Management Ch 5-8

Goal: desired future circumstance or condition that the organization attempts to realize.

Plan: blueprint for goal achievement and specifies the necessary resource allocations, schedules, tasks, and other actions. 

• Goals specify future ends; plans specify today’s means. 

Planning: The concept of planning incorporates both ideas: determining the organization’s goals and defining the means for achieving them.

GOAL + PLAN = PLANNING 

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Levels of Goals and Plans

Well Written Goals

• Written in terms of outcomes rather than actions

• Measurable and quantifiable

• Clear as to a time frame

• Challenging yet attainable

• Written down

• Communicated to all necessary organizational members

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Goals and Plans

1. Strategic Goals: Sometimes called official goals, are broad statements describing where the organization wants to be in the future. These goals pertain to the organization as a whole rather than to specific divisions or departments. 

• Strategic plans are the action steps by which the company intends to attain its strategic goals. 

• Blueprint that defines the organizational activities and resource allocations—in the form of cash, personnel, space, and facilities—required for meeting these targets. 

• Tends to be long-term in nature

• The purpose of strategic plans is to turn organizational goals into realities within that time period. 

2. Tactical Goals: The results that major divisions and departments within the organization intend to achieve. 

• Tactical plans are designed to help execute the major strategic plans and to accomplish a specific part of the company’s strategy.

• Such plans typically have a shorter time horizon than strategic plans—that is, they cover the next year or so. 

• Define what major departments will do to help top managers implement the organization’s overall strategic plan. 

• Developing tactical goals and plans is the responsibility of middle managers, such as the heads of major divisions or functional units.

3. Operational Goals: A specific, measurable result that is expected from departments, work groups, and individuals. (daily tasks)

• Precise and mesurable

• Operational plans: developed at the lower levels of the organization to specify action plans toward achieving operational goals and to support tactical activities

Goals and plans set a standard of performance: Managers set goals for employees to define desired outcomes. Because the employee’s performance can then be measured against this criteria, makes it a standard of performance, not a source of motivation or guide to action.

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Managing Goal Conflict Organizational Mission

Mission: the organization's reason for existence

Mission statement: broadly stated definition of purpose that distinguishes the organization from others of a similar type

• Clearly articulates the organization's strategic direction

• Sets a clear framework for development of all subsequent goals and plans

• Motivates and inspires employees

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Performance Manager 

• Managers use operational goals to direct employees and resources.

• Effective goals are characterized by specific factors (Exhibit 5.4).

• Key performance indicators (KPls): tool used to assess what is important to an organization and how well the organization is progressing toward achieving its strategic goal.

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Managing Goal Conflict

Build a Coalition

Coalitional management: building an alliance of people who support a manager’s goals and influencing other people to accept and work toward those goals. 

• Building a coalition requires talking to many people both inside and outside the organization. 

  • Inside: Coalitional managers solicit the views of employees and key customers.

  • Outside: They talk to other managers all across the organization to get a sense of what people care about and learn which challenges and opportunities they face. 

• A manager can learn who believes in and supports a particular direction and goals as well as who is opposed to them and the reasons for their opposition. 

Modify Goals by Time or Location: Since organizations pursue many goals simultaneously, managers must often deal with two conflicting goals that are both highly important to the organization. In such a case, they must find ways to balance the goals rather than fighting for one over the other.

• An effective approach is to overcome conflicts by adapting the goals across space or time. 

Address Conflicts with Debate and Dialogue: Good managers don’t let conflicts over goals simmer and detract from goal accomplishment or hurt the organization.

Manager Departures: Sometimes, conflicts are lessened or resolved when managers who support a particular goal leave the organization. They may feel so strongly about an issue, perhaps based on personal conviction, that they are not able to compromise.

Strategy map: helps managers see how the different goals of the company are linked together. 

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Performance Management

When writing goals, it is helpful to remember the acronym SMART. SMART means that effective goals are:

Specific: A good goal defines exactly what you expect to accomplish. When your goals are specific, the behaviors required to accomplish them are clear. Many people say that they want to recycle to save the environment, but a better goal would be “Place every used bottle or can in a recycling container within five minutes of finishing its contents.”

Measurable: You can measure the outcomes of a good goal. When you measure how much of a goal you have attained, you get feedback on your work. For example, compare the goal “I want to be skinny” with “I want to lose 10 pounds by the end of the month.” How can you measure skinny? But by measuring the pounds you have lost so far, you know exactly how close you are to meeting your goal.

