6

Chapter6Presentation.pptx

Home >Business & Finance homework help >Accounting homework help >6

The Nature of Management

Chapter 6

©Steve Allen/ Getty Images

©McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.

Learning Objectives

6-1 Define management and explain its role in the achievement of organizational objectives.

6-2 Describe the major functions of management.

6-3 Distinguish among three levels of management and the concerns of managers at each level.

6-4 Specify the skills managers need in order to be successful.

6-5 Summarize the systematic approach to decision making used by many business managers.

6-6 Recommend a new strategy to revive a struggling business.

©McGraw-Hill Education.

The Importance of Management 1

Management

A process designed to achieve an organization’s objectives by using its resources effectively and efficiently in a changing environment

Effectively means having the intended result

Efficiently means accomplishing objectives with a minimum of resources

©McGraw-Hill Education.

Management is a process designed to achieve an organization’s objectives by using its resources effectively and efficiently in a changing environment. Effectively means having the intended result; efficiently means accomplishing the objectives with a minimum of resources.

The Importance of Management 2

Managers

Individuals in organizations who make decisions about use of resources

Use planning, organizing, staffing, directing and controlling to reach organizational objectives

©McGraw-Hill Education.

Managers make decisions about the use of the organization’s resources and are concerned with planning, organizing, directing, and controlling the organization’s activities so as to reach its objectives.

The Importance of Management 3

Staffing

Hiring people to carry out the work of the organization

Downsizing

Acquiring Suppliers

Ensure products are made available to customers

Maximizes efficiencies and provides creative solutions

Financial Resources

Needed to pay for essential activities

©McGraw-Hill Education.

Every organization must acquire resources (people, services, raw materials, equipment, finances, and information) to effectively pursue its objectives and coordinate their use to turn out a final good or service. Employees are one of the most important resources in helping a business attain its objectives. Hiring people to carry out the work of the organization is known as staffing. Sometimes, managers must also make the difficult decision to reduce the workforce. This is known as downsizing, the elimination of significant numbers of employees from an organization.

Acquiring suppliers is another important part of managing resources and ensuring that products are made available to customers. A good supplier maximizes efficiencies and provides creative solutions to help the company reduce expenses and reach its objectives.

Finally, the manager needs adequate financial resources to pay for essential activities. Primary funding comes from owners and shareholders, as well as banks and other financial institutions. All these resources and activities must be coordinated and controlled if the company is to earn a profit.

Figure 6.1 The Functions of Management

Access the text alternative for these images.

©McGraw-Hill Education.

Management Functions 1

Planning

Process of determining the organization’s objectives and deciding how to accomplish them

Mission

Goals

Objectives

©McGraw-Hill Education.

Planning, the process of determining the organization’s objectives and deciding how to accomplish them, is the first function of management. Planning is a crucial activity because it designs the map that lays the groundwork for the other functions.

A mission, or mission statement, is a declaration of an organization’s fundamental purpose and basic philosophy. It seeks to answer the question: “What business are we in?” Good mission statements are clear and concise statements that explain the organization’s reason for existence.

A goal is the result that a firm wishes to achieve. A company almost always has multiple goals, which illustrates the complex nature of business. A goal has three key components: an attribute sought, a target to be achieved, and a time frame, which is the time period in which the goal is to be attained.

Objectives, the ends or results desired by an organization, derive from the organization’s mission. A business’s objectives may be elaborate or simple. Common objectives relate to profit, competitive advantage, efficiency, and growth. The principal difference between goals and objectives is that objectives are generally stated in such a way that they are measurable.

Management Functions 2

Planning continued

Plans

Strategic plans

Tactical plans

Operational plans

Crisis management or contingency planning

©McGraw-Hill Education.

There are three general types of plans for meeting objectives—strategic, tactical, and operational. A firm’s highest managers develop its strategic plans, which establish the long-range objectives and overall strategy or course of action by which the firm fulfills its mission. Strategic plans generally cover periods of one year or longer.

Tactical plans are short range and designed to implement the activities and objectives specified in the strategic plan. These plans, which usually cover a period of one year or less, help keep the organization on the course established in the strategic plan.

