Introduction to Management Midterm

Management: the right work, done well

Right work: considered the “why”

• Identifying the work to be done by the management and organization

• Two drivers of the “right work” are profitability and growth

• Seen in vision, mission, strategies, etc.

• Are sometimes value-based (ie CSR, legal, ethical, core values)

Done well: considered the “how”

• Understand how the manager gets the work done well

• Through the manager’s own actions, or through the actions of people they influence

• Business performance = process management, measurement, and business improvement

  • Process management: ways to visualize, measure, track and improve processes

The four facets are economic, political, social, and technological

History of Management

Specialization of Labor

Associated terms to know: Adam Smith, assembly line, single-focus

• Adam Smith advocated for the assembly line, where each person focuses on one component of the production process

• Limitation: Did not address coordination between individuals

Systemic Management

Associated terms to know: engineers, economists, industrialization

• Thinking/interaction of job roles within an organization

• Started to address and coordinate labor specialization

• Mostly engineers and economists preformed these attacks

Scientific Management

Associated terms to know: work flow, labor efficiency, removing waste, productivity, Frederick Taylor, Frank and Lillie Gilbreth, Henry Gantt, Taiichi Ohno, Just-In-Time, Big Data

• Frederick Taylor believed in the detailed study of workers’ interaction with machinery and sub-tasks in order to find opportunities for work process productivity. He also believed it was important to incentivize workers for a standard performance when reasonably possible. He did not support union concept of wages in a given class as it was similar to deindividualization, but he did support union improvements for working conditions and hours

• Frank and Lillian Gilbreth did time and motion studies in the early 1900s, focusing on productivity in construction. Lillian also focused on the psychology of management

• Henry Gantt introduced quantitative methods to illustrate elapsed time during the work process, similar to sequential illustrations of workflows. He created the Critical Path Method (a sequence of scheduled activities), Program Evaluation and Review Technique (a project management tool) and founded the emerging field called operations research (focusing on problem-solving)

• Statistical Process Control and Just-In-Time were the foundations for lean manufacturing and “Big Data”

  • Statistical Process Control: monitors manufacturing processes with technology that measures and controls quality

  • Just-In-Time: inventory planning avoiding overstock (Taiichi Ohno)

  • Lean manufacturing: reducing inefficiencies within the supply chain to improve quality and cut costs

  • “Big data”: large quantities of information processed using advanced analytical techniques

Administrative Management

Associated terms to know: oversight of production, typical “management”

• Henri Foyal & The 14 Principles of Management: division of work, authority, discipline, unity of command, unity of direction, subordination to general interest, remuneration, centralization, line of authority/scalar chain, order, equity, tenure stability, initiative, Esprit de corps; very flexible

  • Process of Management: planning + organizing + command + coordination + control

• Max Weber & The 6 Principles for Bureaucracy: division of labor, managerial hierarchy, formal selection, career orientation, formal rules, controls, impersonality; strict, not flexible

Human Relations Management

Associated terms to know: employee welfare, Hawthorne studies, Mary P. Follet, Herbert Simon, bounded rationality

• Welfare secretaries were leaders in employee welfare departments, but then were replaced by employment managers

• Hawthorne studies showed that worker productivity increased when they were being studied, influenced, observed, and communicated with

• Link between supervision, group spirit, and productivity

• Mary P. Follet argued organization was means of control of responsibility

• Herbert Simon argued for the “bounded rationality” theory where managers had limited resources yet need the “perfect decision; they are biased, and instead reach for satisfactory decisions

Identifying the Right Work

5 steps to identifying right work

1. Develop vision statement, vision statement, and goals

2. External analysis

3. Internal analysis

4. Reevaluate, choose best decision

5. Implement strategy

• Vision statement: aspirations, purpose for existence, providing services that serve a societal need, aspirational, understandable, desirable, and compelling

• Mission statement: business description, reason for support, products and services, how the organization will pursue vision

• Goals: specify success, create measurables, identify ideal outcomes

  • Financial goals: level of profit, sales, return on capital employed, net cash, days sales outstanding, days receivables outstanding, inventory

  • Operational goals: market share vs competitors, returning customers, new customers, service/satisfaction/production/defect level

• Strategies: describes how goals will be achieved, actions managers take

  • Differentiation = unique selling proposition

  • Low cost = pricing strategy

  • Combo = slight differentiation with slight lower price point

  • Focus = serve needs of market segment better than competitors

  • Competencies = whether or not there is differentiation

• Porter’s Five Forces Analysis: threat of new entrants, rivalry, bargaining power of buyers and suppliers, substitute threat, industry profitability factors

• Industry Life Cycle: Embryonic, growth, shakeout, mature, decline

  • Embryonic = distinct new product forms new industry

  • Growth = broad acceptance and accelerated growth

  • Shakeout = growth flattens (could decline); exit, mergers, acquisitions

  • Mature = industry growth begins to slow, less new entrants

  • Decline = growth is negative

• Internal analysis tools: product/service quality, efficiency, innovation, customer responsiveness, distinctive competencies