Attainable: Good goals are hard to reach, but not impossible. If a goal is too easy, you will not have to work hard to attain it, and your overall performance will not improve. If a goal is too hard, you will be discouraged from attempting to reach it. One way of making sure that goals are attainable is to break larger, difficult goals into smaller, more easily accomplished subgoals.

Result-oriented: A good goal contains only one outcome or accomplishment. If you combine two or more outcomes in one goal, it will be difficult to decide where to focus your attention. For example, “To increase produce sales by 3% and to achieve a 5% market share” is a less effective goal than “To increase produce sales by 3%.”

Time-bound: Good goals specify precisely when you will meet them. Doing so provides you with a deadline for your actions. For example, it is easy to say “I want to be a millionaire,” but you are more likely to accomplish that goal if you say “I will have a million dollars in a bank account by January 1, 2020.”

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Strategic Management 

Set of decisions and actions used to formulate and execute strategies that will provide a completely superior fit between the organization and its environment so as to achieve organizational goals. 

• Purpose of Strategy byFirst step in strategic management is to define explicit strategy.

• Strategy: plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals.

• Competitive advantage: what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.

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Elements of Competive Advantage 

• Target customers

• Exploit core competencies

  • Core competence: something the organization does especially well in comparison to its competitors

• Build synergy

  • Synergy: occurs when organizational parts interact to produce a joint effect that is greater than the sum of its parts acting alone

• Deliver value

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Management by Objectives

Management by objectives (MBO) is a method whereby managers and employees define goals for every department, project, and person and use them to monitor subsequent performance. MBO includes the steps of setting goals, developing action plans, reviewing progress, and appraising performance.

A recent approach that focuses people on the methods and processes used to attain results, rather than on the results themselves, is called management by means (MBM).

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Benefits and Limitations of Planning 

Research indicates that planning generally positively affects a company’s performance. Here are some reasons why:

Goals and plans provide a source of motivation and commitment. Planning can reduce uncertainty for employees and clarify what they should accomplish. A lack of a clear goal hampers motivation because people don’t understand what they’re working toward.

Goals and plans guide resource allocation. Planning helps managers decide where they need to allocate resources, such as employees, money, and equipment. For example, the strategic goal of rebuilding Cadillac in the image of BMW and other luxury auto brands means allocating more resources to building and marketing the company’s brand identity and creating a luxury dealership experience for car shoppers. 

Goals and plans are a guide to action. Planning focuses attention on specific targets and directs employee efforts toward important outcomes. It helps managers and other employees know what actions they need to take to achieve goals.

Goals and plans set a standard of performance. Because planning and goal setting define desired outcomes, they also establish performance criteria so that managers can measure whether things are on or off track. Goals and plans provide a standard of assessment.

Despite these benefits, some researchers think planning can hurt organizational performance in certain ways. Thus, managers should understand the limitations to planning, particularly when the organization is operating in a turbulent environment:

Goals and plans can create too much pressure. If too much pressure is put on managers and employees to meet overly ambitious goals, they may resort to dysfunctional or unethical behavior in an effort to meet their targets. Recall from Chapter 4 the example of Wells Fargo retail bank employees opening fake bank and credit card accounts and forcing customers into unnecessary fee-generating products in an attempt to meet the excessively high sales goals set by top management. Several bankers in Wells Fargo’s foreign exchange business were also found to have overcharged hundreds of companies for currency trades to meet high goals. 

Goals can create a false sense of certainty. Having a plan can give managers a false sense that they know what the future will be like. However, all planning is based on assumptions, and managers can’t know with certainty what the future holds for their industry or for their competitors, suppliers, and customers.

Goals and plans may cause rigidity in a turbulent environment. A related problem is that planning can lock the organization into specific goals, plans, and time frames, which may no longer be appropriate as circumstances change. Managing under conditions of change and uncertainty requires a degree of flexibility. Managers who believe in “staying the course” will often stick with a faulty plan even when conditions change dramatically.

Goals and plans can get in the way of intuition and creativity. Success often comes from creativity and intuition, which can be hampered by too much routine planning. For example, during the process of setting goals in the MBO process described previously, employees might play it safe to ensure they can achieve the objectives rather than offer creative ideas. Similarly, managers sometimes squelch creative ideas from employees that do not fit with predetermined action plans

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Planing for a Turbulent Enviorment

One way that managers can gain benefits from planning and control its limitations is by using innovative planning approaches that are in tune with today’s turbulent environment: 

• Three approaches that help brace the organization for unexpected—even unimaginable—events are contingency planning, scenario building, and crisis planning.