Operational plans are very short term and specify what actions specific individuals, work groups, or departments need to accomplish in order to achieve the tactical plan and, ultimately, the strategic plan. They apply to details in executing activities in one month, week, or even day.

Another element of planning is crisis management or contingency planning, which deals with potential disasters such as product tampering, oil spills, fire, earthquake, computer viruses, or even a reputation crisis due to unethical or illegal conduct by one or more employees. Unfortunately, many businesses do not have updated contingency plans to handle the types of crises that their companies might encounter.

Management Functions 3

Organizing

Structuring of resources and activities to accomplish objectives in an efficient and effective manner

Helps create synergy

Establishes lines of authority

Improves communication

Helps avoid duplication of resources

Can improve competitiveness by speeding up decision making

©McGraw-Hill Education.

Rarely are individuals in an organization able to achieve common goals without some form of structure. Organizing is the structuring of resources and activities to accomplish objectives in an efficient and effective manner. Managers organize by reviewing plans and determining what activities are necessary to implement them; then, they divide the work into small units and assign it to specific individuals, groups, or departments.

Organizing is important for several reasons. It helps create synergy, whereby the effect of a whole system equals more than that of its parts. It also establishes lines of authority, improves communication, helps avoid duplication of resources, and can improve competitiveness by speeding up decision making.

Management Functions 4

Directing

Motivating and leading employees to achieve organizational objectives

Telling employees what to do and when to do it by using deadlines

Determining and administering rewards and recognition

Motivate employees by providing incentives

Asking workers to contribute ideas

©McGraw-Hill Education.

During planning and organizing, staffing occurs and management must direct the employees. Directing is motivating and leading employees to achieve organizational objectives. Good directing involves telling employees what to do and when to do it through the implementation of deadlines and then encouraging them to do their work.

Directing also involves determining and administering appropriate rewards and recognition, and motivating employees by providing incentives. Smart managers, therefore, ask workers to contribute ideas for reducing costs, making equipment more efficient, improving customer service, or even developing new products. This participation also serves to increase employee morale. Recognition and appreciation are often the best motivators.

Management Functions 5

Controlling

Process of evaluating and correcting activities to keep the organization on course

Consists of five activities:

Measuring performance

Comparing present performance with standards or objectives

Identifying deviations from standards

Investigating causes of deviations

Taking corrective action when necessary

©McGraw-Hill Education.

Planning, organizing, staffing, and directing are all important to the success of an organization, whether its objective is earning a profit or something else. But what happens when a firm fails to reach its goals despite a strong planning effort? Controlling is the process of evaluating and correcting activities to keep the organization on course. Control involves five activities: (1) measuring performance, (2) comparing present performance with standards or objectives, (3) identifying deviations from the standards, (4) investigating the causes of deviations, and (5) taking corrective action when necessary.

Controlling and planning are closely linked. Planning establishes goals and standards. By monitoring performance and comparing it with standards, managers can determine whether performance is on target. When performance is substandard, management must determine why and take appropriate actions to get the firm back on course. In short, the control function helps managers assess the success of their plans.

POLLING QUESTION

The local Honda dealership manager, George, regularly communicates with employees about their sales strategies and goals. This is part of the _____ function.

Planning

Organizing

Directing

Controlling

©McGraw-Hill Education.

Answer: B. Organizing

Keeping employees informed is an important part of a manager’s organizing function.

Figure 6.2 Levels of Management Planning

Access the text alternative for these images.

©McGraw-Hill Education.

Types of Management 1

Levels of Management

Top management

Includes the president and other top executives of a business, such as chief executive officer (CEO), chief financial officer (CFO), and chief operations officer (COO), who have overall responsibility for the organization

Spend most of their time planning

Compensation committees work with directors and CEOs to keep pay in line with performance

Workforce diversity is good for workers and bottom line

©McGraw-Hill Education.

In businesses, top managers include the president and other top executives, such as the chief executive officer (CEO), chief financial officer (CFO), and chief operations officer (COO), who have overall responsibility for the organization. With technological advances accelerating and privacy concerns increasing, many companies are adding a new executive in the form of a chief privacy officer (CPO).

Top-level managers spend most of their time planning. They make the organization’s strategic decisions, decisions that focus on an overall scheme or key idea for using resources to take advantage of opportunities.

