Management and Leadership Flashcards

Management and Leadership

Management vs. Leadership

• Management involves directing people and organizing resources for efficient job execution.
• Leadership focuses on motivating and inspiring individuals toward a shared objective, providing direction and fostering innovation.
• Key differences:
  • Managers handle day-to-day decisions, while leaders focus on long-term plans.
  • Leadership roles often require management skills, but not all managers are leaders, and vice versa.

Styles of Leadership

• Autocratic (Authoritarian)
  • The leader makes decisions independently and dictates how objectives are achieved.
  • Effective for unskilled workers and crisis management but requires close supervision.
• Paternalistic
  • A softer autocratic style where the leader consults workers before making decisions.
  • Workers cannot make their own decisions.
  • Can demotivate skilled workers.
• Democratic
  • Encourages workforce participation in decision-making.
  • Leaders discuss issues, delegate, and value advice, requiring strong communication skills.
  • Boosts employee motivation and distributes the decision-making burden.
• Laissez-faire
  • A hands-off approach with minimal interference in business operations.
  • Suitable only for small, highly motivated teams.

Factors Influencing Management and Leadership Styles

• Internal and external factors influence a manager's or leader's behavior; adapting style to the situation is crucial.

Internal Factors

• Urgent tasks benefit from autocratic leadership, while routine tasks do not.
• A large, unskilled workforce suits autocratic leadership, whereas a small, educated workforce suits a democratic approach.

External Factors

• Recessions require strong leadership (autocratic or paternalistic) for quick commands.
• Economic growth allows for democratic leadership and communication with employees.
• Increased competition necessitates democratic leaders to motivate employees for change, as laissez-faire leaders may lack guidance.

The Tannenbaum-Schmidt Continuum

The Tannenbaum-Schmidt Continuum is a scale that represents a range of management styles, from autocratic to participative.

1. Tells: Autocratic management style with zero workforce involvement in decision making, which can be divisive.
2. Sells: The manager makes a decision but explains the rationale to the workforce, allowing questions but not influence.
3. Suggests: The decision is outlined, and the workforce is allowed to discuss and ask questions to feel their opinions are considered.
4. Consults: A tentative decision is proposed, inviting discussion and modifications, recognizing the value of workforce participation.
5. Joins: The manager proposes a problem, and the workforce collaborates to discuss solutions, with the manager making the final decision based on their specific knowledge.
6. Delegates: The manager outlines the problem and sets constraints, allowing the team to discuss solutions and make the final decision, with the manager accountable for the outcome, showing a high level of trust.
7. Abdicates: The team defines and solves the problem with complete freedom, relying on their expertise, while the manager remains accountable, requiring confidence in the team's capabilities.

Decision Trees

Purpose

• Decision trees support decision-making, such as opening a new outlet or developing a new product.
• They provide a form of scientific decision-making for uncertain outcomes.

Components

• Probabilities: Subjective estimates based on experience (e.g., 0.6 for 60% probability).
• Expected Value (EV): Probability of outcome × Financial value of outcome.
• Net Gain: EV - Initial costs.

Structure

• Squares represent decisions.
• Circles represent uncertain outcomes.

Process

1. Identify courses of action.
2. Assign probabilities.
3. Calculate EV and net gain.
4. Choose the action with the highest net gain.

Example: Chocolate Bar Launch

• Scenario: Launching a chocolate bar with or without marketing.
• With marketing:
  • Successful launch: 0.75 probability, revenue of £100K.
  • Failed launch: 0.25 probability, revenue of £20K.
  • Basic launch costs: £1K.
  • Marketing costs: £15K.
• Calculations:
  • With marketing:
    • EV = (£100K \times 0.75) + (£20K \times 0.25) = £80K
    • Net\ gain = £80K - £16K = £64K
  • Without marketing:
    • EV = (£100K \times 0.5) + (£20K \times 0.5) = £60K
    • Net\ gain = £60K - £1K = £59K
• Decision: Spending £15K on marketing is worthwhile, increasing net gain by £5K.