• In addition, by using stretch goals, managers engender high employee motivation and performance that can sustain the organization during challenging times.

Contingency planning

• Contingency plans define company responses to be taken in the case of emergencies, setbacks, or unexpected conditions. 

• To develop contingency plans, managers identify important factors in the environment, such as possible economic downturns, declining markets, increases in cost of supplies, new technological developments, or safety concerns.

• Managers then forecast a range of alternative responses to the most likely high-impact contingencies, focusing on the worst case.

Setting Stretch Goals for Exellence 

Stretch goals are reasonable yet highly ambitious goals that are so clear, compelling, and imaginative that they fire up employees and engender excellence. 

• Stretch goals are characterized by both extreme difficulty and extreme novelty.

• They typically involve radical expectations that go far beyond current levels of capability and performance, and they require totally new activities and approaches to achieve.

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SWOT Analysis 

SWOT analysis includes a careful assessment of the strengths, weaknesses, opportunities, and threats (SWOT) that affect organizational performance. 

• Managers obtain external information about opportunities and threats from a variety of sources, including customers, government reports, professional journals, suppliers, bankers, friends in other organizations, consultants, and association meetings. 

• Many firms contract with special scanning organizations to provide them with news clippings, Internet research, and analyses of relevant domestic and global trends.

  

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Diversification Strategy

Diversification: Companies expand into new lines of business.

Ways to Diversify:

• Mergers: Two or more companies combine to form one.

• Joint Ventures: Strategic alliances for complex or expensive projects.

• Joint ventures are increasing as companies adapt to rapid technological changes and global competition.

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Approaches to Corporate Level Strategy

•  Three approaches to understanding corporate level strategy 

  • Portfolio Strategy

  • Boston Consulting Group Matrix

  • Diversification 

Portafolio Strategy 

Strategic business units (SBUs): business division of the organization that has a unique business mission, product line, competitors, and markets relative to other SBUs in the corporation

Portfolio strategy: pertains to the mix of SBUs and product lines to provide synergy and competitive advantage

The BCG Matrix

BCG matrix: organizes business along two dimensions— business growth rate and market share

The combination of high/low market share and high/low business growth rate provides four categories for a corporate portfolio:

• Star: rapid growth and expansion (high growth, high market share)

• Cash cow: milk to finance bright prospects and stars ()

• Bright prospect: new ventures. risky- a few become stars, others are diversified

• Dog: no investment. keep if some profits. consider divestment. (low growth, low market share)

Chapter 6: Managerial Decisition Making 

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Types of Decisions and Problems

Decision: choice made from available alternatives.

Decision making: The process of identifying problems and opportunities and then resolving them.

Management decisions typically fall into one of two categories: 

• Programmed decisions: Involve situations that have occurred often enough to enable decision rules to be developed and applied in the future.

• Nonprogrammed decisions: Made in response to situations that are unique, are poorly defined and largely unstructured, and have important consequences for the organization. 

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Facing Uncertainity and Ambiguity

Certainty: A situation in which all the information the decision maker needs is fully available.

Risk: Means that a decision has clear-cut goals and good information is available, but the future outcomes associated with each alternative are subject to chance.

Uncertainty: Occurs when managers know which goals they want to achieve, but information about alternatives and future events is incomplete.

Ambiguity is a condition in which the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and information about outcomes is unavailable.

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Decision-Making Models

Classical Model: based on the assumption that managers should make logical decisions that are economically sensible and in the organization’s best economic interest.

• Normative: How a decision maker should make a decision. 

Assumptions:

• The decision maker operates to accomplish goals that are known and agreed on. Problems are precisely formulated and defined.

• The decision maker strives for conditions of certainty and tries to gather complete information. All alternatives and the potential results of each are calculated.

• Criteria for evaluating alternatives are known. The decision maker selects the alternative that will maximize the economic return to the organization.

• The decision-maker is rational and uses logic and makes the decision that will maximize the attainment of organizational goals.

