FORUM - CASE 12: "Facebook: Social Networking is a Big Business" (p522)
Scarlett Li
0470878215manage.pdf
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John Wiley & Sons, Inc.
Exploring Management
THIRD EDITION{
John R. Schermerhorn, Jr.
Ohio University
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ISBN 13 978-0-470-87821-7
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Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
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■ I once again dedicate this book to the person who lovingly helps me explore and
appreciate life’s wonders: My wife, Ann.
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DR. JOHN R. SCHERMERHORN JR. is the Charles G. O’Bleness Professor Emeritus of
Management in the College of Business at Ohio University where he teaches undergrad-
uate and MBA courses in management, organizational behavior, and Asian business.
He earned a PhD degree in organizational behavior from Northwestern University, after
receiving an MBA degree (with distinction) in management and international business
from New York University, and a BS degree in business administration from the State
University of New York at Buff alo.
Highly dedicated to instructional excellence and serving the needs of practicing man-
agers, Dr. Schermerhorn focuses on bridging the gap between the theory and practice of
management both in the classroom and in his textbooks. He has won awards for teaching
excellence at Tulane University, Th e University of Vermont, and Ohio University, where
he was named a University Professor, the university’s leading campus-wide award for un-
dergraduate teaching. He also received the excellence in leadership award for his service
as Chair of the Management Education and Development Division of the Academy of
Management.
Dr. Schermerhorn’s international experience adds a unique global dimension to his
teaching and textbooks. He holds an honorary doctorate from the University of Pécs in
Hungary, awarded for his international scholarly contributions to management research
and education. He has also served as a Visiting Professor of Management at the Chinese
University of Hong Kong, as on-site Coordinator of the Ohio University MBA and Execu-
tive MBA programs in Malaysia, and as Kohei Miura visiting professor at the Chubu Uni-
versity of Japan. Presently he is Adjunct Professor at the National University of Ireland at
Galway, a member of the graduate faculty at Bangkok University in Th ailand, and Perma-
nent Lecturer in the PhD program at the University of Pécs in Hungary.
An enthusiastic scholar, Dr. Schermerhorn is a member of the Academy of Manage-
ment, where he served as chairperson of the Management Education and Development
Division. Educators and students alike know him as author of Management 11e (Wiley,
2011) and senior co-author of Organizational Behavior 12e (Wiley, 2012). His many books
are available in Chinese, Dutch, French, Indonesian, Portuguese, Russian, and Spanish
language editions. Dr. Schermerhorn has also published numerous articles in publications
such as the Academy of Management Journal, Academy of Management Review, Academy of
Management Executive, Organizational Dynamics, Journal of Management Education, and
the Journal of Management Development.
Dr. Schermerhorn is a popular guest speaker at colleges and universities. His recent
student and faculty workshop topics include innovations in business education, teaching
the millennial generation, global perspectives in management, and textbook writing and
scholarly manuscript development.
■ About the Author
vii
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viii ■ About the Author
{ DEAR READER: Welcome to Exploring Management, Th ird Edition.
I hope you fi nd it both interesting and useful as you prepare for future career success.
My own career as a management educator has been a journey of wonderful exploration
and personal growth. I have been continuously enriched by the opportunity to learn from
my students and colleagues around the world.
I believe the study of management is also an exploration, a daily one, whether we are
instructors or students. After all, management is part of our everyday lives—at work, at
school, at home, and even at leisure. It is ever present as we sort through the challenges
of multiple responsibilities, distant horizons, constantly changing opportunities, great
potential, and the wonders of a diverse global community.
Perhaps these words from T. S. Eliot’s poem Little Gidding best describe the quest we
all share:
We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the fi rst time.
Th e study of management is an ongoing journey, one full of enrichment and explora-
tion. But in the end we return to application, trying to use what we have learned through
experience to better our lives and those of others. Th is is really what this book, Exploring
Management, Th ird Edition, is all about.
Take a minute to look at the book’s cover, browse through the book’s overall design,
and just fl ip through some of the pages. Does the art inspire you and the design attract
you to consider not only what’s ahead in the book and in your management course, but
also in your own life? I hope so. Because after all, how well we manage our lives, careers,
and organizations can make a big diff erence in our increasingly complex world.
Please join me in using Exploring Management, Th ird Edition, and your management
course as great learning opportunities, ones that can have life-long career and personal
benefi ts. I believe you’ll fi nd the experience rich with the potential for lasting personal
and professional value.
Have a great course and a valuable learning experience.
Sincerely,
John Schermerhorn
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||| What makes Exploring Management, Th ird Edition, diff erent?
Students tell me over and over again that they learn best when their courses and assignments fi t well in the context of their
everyday lives, career aspirations, and personal experiences. I have written Exploring Management, Th ird Edition to meet
and engage the new generation of students in their personal spaces. It uses lots of examples, applications, visual highlights,
and learning aids to convey the essentials of management. It also asks students lots of thought-provoking questions as they
read. My hope is that this special approach and underlying pedagogy will help management educators work in many unique
and innovative ways to enrich the learning experiences of their students.
■ Exploring Management off ers a fl exible, topic-specifi c presentation. Th e fi rst thing you’ll notice is that Exploring Management presents material in a way that meets student preferences for
reading and studying “chunks” of material that can be digested in relatively short time periods. Th is is in direct response
to my classroom experiences where I, and my students, fi nd the typical book chapters increasingly cumbersome to handle.
In Exploring Management students never read more than several pages before hitting a “Study Guide” section that asks and
allows them to bring closure to what they have just read in a meaning ful way. When students can read and achieve closure
on a “chapter” of material, they tend to study it better, remember it better, and achieve better on tests and assignments
dealing with it.
Topics in the book are easily assignable and sized just right for a class session or a class discussion. Although presented
in the traditional planning, organizing, leading, and controlling framework, everything can be used in any order based on
instructor preferences. Th ere are many options available for courses of diff erent types, lengths, and meeting schedules, in-
cluding online and distance learning formats. It all depends on what fi ts best with your course design, learning approaches,
and class session objectives.
■ Exploring Management uses an integrated learning design. Every chapter opens with a catchy subtitle and clear visual presentation that help students understand material right
from the beginning. Th e opening Management Live vignette links chapter topics with popular culture examples from
movies and television. Key learning objectives are listed in Your Chapter Takeaways, and What's Inside highlights fi ve
interesting and useful chapter features—Explore Yourself, Role Models, Ethics Check, Facts to Consider, and Manager's
Library. Within the chapter, each major section begins with a visual overview that helps students frame their reading.
Th e overview poses a Takeaway question with Answers to Come—a listing of answers to the takeaway question as
found in the section subheadings. Each major section ends with a Study Guide—a one-page checkpoint for learning
and test preparation allows students to pause, consolidate, and check learning before moving on to the next section. Th e
study guide elements include
• Rapid Review—bullet-list summary of concepts and points,
• Terms to Defi ne—glossary quiz for vocabulary development,
• Be Sure You Can—checkpoint of major learning outcomes for mastery,
• Questions for Discussion—questions to stimulate inquiry and prompt class discussions,
• What Would You Do?—asks students to apply section topics to a problem-solving situation.
||| How will Exploring Management, Th ird Edition,
motivate students to learn about management?
Today’s students continuously deal with a wide variety of confl icting demands and distractions. In working with them, I
fi nd that my teaching methods and instructional materials must constantly evolve. Th at’s why I have taken special care to
write Exploring Management, Th ird Edition, with a student-friendly writing style, emphasis on visual learning, inclusion of
■ Preface
ix
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x ■ Preface
lots of timely features and examples, and an appealing design to the book’s pages. I hope you’ll agree that I am writing and
presenting material in ways that come closer to meeting our students in their spaces—rich, varied, colorful, spontaneous,
and digital.
■ Exploring Management relates concepts to students’ experiences and interests. To better connect with the student reader, Exploring Management includes a number of special features that present timely
content in a visually appealing and meaningful way. Th e following features are not only interesting to the reader, they are also
prompts and frames that can be used for class discussions and assignments.
• Role Models—introduces a real person’s experience with the issues being discussed and asks students to answer
What’s the Lesson Here? Examples include Ursula Burns, CEO of Xerox and the fi rst African American woman to
head a Fortune 500 fi rm; Jeff Bezos, founder and CEO of Amazon; and Gary Hirshberg, social entrepreneur and
Co-founder of Stonyfi eld Farms.
• Ethics Check—poses an ethical dilemma and asks students to answer “You Decide” examples including “Good and Bad
News for Middle Managers,” “Millennials May Need Special Handling,” “Recession a Great Time for Prioritizing,” and
“Internet Censorship Spurs Cultural Debate.”
• Explore Yourself—reminds students how chapter content relates to important personal skills and characteristics,
and asks them to “Get to Know Yourself Better” by taking self-assessments and completing other active learning
activities. Examples include self-management, learning style, integrity, self-confi dence, diversity maturity, and cultural
awareness.
• Facts to Consider—brief summary of data and facts that stimulate critical inquiry and off er fuel for class discussions
and debates asks students “What Are Your Th oughts?” after considering the facts presented. Examples include “Diversity
Contradictions in Employment Trends,” “Offi ce Romance Policies Vary Widely,” and “Corruption and Bribes Haunt Inter-
national Business.”
• Manager’s Library—brief review of a popular book that is on the reading list of many managers, and asks students
to “Refl ect and React” to what the book is all about. Examples include Delivering Happiness by Tony Hsieh, Women
Count by Susan Bulkeley Butler, and Th e Trophy Kids Grow Up by Ron Alsop.
■ Exploring Management uses a conversational and interactive writing style. Th e author’s voice in Exploring Management breaks away from the textbook norm of communicating as the “sage on stage.” So,
I have tried to speak with students the way I do in the classroom—conversationally, interactively, and in a nondidactic fashion.
User experiences with the second edition confi rmed that this is the right approach.