Advantages

• Systematic Thinking: Forces managers to consider all potential outcomes.
• Visual Representation: Offers a clear picture of potential outcomes.
• Quantitative Comparison: Allows comparison of options quantitatively.
• Useful in Familiar Situations: Effective when managers have experience for accurate probability estimates.

Disadvantages

• Reliance on Quantitative Data: Ignores qualitative factors like employee morale.
• Probability Prediction: Difficult to predict accurately, affecting decision quality.
• Limited Range of Outcomes: Simplifies real-world complexity, potentially overlooking nuanced results.

Scientific vs. Intuitive Decision Making

Scientific Decision Making

• Based on data and comparison of outcomes to objectives.
• Model:
  1. Set objectives.
  2. Collect data.
  3. Analyze data.
  4. Make decision.
  5. Implement decision.
  6. Review decision.
• Advantages:
  • Reduces risk of expensive mistakes.
  • Logical and structured approach which can be adapted if necessary.
• Disadvantages:
  • Costly and time-consuming.
  • May be less creative.
  • Relies on reliable, up-to-date data; biased data leads to unreliable decisions.

Intuitive Decision Making

• Based on hunches or gut instinct.
• Advantages:
  • Can lead to great business decisions and keep the company ahead of its competition.
  • Quick decision-making.
  • Helpful when data is unavailable or in unfamiliar situations.
• Disadvantages:
  • Risky and can lead to mistakes.
  • Can be irrational and not based on logical reasons.

Risk, Reward, and Uncertainty

• Risk: Potential for high rewards if successful, but businesses often try to reduce risk.
• Reward: Financial or other benefits expected from decisions.
• Uncertainty: The degree to which the outcome of a decision is unknown; scientific decision-making can help reduce uncertainty.

Opportunity Cost

• Opportunity cost is the value of the next best alternative that's been given up

Other Factors Influencing Decisions

• Mission: A business's main purpose influences decisions.
• Objectives: Medium to long-term targets that help a business achieve its mission.
• Ethics: Moral and social values affect decisions.
• External Environment: External factors like competition, trends, and the economy affect decisions.
• Resource Constraints: Availability of resources like money, people, time, and raw materials affects planning.

Stakeholders and Decision Making

Types of Stakeholders

• Internal: Within the business (e.g., shareholders, managers, employees).
• External: Outside the business (e.g., customers, suppliers, local community, government).

Examples

• Shareholders: Owners who seek profit, dividends, and high share prices.
• Managers: Want high salaries, bonuses, and promotion prospects.
• Employees: Seek secure employment, good wages, and safe working conditions.
• Customers: Want quality goods at low prices.
• Suppliers: Seek regular orders and prompt payment.
• Local Community: Desires local employment and community support.
• Government: Aims for tax revenue, job creation, and legal compliance.
• Banks: Expect loan repayments on time.

Conflicting Objectives

• Stakeholder objectives often conflict.
• Businesses aim to balance stakeholder satisfaction.
• Example: Cutting costs to please shareholders may upset employees and customers.

Stakeholder Mapping

• Stakeholder mapping helps businesses understand the influence and interest of different stakeholders.
• Stakeholders are mapped to one of four quadrants:
  1. High Power/High Interest: Manage closely, as their satisfaction is vital.
  2. High Power/Low Interest: Keep satisfied, as they can significantly impact the business.
  3. Low Power/High Interest: Keep informed, as they can influence more powerful stakeholders.
  4. Low Power/Low Interest: Monitor with minimal effort.

Example: Italian Restaurant

• High Power/High Interest: Shareholders, Customers
• High Power/Low Interest: Local Council
• Low Power/High Interest: Employees, Suppliers
• Low Power/Low Interest: Local Residents, Local Media

Managing Stakeholder Relationships

1. Avoid prioritizing one stakeholder at the expense of others.
2. Consult key stakeholders.
3. Maintain good communication, using social media and websites.