-------------------------------------------------------------------------------------------Administrative model use of a rational decision-making process within the limits of human and environmental factors

• Descriptive: how managers actually make decisions in complex situations

• Bounded rationality: people have limits or boundaries on how rational they can be

• Satisficing: choosing the first solution that satisfies minimal decision criteria

Assumptions:

• Goals are often vague and conflicting 

• Managers are often unaware of problems or opportunities 

• Rational procedures are not always used; simplistic view of problems. 

• Managers’ searches for alternatives are limited.

• Most managers settle for satisficing. 

Intuition: quick apprehension of decision situation based on experience but without conscious thought 

Quarisationality: combining intuitive and analytical thought 

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Political Model: Useful for nonprogrammed decisions when conditions are uncertain, information is limited, and there is manager conflict about goals to pursue or action to take

• Resembles the real environment

• Coalition: informal alliance among managers who support specific goal

  • Without a coalition, powerful groups can derail the decision-making process

• Managers disagree about what goals to pursue or what actions to take.

• It often leads to better outcomes in fast-changing environments, where quick and flexible decisions are necessary.

Assumptions:

• Diverse Interests: Organizations consist of various groups that have different goals and values. This can lead to disagreements among managers.

• Ambiguous Information: Information isn’t always clear or complete. Problems can be complex, making it hard to analyze everything rationally.

• Limited Resources: Managers often don’t have enough time, money, or mental energy to consider every detail. They need to communicate with each other to gather insights and reduce confusion.

• Bargaining and Discussion: Decision-making often involves negotiation and debate. Managers work together, forming informal groups (coalitions) to support specific goals or solutios

  

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Decisions-Making Steps

1. Recognition of Decisition Requirment 

• Managers face decisions based on either problems or opportunities.

  • problem: happens when the organization's performance falls short of its goals. This means something is not working well.

  • opportunity: managers see a chance to achieve more than the current goals.

  • This means there's a possibility to improve performance beyond what is expected.

• Awareness of a problem or opportunity is the first step in decision-making.

  • This requires monitoring both the internal and external environments for issues that need attention.

• Sources of information: 

• Formal sources like financial and performance reports help spot problems early.

• Informal sources include talking to other managers, gathering opinions, and seeking advice on key problems or opportunities.

• Recognizing decision requirements: can be challenging, as it often involves piecing together different bits of information in new ways.

2. Diagnosis and Analysis of Causes

• Diagnosis: is the step where managers refine their understanding of a problem or opportunity.

• It involves analyzing the underlying causes of the situation.

• Often, the real problem is hidden behind what managers initially think is the issue.

• By looking at the situation from different perspectives, managers can identify the true problem.

• In the process, managers might also discover new opportunities they hadn’t noticed before.

• Diagnosis involves refining the understanding of a problem by analyzing its underlying causes.

• Managers can't solve problems if they don't know about them or are focusing on the wrong issues.

• One method to get to the root cause is the 5 Whys technique

3. Development of Alternatives

• The next step is to generate alternative solutions that address the situation and fix the underlying causes.

• For programmed decisions (routine decisions), alternatives are usually easy to identify and already exist in the organization’s rules.

• For nonprogrammed decisions (new, unique decisions), managers need to develop new solutions.

  • Under high uncertainty, managers might create just one or two options that seem good enough.

• Limiting the search for alternatives is a major reason for decision failure in organizations.

  • Researcher Paul Nutt found that decisions with only one alternative failed over 50% of the time.

  • Considering at least two alternatives led to successful outcomes two-thirds of the time.

• Even if only one option seems obvious, it's important to find at least one more to increase the chance of success.

• Decision alternatives are tools to help reduce the gap between the organization's current and desired performance.

4. Selection of the Desired Alternatives

• Once feasible alternatives are developed, one must be selected.

• Managers aim to choose the alternative that:

• Best fits the organization's overall goals and values.

• Achieves the desired results using the fewest resources.

• Involves the least amount of risk and uncertainty.

• For nonprogrammed decisions (new or uncertain situations), some risk is unavoidable, so managers try to assess the likelihood of success for each alternative.

• Managers often rely on intuition and experience to estimate how likely a course of action is to succeed.

• Basing decisions on the organization's goals and values helps guide the selection of the best alternative.

• Choosing among alternatives also depends on managers' personality and their willingness to accept risk and uncertainty.

• Risk propensity is the willingness to take risks in exchange for a potentially greater payoff.

5. Implementation of the Chosen Alternative

• The implementation stage involves using managerial, administrative, and persuasive skills to ensure the chosen alternative is put into action.