Although it may seem unusual to have an author speaking directly to his audience, just as with this preface, my goal
is to be a real person and to approach the student readers in the spirit of what Ellen Langer calls mindful learning. 1 She
describes this as engaging students from a perspective of active inquiry rather than as consumers of facts and prescrip-
tions. I view it as a way of trying to move textbook writing in the same direction we are moving our teaching—being less
didactic and more interactive, trying to involve students in a dialog around meaning ful topics, questions, examples, and
even dilemmas.
In short, I want students to actively question and engage the world around them; I want them to be informed; I want them
to take ownership of the principles and insights of our discipline. Don’t you want the same, and more?
■ Exploring Management visually enhances the content presentation to appeal to visual learners. Most students are very visual in their attention to information; this is a refl ection of trends in popular culture. Th ey watch
movies, play video games, read and work online, chat, follow Facebook, and Tweet—often all at once! Th is has to make a
diff erence in how they approach their courses, and it is why I visually enhance the presentation of text content in two sig-
nifi cant ways.
First, in major fi gures that have some complexity the fi gure title or caption is posed as a question. I then answer that ques-
tion both in the fi gure drawing and in a short narrative summary below the fi gure. I call these “talking fi gures” in that the
narrative speaks to the reader as he or she visualizes the topic being discussed.
Second, I periodically supplement the running text presentation with visual highlights. Whether it is a table that briefl y lists
important points, a boxed highlight that summarizes a key point or theory, or a mini-fi gure that schematically summarizes a
1 Ellen J. Langer, Th e Power of Mindful Learning (Reading, MA: Perseus, 1997).
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xi■ Preface
concept under discussion, everything is designed to fi t into and fl ow naturally with the text. Th ese visual accents and remind-
ers are designed as informative parts of a holistic reading experience, much as we engage when reading magazines, newspa-
pers, and Internet content.
||| How will Exploring Management, Th ird Edition, ensure that students
understand and apply management concepts and practices?
Good things, like the fi eld of management itself, grow from strong foundations. As instructors we need to help our students
not only gain those foundations, but also see the connections to the real world of management applications and practices.
We need to help them develop intellectual capital that is supported by personal capacities for growth, continuous learning,
and good old-fashioned hard work.
■ Exploring Management includes a carefully selected set of end-of-chapter learning activities. Keeping in mind what often matters most to students—grades—my fi rst priority is to help them prepare for quizzes and
tests and to earn the best possible grades in their course. Test Prep asks students to answer multiple choice, short re-
sponse, and integration and application questions to provide a good starting point for testing success. When coupled with
the additional interactive test versions available on the Exploring Management student companion Web site, Test Prep
becomes a substantial learning resource.
Once the Test Prep is complete, students are directed to additional active learning and personal development activi-
ties that fi t chapter content. Th ese activities are found in two end-of-book sections—the Skill-Building Portfolio and
Cases for Critical Th inking.
• Skill-Building Portfolio—includes Self-Assessments, Class Exercises, and Team Projects. Each has been carefully cho-
sen to be a good match for the recommended chapters, a sound way of engaging students in further refl ection and skills
development, and an enriching opportunity for individual or team assignments.
• Cases for Critical Th inking—off ers Chapter Cases that engage students in critical thinking about timely situations and
events involving real people in organizations. Written in magazine style, many with sidebars that become mini-cases in
themselves, each case can be used for both class discussion and individual or team assignments.
Each chapter is accompanied by a chapter Self-Assessment, found in the end of the book, chosen to complement the
subject matter. Examples include Learning Tendencies, Internal/External Locus of Control, and Managerial Assump-
tions. Students score and interpret the assessments to encourage greater self-refl ection and personal exploration. A
Case Snapshot introduces the recommended case study using a “tag line” and magazine format to interest the student
reader and focus him or her on key issues and themes relevant to material being studied. Further, the Online Interactive
Learning Resources section includes recommended active-learning activities (located online and in WileyPLUS). Th ese
include More Self-Assessments—to help students to further explore their managerial skills, tendencies, and personal
characteristics; Experiential Exercises—for class activities and teamwork relating to the chapter content; and at least
one Team Project—an active-learning group assignment that requires research, writing, and presentation on a current
topic or issue.
■ Student and Instructor Resources
||| What additional special materials does Exploring Management,
Th ird Edition, off er to both instructors and students?
When it comes to support packages, it’s always helpful to have a lot of useful material available. With that in mind, I worked
closely with Wiley and my colleagues in designing materials for instructors and students that extend the goals of this book.
Th e next two pages are just a sampler of the additional resources that can enrich your course.
• Companion Web Site Th e Companion Web site for Exploring Management at http://www.wiley.com/college/schermerhorn,
contains a myriad of tools and links to aid both teaching and learning, including nearly all of the resources described in
this section.
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xii ■ Preface
• Instructor’s Resource Guide Prepared by Susan Verhulst, Des Moines Area Community College, the Instructor’s
Resource Guide includes a Conversion Guide; Chapter Outlines; Chapter Objectives; Teaching Notes on how to
integrate and assign special features; and suggested answers for all quiz and test questions found in the text. A series
of Lecture Notes are included to help integrate the various resources available. Th e Instructor’s Resource Guide also
includes additional discussion questions and assignments that relate specifi cally to the cases, as well as case notes,
self-assessments, and team exercises.
• Test Bank Th is Test Bank prepared by Amit Shah, Frostburg State University, consists of over 40 true/false, multiple-
choice, and short-answer questions per chapter. It was specifi cally designed so that the questions vary in degree of
diffi culty, from straightforward recall to challenging, to off er instructors the most fl exibility when designing their exams.
Adding more fl exibility is the Computerized Test Bank, which requires a PC running Windows. Th e Computerized Test
Bank, which contains all the questions from the manual version, includes a test-generating program that allows instruc-
tors to customize their exams.
• PowerPoint Slides Prepared by Susan Verhulst, Des Moines Area Community College, this set of interactive PowerPoint
slides includes lecture notes to accompany each slide. Th is resource provides another visual enhancement and learn-
ing aid for students, as well as additional talking points for instructors. Instructors can access the PowerPoint slides and
lecture notes on the instructor portion of the book’s Web site.
• Personal Response System PRS or “Clicker” content for each chapter will spark additional discussion and debate in the
classroom. For more information on PRS, please contact your local Wiley sales representative.
• Web Quizzes Th is resource, prepared by Amit Shah, Frostburg State University, available on the student portion of the
Exploring Management companion Web site, off ers online quizzes, with questions varying in level of diffi culty, designed
to help students evaluate their individual progress through a chapter. Each chapter’s quiz includes 10 questions. Th ese
review questions, developed by the Test Bank author, were created to provide the most eff ective and effi cient testing
system. Within this system, students have the opportunity to “practice” the type of knowledge they’ll be expected to
demonstrate on the exam.
• New Management Weekly Updates Keep you and your students updated and informed on the very latest in business news
stories. Each week you will fi nd links to 5 new articles, video clips, business news stories, and so much more with discussion
questions to elaborate on the stories in the classroom. http://wileymanagementupdates.com
• Management Calendar Provides daily management tips for discussion.
• Videos and Video Teaching Guide were prepared by Jessica-April and Amit Shah, Frostburg State University. Th is set of
short video clips provides an excellent starting point for lectures or for general classroom discussion.
• Business Extra Select Wiley has launched this online program, found at http://www.wiley.com/college/bxs, to provide
instructors with millions of content resources, including an extensive database of cases, journals, periodicals, newspapers,
and supplemental readings. Th is courseware system lends itself extremely well to integrating real-world content within
the management course, thereby enabling instructors to convey the relevance of the course to their students.
■ WileyPLUS WileyPLUS is an innovative, research-based, online environment for eff ective teaching and learning.
||| What do students receive with WileyPLUS?
A Research-based Design. WileyPLUS provides an online environment that integrates relevant resources, including the entire digital textbook, in an easy-to-navigate framework that helps students study more eff ectively.
• WileyPLUS adds structure by organizing textbook content into smaller, more manageable “chunks.”
• Related media, examples, and sample practice items reinforce the learning objectives.
• Innovative features such as calendars, visual progress tracking, and self-evaluation tools improve time management and
strengthen areas of weakness.
One-on-one Engagement. With WileyPLUS for Exploring, 3rd Edition, students receive 24/7 access to resources that promote positive learning outcomes. Students engage with related examples (in various media) and sample practice items, including:
• Animated Figures
• CBS/BBC videos
• Self-Assessments quizzes students can use to test themselves on topics such as emotional intelligence, diversity aware-
ness, and intuitive ability.
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xiii■ Preface
• Management Calendar including Daily Management tips
• iPhone Applications for Download
• Flash Cards
• Hot Topic Modules
• Crossword Puzzles
• Self-Study Questions
Measurable Outcomes. Th roughout each study session, students can assess their progress and gain immediate feedback. WileyPLUS provides precise reporting of strengths and weaknesses, as well as individualized quizzes, so that students are confi -
dent they are spending their time on the right things. With WileyPLUS, students always know the exact outcome of their eff orts.
||| What do instructors receive with WileyPLUS?
WileyPLUS provides reliable, customizable resources that reinforce course goals inside and outside of the classroom as well
as visibility into individual student progress. Pre-created materials and activities help instructors optimize their time:
Customizable Course Plan: WileyPLUS comes with a pre-created Course Plan designed by a subject matter expert uniquely for this course. Simple drag-and-drop tools make it easy to assign the course plan as-is or modify it to refl ect
your course syllabus.
Pre-created Activity Types Include: • Questions
• Readings and resources
• Presentation
• Print Tests
• Concept Mastery
• Project
Course Materials and Assessment Content: • Lecture Notes PowerPoint Slides
• Classroom Response System (Clicker) Questions
• Image Gallery
• Instructor’s Manual
• Gradable Reading Assignment Questions (embedded with online text)
• Question Assignments: all end-of-chapter problems
• Testbank
• Pre- and Post-Lecture Quizzes
• Web Quizzes
• Video Teaching Notes—includes questions geared towards applying text concepts to current videos
Gradebook: WileyPLUS provides instant access to reports on trends in class performance, student use of course materials and progress towards learning objectives, helping inform decisions and drive classroom discussions.
