for achieving them, and the standards for measuring success.

Strategy

sets the long-term goals and direction for an organization. It represents an “educated guess” about what long-term goals or direction to pursue for the survival or prosperity of the organization.

Strategic Management

the formulation and the implementation of strategies and strategic goals. It is a process that involves managers from all parts of the organization—top managers, middle managers, first-line managers, and team leaders. It derives from an organization’s mission and vision.

Sustainable competitive advantage

Occurs when an organization can get, and stay, ahead in four areas:

1. Responsiveness to customers

2. Innovation

3. Quality

4. Effectiveness

Levels of Planning

Mission Statement

• Expresses the purpose of the organization

• What is our reason for being?

• Why are we here?

Vision Statement

• It is a clear sense of the future and the actions needed to get there.

• What do we want to become?

• Where do we want to go?

Values Statement

• What the company stands for: its core priorities, the values its employees embody, and what its products contribute to the world

• What values do we want to emphasize?

Strategic Planning

Determines what the organization’s long-term goals should be for the next 1-5 years with the resources they expect to have available; done by top management

Tactical Planning

Determining what contributions departments or similar work units can make with their given resources during the next 6-24 months; done by middle management

Operational Planning

Determining how to accomplish specific tasks with available resources within the next 1-52 weeks; done by first-line managers

SMART goals

Specific, Measurable, Attainable, Results-oriented, Target Date

Management by Objectives (MBO)

a four-step process:

1. Jointly set objectives.

2. Develop an action plans.

3. Periodically review of performance.

4. Make performance appraisal and reward the employee according to results.

cascading goals

Making lower-level goals align with top goals

• Top and middle management must be committed.

• Goals must be applied organization-wide.

• Goals must “cascade” (be linked consistently down through the organization).

Planning/control cycle

Strategic Positioning

attempts to achieve sustainable competitive advantage by preserving what is distinctive.

Based on three principles:

1. Strategy is the creation of a unique and valuable position.

❖ Few needs, many customers.

❖ Broad needs, few customers.

❖ Broad needs, many customers.

2. Strategy requires trade-offs in competing.

3. Strategy involves creating a “fit” among activities.

Levels of Strategy

• Corporate-Level Strategy

  • focuses on the organization as a whole

  • executives generally referred to as the “C-Suite”

• Business-Level Strategy

  • focuses on individual business units or product/service lines

  • senior-level managers below the C-Suite typically are responsible for this level of strategy

• Functional-Level Strategy

  • applies to each functional area of the organization to support higher level strategies

  • functional managers lead planning discussions at this level

Steps of Strategic Management Process

1. establish the mission, vision, and values statements

2. assess the current reality

3. formulate the strategies and plans

4. implement the strategies and plans

5. maintain strategic control: the feedback loop

SWOT Analysis

a situational analysis in which a company assesses its strengths, weaknesses, opportunities, and threats.

• Internal environment is the analysis of internal strengths and weaknesses.

• External environment is the analysis of external opportunities and threats.

Forecasting

A vision or projection of the ­future

Trend Analysis

a hypothetical extension of a past series of events into the future. The basic assumption is that the picture of the present can be projected into the future.

Scenario Analysis

the creation of alternative hypothetical but equally likely future conditions.

Benchmarking

A process by which a company compares its performance with that of high-performing organizations