MGT Exam 2 Study Guide

LO 7.1 Describe the goal-setting process in organizations.

A goal is defined as a specific commitment to achieve a desired result within a certain period of time. To maximize effectiveness and efficiency, goals must be set within a strategic framework consisting of mission, vision, and values. Managers setting goals must follow the organization’s mission, have a clear vision of what they want to achieve, and ensure that the team embraces the core values of what the organization represents. Fostering a strong corporate culture within this framework is the first step toward goal success.

LO 7.2 Explain the different types of goals and plans in an organization.

There are a number of different kinds of goals and plans to achieve certain objectives. Examples of goals include short-term goals, long-term goals, stretch goals, distal goals, and proximal goals. An important part of goal setting is to turn short-term and long-term goals into actionable goal plans. Types of plans include operational plans composed of standing plans and single-use plans. Examples of standing plans include policies, procedures, and rules; there are two main types of single-use plans: programs and projects. Other types of plans include tactical plans, directional plans, business plans, and action plans.

LO 7.3 Explain the principles of goal setting and its application to organizations.

Goal setting theory developed by Edwin Locke and Gary Latham in the 1960s suggests that human performance is directed by conscious goals and intentions. The core principles of effective goal setting to motivate workers are presented in five dimensions: clarity, challenge, commitment, feedback, and task complexity.

LO 7.4 Describe SMART goals and how they are used in organizations.

SMART goals must be specific, measurable, achievable, relevant, and time-bound. Yet different business environments need different types of goals. While SMART goals may be suitable in some circumstances, they may not be suitable in others. SMART goals tend to work when applied to predictable business environments where the future is similar to the past, and the products or services are relatively the same.

LO 7.5 Describe how managers apply different types of goal-setting approaches.

Results-centered approaches to goal setting include SMART goals and management by objectives (MBO). MBO is a method in which management and employees agree to specific goals that are then used to evaluate individual performance. The main purpose of the MBO approach is to motivate employees rather than control. There are five steps to the MBO process: manager sets employee objectives, manager develops action plans, manager monitors and reviews progress, manager evaluates performance, and manager rewards performance according to results.

An example of a process-centered approach to goal setting is total quality management (TQM). The main aspects of TQM include striving for long-term solutions rather than short-term gains, rectifying errors and delays as quickly as possible, focusing on the customer as the main priority, continually improving systems and people performance, investing in ongoing training programs and workshops, building teams motivated to be innovative and creative, and creating an environment where all employees are involved in providing ideas and feedback.

A contingency model of goal setting considers tasks in terms of straightforwardness, ambiguity, and flexibility and how managers and employees can change the nature of the goal-setting process to better fit the type of task required.

LO 7.6 Illustrate how managers track progress of goal plans through performance dashboards.

Performance dashboards provide a visual representation of an organization’s strategies and goals, which allows managers to easily track progress toward metrics and goals in real time. Performance dashboards provide managers access to key performance indicators (KPIs), measurements that managers identify as vital to the company’s performance with regard to financials, internal processes, customers, and learning/growth. A balanced scorecard focuses on three key nonfinancial areas: (1) relationships with customers, (2) key internal processes, and (3) learning and growth.

LO 2.1 Explain ethics as they relate to the five domains of individuals, organizations, stakeholders, government, and the global community.

Ethics are the moral principles, values, and beliefs that govern group or individual behavior according to what is right or wrong and what contributes to the balanced good of all stakeholders. As described by psychologist Lawrence Kohlberg, individuals go through “stages of moral development” in their lives. Organizations that carry out unethical business practices have a negative impact on their stakeholders. In addition, governments play an important role in establishing rules and regulations to guide business ethics. Finally, the global community must adhere to the ethical principles outlined by the United Nations.

LO 2.2 Demonstrate processes and practices for managing organizational ethics.

When there is no clearly correct course of action, managers are required to make decisions based on one or more of the following principles: legal, individual, virtuous, long-term self-interest, community, utilitarian, and distributed justice. To assist with ethical decision-making, many organizations publish ethical guidelines called codes of conduct.

LO 2.3 Summarize management’s role in building responsible businesses based on ethical decision-making.

Managing responsibly in today’s business environment requires managers to make principle-based decisions informed by industry and societal standards. In some cases, organizations may decide to address a negative externality proactively by internalizing it, thus benefiting stakeholders. Managers define and foster ethical organizational cultures in two ways: (1) applying a framework for ethical decision-making and (2) ethics training.

LO 2.4 Describe how businesses approach social responsibility.

Social responsibility is an ethical framework for outlining the duties managers need to perform to benefit both the organization and society. When social responsibility goes beyond managers to the organization itself, it is called corporate social responsibility (CSR), an ethical framework for describing the efforts made by corporations to drive positive environmental and societal change.

LO 2.5 Illustrate the role of social entrepreneurship in society.

Social entrepreneurship is the process of sourcing innovative solutions to social and environmental problems. Many of these problems relate to the environment, poverty, sustainability, equality, education, child mortality, sanitation, terrorism, and health and wellness. Social entrepreneurs are people who start a business for the dual purpose of profit and societal benefit. There are several models of social entrepreneurship: social purpose ventures, social consequence ventures, and enterprising nonprofits.

LO 6.1 Describe the types of decisions managers make.

Decision-making is the action or process of identifying a strategy to resolve problems.

Managers make two types of decisions: programmed and nonprogrammed. Programmed decisions are routine tasks based on preestablished rules and guidelines, and nonprogrammed decisions are based on reason and/or intuition in response to a unique situation that requires tailored actions. Managers often use a five-step model of decision-making (also called the classical model of decision-making) to help them make good decisions and find solutions to complex problems.

LO 6.2 Identify the steps in the classical decision-making model.

Step 1: Define the problem.Step 2: Identify and weigh decision criteria.Step 3: Generate multiple alternatives.Step 4: Rate alternatives based on the decision criteria.Step 5: Choose, implement, and evaluate the best alternative.

LO 6.3 Discuss the different decision-making styles used by managers.

Research has shown that decision-making styles vary along two dimensions: value orientation and tolerance for ambiguity. Combined, the two dimensions form the four styles of decision-making: directive, analytical, conceptual, and behavioral.

LO 6.4 Identify the factors that influence our decisions in the workplace.

While making decisions requires being in the right mindset and following a series of important steps, other factors may influence the way in which we make decisions in the real world. These factors include bounded rationality, satisficing, intuition, heuristics, and bias. Nobel Prize–winning psychologists Kahneman and Tversky suggested three types of heuristics: availability heuristic, anchoring and adjustment heuristic, and representative heuristic. Our heuristics tend to lead to biases and errors relating to how we process information. These biases include common-information bias, confirmation bias, sunk cost bias, hindsight bias, escalation of commitment, and framing bias.

LO 6.5 Discuss how managers can overcome barriers to decision-making.

Our biases tend to manifest themselves in our behavior, which stifles the creative process, causing barriers to decision-making. People hesitate to make decisions for a number of reasons: fear they may not be right, fear of what others might say or think, or fear of following through on a decision once it has been made. Several tools are available to help people organize their thoughts and resolve decision-making paralysis: the Ben Franklin balance sheet, the report card method, and partner-in-absentia method.

LO 6.6 Explore the different methods of group decision-making.

Group decision-making offers many benefits but can also hinder the process. Groupthink and sequential decision-making can interrupt the decision process. Several group decision-making techniques help to limit the effects of sequential decision-making and groupthink: brainstorming, the Delphi technique, and the nominal group technique (NGT).