WileyPLUS. Learn More. www.wileyplus.com.
Powered by proven technology and built on a foundation of cognitive research, WileyPLUS has enriched the education of mil-
lions of students, in over 20 countries around the world.
■ Acknowledgments Th is isn’t the typical “book” project that most publishers deal with, one developed from a neat proposal. Instead, Exploring
Management, Th ird Edition, is a “concept” book, which began, grew, and found life and form in its fi rst and second editions
over the course of many telephone conversations, conference calls, e-mail exchanges, and face-to-face meetings. It has since
matured and been refi ned in content, style, and direction as a third edition through the useful feedback provided by many
satisfi ed users and reviewers. It has also benefi ted from the continued commitments and sharp eyes of a most professional
staff at John Wiley & Sons.
As always, there wouldn’t be an Exploring Management without the support, commitment, creativity, and dedication of
the following members of the Wiley team. It’s a team with which I am most proud to be associated. My thanks travel now to
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xiv ■ Preface
you all: Lisé Johnson, Executive Editor, who led the team with a helpful and steady hand, while always providing me what an
author so often needs when struggling to accomplish seemingly elusive goals—friendship; George Hoff man, Vice President
and Publisher; Sarah Vernon, Assistant Editor; Melissa Solarz, Editorial Assistant; Kelly Simmons, Marketing Manager; San-
dra Dumas, Senior Production Editor; Harry Nolan, Creative Director; Hilary Newman, Photo Manager; Teri Stratford, Photo
Researcher; and Anna Melhorn, Illustration Editor.
I am especially indebted to two of the Wiley team whose invaluable contributions were ever present through the many
highs and lows of a very complex project—Susan McLaughlin, whose enthusiasm, initiative, and expertise provided the very
best support as Developmental Editor, and Suzanne Ingrao, Outside Production Service Manager and head of Ingrao Associ-
ates, whose diligence and persistence led all of us through a demanding production cycle.
My special thanks go to Robert (Lenie) Holbrook of Ohio University for contributing the Management Live feature that
introduces each chapter, the instructor’s guide that shows instructors how to truly make this feature go “live” in their class-
rooms, and the creative supplement Art Imitates Life that more broadly describes how popular culture can be readily used
to enhance student engagement and learning. Th e fi ne work of Brandon Warga of Kenyon College in creating a timely and
compelling set of chapter cases is also appreciated.
Focus Group Participants: Maria Aria, Camden County College
Ellen Benowitz, Mercer County Community College
John Brogan, Monmouth University
Lawrence J. Danks, Camden County College
Matthew DeLuca, Baruch College
David Fearon, Central Connecticut State University
Stuart Ferguson, Northwood University
Eugene Garaventa, College of Staten Island
Scott Geiger, University of South Florida, St. Petersburg
Larry Grant, Bucks County Community College
Fran Green, Pennsylvania State University, Delaware County
F. E. Hamilton, Eckerd College
Don Jenner, Borough of Manhattan Community College
John Podoshen, Franklin and Marshall College
Neuman Pollack, Florida Atlantic University
David Radosevich, Montclair State University
Moira Tolan, Mount Saint Mary College
Virtual Focus Group Participants: George Alexakis, Nova Southeastern University
Steven Bradley, Austin Community College
Paula Brown, Northern Illinois University
Elnora Farmer, Clayton State University
Paul Gagnon, Central Connecticut State University
Eugene Garaventa, College of Staten Island
Larry Garner, Tarleton State University
Wayne Grossman, Hofstra University
Dee Guillory, University of South Carolina, Beaufort
Julie Hays, University of St. Th omas
Kathleen Jones, University of North Dakota
Marvin Karlins, University of South Florida
Al Laich, University of Northern Virginia
Vincent Lutheran, University of North Carolina, Wiilmington
Douglas L. Micklich, Illinois State University
David Oliver, Edison College
Jennifer Oyler, University of Central Arkansas
Kathleen Reddick, College of Saint Elizabeth
Terry L. Riddle, Central Virginia Community College
Roy L. Simerly, East Carolina University
Frank G. Titlow, St. Petersburg College
David Turnipseed, Indiana University—Purdue University, Fort Wayne
Michael Wakefi eld, Colorado State University, Pueblo
George A. (Bud) Wynn, University of Tampa
Reviewers: M. David Albritton, Northern Arizona University
Mitchell Alegre, Niagara University
Karen R. Bangs, California State Polytechnic University
Heidi Barclay, Metropolitan State University
Patrick Bell, Elon University
Michael Bento, Owens Community College
William Berardi, Bristol Community College
Robert Blanchard, Salem State University
Peter Geoff rey Bowen, University of Denver
Ralph R. Braithwaite, University of Hartford
David Bright, Wright State University-Dayton
Kenneth G. Brown, University of Iowa
Diana Bullen, Mesa Community College
Beverly Bugay, Tyler Junior College
Robert Cass, Virginia Wesleyan College
Savannah Clay, Central Piedmont Community College
Suzanne Crampton, Grand Valley State University
Kathryn Dansky, Pennsylvania State University
Susan Davis, Clafl in University
Jeanette Davy, Wright State University
Matt DeLuca, Baruch College
Karen Edwards, Chemeketa Community College
Valerie Evans, Lincoln Memorial University
Paul Ewell, Bridgewater College
Gary J. Falcone, LaSalle University
Elnora Farmer, Clayton State University
Gail E. Fraser, Kean University
Nancy Fredericks, San Diego State University
Larry Garner, Tarleton State University
Cindy Geppert, Palm Beach State College
Richard J. Gibson, Embry-Riddle University
Dee Guillory, University of South Carolina, Beaufort
Aaron Hines, SUNY New Paltz
Tammy Hunt, University of North Carolina Wilmington
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xv■ Preface
Debra Hunter, Troy University
Kimberly Hurnes, Washtenaw Community College
Gary S. Insch, West Virginia University
Barcley Johnson, Western Michigan University
Louis Jourdan, Clayton State University
Edward Kass, University of San Francisco
Judith Kizzie, Howard Community College
Robert Klein, Philadelphia University
John Knutsen, Everett Community College
Al Laich, University of Northern Virginia
Susan Looney, Delaware Technical & Community College
Vincent Lutheran, University of North Carolina, Wilmington
Jim Maddox, Friends University
John Markert, Wells College
Marcia Marriott, Monroe Community College
Brenda McAleer, Colby College
Randy McCamery, Tarleton State University
Gerald McFry, Coosa Valley Technical College
Diane Minger, Cedar Valley College
Michael Monahan, Frostburg State University
Lam Nguyen, Palm Beach State College
Joelle Nisolle, West Texas A&M University
Penny Olivi, York College of Pennsylvania
Jennifer Oyler, University of Central Arkansas
Kathy Pederson, Hennepin Technical College
Nancy Ray-Mitchell, McLennan Community College
Catherine J. Ruggieri, St. John’s University
Joseph C. Santora, Essex County College
Charles Seifert, Siena College
Sidney Siegel, Drexel University
Wendy Smith, University of Delaware
Howard Stanger, Canisius College
Henry A. Summers, Stephen F. Austin State University
Daryl J. Taylor, Pasadena City College
Jody Tolan, University of Southern California, Marshall School of
Business
David Turnipseed, Indiana University—Purdue University,
Fort Wayne
Robert Turrill, University of Southern California
Vickie Tusa, Embry-Riddle University
Michael Wakefi eld, Colorado State University, Pueblo
Charles D. White, James Madison University
Daniel Wubbena, Western Iowa Tech Community College
Alan Wright, Henderson State University
Student Focus Group Participants, Baruch College: Farhana Alam, Laureen Attreed, Sarah Bohsali, Susanna
Eng, Dino Genzano, Annie Gustave, Andrew Josefi ak, Diana
Pang, Vidushi Parmar, Dulari Ramkishun, Vicky Roginskaya,
Jessica Scheiber, Ruta Skarbauskaite, Darren Smith, Anita
Alickaj, Dana Fleischer, Mandie Gellis, Haider Mehmood,
and Dina Shlafman
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{ Managers and Management 1 Managers and the Management Process: Everyone becomes a manager someday. 2 2 Management Learning: Great things grow from strong foundations. 30 3 Ethics and Social Responsibility: Character doesn’t stay home when we go to work. 54
{ Planning and Controlling 4 Managers as Decision Makers: Th ere is no substitute for a good decision. 84 5 Plans and Planning Techniques: Get there faster with objectives. 110 6 Controls and Control Systems: What gets measured happens. 132 7 Strategy and Strategic Management: Insight and hard work deliver results. 156
{ Organizing 8 Organization Structure and Design: It’s all about working together. 178 9 Organizational Cultures, Innovation, and Change: Adaptability and values set the tone. 204 10 Human Resource Management: Nurturing turns potential into performance. 230
{ Leading 11 Leadership: A leader lives in each of us. 256 12 Individual Behavior: Th ere’s beauty in individual diff erences. 282 13 Motivation: Respect unlocks human potential. 306 14 Teams and Teamwork: Two heads really can be better than one. 330 15 Communication: Listening is the key to understanding. 358
{ Environment 16 Diversity and Global Cultures: Th ere are new faces in the neighborhood. 382 17 Globalization and International Business: Going global isn’t just for travelers. 402 18 Entrepreneurship and Small Business: Taking risks can make dreams come true. 422
Skill-Building Portfolio SB-1
Cases for Critical Th inking C-1
■ Brief Contents
xvii
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{1 Managers and the Management Process 2 1.1 What Does It Mean to Be a Manager? 4
• Organizations have diff erent types and levels of managers. 4
• Accountability is a cornerstone of managerial performance. 6
• Eff ective managers help others achieve high performance and satisfaction. 6
• Managers must meet multiple changing expectations. 7
1.2 What Do Managers Do and What Skills Do Th ey Use? 10
• Managerial work is often intense and demanding. 10
• Managers plan, organize, lead, and control. 11
• Managers enact informational, interpersonal, and decisional roles. 13
• Managers pursue action agendas and engage in networking. 14
• Managers use a variety of technical, human, and conceptual skills. 15
• Managers can and should learn from experience. 16
1.3 What Are Some Important Career Issues in the New Workplace? 19
• Globalization and job migration are changing the world of work. 19
• Failures of ethics and corporate governance are troublesome. 20
• Diversity and discrimination are continuing social priorities. 22
• Intellectual capital and self-management skills are essential for career success. 23
{2 Management Learning 30 2.1 What Are the Lessons of the Classical Management Approaches? 32
• Taylor’s scientifi c management sought effi ciency in job performance. 32
• Weber’s bureaucratic organization is supposed to be effi cient and fair. 34
• Fayol’s administrative principles describe managerial duties and practices. 36
2.2 What Are the Contributions of the Behavioral Management Approaches? 38