Compensation committees are increasingly working with boards of directors and CEOs to attempt to keep pay in line with performance in order to benefit stockholders and key stakeholders. Successful management translates into happy stockholders who are willing to compensate their top executives fairly and in line with performance.

Workforce diversity is an important issue in today’s corporations. Effective managers at enlightened corporations have found that diversity is good for workers and for the bottom line.

Table 6.1 Compensation Packages of CEOs

CEO	Company	Total Compensation
Ginni Rometty	IBM	$96 million
Tim Cook	Apple	$150 million
Elon Musk	Tesla	$99 million
John D. Wren	Omnicom Group	$26 million
Margaret C. Whitman	Hewlett-Packard	$32 million
Sundar Pichai	Google	$106 million
Mark G. Parker	Nike	$47 million

Sources: Emmie Martin, “The 5 Highest-Paid CEOs in the U.S.,” CNBC, May 11, 2017, https://www.cnbc.com/2017/05/11/highest-paid-ceos-in-america.html (accessed April 16, 2018); Samuel Stebbins, “Highest Paid CEOs in 2017,” 24/7 Wall St., December 28, 2017, https://247wallst.com/special-report/2017/12/28/highest-paid-ceos-in-2017/ (accessed April 16, 2018).

©McGraw-Hill Education.

Table 6.2 Five Rules of Successful Diversity Recruiting

Involve employees: Educate all employees on the tangible benefits of diversity recruiting to garner support and enthusiasm for those initiatives.

Communicate diversity: Prospective employees are not likely to become excited about joining your company just because you say that your company is diversity-friendly; they need to see it.

Support diversity initiatives and activities: By supporting community-based diversity organizations, your company will generate the priceless word-of-mouth publicity that will lead qualified diversity candidates to your company.

Delegate resources: If you are serious about diversity recruiting, you will need to spend some money getting your message out to the right places.

Promote your diversity initiatives: Employers need to sell their company to prospective diversity employees and present them with a convincing case as to why their company is a good fit for the diversity candidate.

Source: Adapted from Juan Rodriguez, “The Five Rules of Successful Diversity Recruiting,” Diversityjobs.com, www.diversityjobs. com/Rules-of-Successful Diversity-Recruiting (accessed February 25, 2010).

©McGraw-Hill Education.

Types of Management 2

Levels of Management continued

Middle management

Responsible for tactical and operational planning that implements the general guidelines established by top management

Responsibility is more narrowly focused

Involved in the specific operations of the organization

©McGraw-Hill Education.

Rather than making strategic decisions about the whole organization, middle managers are responsible for tactical and operational planning that will implement the general guidelines established by top management. Thus, their responsibility is more narrowly focused than that of top managers. Middle managers are involved in the specific operations of the organization and spend more time organizing than other managers. In business, plant managers, division managers, and department managers make up middle management.

Types of Management 3

Levels of Management continued

First-Line management

Responsible for implementing the plans established by middle management

Direct workers’ daily performance

Spend most of their time directing and controlling

©McGraw-Hill Education.

Most people get their first managerial experience as first-line managers, those who supervise workers and the daily operations of the organization. They are responsible for implementing the plans established by middle management and directing workers’ daily performance on the job. They spend most of their time directing and controlling. Common titles for first-line managers are foreman, supervisor, and office manager.

Figure 6.3 Importance of Management Functions to Managers in Each Level

Access the text alternative for these images.

©McGraw-Hill Education.

Table 6.3a Areas of Management

Financial Manager

Focus on obtaining the money needed for the successful operation of the organization and using that money in accordance with organizational goals.

Production and Operations Manager

Develop and administer the activities involved in transforming resources into goods, services, and ideas ready for the marketplace.

Human Resources Manager

Handle the staffing function and deal with employees in a formalized manner.

©McGraw-Hill Education.

Table 6.3b Areas of Management

Marketing Manager

Responsible for planning, pricing, and promoting products and making them available to customers through distribution.

Information Technology (IT) Manager

Responsible for implementing, maintaining, and controlling technology applications in business, such as computer networks.

Administrative Manager

Manage an entire business or a major segment of a business; do not specialize in a particular function.

©McGraw-Hill Education.

