Managing the Business

Chapter 5: Managing the Business

The Management Process

  • Overview of Management
    • Essential for both large and small companies.
    • Relies on managers to effectively run businesses.
    • Key functions include:
    • Analyzing competitive environments
    • Planning
    • Organizing
    • Directing
    • Controlling day-to-day operations

Definition of Management

  • Management Defined:
    • The process of planning, organizing, leading, and controlling an organization's financial, physical, human, and information resources to achieve its goals.

Basic Management Functions

  • Four Basic Managerial Functions:
    • Setting Goals: Part of planning.
    • Establishes direction for the organization.
    • Organizing: Involves structuring the organization.
    • Allocating resources and assigning tasks.
    • Leading: Focused on managing people.
    • Guiding and motivating employees to achieve objectives.
    • Controlling: Monitoring performance to ensure goals are met.

Planning & Decision Making

  • Planning Components:
    1. Goal determination
    2. Strategy development
    3. Tactical and operational plans establishment

Functions of Management

  • Planning and Decision Making
  • Organizing
  • Leading
  • Controlling

Leading

  • Definition: Guiding and motivating employees to meet company objectives.
    • Examples of Successful Leaders:
    • Walt Disney
    • Sam Walton
    • Howard Shultz
    • Key Traits of Legendary Leaders:
    • Uniting employees for mutual benefit.
    • Earning trust and respect.
    • Example: Howard Shultz initiated stock options for employees at Starbucks.

Controlling

  • Definition: Ensuring organizational performance meets established goals.
    • Example of Control Process:
    • CEOs monitor costs and performance.
    • Decision-making based on performance outcomes (e.g., increasing advertising when sales are low).

The Science and the Art of Management

  • Science of Management:

    • Analysis of problem solving and decision-making through objective data.
    • Applied for routine and straightforward issues.

  • Art of Management:

    • Often requires intuition, experience, and personal insights for complex decisions.
    • Example: Starbucks NYC experience (market research vs. actual customer preference led to adjusting strategy).

Becoming A Manager

  • Role of Education:

    • Building managerial skills often starts with education; a college degree is essential.
    • MBAs are common among executives.
    • Companies like GE, McDonald's, and Shell Oil offer in-house training for managerial development.

  • Role of Experience:

    • Management skills are acquired through experience in various jobs.
    • Training programs across numerous roles in organizations (e.g., Proctor and Gamble, General Mills, Shell Oil) produce well-rounded managers.

Characteristics of a Great Manager

  • Motivates employees through compelling mission and vision.
  • Assertive, capable of overcoming challenges and resistance.
  • Fosters a culture of accountability.
  • Builds relationships based on trust, dialogue, and transparency.
  • Prioritizes productivity over political considerations.

Types of Managers

  • Management Levels:

    • Top Managers: Oversee entire organization.
    • Middle Managers: Implement policies from top management.
    • First Line Managers: Supervise daily operations.

  • Areas of Management:

    • Human Resource Managers:
    • Responsibilities: Hiring, training, evaluating performance, and managing compensation.
    • Operations Managers:
    • Responsibilities: Overseeing production, inventory, and quality control.
    • Marketing Managers:
    • Responsibilities: Managing development, pricing, promotion, and distribution of products.
    • Information Managers:
    • Design systems for information management.
    • Financial Managers:
    • Oversee accounting and financial resources.

Management Roles and Skills

  • Basic Managerial Roles:
    1. Technical Skills
    2. Interpersonal Skills
    3. Conceptual Skills
    4. Diagnostic Skills
    5. Communication Skills
    6. Decision-Making Skills
    7. Time-Management Skills

Skill Details

  • Technical Skills:

    • Necessary for specialized tasks.
    • Developed through education and experience.

  • Interpersonal Skills:

    • Important for building relationships and understanding people.

  • Conceptual Skills:

    • Enable managers to think creatively and identify opportunities/threats.

  • Decision-Making Skills:

    • Identifying problems and determining best actions.
    • Poor decision-making can lead to business failure (e.g., Circuit City).

  • Time Management Skills:

    • Essential for efficiency; addressing time-wasting activities like:
    • Overhead of paperwork
    • Unscreened telephone calls
    • Inefficient meetings
    • Excessive time on emails and texts

Global Management Skills

  • Need for understanding of foreign markets and cultural differences.
  • Collaboration with international teams on real-time basis; example: GM employee coordinating with South Korean team.

Management and Technology Skills

  • Advancements in technology assist managers in processing information and organization.

Strategic Management: Setting Goals and Formulating Strategy

  • Importance of Strategic Management:

    • Continuous planning, monitoring, analysis and assessment essential for goal achievement.
    • Organizations must adapt to changing business environments.

  • Effective Goal Setting:

    • Starting point of successful strategic management.
    • Managers decide actions needed to reach those goals.

  • Definition of Strategy:

    • A broad set of plans for executing decisions to achieve organizational goals.

Setting Business Goals

  • Purpose of Goal Setting:

    • Provides direction and guidance, aids resource allocation, defines corporate culture, and assists performance assessment.

  • Types of Goals:

    • Mission Statements: Describe how to achieve the company purpose (examples: Tesla and Google).

    • Long-Term Goals: Typically over 5 years.

    • Intermediate Goals: 1-5 years.

    • Short-Term Goals: Usually 1 year.

Types of Strategies

  • Corporate Strategy:

    • Determines the businesses a company will operate.
    • Example: Companies with multiple brands (e.g., GM with Cadillac, Chevy).

  • Business Strategy:

    • Necessary when multiple operations require distinct strategies.

  • Functional Strategy:

    • Specific strategies developed by managers in areas like marketing and finance to meet corporate goals.

Strategy Formulation Steps

  • Step 1: Setting Strategic Goals (aligned with mission statement).

  • Step 2: Analyzing Organization and Environment through SWOT Analysis:

    • Strengths, weaknesses, opportunities, threats identified.

  • Step 3: Matching the Organization with its Environment:

    • Leverage strengths, mitigate weaknesses, capitalize on opportunities, and counter threats.

A Hierarchy of Plans

  • Levels of Plans:
    • Strategic Plans: Resource allocation and company priorities.
    • Tactical Plans: Short-term plans for implementing aspects of strategic plans.
    • Operational Plans: Short-term targets for performance.

Contingency Planning and Crisis Management

  • Contingency Plan: Known as Plan B; action plan for unexpected scenarios.

  • Crisis Management: Immediate response plan for emergencies.

  • Distinction:

    • Contingency planning is proactive (prepares for potential issues); crisis management is reactive (responds to already occurred issues).

Management and the Corporate Culture

  • Importance of Corporate Culture: Vital for success and motivation within an organization.
  • Benefits of Strong Corporate Culture:
    • Increased productivity
    • Improved employee health and satisfaction
    • Enhanced customer satisfaction
    • Higher innovation levels
    • Reduced absenteeism and turnover rates
    • Improved engagement and communication.

Managing and Communicating Culture

  • Managers should:
    • Understand and transmit corporate culture to employees.
    • Incorporate training on corporate culture for new employees.
    • Recognize and reward those who support the culture.

Changing Corporate Culture

  • Difficult yet sometimes necessary.
  • Effective change often requires new visions and systems for employee appraisal and compensation.

Team Work

  • Team Exercise:
    • Read pages 138–139 and pages 165 (questions 5-26 through 5-29).
    • Additionally, read pages 164 (dreams can come true—5-17 through 5-20).
    • Engage with People’s Problems on page 165 (5-21 through 5-25).