• Follett viewed organizations as communities of cooperative action. 38
• Th e Hawthorne studies focused attention on the human side of organizations. 40
• Maslow described a hierarchy of human needs with self-actualization at the top. 41
• McGregor believed managerial assumptions create self-fulfi lling prophecies. 42
• Argyris suggests that workers treated as adults will be more productive. 43
2.3 What Are the Foundations of Modern Management Th inking? 45
• Managers use quantitative analysis and tools to solve complex problems. 45
• Organizations are open systems that interact with their environments. 46
• Contingency thinking holds that there is no one best way to manage. 48
• Quality management focuses attention on continuous improvement. 49
• Evidence-based management seeks hard facts about what really works. 50
■ Detailed Contents
xix
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{3 Ethics and Social Responsibility 54 3.1 How Do Ethics and Ethical Behavior Play Out in the Workplace? 56
• Ethical behavior is values driven. 57
• What is considered ethical varies among moral reasoning approaches. 58
• What is considered ethical can vary across cultures. 60
• Ethical dilemmas arise as tests of personal ethics and values. 61
• People have tendencies to rationalize unethical behaviors. 63
3.2 How Can We Maintain High Standards of Ethical Conduct? 65
• Personal character and moral development infl uence ethical decision making. 65
• Training in ethical decision making can improve ethical conduct. 67
• Protection of whistleblowers can encourage ethical conduct. 68
• Managers as positive role models can inspire ethical conduct. 68
• Formal codes of ethics set standards for ethical conduct. 69
3.3 What Should We Know About the Social Responsibilities of Organizations? 72
• Social responsibility is an organization’s obligation to best serve society. 73
• Scholars argue cases for and against corporate social responsibility. 74
• Social responsibility audits measure the social performance of organizations. 75
• Sustainability is an important social responsibility goal. 76
• Social business and social entrepreneurship point the way in social responsibility. 79
{4 Managers as Decision Makers 84 4.1 How Do Managers Use Information to Solve Problems? 86
• Managers deal with problems posing threats and off ering opportunities. 86
• Managers can be problem avoiders, problem solvers, or problem seekers. 88
• Managers make programmed and nonprogrammed decisions when solving problems. 88
• Managers can use systematic and intuitive thinking. 89
• Managers use diff erent cognitive styles to process information for decision making. 89
• Managers make decisions under conditions of certainty, risk, and uncertainty. 90
4.2 What Are Five Steps in the Decision-Making Process? 93
• Step 1 is to identify and defi ne the problem. 94
• Step 2 is to generate and evaluate alternative courses of action. 94
• Step 3 is to decide on a preferred course of action. 95
• Step 4 is to implement the decision. 96
• Step 5 is to evaluate results. 97
• Ethical reasoning is important at all steps in decision making. 98
4.3 What Are Some Current Issues in Managerial Decision Making? 100
• Personal factors help drive creativity in decision making. 100
• Group decision making has both advantages and disadvantages. 102
• Judgmental heuristics and other biases and traps may cause decision-making errors. 103
• Managers must be prepared for crisis decision making. 104
{5 Plans and Planning Techniques 110 5.1 How and Why Do Managers Use the Planning Process? 112
• Planning is one of the four functions of management. 112
• Planning is the process of setting objectives and identifying how to achieve them. 113
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• Planning improves focus and action orientation. 114
• Planning improves coordination and control. 115
• Planning improves time management. 115
5.2 What Types of Plans Do Managers Use? 118
• Managers use short-range and long-range plans. 118
• Managers use strategic and operational plans. 118
• Organizational policies and procedures are plans. 119
• Budgets are plans that commit resources to activities. 121
5.3 What Are Some Useful Planning Tools and Techniques? 123
• Forecasting tries to predict the future. 123
• Contingency planning creates backup plans for when things go wrong. 124
• Scenario planning crafts plans for alternative future conditions. 124
• Benchmarking identifi es best practices used by others. 125
• Participatory planning improves implementation capacities. 126
• Goal setting helps align plans and activities throughout an organization. 127
{6 Controls and Control Systems 132 6.1 How and Why Do Managers Use the Control Process? 134
• Controlling is one of the four functions of management. 134
• Control begins with objectives and standards. 135
• Control measures actual performance. 136
• Control compares results with objectives and standards. 137
• Control takes corrective action as needed. 138
6.2 What Types of Controls Are Used by Managers? 140
• Managers use feedforward, concurrent, and feedback controls. 140
• Managers use both internal and external controls. 142
• Managing by objectives is a way to integrate planning and controlling. 143
6.3 What Are Some Useful Control Tools and Techniques? 146
• Quality control is a foundation of modern management. 146
• Gantt charts and CPM/PERT are used in project management and control. 147
• Inventory controls help save costs. 148
• Breakeven analysis shows where revenues will equal costs. 149
• Financial ratios measure key areas of fi nancial performance. 149
• Balanced scorecards help top managers exercise strategic control. 150
{7 Strategy and Strategic Management 156 7.1 What Types of Strategies Are Used by Organizations? 158
• Strategy is a comprehensive plan for achieving competitive advantage. 158
• Organizations use corporate, business, and functional strategies. 159
• Growth strategies focus on expansion. 160
• Restructuring and divestiture strategies focus on consolidation. 161
• Global strategies focus on international business initiatives. 162
• Cooperative strategies focus on alliances and partnerships. 163
• E-business strategies focus on using the Internet for business success. 163
7.2 How Do Managers Formulate and Implement Strategies? 166
• Th e strategic management process formulates and implements strategies. 166
• Strategy formulation begins with the organization’s mission and objectives. 167
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xxii ■ Detailed Contents
• SWOT analysis identifi es strengths, weaknesses, opportunities, and threats. 167
• Porter’s fi ve forces model examines industry attractiveness. 168
• Porter’s competitive strategies model examines business and product
strategies. 169
• Portfolio planning examines strategies across multiple businesses
or products. 171
• Strategic leadership ensures strategy implementation and control. 172
{8 Organization Structure and Design 178 8.1 What Is Organizing as a Managerial Responsibility? 180
• Organizing is one of the management functions. 180
• Organization charts describe the formal structures of organizations. 181
• Organizations also operate with informal structures. 182
• Informal structures have good points and bad points. 183
8.2 What Are the Most Common Types of Organization Structures? 185
• Functional structures group together people using similar skills. 185
• Divisional structures group together people by products, customers,
or locations. 187
• Matrix structures combine the functional and divisional structures. 188
• Team structures use many permanent and temporary teams. 189
• Network structures extensively use strategic alliances and outsourcing. 190
8.3 What Are the Trends in Organizational Design? 194
• Organizations are becoming fl atter, with fewer levels of management. 194
• Organizations are increasing decentralization. 195
• Organizations are increasing delegation and empowerment. 196
• Organizations are becoming more horizontal and adaptive. 198
• Organizations are using more alternative work schedules. 199
{9 Organizational Cultures, Innovation, and Change 204 9.1 What Is the Nature of Organizational Culture? 206
• Organizational culture is the personality of the organization. 206
• Organizational culture shapes behavior and infl uences performance. 207
• Th e observable culture is what you see and hear as an employee or customer. 208
• Th e core culture is found in the underlying values of the organization. 209
• Value-based management supports a strong organizational culture. 210
9.2 How Do Organizations Support and Achieve Innovation? 213
• Organizations pursue process, product, and business model innovations. 213
• Green innovations pursue and support the goals of sustainability. 214
• Social innovations seek solutions to important societal problems. 214
• Commercializing innovation turns new ideas into salable products. 215
• Innovative organizations share many common characteristics. 216
9.3 How Do Managers Lead the Processes of Organizational Change? 219
• Organizations pursue both transformational and incremental changes. 219
• Th ree phases of planned change are unfreezing, changing, and refreezing. 220
• Managers use force-coercion, rational persuasion, and shared power
change strategies. 222
• Change leaders identify and deal positively with resistance to change. 224
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{10 Human Resource Management 230 10.1 What Are the Purpose and Legal Context of Human Resource Management? 232
• Human resource management attracts, develops, and maintains a talented
workforce. 232
• Strategic human resource management aligns human capital with organizational
strategies. 233
• Government legislation is supposed to protect workers against employment
discrimination. 234
• Laws can’t guarantee that employment discrimination will never happen. 235
10.2 What Are the Essential Human Resource Management Practices? 238
• Recruitment attracts qualifi ed job applicants. 238
• Selection makes decisions to hire qualifi ed job applicants. 240
• Socialization and orientation integrate new employees into the organization. 241
• Training continually develops employee skills and capabilities. 241
• Performance management appraises and rewards accomplishments. 242
• Retention and career development provide career paths. 244
10.3 What Are Current Issues in Human Resource Management? 247
• Today’s lifestyles increase demands for fl exibility and work-life balance. 247
• Organizations are using more independent contractors and part-time workers. 248
• Compensation plans infl uence employee recruitment and retention. 249
• Fringe benefi ts are an important part of employee compensation packages. 250
• Labor relations and collective bargaining are closely governed by law. 251
{11 Leadership 256 11.1 What Are the Foundations for Eff ective Leadership? 258
• Leadership is one of the four functions of management. 258
• Leaders use position power to achieve infl uence. 259
• Leaders use personal power to achieve infl uence. 260
• Leaders bring vision to leadership situations. 261
• Leaders display diff erent traits in the quest for leadership eff ectiveness. 262
• Leaders display diff erent styles in the quest for leadership eff ectiveness. 262
11.2 What Can We Learn from the Contingency Leadership Th eories? 265
