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Planning, Strategizing, Decision Making (Ch. 5 in Hill/McShane) Planning - Benefits/Advantages vs. Pitfalls/Disadvantages o Planning- A process whereby managers select goals, choose strategies to attain those goals, allocate responsibility for implementing actions to specific individuals or units, measure the success of actions by comparing actual results against the goals, and revise plans accordingly. o Benefits: Planning gives direction and purpose to an organization; it is a mechanism for deciding the goals of the organization. Planning is the process by which management allocates scarce resources, including capital and people, to different activities. Planning drives operating budgets- strategic, operations, and unit plans determine financial budgets for the coming year. Assigns roles and responsibilities to individuals and units within the organization. Enables managers to better control the organizations. Pitfall Solution Too centralized; top-down Decentralized Planning Failure to question assumptions Scenario planning; devil’s advocate Failure to implement Link to goals; tie to budgets Failure to anticipate rivals’ actions Role-playing Decision making- Making decisions is a major component of a manager’s job. (See page 122: Figure 5.6 for the Rational Decision Making Module) o Cognitive biases- Decision-making errors that we are all prone to making and that have been repeatedly verified in laboratory settings or controlled experiments with human decision makers. Prior hypothesis bias- Decision makers who have strong prior beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong. Stereotyping Escalation of Commitment- Arises when decision makers, having already committed significant resources to a project, commit even more resources if they receive feedback that the project is failing. Reasoning by analogy- The use of simple analogies to make sense out of complex problems. Representativeness-Generalizing from a small sample or even a single vivid anecdote.
Illusion of control- The tendency to overestimate one’s ability to control events. Availability error- Arises from out predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine. Framing bias- Bias arising from how a problem or decision is framed. Groupthink-Arises when a group of decision makers embarks on a course of action without questioning underlying assumptions. Symptoms Illusion of invulnerability- “Everything will work out because we are a special group” Belief in inherent morality of group- Members automatically assume the rightness of their cause. Self-censorship- Censoring oneself as to not upset the dynamic of the group. Isolationism- Stereotyping of outsiders False sense of unanimity- Interpretation of silence as agreement. Techniques for improving decision making Devil’s advocate- The generation of both a plan and a critical analysis of the plan by a devil’s advocate. Outsider view- identifying a reference class of analogous past strategic initiatives, determining whether those initiatives succeeded or failed, and evaluating a project at hand against those prior initiatives. Dialectic inquiry- The generation of a plan (a thesis) and a counterplan (antithesis) that reflect plausible but conflicting courses of action. Identify a number of alternatives before taking action Organizing/Structure (Ch. 8 in Bateman/Snell blue readings book ) Fundamentals – what is differentiated must be integrated (See page 71: Figure 8.1) o Organization chart- The reporting structure and divisions of labor within an organization. o Differentiation- An aspect of the organization’s internal environment created by job specialization and the division of labor. o Integration- The degree to which differentiated work units work together and coordinate their efforts. o Division of Labor- The assignment of different tasks to different people or groups.
Decentralized organization: An organization in which lower-level managers make important decisions. Horizontal Structure o Line Departments- Units that deal directly with the organization’s primary goods and services. o Staff departments- Units that support Line Departments. o Departmentalization- Subdividing an organization into smaller subunits. Functional- Departmentalization around specialized activities such as production, marketing and human resources. Divisional- Departmentalization that groups units around products, customers, or geographic regions. Functional Organization Divisional Organization A central purchasing department Each division has its own purchasing department. Separate companywide marketing, production, design, and engineering departments. Each product group has experts in marketing, design, production, and engineering. A central-city health department The school district and the prison have their own health units. Plantwide inspection, maintenance, and supply departments. Production Team Y does its own inspection, maintenance, and supply. A university statistics department teaches statistics for the entire university. Each department hires statisticians to teach its own students. Matrix- An organization composed of dual reporting relationships in which some managers report to two superiors—a functional manager and a divisional manager. Pros Cons Decision making is decentralized to a level where information is processed properly and relevant knowledge is applied. Confusion can arise because people do not have a single superior to whom they feel primary responsibility. Extensive communication networks help process large amounts of information. The design encourages managers who share subordinates to jockey for power. With decisions delegated to appropriate levels, higher management levels are not overloaded with operational decisions. The mistaken belief can arise that matrix management is the same thing as group decision making—in other words, everyone must be consulted for every decision. Resource utilization is efficient because key resources are shared across several important Too much democracy can lead to not enough action.