• Success depends on whether the decision can be effectively translated into action.

• Sometimes alternatives fail because managers lack the resources, energy, or support from others to make it happen.

• Successful implementation requires:

• Discussion, trust-building, and engagement with people affected by the decision.

• Communication, motivation, and leadership skills to ensure the decision is carried out.

• When employees see managers follow up on decisions and track their success, they are more likely to be committed to positive action.

6. Evaluation and Feedback

• The evaluation stage of the decision-making process involves:

• Gathering information to assess how well the decision was implemented.

• Determining whether the decision achieved its intended goals.

• Rapid feedback is crucial. 

• Feedback also aids managers in making better decisions.

• Decision-making is an ongoing process:

• It doesn’t end once a decision is made; instead, feedback can lead to a new decision cycle.

• If a decision fails, it triggers a new analysis of the problem and reevaluation of alternatives

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Personal Decision Framework

Research has identified four major decision styles: Directive, Analytical, Conceptual, and Behavioral. 

1. Directive Style

• Used by individuals who prefer simple, clear-cut solutions.

• Managers make decisions quickly and often consider only one or two alternatives.

• They tend to rely on existing rules or procedures.

2. Analytical Style

• Preferred by those who like to consider complex solutions based on extensive data.

• Individuals carefully assess alternatives and rely on objective, rational information.

•  They strive for the best possible decision using available information.

3. Conceptual Style

• Individuals consider a broad range of information and are socially oriented.

• They enjoy discussing problems and alternatives with others.

• Managers explore many alternatives, relying on both people and systems for input.

4. Behavioral Style

• Managers have a deep concern for others as individuals.

• They focus on the personal development of others and make decisions that support their goals.

• Prefer one-on-one discussions to understand feelings and the impact of decisions.

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Why Do Managers Make Bad Decisions? 

• Managers face a constant demand for decisions, leading to potential mistakes.

• Understanding factors causing bad decisions can help improve decision-making.

• Many bad decisions stem from:

• Errors in judgment due to the mind's limited capacity.

• Unconscious biases that affect decision-making.

Six Common Biases Affecting Decisions:

1. Being Influenced by Initial Impressions (Anchoring Bias)

• Disproportionate weight is given to the first information received.

• Initial impressions can anchor subsequent thoughts and judgments.

2. Fearing Failure or Loss (Loss Aversion)

• Managers may continue investing in failing projects to justify past decisions.

• Loss aversion means that potential losses weigh more heavily than potential gains.

• Example: Managers are more likely to fund a failing product rather than cut their losses due to the fear of loss.

3. Seeing What You Want to See (Confirmation Bias)

• Managers tend to seek information that supports their existing beliefs while ignoring contradictory evidence.

4. Perpetuating the Status Quo

• Managers may rely on past successes and fail to explore new options or technologies.

5. Being Influenced by Emotions

• Strong emotions can impair decision-making abilities.

• Managers should strive to minimize emotional influences in their decisions.

6. Being Overconfident

• Many people overestimate their ability to predict uncertain outcomes.

• Example: Fast-food chain managers assumed low employee turnover guaranteed profitability, but analysis showed the opposite could also be true.

• Overconfidence can lead to risky, poor decisions

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Innovative Decision Making 

• The ability to make fast, widely supported, high-quality decisions on a frequent basis is a critical skill in today’s fast-moving organizations.

• Brainstorming uses a face-to-face interactive group to spontaneously suggest as many ideas as possible for solving a problem. 

Electronic brainstorming 

• Brings people together in an interactive group over a computer network. 

• One member writes an idea, another reads it and adds other ideas.

• Studies show that electronic brainstorming generates about 40 percent more ideas than individuals brainstorming alone. 

• Because the approach is anonymous, it circumvents possible social inhibitions, so more people actively participate.

•  Electronic brainstorming also allows people to write down their ideas immediately, thus avoiding the possibility that a good idea might slip away while the person is waiting for a chance to speak in a face-to-face group. 

Postmortem Analysis

• A review conducted after a project or event has completed, analyzing what went well and what didn’t.

• This technique focuses on lessons learned from past experiences rather than generating new ideas.

Premortem Analysis

• A technique where a team imagines that a project has failed and then works backward to identify possible reasons for that failure.

• This method encourages thinking about potential pitfalls and risks.

Traditional Brainstorming

• A face-to-face meeting where participants share ideas spontaneously, aiming to build on each other’s thoughts.