• Fiedler’s contingency model matches leadership styles with situational diff erences. 265
• Th e Hersey-Blanchard situational leadership model matches leadership styles with the
maturity of followers. 267
• House’s path-goal theory matches leadership styles with task and follower characteristics. 267
• Leader-member exchange theory describes how leaders treat in-group and out-group
followers. 268
• Th e Vroom-Jago model describes a leader’s choice of alternative decision-making
methods. 269
11.3 What Are Current Issues and Directions in Leadership Development? 272
• Transformational leadership inspires enthusiasm and great performance. 272
• Emotionally intelligent leadership handles emotions and relationships well. 273
• Interactive leadership emphasizes communication, listening, and participation. 274
• Moral leadership builds trust from a foundation of personal integrity. 275
• Servant leadership is follower centered and empowering. 277
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{12 Individual Behavior 282 12.1 How Do Perceptions Infl uence Individual Behavior? 284
• Perceptual distortions can obscure individual diff erences. 285
• Perception can cause attribution errors as we explain events and problems. 287
• Impression management is a way of infl uencing how others perceive us. 287
12.2 How Do Personalities Infl uence Individual Behavior? 290
• Th e Big Five personality traits describe work-related individual diff erences. 290
• Th e Myers-Briggs Type Indicator is a popular approach to personality assessment. 291
• Self-monitoring and other personality traits infl uence work behavior. 292
• People with Type A personalities tend to stress themselves. 293
• Stress has consequences for work performance and personal health. 294
12.3 How Do Attitudes, Emotions, and Moods Infl uence Individual Behavior? 297
• Attitudes predispose people to act in certain ways. 297
• Job satisfaction is a positive attitude toward one’s job and work experiences. 298
• Job satisfaction infl uences work behaviors. 299
• Job satisfaction has a complex relationship with job performance. 300
• Emotions and moods are positive and negative states of mind that infl uence behavior. 300
{13 Motivation 306 13.1 How Do Human Needs Infl uence Motivation to Work? 308
• Maslow described a hierarchy of needs topped by self-actualization. 308
• Alderfer’s ERG theory deals with existence, relatedness, and growth needs. 309
• McClelland identifi ed acquired needs for achievement, power, and affi liation. 310
• Herzberg’s two-factor theory focuses on higher-order need satisfaction. 312
• Th e core characteristics model integrates motivation and job design. 313
13.2 How Do Th ought Processes and Decisions Aff ect Motivation to Work? 316
• Equity theory explains how social comparisons motivate individual behavior. 316
• Expectancy theory considers Motivation � Expectancy � Instrumentality � Valence. 318
• Goal-setting theory shows that well-chosen and well-set goals can be motivating. 320
13.3 How Does Reinforcement Infl uence Motivation to Work? 323
• Operant conditioning infl uences behavior by controlling its consequences. 323
• Positive reinforcement connects desirable behavior with pleasant consequences. 325
• Punishment connects undesirable behavior with unpleasant consequences. 325
{14 Teams and Teamwork 330 14.1 Why Is It Important to Understand Teams and Teamwork? 332
• Teams off er synergy and other benefi ts to organizations and their members. 332
• Teams often suff er from common performance problems. 333
• Organizations are networks of formal teams and informal groups. 334
• Organizations use committees, task forces, and cross-functional teams. 335
• Virtual teams are increasingly common in organizations. 336
• Self-managing teams are a form of job enrichment for groups. 337
14.2 What Are the Building Blocks for Successful Teamwork? 339
• Teams need the right members and other inputs to be eff ective. 340
• Teams need the right processes to be eff ective. 342
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• Teams move through diff erent stages of development. 342
• Team performance is aff ected by norms and cohesiveness. 344
• Team performance is aff ected by task and maintenance roles. 345
• Team performance is aff ected by use of communication networks. 346
14.3 How Can Managers Create and Lead High-Performance Teams? 348
• Team building helps team members learn to better work together. 348
• Team performance is aff ected by use of decision-making methods. 349
• Team performance suff ers when groupthink leads to bad decisions. 350
• Team performance benefi ts from good confl ict management. 352
{15 Communication 358 15.1 What Is Communication and When Is It Eff ective? 360
• Communication is a process of sending and receiving messages with meanings
attached. 361
• Communication is eff ective when the receiver understands the sender’s
messages. 361
• Communication is effi cient when it is delivered at low cost to the sender. 362
• Communication is persuasive when the receiver acts as the sender intends. 363
15.2 What Are the Major Barriers to Eff ective Communication? 366
• Poor use of channels makes it hard to communicate eff ectively. 367
• Poor written or oral expression makes it hard to communicate eff ectively. 367
• Failure to spot nonverbal signals makes it hard to communicate eff ectively. 368
• Status diff erences make it hard to communicate eff ectively. 368
• Physical distractions make it hard to communicate eff ectively. 369
15.3 How Can We Improve Communication with People at Work? 371
• Active listening helps people say what they really mean. 371
• Constructive feedback is specifi c, timely, and relevant. 372
• Offi ce spaces can be designed to encourage interaction and communication. 373
• Transparency and openness ensure that accurate and timely information is shared. 373
• Appropriate use of technology can facilitate more and better communication. 375
• Sensitivity and etiquette can improve cross-cultural communication. 376
{16 Diversity and Global Cultures 382 16.1 What Should We Know About Diversity in the Workplace? 384
• Th ere is a business case for diversity. 384
• Inclusive organizational cultures value and support diversity. 385
• Organizational subcultures can create diversity challenges. 385
• Minorities and women suff er diversity bias in many situations. 387
• Managing diversity should be a top leadership priority. 388
16.2 What Should We Know About Diversity Among Global
Cultures? 391
• Culture shock comes from discomfort in cross-cultural situations. 391
• Cultural intelligence is the capacity to adapt to foreign cultures. 392
• Th e “silent” languages of cultures include context, time, and space. 393
• Hofstede identifi es fi ve value diff erences among national cultures. 394
• Country clusters show cultural diff erences. 397
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{17 Globalization and International Business 402 17.1 How Does Globalization Aff ect International Business? 404
• Globalization involves the growing interdependence of the world’s economies. 405
• Globalization creates a variety of international business opportunities. 405
• International business is done by global sourcing, import/export, licensing,
and franchising. 406
• International business is done by joint ventures and wholly owned subsidiaries. 408
• International business is complicated by diff erent legal and political systems. 409
17.2 What Are Global Corporations and How Do Th ey Work? 412
• Global corporations or MNCs do substantial business in many countries. 412
• Th e actions of global corporations can be controversial at home and abroad. 413
• Managers of global corporations face a variety of ethical challenges. 414
• Planning and controlling are complicated in global corporations. 414
• Organizing can be diffi cult in global corporations. 416
• Leading is challenging in global corporations. 416
{18 Entrepreneurship and Small Business 422 18.1 What Is Entrepreneurship and Who Are Entrepreneurs? 424
• Entrepreneurs are risk takers who spot and pursue opportunities. 425
• Entrepreneurs often share similar backgrounds and experiences. 426
• Entrepreneurs often share similar personality traits. 428
• Women and minority entrepreneurs are growing in numbers. 428
• Social entrepreneurs seek novel solutions to pressing social problems. 430
18.2 What Should We Know About Small Business and How to Start One? 433
• Small businesses are mainstays of the economy. 433
• Small businesses must master three life-cycle stages. 434
• Family-owned businesses can face unique challenges. 435
• Most small businesses fail within fi ve years. 436
• Assistance is available to help small businesses get started. 437
• A small business should start with a sound business plan. 438
• Th ere are diff erent forms of small business ownership. 439
• Th ere are diff erent ways of fi nancing a small business. 440
Skill-Building Portfolio SB-1
Self-Assessments
1. Personal Career Readiness
2. Managerial Assumptions
3. Terminal Values Survey
4. Intuitive Ability
5. Time Management Profi le
6. Internal/External Control
7. Handling Facts and Inferences
8. Empowering Others
9. Tolerance for Ambiguity
10. Performance Appraisal Assumptions
11. Least-Preferred Co-Worker Scale
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12. Stress Test
13. Two-Factor Profi le
14. Team Leader Skills
15. Feedback and Assertiveness
16. Diversity Awareness
17. Global Intelligence
18. Entrepreneurship Orientation
Class Exercises
1. My Best Manager
2. Evidence-Based Management Quiz
3. Confronting Ethical Dilemmas
4. Lost at Sea
5. Th e Future Workplace
6. Stakeholder Maps
7. Strategic Scenarios
8. Organizational Metaphors
9. Force-Field Analysis
10. Upward Appraisal
11. Leading by Participation
12. Job Satisfaction Preferences
13. Why We Work
14. Understanding Team Dynamics
15. Communication and Teamwork Dilemmas
16. Alligator River Story
17. American Football
18. Entrepreneurs Among Us
Team Projects
1. Managing Millennials
2. Management in Popular Culture
3. Organizational Commitment to Sustainability
4. Crisis Management Realities
5. Personal Career Planning
6. After Meeting/Project Review
7. Contrasting Strategies
8. Network “U”
9. Organizational Culture Walk
10. Th e Future of Labor Unions
11. Leadership Believe-It-Or-Not
12. Diffi cult Personalities
13. CEO Pay
14. Superstars on the Team
15. How Words Count
16. Job Satisfaction Around the World
17. Globalization Pros and Cons
18. Community Entrepreneurs
Cases for Critical Th inking C-1
Case 1: Trader Joe’s: Keeping a Cool Edge
Case 2: Zara International: Fashion at the Speed of Light
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xxviii ■ Detailed Contents
Case 3: Patagonia: Leading a Green Revolution
Case 4: Amazon: One E-Store to Rule Th em All/Sidebar: Barnes & Noble: Adapting to an Uncertain Future
Case 5: Nordstrom: Planning a Better Inventory/Sidebar: Zappos: How Zappos Did it
Case 6: Electronic Arts: Inside Fantasy Sports/Sidebar: Zynga: Building an Army of Social Games
Case 7: Dunkin’ Donuts: Betting Dollars on Donuts
Case 8: Nike: Spreading Out to Stay Together
Case 9: Apple: People and Design Create the Future
Case 10: Netfl ix: Making Movie Magic/Sidebar: Redbox: Will Customers Wait for New Releases?