• Distinctive competency: effective differentiation (unique)

• Core competency: organization can do well (but is not unique)

• Strategy implementation: organization structure, monitoring and control, culture

• Plans often have key goals, key steps, key initiatives, resources, timeline, etc

Doing What’s “Right”

The four elements for doing what’s right are business law, ethical decision making, core values, and corporate social responsibility

Business Law

• National Labor Relations Act, Fair Labor Standards Act, Social Security law, Equal Pay Act, Civil Rights Act, Occupational Safety and Health Act all involve labor requirements to safeguard workers

• Uniform Commercial Code sets standard statues nationwide so it is easier to govern commercial activities across the nation (especially recording transit)

• Clean Air Act, Clean Water Act, Noise Control Act, Environmental Protection Agency – environmental

• Some industry specific regulations

  • Publicly traded companies – Sbrbanes-Oxley Act - financial reports must be accurate and reliable

  • Oil/Gas industry – rights of mineral owners, conservation of resources

  • Financial Services – securities and exchange commission establish rules like capital and reserve and credit rating requirements, corporate governance, and financial disclosures

Ethical Decision Making

• Internal and external factors affect what happens when unethical behavior occurs

• What “should” happen = moral awareness, moral judgement, moral intention, action/implmentation

• Utilitarian approach = greatest good for greatest number of people

• Individualism approach = promotes individual’s best long-term interests

• Moral rights approach = does not violate any fundamental moral rights

• Distributive justice, procedural justice, compensatory justice

• Impartial opinion

• Full disclosure

• People make imperfect decisions because of the context in which they perceive information

Core values

• Core values are underlying norms of behavior and actions that must be shown through actions and intentions

Corporate Social Responsibility

• actions to recognize and proactively respond to stakeholder needs and expectations; what the “smart” thing to do is

• CSR was before considered voluntary, but now it is more of a requirement to appease stakeholders and consumers. Shows organization’s accountability for transparency and can lead to positive business outcomes

Growth, Innovation, and Entrepreneurship

• The two drivers of economic value of a business are profitability and growth

• Profitability is the ability to generate long-term profits necessary to provide an appropriate and risk adjusted rate of return on capital employed

  • ROIT = NIAT / Equity + LT Debt

    • Return on Investment Capital = Net Income After Taxes / (Equity + Long Term Debt)

  • Risk is the likelihood that the net positive cash flows projected for the future will actually be realized. The higher the risk, the higher the rate of returns (generally)

  • Typically, a risk adjusted rate of return on equity invested should be at least 7-10% for a business with average risk

• Growth is the rate of increase in net cash flows year over year

  • Equity holders in a business value growth because it indicates an increase in future cash flows and profitability

There are a couple options for creating growth

• Existing markets/services to current customers (market penetration strategy)

  • Incentives as opposed to quantity discounts

• Gaining new customers while retaining current customers

  • Share building: bringing customers who were buying competitor products

  • Market development: bringing new customers into the market

• New products/services to current and new customers

• Selling existing products/services into new markets

• Entering completely new markets with new products/services

Innovation: executing an idea which addresses a specific challenge and creates value for both the developer and the user

1. Use of artificial intellegence

2. Use of technology platforms

3. Use of collaborative ecosystems

   Ecosystems: multiple organizations working together to improve development of technology, products, ad services

• Entrepreneurship is bringing new ideas and concepts that create value. They act with urgency in creative ways to address immediate challenges and generate opportunities

  • Intrapreneurship = how large business are able to create new business ventures

• Large business create successful new ventures in a couple of ways

  • Top leadership commitment

  • Creating limited target areas aligned to core competencies of the business

  • Overcoming typical obstacles that stifle internal new ventures

  • Creating separately funded business development organizations

  • Using innovation tools (tech platforms & collaboration ecosystems)

  • Learning from prior ventures

  • Terminating unsuccessful ventures

Managing a Global Business

• Have to decide whether to sell your business globally since you will be competing against more organizations. Globalization exists even with attempts of promoting nationalism

• The organization must also decide whether to standardize its products or to customize them to meet local preferences

• Creating an entrance strategy is also important

• Globalization is the trend towards a more integrated and interdependent global economy

Factors driving globalization

1. Declining trade barriers

2. Technology

3. Multinational enterprises

4. Global institutions

Key elements of political economy

1. Political

2. Economic

3. Legal

Core strategies for conducting international business

1. Global standard

2. Local customization

3. Combination

Strategies for entering a foreign market

1. Export - Ship products from another country, sell products directly

2. License - Sell rights to 3rd party, sell business products

3. Franchise - business partner can use trademarks/patents, provide business guidance

4. Joint venture - formal arrangement to collaborate with business

5. Strategic alliance - less formal agreement (manufacturing, market support)

6. DIY - business control 

How do you decide

1. Direct control preferences

2. Are there suitable business partners or acquisition targets

3. Legality

4. Product/service nature

5. Time and risk