programs or products at the same time. Employees learn the collaborative skills needed to function in an environment characterized by frequent meetings and more informal interactions. Dual career ladders are elaborated as more career options become available on both sides of the organization. Network- A collection of independent, mostly single-function firms that collaborate on a good service. o Dynamic network- Temporary arrangements among partners that can be assembled and reassembled to adapt to the environment. o The firm must choose the right specialty. It must be something that the market needs and which the firm is better at providing than other firms. o The firm must also choose collaborators that are excellent at what they do and that provide complementary strengths. o The firm must make certain that all parties fully understand the strategic goals of the partnership. o Each party must be able to tryst all the others with strategic information and also trust that each collaborator will deliver quality products even if the business grows quickly and makes heavy demands. Broker- A person who assembles and coordinates participants in a network. Designer Role- A network architect who envisions a set of groups or firms whose collective expertise could be focused on a particular good or service. Process engineering role- A network co-operator who takes the initiative to lay out the flow of resources and relationships and makes certain that everyone shares the same goals, standards, payments, and the like. Nurturing Role- A network developer who nurtures and enhances the network to make certain the relationships are healthy and mutually beneficial. Integrating Mechanisms (See page 94: Figure 8.8) o Standardization- Establishing common routines and procedures that apply uniformly to everyone. o Formalization- The presence of rules and regulations governing how people in the organization interact. o Coordination by plan- Interdependent units are required to meet deadlines and objectives that contribute to a common goal.
If performance falls short of goals and standards, managers need to find the reason for the variance. This requires collecting more information, much of which might be qualitative data gleaned from face-to-face meetings and detailed probing. The same is true if performance exceeds goals or standards. o Response to variance (Corrective action or Reinforcement) Corrective Action When actual performance easily exceeds a goal, corrective action might be taken to raise the goal. When performance falls short, management may change the goal, strategy, operations, or personnel. Radical change is not always the appropriate response. Providing Reinforcement If goals are met or exceeded, managers must provide timely positive reinforcement to those responsible. Positive reinforcement increases the probability that individuals will continue with successful endeavors and similar behavior. Formal methods of control o Personal- Making sure through personal inspection and direct supervision that individuals and units behave in a way that is consistent with the goals of an organization. Can be subjective. Excessive supervision can be demotivating. Must be limited. o Bureaucratic- Control through a formal system of written rules and procedures. Almost all large organization use some bureaucratic controls. Budgetary controls and controls over capital spending. They allow managers to decentralize decision making within the constraints specified by formal rules and procedures. Excessive bureaucratic controls can be stifling and limit the abilities of individuals. They can also lead to unintended consequences when individuals try to find a way around rules that they think are unreasonable. o Output- Setting goals for units or individuals to achieve and monitoring performance around those goals. Unit manager’s performance is judged by their ability to meet goals. Output goals are normally established through negotiation between units and senior management at headquarters. As long as units meet their goals, unit managers are given autonomy. This is called “management by exception.” Give greater autonomy than personal or bureaucratic controls.
Senior managers must make sure that units are achieving goals through means consistent with the values and standards of the organization. Managers need to choose the right output criteria to measure performance. Output controls do not work if there are extensive interdependencies between units. Performance Ambiguity- A situation that occurs when the link between causes and effects is ambiguous. Senior managers cannot effectively control the division simply by relying on obvious output controls. o Cultural – Regulating behavior by socializing employees so that they internalize the values and assumptions of an organization and act in a manner that is consistent with them. Not universally beneficial. Cultural controls are difficult to change. o Self control- Occurs when employees regulate their own behavior so that it is congruent with organizational goals. o Incentives-Devices used to encourage and reward appropriate employee behavior. Giving employees incentives to work productively is believed to cut the need for other control systems. Types of incentives used may vary based on employees and tasks. The incentives used must match the work performed. o Peer control- Occurs when employees pressure others within their team or work group to perform up to or in excess of the expectations of the organization. o Market controls- Regulating the behavior of individuals and units within an enterprise by setting up an internal market for some valuable resources such as capital. The main problem with market controls is that fostering internal competition between divisions for capital and the right to develop new products can make it difficult to establish cooperation between divisions for mutual gain. Informal methods of control o Back channel- An informal channel through which managers can collect important information. Control metrics o Balanced Scorecard- A control approach that suggests managers use several different financial and operational metrics to track performance and control an organization (See page 224: Figure 9.3. Robert Kaplan and David Norton, creators of the balance scorecard, suggest that managers use a number of different financial and operational metrics to track an organization and its performance.