Case 11: SAS: Business Decisions at the Speed of Light/Sidebar: Sungard: Risky Business
Case 12: Facebook: Social Networking Is Big Business/Sidebar: LinkedIn: Social Networking’s All Grown Up
Case 13: Panera Bread Company: Staying Ahead of Long-Term Trends/Sidebar: TOMS: Get One, Give One
Case 14: Pixar: Animated Geniuses/Sidebar: DreamWorks: DreamWorks Delights
Case 15: Twitter: Redefi ning Communications/Sidebar: Yammer: Microblogging Goes Corporate
Case 16: Toyota: Looking Far into the Future/Sidebar: Ford: Th e Assembly Line Goes Global
Case 17: Harley-Davidson: Style and Strategy Have Global Reach
Case 18: In-N-Out Burger: Building a Better Burger/Sidebar: Sprinkles: Leading a Sweet Trend
Test Prep Answers AN-1
Glossary G-1
Endnotes EN-1
Photo Credits PC-1
Name Index NI-1
Subject Index SI-1
Organization Index OI-1
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Exploring Management
THIRD EDITION{
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Zappos CEO Tony Hsieh is into happiness. His goal is “to set up
an environment where the personalities, creativities, and
individuality of all diff erent employees come out and shine.”
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Explore Yourself More on self-management
Role Models Ursula Burns leads Xerox with
confi dence and a strategic eye
Ethics Check Coke’s secret formula a
tempting target
Facts to Consider Employment contradictions in
workforce diversity
Manager’s Library Delivering
Happiness by
Tony Hsieh
1 Managers and the
Management
Process
Everyone Becomes a Manager Someday
1. Understand what it
means to be a
manager.
2. Know what managers
do and what skills
they use.
3. Recognize important
career issues in the
new workplace.
YOUR CHAPTER 1
TAKEAWAYS
Management Live
Self-Management and Slumdog Millionaire
T he Times of London called this movie an “exotic, edgy thriller,”
while Th e New York Times described it as a “gaudy, gorgeous
rush of color, sound and motion.” What’s your take on this rags-
to-riches story of an orphan growing up in Mumbai, India, and fi nding his way
to a TV game show off ering him the chance to be a “slumdog millionaire”?
When the disgruntled game-show host has the police chief rough up the main
character Jamal (Dev Patel) the night before the big show, he asks: “What the
hell can a slum boy possibly know?” Facing the chief and the prospect of more
mistreatment, Jamal looks him in the eye and says in return: “Th e answers.”
Th is movie is a study in discipline, confi dence, and self-management—the capacity to act with a strong sense of self-awareness. As a career skill, this ability
helps us stay confi dent, build on strengths, overcome weaknesses, and avoid
viewing ourselves both more favorably or more negatively than is justifi ed.
You have to admire the way Jamal held up under the police chief ’s torture.
And, he didn’t fall prey to the quiz master’s repeated attempts to deceive and
pressure him into not believing his own best answers. It’s a classic case of self-
management in action.
Even if you’ve already seen it, Slumdog Millionaire is worth another viewing.
Watch for lessons on management and personal career development that you
might explore with your friends and classmates.
E l Y lf Ethi Ch k Manager’s
W H A T ’ S I N S I D E
3
M L D
H
T
M
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Takeaway 1.1 What Does It Mean to Be a Manager?
ANSWERS TO COME
■ Organizations have diff erent types and levels of managers.
■ Accountability is a cornerstone of managerial performance.
■ Eff ective managers help others achieve high performance and satisfaction.
■ Managers must meet multiple and changing expectations.
You find them everywhere, in small and large businesses, voluntary
associations, government agencies, schools, hospitals, and wherever people work
together for a common cause. Even though the job titles vary from team leader
to department head, project leader, president, administrator, and more, the peo-
ple in these jobs all share a common responsibility—helping others do their best
work. We call them managers—persons who directly supervise, support, and help activate work eff orts to achieve the performance goals of individuals, teams, or
even an organization as a whole. In this sense, I think you’ll agree with the chapter
subtitle: Everyone becomes a manager someday.
||| Organizations have diff erent types and levels of managers.
Look at Figure 1.1. It describes an organization as a series of layers, each of which represents diff erent levels of work and managerial responsibilities.
1
First-Line Managers and Team Leaders “I’ve just never worked on anything that so visibly, so dramatically changes the
quality of someone’s life. Some days you wake up, and if you think about all the work
you have to do it’s so overwhelming, you could be paralyzed.” Th ese are the words
of Justin Fritz as he described his experiences leading a 12-member team to launch
a new product at Medtronic, a large medical products company. He is a fi rst-line manager—someone who is formally in charge of a small work group composed of nonmanagerial workers. About the challenge of managerial work, Fritz says: “You
just have to get it done.” 2
A manager is a person who supports and is responsible for the work of others.
EXPLORING MANAGEMENT4
TYPICAL BUSINESS Board of directors
TYPICAL NONPROFIT Board of trustees
Top managers
Middle managers
First-line managers
Nonmanagerial workers
FIGURE 1.1 What Are the Typical Job Titles and Levels of Manage- ment in Organizations? Th e traditional organization
is structured as a pyramid.
Th e top manager, typically a
CEO, president, or executive
director, reports to a board of
directors in a business or to a
board of trustees in a nonprofi t
organization. Middle managers
report to top managers, and fi rst-
line managers or team leaders
report to middle managers.
First-line managers supervise people who perform nonmanagerial duties.
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Managers and the Management Process ■ Chapter 1 5
A fi rst job in management typically involves serving as a team leader or supervi-
sor. Typical job titles for these fi rst-line managers include department head, team
leader, and unit manager. For example, the leader of an auditing team is considered
a fi rst-line manager, as is the head of an academic department in a university. Even
though most people enter the workforce as technical specialists such as auditor,
market researcher, or systems analyst, sooner or later they often advance to these
positions of initial managerial responsibility. And they serve as essential building
blocks for organizational performance. 3
Middle Managers Look again at Figure 1.1. Th is time consider where Justin may be headed in his
career. At the next level above team leader we fi nd middle managers—persons in charge of relatively large departments or divisions consisting of several smaller
work units or teams.
Middle managers usually supervise several fi rst-line managers. Examples in-
clude clinic directors in hospitals; deans in universities; and division managers,
plant managers, and regional sales managers in businesses. Because of their po-
sition “in the middle,” these managers must be able to work well with people from
all parts of the organization—higher, lower, and side-to-side. As Justin moves up
the career ladder to middle management, there will be more pressure and new
challenges. But there should also be rewards and satisfaction.
Top Managers Some middle managers advance still higher in the organization, earning job
titles such as chief executive offi cer (CEO), chief operating offi cer (COO), chief
fi nancial offi cer (CFO), chief information offi cer (CIO), president, and vice presi-
dent. Th ese top managers are part of a senior management team that is respon- sible for the performance of an organization as a whole or for one of its larger
parts. Th ey must be alert to trends and developments in the external environ-
ment, recognize potential problems and opportunities, set strategy, and lead the
organization to success. 4
Procter & Gamble’s former CEO, A. G. Lafl ey, once said his job was to “link
the external world with the internal organization . . . make sure the voice of the
consumer is heard . . . shape values and standards.” 5 Th e best top managers are
future-oriented strategic thinkers in tune with their environments and able to
make good decisions under competitive and uncertain conditions. As Lafl ey
points out, they should be “balancing the need for performance in the short
term with the need to invest for the longer term.” 6
Middle managers oversee the work of large departments or divisions.
Top managers guide the performance of the organization as a whole or of one of its major parts.
As executive editor at Business Week, John A. Byrne enjoyed the
rush of accomplishment from doing a challenging job well.7 Even with
extreme hours, he said, “rarely do I leave thinking I’ve wasted a day
doing something that I didn’t want to do.” Byrne even joked that his
job was sometimes like being in college and pulling all-nighters on
major projects. And he claimed “More often than not I walk out feeling
immensely proud of the people I work with and of the amazing things we
have achieved together.”
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EXPLORING MANAGEMENT6
Members of a board of directors are elected by stockholders to represent their ownership interests.
Governance is oversight of top management by a board of directors or board of trustees.
HIGHER
MANAGEMENT
Accountability
Dependency
Work team members
Manager
Accountability is the requirement to show performance results to a supervisor.
Boards of Directors Both A. G. Lafl ey and John Byrne seem responsible and successful, but think
about those top managers who are just the opposite. You have to admit that
some don’t live up to expectations and even take personal advantage of their
positions, perhaps to the point of ethics failures and illegal acts. Who or what
keeps CEOs and other senior managers focused and high performing?
If you look back at Figure 1.1 you’ll see that even the CEO or president of an orga-
nization reports to a higher-level boss. In business corporations, this is a board of directors, whose members are elected by stockholders to represent their ownership interests. In nonprofi t organizations, such as a hospital or university, top managers
report to a board of trustees. Th ese board members may be elected by local citizens,
appointed by government bodies, or invited to serve by existing members.