• This technique encourages creativity and can yield a good number of ideas.

Chapter 7: Designing Organization Structure 

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Organizing and Structure

• Organizing: the development of organizational resources to achieve strategic goals

• Organizing is important because it follows from strategy

• Strategy defines what to do, and organizing defines how to do it

Organization Structure 

• The set of formal tasks assigned to individuals and departments

• Formal reporting relationships

• The design of systems to ensure effective coordination of employees across department

• Organization chart: the visual representation of an organization's structure

Division of Labor: the degree to which organizational tasks are subdivided into separate jobs 

• Loosing popularity because too much specialization leads to employee isolation and boredom 

Chain of Command: an unbroken line of authority that links all employees in an organization and shows who reports to whom

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Authority, Responsibility, and Delegation 

Authority: the formal and legitimate right of a manager to make decisitions, issue orders, and allocate resources to achieve organizationally desired outcomes. 

• Authority is vested in organizational positions, not people.

• Authority flows down the vertical hierarchy

• Authority is accepted by subordinates 

Responsability: the duty to perform the task or activity as assigned 

Accountability: the mechanism through which authority and responsibility are aligned 

Delegation: the process that managers use to transfer authority and responsibility down the hierarchy 

Verbal communication not as good as written. Hard to remember or understood. Retention. 

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Line and Staff Authority 

Line authority: managers have formal authority to direct and control inmediate subordinates.

• Line departments perform tasks tgat reflect the organization’s primary goal and mission.

Staff authority: narrow authority that includes the right to advise, recommend, and counsel in the staff specialist’ are of expertise. 

Staff departments support line departments. 

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Span of Managment

Span of Management: the number of employees reporting to a supervisor.

Less supervision/larger spans of control 

• Work is stable and routine

• Subordinates perform similar work in one location.

• Subordinates are highly trained. 

• Rules and procedures are defined.

• Support systems and personnel are available 

• There are a few nonsuperviosry activities.

• Managers prefer a large span. 

Tall Structure: span of management that is narrow and has many hierarchical levels 

Flat Structure: span of  management that is wide and has few hierarchical levels.

Common structural problem is too many levels with a span that is too narrow. 

Span of Management:  Centralization and Decentralization 

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Five Approaches to Structural Design

Departmetalization: Basis for grouping positions into departments and departments into the total organization

Vertical function approach

Vertical structure: the grouping of activities by common function from the bottom to the top of the organization

• Positions are grouped into departments based on similar skills, expertise, work activities, and resource use. 

Divisional Approach

Divisional structure: departments are grouped together based on similar organizational outputs. 

Geographic or customer-based divisions

• focuses company activities on local market conditions 

• Competitive advantage: selling a product adapted to a given country 

Matrix approach

Combines both functional and divisional approaches simultaneously, in the same part of the organization.

• Improves coordination and info

• Dual lines of authority make the matrix unique 

Two boss employees: employees who report to two supervisors simultaneously and must resolve conflicting demands from the matrix bosses. 

Matrix boss: the product or functional boss who is responsible for one side of the matrix.

Top leader: person who oversees both the product and functional chains of command and is responsible for the entire matrix 

Team approach

Cross functional teams: consists of employees from various functional departments who are responsible to meet as a team and resolve mutual problems

Permanent teams: groups of employees who are organized in a way similar to a formal department.

Team based structure: the entire organization is made up of horizontal teams that coordinate their work and work directly with customers to accomplish the organization’s goals. 

Advantages of team approach

• breaks down barriers across departments, improving coordination and cooperation

• Enables rapid adaptation to environmental change and costumer requests 

• Boost employee morale 

Disadvantages of the team approach

• Employees may experience dual loyalties

• Requires increased coordination efforts and time

• Can cause greater decentralization and loss of the “big picture”

Virtual network approach

Outsourcing: farming out certain activities, such as manufacturing or credit processing.

Virtual network structure: the firm subcontracts most of its major functions to separate companies and coordinates their activities from a small organization at headquarters

Factors Affecting Organizational Structure

Structure Follows Strategy

Business performance is influenced by how well structure is aligned with strategy and needs of the environment.

• Structural responses to strategy and environment:

• Mechanistic organizations: efficiency is the goal in a stable environment.