o Time, people, budget, and physical work facilities can be controlled. Needs and Drives – “what” motivates people Maslow’s hierarchy of needs- a motivation theory of needs arranged in a hierarchy, whereby people are motivated to fulfill a higher need as a lower one becomes gratified. (for pyramid, see page 320: Figure 13.3) o The theory says that individuals are motivated by many needs at the same time, but the lowest are the strongest. o Self actualization is at the top of the hierarchy. The need for self-fulfillment in reaching one’s potential. o Limitation: Does not capture all needs. o Management Implications: Employees have different needs at different times. Employees have several interdependent needs, not just one dominant need. At some point, most employees want to achieve their full potential (self-actualization). Employees needs are influenced by values and norms. Learned needs theory- David McClelland expanded on Maslow’s idea that need strength is reinforced or weakened by personal values and social influences. o Need for achievement (nAch) : People with a strong need for achievement want to accomplish reasonably challenging goals through their own efforts. o Need for affiliation (nAff) : A desire to seek approval from others, conform to their wishes and expectations, and avoid conflict and confrontation. o Need for power (nPow) : People with a high need for power want to exercise control over others and are concerned about maintaining their leadership positions. Personalized Power: Enjoyment of power to advance personal interests. Socialized Power: A desire for power as a means to help others. Four-drives theory- A motivation theory based on the innate drives to acquire, bond, learn, and defend that incorporates both emotions and rationality. (See page 324) o Drive to acquire: The drive to seek, take, control, and retain objects and personal experiences. It extends beyond basic food and water to status and recognition in society.
Foundation for competition and the need for esteem. o Drive to bond: The drive to form social relationships and develop mutual caring commitments with others. Motivates people to coordinate. o Drive to learn: The drive to satisfy curiosity and to know and understand oneself. Related to self-actualization. o Drive to defend: Drive that creates a “fight-or-flight” response in the face of personal danger. It includes defending our physical selves, as well as relationships, acquisitions, and belief systems. Always reactive- triggered by a threat. All other three drives are proactive- we seek to improve them. Management Implications: o Ensure that individual jobs and workplaces provide a balanced opportunity to fulfill the drives to acquire, learn, bond, and defend. o The drives should remain in balance. The organization should not overly fulfill one. Expectations, Goals, and Feedback Expectancy theory-A motivation theory based on the idea that work effort is directed toward behaviors that people believe will lead to desired outcomes (See page 327: Figure 13.5. o E-to-P expectancy: Probability that effort will result in a specific level of performance. o P-to-O expectancy: Probability that performance will result in specific outcomes. o Outcome Valences: The outcomes positive or negative value to the employee. Management Implications: o E-to-P expectancies are influenced by an individual’s belief that he or she can complete a task successfully. Companies increase this attitude by assuring employees that they have the necessary competencies, role perceptions, and resources. They are learned, so behavioral modeling and supportive feedback strengthen employee self-confidence. Select people with desired skills and knowledge. Provide training and clarify job requirements. Provide sufficient time and resources.
Equity theory- A theory that explains how people develop perceptions of fairness in the distribution and exchange of resources. Comparison of one’s own outcomes/ratios with those of others. o How Employees Correct Inequity Feelings: Change Inputs- Employees perform at a lower level or ask the better- off co-worker to do more of the work to justify his or her higher pay or more favorable outcomes. Change Outcomes- Employees ask for a pay increase or make unauthorized use of company resources. They may also ask the boss to stop giving favorable treatment to the other co-worker. Change Perceptions: Employees make themselves believe that the other worker really is doing more. Leave the Situation: They might quit or transfer to another job where rewards are more equitably distributed. Job characteristics model- A job design model that relates motivational properties of jobs to specific personal and organizational consequences of those properties. (See page 336: Figure 13.7) o Experienced Meaningfulness: The belief that one’s work is worthwhile or important. o Experienced Responsibility: Feeling personally accountable for the outcomes of one’s efforts. o Knowledge of Results: Derived from job feedback. o Skill Variety : The use of different skills and talents to complete a variety of work activities. Task Identity : The degree to which a job requires completion of a whole or identifiable piece of work. Task Significance : The degree to which a job effects the organization and society. Autonomy : Jobs with high levels of autonomy provide freedom, independence, and discretion in scheduling work and determining the procedures to be used to complete the work. (Employees make their own decisions) Job Feedback : The degree to which employees can tell how well they are doing based on direct sensory information from the job itself. Job Satisfaction/Dissatisfaction (Ch. 14 Hill/McShane) EVLN model - Outlines the consequences of job dissatisfaction. Exit - Leaving the organization, transferring to another work unit, or trying to make these exits. High employee turnover rate with job dissatisfaction. Voice - Any attempt to change, rather than escape from, a dissatisfying situation. Experienced Meaningfulness Experienced Responsibility Knowledge of Results
Voice can be a constructive response, such as recommending ways for management to improve the situation. It can also be confrontational (i.e. filing formal grievances/complaints) Loyalty - “Loyalists” are employees who respond to dissatisfaction by waiting patiently for the problem to be solved by others. Neglect - Reducing work effort, paying less attention to quality, and increasing absenteeism and lateness. Considered a passive activity that has negative consequences for the organization. Power & Influence (Ch. 15 Hill/McShane) Sources of Power Organizational – the formal hierarchical position (CEO, VP, Frontline Managers, Regular Employees) Legitimate - Derives from an implicit agreement among organization members that people higher up in the hierarchy can ask for certain behaviors from subordinates. Comes from norm that those higher up should direct subordinates. Control over information - The right to control information flow is a form of legitimate power. Most common in highly bureaucratic firms. Reward - Managers can reward behavior that they deem consistent with company goals. Pay increases, bonuses, promotions Legitimate power over rewards is sanctioned by norms, laws, and a need to maintain legitimacy. Coercive- Personal Referent – Individual power based on a high level of identification with admiration or respect for the power holder. Individual characteristics & attributes, esp. charisma Energy, endurance, and physical stamina The ability to focus one’s energy and avoid wasted efforts. Empathy, which makes it possible to read and understand others. Flexibility, particularly with respect to selecting various means to achieve one’s goals.