In both business and the public sector, the basic responsibilities of a board
are the same. Its members are supposed to oversee the aff airs of the organi-
zation and the performance of its top management. In other words, they are
supposed to make sure that the organization is always being run right. Th is is
called governance, the oversight of top management by an organization’s board of directors or board of trustees.
||| Accountability is a cornerstone of managerial performance.
Th roughout the workplace, not just at the top, the term accountability describes the requirement of one person to answer to a higher authority for performance
achieved in his or her area of work responsibility. Th is notion of
accountability is an important aspect of managerial performance.
In the traditional organizational pyramid, accountability fl ows up-
ward. Team members are accountable to a team leader, the team
leader is accountable to a middle manager, the middle manager is
accountable to a top manager, and the top manager is accountable
to a board of directors.
Lets not forget that accountability in managerial performance
is always accompanied by dependency. At the same time that any
manager is being held accountable by a higher level for the perfor-
mance results of her or his area of supervisory responsibility, the
manager is dependent on others to do the required work. In fact,
we might say that a large part of the study of management is all
about learning how to best manage the dynamics of accountability
and dependency as shown in the small fi gure.
||| Eff ective managers help others achieve high performance and satisfaction.
Th is discussion of performance accountability and related challenges may
make you wonder : What exactly is an eff ective manager? Most people, perhaps
you, would reply that an eff ective manager is someone who helps people and
organizations perform. Th at’s a fi ne starting point, but we should go a step fur-
ther. I defi ne an eff ective manager as someone who successfully helps others achieve both high performance and satisfaction in their work.
An eff ective manager successfully helps others achieve high performance and satisfaction in their work.
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Managers and the Management Process ■ Chapter 1 7
Th e concern for not just work performance but also job satisfaction is a cen-
tral theme in our society. It calls attention to quality of work life (QWL) issues— the overall quality of human experiences in the workplace. Have you experienced
a “high QWL” environment? Most people would describe it as a place where they
are respected and valued by their employer. Th ey would talk about fair pay, safe
work conditions, opportunities to learn and use new skills, room to grow and
progress in a career, and protection of individual rights. Th ey would say everyone
takes pride in their work and the organization.
Are you willing to work anywhere other than in a high QWL setting? Would
you, as a manager, be pleased with anything less than helping others achieve not
just high performance but also job satisfaction? 8 Sadly, the real world doesn’t
always live up to these expectations. Talk to parents, relatives and friends who
go to work every day. You might be surprised. Many people still labor in diffi cult,
sometimes even hostile and unhealthy, conditions—ones we would consider
low QWL for sure! 9
||| Managers must meet multiple and changing expectations.
As president and CEO of Cornerstone Research, Cindy Zollinger directly supervises
24 people. But she says: “I don’t really manage them in a typical way; they largely run
themselves. I help them in dealing with obstacles they face, or in making the most of
Quality of work life is the overall quality of human experiences in the workplace.
Working Mother Looks for the Best
Great Employers Put Top Value on People
Working Mother magazine’s annual listing of the “100 Best Companies for Work-
ing Mothers” has become an important management benchmark—both for
employers who want to be among the best and for potential employees who
want to work only for the best. Th e magazine, part of Working Mother Media,
has a monthly readership of over 3 million and is well worth a look. Topics in
Working Mother cover the full gamut from kids to health to personal motivation
and more.
Self-described as helping women “integrate their professional lives, their fam-
ily lives and their inner lives,” Working Mother mainstreams coverage of work-life
balance issues and needs for women. One issue reported on moms who “pushed
for more family-friendly benefi ts and got them.” Th e writer described how Kristina
Marsh worked to get lactation support for nursing mothers as a formal benefi t
at Dow Corning, and how Beth Schiavo started a Working Moms Network in
Ernst & Young’s Atlanta offi ces and then got it approved as a corporate program
nationwide.
A list of best employers for multicultural women includes Allstate, American
Express, Deloitte, Ernst & Young, IBM, and General Mills. In terms of making the
selections, Working Mother says: “All of our winning companies not only require
manager training on diversity issues but also rate manager performance partly
on diversity results, such as how many multicultural women advance.”
Pick up a copy of Working
Mother magazine or browse
the online version. It’s a
chance to learn more about
the complexities of work-
life balance, including the
challenges faced by women
blending motherhood with
a career. It’s also a place to
learn which employers are
truly great in respecting
quality of work life issues.
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT8
Customers and clients
Ultimate beneficiaries of the organization’s efforts
Serve
Support
Support
Top managers
Keep organization’s mission and strategies
clear
Team leaders and managers
Do work directly affecting customer/client satisfaction
Operating workers
Help the operating workers do their jobs and solve problems
FIGURE 1.2 How Do Mindsets Change When the Organization Is Viewed as an Upside-Down Pyramind? If we turn the traditional
organizational pyramid upside
down, we get a valuable look
at how managerial work is
viewed today. Managers are at
the bottom of the upside-down
pyramid, and they are expected
to support the operating
workers above them. Th eir
goal is to help these workers
best serve the organization’s
customers at the top. Th e
appropriate mindset of this
supportive manager is more
“coaching” and “helping” than
“directing” and “order giving.”
opportunities they fi nd.” 10
As Cindy’s comments suggest, we are in a time when the
best managers are known more for “helping” and “supporting” than for “directing”
and “order giving.” Th e terms “coordinator,” “coach,” and “team leader” are heard as
often as “supervisor” or “boss.” Th e fact is that most organizations need more than
managers who simply sit back and tell others what to do.
Take a moment to jot down a few notes on the behaviors and characteristics
of the best managers you’ve ever had. My students describe theirs as leading by
example, willing to do any job, treating others as equals and with respect, acting
approachable, being enthusiastic, expecting outstanding performance, and help-
ing others grow. Th ey talk about managers who often work alongside those they
supervise, spending most of their time providing advice and support so that oth-
ers can perform to the best of their abilities and with satisfaction. How does this
listing compare with your experiences?
Figure 1.2 uses the notion of an upside-down pyramid to describe a new mindset for managers—a real expression of what it means to act as a coach
rather than an order-giver. Th e concept of the upside-down pyramid fi ts well with Cindy Zollinger’s description of her job as a manager, and it should also be
consistent with how you described your best manager.
Prominent at the top of the upside-down pyramid are nonmanagerial
workers—people who interact directly with customers and clients or produce
products and services for them. Managers are shown a level below. Their at-
tention is concentrated on supporting these workers so they can best serve
the organization’s customers.
In the upside-down pyramid view, there is no doubt that the organization
exists to serve its customers. And it is clear that managers are there to help and
support the people whose work makes that possible. Doesn’t that sound like the
way things should be?
Th e upside-down pyramid view puts customers at the top of the organization being served by workers who are supported by managers below them.
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Managers and the Management Process ■ Chapter 1 9
Takeaway 1.1 What Does It Mean to Be
a Manager?
Rapid Review • Managers support and facilitate the work eff orts of other people in organizations. • Top managers scan the environment and pursue long-term goals; middle
managers coordinate activities among large departments or divisions; first-
line managers, like team leaders, supervise and support nonmanagerial
workers.
• Everyone in organizations is accountable to a higher-level manager for his or her performance accomplishments; at the highest level, top managers are held ac-
countable by boards of directors or boards of trustees.
• Eff ective managers help others achieve both high performance and high levels of job satisfaction.
• New directions in managerial work emphasize “coaching” and “supporting,” rather than “directing” and “order giving.”
• In the upside-down pyramid view of organizations, the role of managers is to support nonmanagerial workers who serve the needs of customers at the top.
Questions for Discussion 1. Other than at work, in what situations do you expect to be a manager during
your lifetime?
2. Why should a manager be concerned about the quality of work life in an organization?
3. In what ways does the upside-down pyramid view of organizations off er advantages over the traditional view of the top-down pyramid?
Be Sure You Can • explain how managers contribute to organizations • describe the activities of managers at diff erent levels • explain how accountability operates in organizations • describe an eff ective manager • list several ways the work of managers is changing from the past • explain the role of managers in the upside-down pyramid
What Would You Do? When people are promoted into positions of managerial responsibility they
often end up supervising friends and colleagues. What is the best way for the
newly appointed manager to deal with this situation, while earning the respect
of others and building a smoothly functioning work team?
STUDY GUIDE
Terms to Defi ne
Accountability
Board of directors
Eff ective manager
First-line manager
Governance
Manager
Middle managers
Quality of work life
Top managers
Upside-down pyramid
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EXPLORING MANAGEMENT10
The managers we have been discussing are indispensable to organizations.
Th eir eff orts bring together resources, technology, and human talents to get
things done. Some are fairly routine tasks that are repeated day after day. Many
others, however, are challenging and novel, often appearing as unexpected prob-
lems and opportunities. But regardless of the task at hand, managers are expect-
ed to make things happen in ways that best serve the goals of the organization,
the needs of its customers, and the interests of its employees or members.
||| Managerial work is often intense and demanding.
The manager can never be free to forget the job, and never has the pleasure
of knowing, even temporarily, that there is nothing else to do. . . . Managers
always carry the nagging suspicion that they might be able to contribute just
a little bit more. Hence they assume an unrelenting pace in their work.11
Although what managers do may seem straightforward, this quote from scholar
and consultant Henry Mintzberg shows that putting it into practice can be much
more complicated. In his classic book Th e Nature of Managerial Work, Mintzberg
describes the daily work of corporate chief executives this way. “Th ere was no
break in the pace of activity during offi ce hours. Th e mail . . . telephone calls . . . and
meetings . . . accounted for almost every minute from the moment these execu-
tives entered their offi ces in the morning until they departed in the evenings.” 12
Today, we might add the constant demands of our smartphones, ever-full e-mail
and voice-mail inboxes, and constant streams of instant messages and social
media alerts to Mintzberg’s list of executive preoccupations. 13
Can you imagine a day fi lled with managerial responsibilities? Th e managers
Mintzberg observed had little free time because unexpected problems and con-
tinuing requests for meetings consumed almost all the time that was available.