• Organic organizations: innovation is the goal in a rapidly changing environment. (like AI)

Workflow Technology

Workflow technology: knowledge, tools, techniques, and activities used to transform organizational inputs into outputs

Woodward's categories:

• Small-batch production: firms produce goods in batches of one or a few products designed to customer specification

• Mass production: standardized production runs of a large volume of identical products

• Continuous process production: entire workflow is mechanized and runs without stopping

• Technical complexity: degree to which machinery is used in production without people

Chapter 8: Managing Innovation and Change 

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Innovation and the Changing Workplace

Organizational Inovation: the creation and implementation of a new idea, solution, or behavior by an organization

• Causes of change: outside forces, managers

• Change concepts: disruptive innovation, ambidextrous approach.

• Innovation begins when people recognize and generate new ideas that solve problems or address opportunities. 

• Sometimes innovation is spurred by forces outside the organization, such as when a powerful customer demands annual price cuts, when a key supplier goes out of business, or when new government regulations go into effect. 

• At other times, managers within the company see a need for product or service innovations, for creating greater efficiencies in operations, or for other alterations to keep the organization profitable. 

• Two concepts that address the need for organizational change are disruptive innovation and the ambidextrous approach.

Disruptive Innovation: innovations in products or services that typically start small and end up completely replacing an existing product or service technology for producers and consumer. 

• Becoming a goal for global companies

• Many come from small entrepreneurial firms

Reverse Innovation: Creating innovative, low-cost products for emerging markets and then quickly and inexpensively repackaging them for sale in developed countries.

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Ambidextrous Approach

• Ambidextrous companies can create and implement ideas.

Ambidextrous approach: incorporating structures and processes that are appropriate both for the creative impulse and for the systematic implementation of innovations

• Exploration: encouraging creativity, risk taking, experimentation, and the development of new ideas

• Exploitation: implementing new ideas with established capabilities and routines

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New Product and Technologies

Product innovation: a change in the organization's product or service outputs

• Process innovation: a change in the organization's production processes

• Technology change: a change in the organization's production process

Three innovation strategies for products and processes

• Discovery

• Horizontal collaboration and open innovation

• Innovative roles and structures

Discovery: The stage where ideas for new products and technologies are born.

Creativity: Generation of novel ideas that might meet perceived needs or respond to opportunities for the organization

Bottom-up approach: encouraging the flow of ideas from lower levels

Characteristics of Creative People and Organizations

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Horizontal Collaboration and Open Innovation

Ideas for innovations originate at lower levels of the organization and need to flow horizontally across departments. In addition, people and organizations outside the firm can be rich sources of innovative ideas. Thus, many companies focuse on improving both horizontal collaboration within the organization and coordination and cooperation with external parties through the process of open innovation.

“Innovation is a team sport” Characteristics of innovative companies:

• Work with customers to understand needs and develop solutions.

• Use new technology effectively.

• Shared new product development process supported by top management.

• Members from key departments cooperate in development of new products or services.

• Cross-functional team guides project from beginning to end.

One approach to successful innovation is called the horizontal linkage model…

Horizontal linkage model: research, manufacturing, sales, and marketing simultaneously contribute to new products and technologies

• Open innovation: search for and commercialization of new ideas beyond the organization and industry

• Crowdsourcing: approach to open innovation that involves obtaining information, ideas, or opinions from a large group of people

• Innovation by acquisition: buying start-up companies to obtain innovative products, services, and creative talent

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Innovation Roles and Structures

• Corporate intrapreneurship: development of an internal entrepreneurial spirit, philosophy, and structure to encourage employees to act like entrepreneurs

• Idea champion: person who sees the need for and enthusiastically supports productive change within the organization

• Idea incubator: organizational program that provides a safe harbor where employees can generate and develop ideas without interference from company bureaucracy or politics

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Changing People and Culture

All successful changes involve changes in people and culture as well. Changes in people and culture relate to how employees think—that is, changes in mind-set. 

• People change concerns just a few employees, such as sending a handful of middle managers to a training course to improve their leadership skills. 

• Culture change pertains to the organization as a whole, such as when the Internal Revenue Service (IRS) shifted its basic mind-set from an organization focused on collection and compliance to one dedicated to informing, educating, and serving customers (i.e., taxpayers) Is a major shift in the norms, values, and mind-set of the entire organization.

• Large Group Intervention: FAST, WIDELY SHARED

• Large-group interventions can be conducted in as little as two or three days, making them much faster than traditional organizational development techniques, which take weeks or even years to implement.