POLLING QUESTION

Aziz is the guy you call when your computer crashes. Or, he may call your boss when your social media usage on your work computer exceeds 25 percent of your 40-hour work week. Aziz is the _____.

Marketing manager

HR manager

Administrative manager

IT manager

©McGraw-Hill Education.

Answer: D. IT manager

This is the person that would be responsible for the computer networks systems within a business.

Table 6.4 Managerial Roles

Interpersonal

Figure	Attending an award banquet
Liaison	Coordinating production schedule with supply manager
Leadership	Conducting performance appraisal for subordinates

Informational

Monitor	Contacting government regulatory agencies
Disseminator	Conducting meetings with subordinates to pass along safety policy
Spokesperson	Meeting with consumer group to discuss product safety

Decisional

Entrepreneur	Changing work process
Disturbance Handler	Deciding which unit moves into new facilities
Resource Allocator	Deciding who receives new computer equipment
Negotiator	Settling union grievance

Source: Roles developed by management professor Henry Mintzberg

©McGraw-Hill Education.

Skills Needed by Managers

Technical Expertise

Conceptual Skills

Analytical Skills

Human Relations Skills

©McGraw-Hill Education.

Managing effectively and efficiently requires certain skills—technical expertise, conceptual skills, analytical skills, human relations skills, and leadership.

Managers need technical expertise, the specialized knowledge and training required to perform jobs related to their area of management. Conceptual skills, the ability to think in abstract terms, and to see how parts fit together to form the whole, are needed by all managers, but particularly top-level managers. Analytical skills refer to the ability to identify relevant issues and recognize their importance, understand the relationships between them, and perceive the underlying causes of a situation. People skills, or human relations skills, are the ability to deal with people, both inside and outside the organization.

Leadership 1

Leadership

Ability to influence employees to work toward organizational goals

Leadership Styles

Autocratic

Democratic

Free-rein

Authentic

©McGraw-Hill Education.

Leadership is the ability to influence employees to work toward organizational goals. Strong leaders manage and pay attention to the culture of their organizations and the needs of their employees.

Managers often can be classified into three types based on their leadership style. Autocratic leaders make all the decisions and then tell employees what must be done and how to do it. Democratic leaders involve their employees in decisions. The manager presents a situation and encourages his or her subordinates to express opinions and contribute ideas. Free-rein leaders let their employees work without much interference. The manager sets performance standards and allows employees to find their own ways to meet them.

Another type of leadership style that has been gaining in popularity is authentic leadership. Authentic leadership is a bit different from the other three leadership styles because it is not exclusive. Both democratic and free-rein leaders could qualify as authentic leaders depending upon how they conduct themselves among stakeholders. Authentic leaders are passionate about the goals and mission of the company, display corporate values in the workplace, and form long-term relationships with stakeholders.

POLLING QUESTION

Simone is a partner at a male-dominated engineering firm that is experiencing high employee turnover. She is overly strict with her employees because she’s concerned about their perception of her. To ease tensions and foster a sense of unity, what do you think she should do?

Continue as she’s been doing

Schedule employee lunches to get to know them

Create an anonymous survey to provide feedback on her leadership

Institute clear guidelines that denote proper office etiquette

©McGraw-Hill Education.

Student answers will vary. Students should discuss the advantages and disadvantages for each of these strategies.

Table 6.5 Requirements for Successful Leadership

Communicate objectives and expectations.

Gain the respect and trust of stakeholders.

Develop shared values.

Acquire and share knowledge.

Empower employees to make decisions.

Be a role model for appropriate behavior.

Provide rewards and take corrective action to achieve goals.

©McGraw-Hill Education.

Leadership 2

Employee Empowerment

Occurs when employees are provided with the ability to take on responsibilities and make decisions about their jobs

Participative decision making

Leadership in teams

©McGraw-Hill Education.

Businesses are increasingly realizing the benefits of participative corporate cultures characterized by employee empowerment. Employee empowerment occurs when employees are provided with the ability to take on responsibilities and make decisions about their jobs. Employee empowerment does not mean that managers are not needed. Managers are important for guiding employees, setting goals, making major decisions, and other responsibilities.

Leaders who wish to empower employees adopt systems that support an employee’s ability to provide input and feedback on company decisions. Participative decision making, a type of decision making that involves both manager and employee input, supports employee empowerment within the organization. One of the best ways to encourage participative decision making is through employee and managerial training.

