Chapter 1-8: Introduction to Organizational Management and Strategic Planning

Management Fundamentals

Authority

  • Definition: The right to make decisions and give orders.
  • Flow: Authority always flows downward in an organization.
    • It flows from the highest levels of command to the lowest.
    • Origin: Owners of the organization (e.g., sole proprietorship, partnership, corporation, LLC).
  • Corporate Authority Flow: In publicly traded corporations, stockholders (shareholders) elect a Board of Directors, and authority then flows downward through the board to managers and employees.
  • Analogy to Government: The U.S. political system is a Republic, a representative democracy, not a pure direct democracy. Citizens elect representatives (congresspeople, senators) to act on their behalf. Similarly, stockholders elect board members to represent their interests in the corporation, rather than making direct management decisions.

Corporate Stock and Voting Rights

  • Common Stockholders:
    • Possess voting rights for electing the Board of Directors.
    • Are paid off last during the liquidation of an organization.
  • Preferred Stockholders:
    • Do not have voting rights; they give these up.
    • Receive preferred treatment in terms of payments, often higher interest or dividends.
    • Are paid off first in the event of organizational liquidation.
    • The trade-off is giving up voting power for financial security.

Types of Managers and Authority

  • Line Managers:
    • Role: Generalists, decision-makers.
    • Manage an entire recognizable function or major activity within the firm.
    • Authority: They must have authority to enact decisions among their subordinates.
  • Staff Managers:
    • Role: Advisers to line managers, experts, specialists.
    • Provide specialized information to help line managers make decisions.
    • Authority: Do not inherently make decisions or give orders.
    • Decision-making Mechanism: Can only make decisions or give orders if authority is delegated to them by a line manager, particularly within their area of expertise or when numerous decisions are required in their specialty.

Responsibility

  • Definition: An obligation to perform policies or duties.
  • Creation: Responsibility is created by the exercise of one's authority.
    • It does not exist on its own; subordinates are not responsible for anything unless authority has been exercised by a line manager.
  • Flow: Responsibility flows upward. Subordinates are accountable to their superiors.

The Organizational Chart

  • A physical diagram illustrating how authority flows downward through the process of delegation in an organization.
    • Typically starts with the Chief Executive Officer (CEO), followed by Vice Presidents (e.g., VP of Marketing, VP of Manufacturing), and so forth.

Directing

  • Definition: The management function involving giving orders, making decisions, and motivating employees.
  • Formal Organization:
    • Basis: Runs strictly according to authority and responsibility.
    • Mechanism: Managers (especially line managers) give orders; employees (subordinates) are obligated to carry them out.
    • Protocol: Employees should always report to their immediate manager. Bypassing an immediate manager (going to their boss) is considered a breach of protocol and can damage relations.
  • Insubordination:
    • Definition: Not following orders from a superior.
    • Consequences: Leads to discipline and accountability.
    • Progressive Discipline (Labor Law): A structured process for addressing infractions:
      1. Verbal Warning: First offense.
      2. Written Warning: Documented in HR file; negatively impacts promotion and retention chances.
      3. Suspension: May be without pay; further reduces chances of retention.
      4. Dismissal: Termination of employment; the final step. (This sequence must be followed to avoid legal challenges from employees).
  • Informal Organization:
    • Basis: Interpersonal connections and relationships that develop organically among people due to human interaction.
    • Mechanism: Operates through the exercise of power.
    • Power: Derived from an individual's charisma, personality, and ability to influence others, regardless of their formal position. Power often gets more things done than formal authority.
    • Motivation: Employees are motivated through the exercise of power and internal factors, not solely by authority.
    • Internalized (Intrinsic) Motivation:
      • Managers should understand what makes subordinates