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Training and Development

• Training is a frequently used approach to changing people’s mind-set

• Training programs can be offered to large blocks of employees.

• Emphasize training and development for managers 

  • Managers’ behavior and attitudes will influence people and lead to a culture change 

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Organizational Development

Organization development (OD) is a planned, systematic process of change that uses behavioral science techniques to create a positive corporate culture and improve the way people and departments relate to one another.

OD focuses on the human and social aspects of the organization:

• Encourage a sense of community

• Push for organizational climate of openness and trust

• Provide opportunities for personal growth and development 

• Conflict management 

Popular specialized techniques of organization development: 

• Team building is an OD intervention that enhances cohesiveness by helping groups of people learn to work together as a team.

• With survey feedback, OD change agents survey employees to gather their opinions regarding corporate values, leadership, participation, cohesiveness, and other aspects of the organization, then meet with small groups to share the results and brainstorm solutions to problems identified by the results.

• Large-group intervention is an OD approach that brings together people from different parts of the organization (and often including outside stakeholders) to discuss problems or opportunities and plan for change.

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Implementing Innovation and Change 

Change is the adoption of a new idea by an organization.

• Change is similar to innovation except that the new idea may be created elsewhere. 

• A new idea will not benefit the organization until it is in place and actually being used. Implementation is the most crucial part of the innovation or change process, yet often the most difficult. 

• In this final section, we discuss a three-stage process of implementing change, some reasons for resistance to change, and techniques that managers can use to overcome resistance and successfully implement change.

Implementation Stages 

Change is frequently disruptive and uncomfortable for managers as well as employees.

• Changes in corporate culture and human behavior are especially tough to accomplish and require major effort. 

1. Unfreezing: makes people aware of problems and gets them motivated to accept the change. Unfreezing may begin when managers present information that shows discrepancies between desired behaviors or performance and the current state of affairs. In addition, managers establish a sense of urgency to unfreeze people and create an openness and willingness to change. Successful change involves using emotion as well as logic to persuade people. Managers create a vision for change that everyone can believe in, and widely communicate the vision and plans for change throughout the company.

Changing: occurs when individuals experiment with new behavior and learn new skills to be used in the workplace. The changing stage might involve a number of specific steps. For example, managers put together a coalition of people with the will and power to guide the change, communicate about the desired changes, train people in the new skills and behaviors, and empower employees to act on the plan and accomplish the desired changes.

Refreezing: occurs when individuals acquire new behaviors or values and are rewarded for adopting them by the organization. The impact of new behaviors is evaluated and reinforced. Managers may provide updated data to employees that demonstrate positive changes in individual and organizational performance. Top executives celebrate successes and reward positive behavioral changes. At this stage, changes are institutionalized within the organizational culture, so that employees begin to view the changes as a normal, integral part of how the organization operates. Employees may also participate in refresher courses to maintain and reinforce the new behaviors.

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Why Do People Resist Change?

Self Interest 

• Fear of personal loss is perhaps the biggest obstacle to organizational change 

Lack of understanding and trust 

Uncertainty 

Different assessments and goals

Some reasons for resistance are legitimate 

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Creating a Sense of Unity

A problem or crisis lowers resistance to change 

Managers must help people feel the need for change 

Need for change: a disparity between existing and desired performance levels 

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Managment Change Strategies 

Communication and education: This means explaining the reasons for the change and providing all the information people need to understand it. It helps people feel informed and less confused, making them more likely to accept the change.

Coercion: This involves forcing people to accept the change by using threats, pressure, or authority. It’s not a friendly method and can cause resentment, but it might work if there's no other choice.

Top management support: This means that the leaders or managers of the company show they fully back the change. When employees see that their leaders are committed, they’re more likely to follow along.

Negotiation: This is when you make deals with people to get them on board with the change. You might offer them something they want (like flexible schedules) in exchange for their agreement to the new plan.

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Centralize vs Decentralize

Centralize means bringing decision-making authority and functions into a single, central location or group within a company. This often leads to more uniform policies and streamlined processes but can reduce flexibility and responsiveness to local needs.

Decentralize means distributing decision-making authority and functions across various locations or departments within a company. This allows for greater flexibility, faster responses to local conditions, and empowerment of employees but can lead to inconsistencies and less control over the overall direction.

• Centralize: Control is concentrated in one place.

• Decentralize: Control is spread out across multiple locations or teams.