In today’s business world, decisions made by teams are becoming the norm. Teamwork has often been an effective way for encouraging employee empowerment. Although decision making in teams is collective, the most effective teams are those in which all employees are encouraged to contribute their ideas and recommendations.

Figure 6.4 Steps in the Decision-Making Process

Access the text alternative for these images.

©McGraw-Hill Education.

Decision Making 1

Recognizing and Defining the Decision Situation

Situations may be positive or negative

Situations calling for small-scale decisions occur without warning

Large-scale decisions generally occur after some warning signs

Once a situation is recognized, management must define it

The first step in decision making is recognizing and defining the situation. The situation may be negative—for example, huge losses on a particular product—or positive—for example, an opportunity to increase sales. Situations calling for small-scale decisions often occur without warning. Situations requiring large-scale decisions, however, generally occur after some warning signs. Once a situation has been recognized, management must define it.

Decision Making 2

Developing Options

A list of possible courses of actions should include both standard and creative plans

Brainstorming

Analyzing Options

Management must look at the practicality and appropriateness of each option

Does the proposed option adequately address the situation?

Once the decision situation has been recognized and defined, the next step is to develop a list of possible courses of action. The best lists include both standard and creative plans. Brainstorming, a technique in which group members spontaneously suggest ideas to solve a problem, is an effective way to encourage creativity and explore a variety of options.

After developing a list of possible courses of action, management should analyze the practicality and appropriateness of each option. An option may be deemed impractical because of a lack of financial resources, legal restrictions, ethical and social responsibility considerations, authority constraints, technological constraints, economic limitations, or simply a lack of information and expertise. When assessing appropriateness, the decision maker should consider whether the proposed option adequately addresses the situation.

Decision Making 3

Selecting the Best Option

Often a subjective procedure

The best option always relates to analyzing risks and trade-offs

Implementing the Decision

Can be fairly simple or very complex

Prepare for unexpected consequences

Monitoring the Consequences

Did the decision accomplish the desired result?

When all courses of action have been analyzed, management must select the best one. Selection is often a subjective procedure because many situations do not lend themselves to quantitative analysis. The best option always relates to analyzing risks and trade-offs.

To deal with the situation at hand, the selected option or options must be put into action. Implementation can be fairly simple or very complex, depending on the nature of the decision. No matter how well planned implementation is, unforeseen problems will arise. Management must be ready to address these situations when they occur.

After managers have implemented the decision, they must determine whether it has accomplished the desired result. Without proper monitoring, the consequences of decisions may not be known quickly enough to make efficient changes.

Management in Practice

Management is not an exact process

Managers spend time on:

Working with others

Establishing and updating an agenda of goals and implementation plans

Networking

Confronting complex and difficult challenges of the business world

Management is not exact and calculated. There is no mathematical formula for managing an organization and achieving organizational goals. Managers spend as much as 75 percent of their time working with others—not only with subordinates but with bosses, people outside their hierarchy at work, and people outside the organization itself.

Managers spend a lot of time establishing and updating an agenda of goals and plans for carrying out their responsibilities. An agenda contains both specific and vague items, covering short-term goals and long-term objectives.

Managers also spend a lot of time networking—building relationships and sharing information with colleagues who can help them achieve the items on their agendas.

Finally, managers spend a great deal of time confronting the complex and difficult challenges of the business world today.

POLLING QUESTION

Guillermo is the owner of Crab-n-Go Tacos. It’s located near a major beach and is consistently busy during the summer. In your opinion, which is Guillermo’s most important responsibility?

Employees – They provide the service.

Customers – They provide the sales revenue.

Employees – They help Guillermo meet his goals.

Customers – Happy customers tell their friends to come, leading to repeat customers.

Student answers will vary. A business is like a machine in that it consists of numerous moving parts, every one of which is integral to the proper functioning of the machine. Take away a key bolt and the machine will fail to operate. Every situation is unique because different factors are at play in the functioning of a business. An owner must take into account and balance many considerations to operate a successful business.

Students should consider the following points.

By decreasing his focus on employee job satisfaction to increase customer retention, Guillermo may potentially increase employee turnover. If this happens, he will have to spend resources on training new employees.