Rational appeal Inspirational appeal Personal appeal Ingratiation - Attempts to increase the extent to which someone likes you. Coalition formation- A group of people that come together to cooperate in attaining a certain goal. Closely related to network building and exchange. When people lack sufficient power on their own, they form coalitions to make changes. Consequences of influence attempts Resistance- Occurs when people or work units object to behavior that someone of power is requiring of them and refuse to engage in it, argue, or try to delay engaging in the behavior. Compliance - Occurs when people comply with a request, but only because they have to. The only exert the minimum level of effort required. Commitment- Occurs when people identify with the requests of someone trying to influence them and internalize that request, adopting it as their own. The strongest consequence of influence and what the influencer should aim for. Associated with greater motivation. Leadership Perspectives (Ch. 16 Hill/McShane) Power & Influence - Leaders rely on legitimate power from hierarchical positions, however, they also rely greatly on personal power. This personal power flows from expertise, a network of allies, and individual attributes. Trait theories – individual characteristics, e.g., Intelligence, strategic thinking, need for power, achievement, charisma o The competency/trait perspective : The notion that certain traits are associated with effective leaders. o Charisma: The ability that individual’s have to charm or influence others. Charismatic leaders: o Have exceptionally high self confidence o Have strength of Conviction o Have assertiveness or Social Dominance o Often are superb communicators o Are able to command the loyalty of their followers, which makes them particularly effective.
o Power Motivation : The unconscious drive to acquire status and power and to have an impact on others. Necessary for leadership effectiveness because getting things done in an organization requires individuals to accumulate power and use it to influence others. Leadership effectiveness requires much more than power motivation. (It requires integrity and employee trust) o Achievement Motivation : The unconscious concern for achieving excellence and accomplishments through one’s individual efforts. Achievement motivated individuals: set challenging goals assume personal responsibility for goal accomplishment are persistent in pursuing goals take calculated risks to achieve goals actively use information for feedback, adjusting their efforts as necessary. o Strategic Thinking : The cognitive ability to analyze a complex situation, abstract from it, and draw conclusions about the best strategy for the firm to follow. Requires: A combination of intelligence and reasoning skills, A talent for big - picture strategic thinking Skills at analyzing an industry, an understanding of competitive dynamics The ability to discern what is important to the firm. o Emotional Intelligence- The ability to monitor one’s own and others’ feelings and emotions, to discriminate among them, and to use this information to guide one’s thinking and actions. Key Components: Self Awareness - The ability to understand one’s own moods, emotions, and drives, as well as their effect on others. Self Regulation - The ability to control or redirect disruptive impulses or moods and to think before acting. Motivation - A passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence. Empathy - Understanding the feelings and viewpoints of subordinates and taking those into account when making decisions. Social Skills - Friendliness with a purpose. Behavioral theories- Links effectiveness of leaders with their behaviors towards subordinates. o People-oriented- A leadership style that includes showing mutual trust and respect for subordinates, demonstrating a genuine concern for their needs, and having a desire to look out for their welfare.
directions and engineering wholesale changes and operational processes, organization architecture, and culture. Transactional Leaders- Help an organization achieve its current objectives, tries to run things as efficiently as possible, but does not try to change the organization’s course. They focus on leader behaviors that improve employee performance and satisfaction.