If the training and skills necessary to work at Crab-n-Go Tacos are minimal and there is a surplus of applicants for job openings, then it may be in Guillermo’s financial best interest to turn his efforts toward his customers.

If there is a shortage in applicants and a relative abundance of customers, it may be in Guillermo’s best interest to focus on employees or find a healthy balance between the two.

Solve the Dilemma Making Infinity Computers Competitive 1

Infinity Computers Inc. produces notebook computers, selling through direct mail companies under the Infinity name and in some retail computer stores under their private brand name

Products are not significantly different from competitors’

Do not have extra product-enhancing features

Very price competitive

Strength of the company has been the CEO/president (George Anderson) and a highly motivated, loyal staff

Weakness is having too many employees and too great of a reliance on one product

This Solve the Dilemma is taken from Chapter 6, Learning Objective 6-6.

Infinity Computers Inc. produces notebook computers, which it sells through direct mail catalog companies under the Infinity name and in some retail computer stores under their private brand names. Infinity’s products are not significantly different from competitors’, nor do they have extra product-enhancing features, although they are very price competitive. The strength of the company has been its CEO and president, George Anderson, and a highly motivated, loyal workforce. The firm’s weakness is having too many employees and too great a reliance on one product. The firm switched to computers with the Intel Core i7 processors after it saw a decline in its netbook computer sales.

Solve the Dilemma Making Infinity Computers Competitive 2

Current strategies are no longer successful

Reorganize company to make it more responsive and competitive

Cut costs

Threat of new technological developments and current competitive conditions could eliminate Infinity

Recognizing that the strategies that initially made the firm successful are no longer working effectively, Anderson wants to reorganize the company to make it more responsive and competitive and to cut costs. The threat of new technological developments and current competitive conditions could eliminate Infinity.

Solve the Dilemma Making Infinity Computers Competitive 3

Critical Thinking Questions

Evaluate Infinity’s current situation and analyze its strengths and weaknesses.

Evaluate the opportunities for Infinity, including its current strategy, and propose alternative strategies.

Suggest a plan for Infinity to compete successfully over the next 10 years

Answers:

Infinity’s strengths include the competitive price of its products, the leadership abilities of its CEO, along with the loyalty and motivation of its employees. Its weaknesses are its tendency to follow its competitors instead of innovating, its overcapacity in terms of workforce, and its reliance on a single product.

Opportunities for Infinity may be emphasizing its price competitiveness or sticking with its current products while reducing the workforce. Other ideas are to create a differentiated product with special features at a lower price than its competitors or to increase product differentiation by incorporating “product-enhancing” features. Infinity could also rely on the loyalty and motivation of its employees to offer outstanding customer service.

Responses will vary, but students should provide the kernel of a strategic plan including such sections as objectives, means to achieve the objectives, and measures of results.

Accessibility Content: Text Alternatives for Images

Figure 6.1 The Functions of Management, Text Alternative

Mangers plan activities to achieve the organization's objectives. They organize resources and activities to achieve the organization's objectives. They direct employees' activities toward achievement of objectives. And they control the organization's activities to keep it on course.

Return to slide containing original image.

Figure 6.2 Levels of Management Planning, Text Alternative

At the bottom of the pyramid is First-Line Management, which includes foremen, supervisors, and office managers. In the middle of the pyramid is Middle Management, which includes plant managers, division managers, and department managers. At the top of the pyramid is Top Management, which includes presidents, C E Os, and executive vice presidents.

Return to slide containing original image.

Figure 6.3 Importance of Management Functions to Managers in Each Level, Text Alternative

Top managers spend most of their time on planning, followed by organizing, and directing. They spend the least amount of time controlling.

Middle managers spend most of their time organizing followed by planning and directing. They spend the least amount of time controlling.

First-line managers spend most of their time controlling, followed by directing and organizing. They spend the least amount of time on planning.

Return to slide containing original image.

Figure 6.4 Steps in the Decision-Making Process, Text Alternative

Step 1: Recognize and define the decision situation

Step 2: Develop options

Step 3: Analyze options

Step 4: Select the best option

Step 5: Implement the decision

Step 6: Monitor the consequences

Return to slide containing original image.