Th eir workdays were intense, hectic, and fast paced; the pressure for always
improving performance was all-encompassing. Any manager, according to
Takeaway 1.2 What Do Managers Do and
What Skills Do Th ey Use?
ANSWERS TO COME
■ Managerial work is often intense and demanding.
■ Managers plan, organize, lead, and control.
■ Managers enact informational, interpersonal, and decisional roles.
■ Managers pursue action agendas and engage in networking.
■ Managers use a variety of technical, human, and conceptual skills.
■ Managers can and should learn from experience.
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Managers and the Management Process ■ Chapter 1 11
Mintzberg, must be ready to work long hours on fragmented and varied tasks at
an intense pace, while getting things done through communication and interper-
sonal relationships.
||| Managers plan, organize, lead, and control. If you are ready to perform as a manager or to get better as one, a good starting
point is Figure 1.3. It shows the four functions in the management process— planning, organizing, leading, and controlling. Th e belief is that all managers, re-
gardless of title, level, and organizational setting, are responsible for doing each
of them well. 14
Th e management process is planning, organizing, leading, and controlling the use of resources to accomplish performance goals.
Planning is the process of setting objectives and determining what should be done to accomplish them.
MANAGEMENT
Leading
Inspiring people to work hard to achieve
high performance
Organizing
Arranging tasks, people, and other resources
to accomplish the work
Controlling
Measuring performance and taking action to
ensure desired results
Planning
Setting performance objectives and deciding
how to achieve them
THE
PROCESS
THE
MANAGEMENT
PROCESS
FIGURE 1.3 What Four Functions Make Up the Management Process? Th e management process
consists of four functions:
planning, organizing, leading,
and controlling. Planning sets
the direction as performance
objectives. Organizing arranges
people and tasks to do the work.
Leading inspires others to work
hard. Controlling measures
performance to make sure
that plans and objectives are
accomplished.
Planning In management, planning is the process of setting performance objectives and determining what actions should be taken to accomplish them. When managers
plan, they set goals and objectives, and select ways to achieve them.
Th ere was a time, for example, when Ernst & Young’s top management grew
concerned about the fi rm’s retention rates for women. 15
Why? Turnover rates
at the time were much higher among women than among men, running some
22% per year and costing the fi rm about 150 percent of each person’s annual
salary to hire and train a replacement. Th en Chairman Philip A. Laskawy re-
sponded to the situation by setting a planning objective to reduce turnover
rates for women.
Organizing Even the best plans will fail without strong implementation. Success begins with
organizing, the process of assigning tasks, allocating resources, and coordinat- ing the activities of individuals and groups. When managers organize, they bring
people and resources together to put plans into action.
At Ernst & Young, Laskawy organized to meet his planning objective by con-
vening and personally chairing a Diversity Task Force of partners. He also estab-
lished a new Offi ce of Retention and hired Deborah K. Holmes, now Global Director
of Corporate Responsibility, to head it. As retention problems were identifi ed
Organizing is the process of assigning tasks, allocating resources, and coordinating work activities.
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EXPLORING MANAGEMENT12
in various parts of the fi rm, Holmes created special task forces to tackle them
and recommend location-specifi c solutions.
Leading The management function of leading is the process of arousing people’s en-
thusiasm to work hard and inspiring their efforts to fulfill plans and ac-
complish objectives. When managers lead, they build commitments to
plans and inf luence others to do their best work in implementing them.
Th is is one of the most talked about managerial responsibilities, and it de-
serves lots of personal thought. Not every manager is a good leader, but
every great manager is one for sure.
Deborah Holmes actively pursued her leadership responsibilities at
Ernst & Young. She noticed that, in addition to the intense work at the
fi rm, women often faced more stress because their spouses also worked.
She became a champion of improved work-life balance and pursued it
relentlessly. She started “call-free holidays” where professionals did not
check voice mail or e-mail on weekends and holidays. She also started a
“travel sanity” program that limited staff ers’ travel to four days a week so
that they could get home for weekends. And she started a Woman’s Access
Program to provide mentoring and career development.
Leading is the process of arousing enthusiasm and inspiring eff orts to achieve goals.
“Frankness,” “sharp humor,” “willingness to take risks,” “deep industry knowledge,” “technical prowess.” These are all phrases used to describe Ursula Burns, CEO of Xerox Corporation. Her career began as a Xerox intern and has led her to become the fi rst African-American woman to head a Fortune 500 fi rm.
Burns took over the fi rm at the height of fi nancial crisis and faced declining sales and profi ts, as well as a stock price that had lost half its value in a year’s time. But her experience and leadership skills were well matched to the fi rm’s many challenges—less paper being used in offi ces, less equipment being bought or leased, and falling prices. Yet Burns conveys confi dence with a smile, intending to pursue more sales in emerging markets, better effi ciencies, and more sales of high- margin services.
In her prior role as president, Burns made tough deci- sions on downsizing, closed Xerox manufacturing opera- tions, and changed the product mix. She also knows how to work well with the fi rm’s board. Director Robert A. McDon- ald of Procter & Gamble says. “She understands the tech-
nology and can communicate it in a way that a director can understand it.”
Burns is a working mother and spouse with a teenage daugh- ter and 20+-year-old stepson. She was raised by a single mom in New York City public housing and eventually earned a master’s degree in engineering from Columbia University. Pride in her achievements came across loud and clear in a speech to the YWCA in Cleveland. “I’m in this job because I believe I earned it through hard work and high performance,” she said. “Did I get some opportunities early in my career because of my race and gender? Probably . . . I imagine race and gender got the hiring guys’ attention. And then the rest was really up to me.”
WHAT’S THE LESSON HERE?
From student intern to CEO of a Fortune 500 fi rm—that’s quite a career. And there should be some lessons here for others to follow. If you were to identify just one or two things from this example that you could copy and put to work right now or on “day one” of your next job, what would they be?
■ URSULA BURNS LEADS XEROX WITH CONFIDENCE AND A STRATEGIC EYE
Role Models “I’M IN THIS JOB BECAUSE I BELIEVE I EARNED IT THROUGH
HARD WORK AND HIGH PERFORMANCE.” {
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Managers and the Management Process ■ Chapter 1 13
Controlling Controlling is the process of measuring work performance, comparing results to objectives, and taking corrective action as needed. As you have surely experi-
enced, things don’t always go as planned. When managers control, they stay in
contact with people as they work, gather and interpret information on perfor-
mance results, and use this information to make adjustments.
At Ernst & Young, Laskawy and Holmes regularly measured retention rates
for women at the fi rm and compared them to the rate that existed when their
new programs were started. By comparing results with plans and objectives,
they were able to track changes in work-life balance and retention rates, and
pinpoint where they needed to make further adjustments in their programs.
Over time, turnover rates for women were, and continue to be, reduced at all
levels in the fi rm. 16
||| Managers enact informational, interpersonal, and decisional roles.
When you consider the four management functions, don’t be unrealistic. Th e
functions aren’t always performed one at a time or step-by-step. Remember the
manager’s workday as earlier described by Mintzberg—intense, fast-paced, and
stressful. Th e reality is that managers must plan, organize, lead, and control
continuously while dealing with the numerous events, situations, and prob-
lems of the day.
To describe how managers actually get things done, Mintzberg identifi ed
three sets of roles that he believed all good managers enact successfully. 17
Th ese are the interpersonal, informational, and decisional roles shown in the
small fi gure.
Controlling is the process of measuring performance and taking action to ensure desired results.
INTERPERSONAL ROLES
How a manager interacts with other people • Figurehead • Leader • Liaison
INFORMATIONAL ROLES
How a manager exchanges and processes information • Monitor • Disseminator • Spokesperson
DECISIONAL ROLES
How a manager uses information in decision making • Entrepreneur • Disturbance handler • Resource allocator • Negotiator
A manager’s informational roles focus on the giving, receiving, and analyzing
of information. Th e interpersonal roles refl ect interactions with people inside and
outside the work unit. Th e decisional roles involve using information to make de-
cisions to solve problems or address opportunities. 18
It is through performing all
of these roles, so to speak, that managers fulfi ll their planning, organizing, lead-
ing, and controlling responsibilities.
Speaking of roles, each chapter of this book has a Role Models feature that
introduces you to successful managers and executives in a variety of settings.
Ursula Burns of Xerox was just featured as our first role model, and her story
is well worth a look.
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EXPLORING MANAGEMENT14
Can you see the pattern here? In just two short minutes, this general manager
accomplished a lot. In fact, he demonstrated excellence with two activities that
management consultant and scholar John Kotter considers critical to succeeding
with the management process—agenda setting and networking. 20
Agenda Setting Th rough agenda setting, managers develop action priorities. Th ese agendas may be incomplete and loosely connected in the beginning. But over time, as the
manager utilizes information continually gleaned from many diff erent sources,
the agendas become more specifi c. Kotter believes that the best managers keep
their agendas always in mind so they can quickly recognize and take advantage
of opportunities to advance them. In the example above, what might have hap-
pened if the manager had simply nodded “hello” to the staff member and contin-
ued on to his meeting?
Networking Th rough networking, managers build and maintain positive relationships with other people, ideally those whose help might be useful someday. Th ese networks
create the opportunities through which priority agenda items can be fulfi lled.
Much of what managers need to get done is beyond their individual capa-
bilities alone. Th e support and contributions of other people often make the
diff erence between success and failure. Networking is a way of developing all-
important social capital—the capacity to attract support and help from others in order to get things done. You can think of it as a capacity to get things done
based on the people you know and how well you relate to them.
Th e manager in our example needed help from someone who did not report
directly to him. Although he wasn’t in a position to order the staff person to help
him out, this wasn’t a problem. Because of the working relationship they main-
tained through networking, she wanted to help when asked. Most managers
maintain extensive networks with peers, members of their work teams, higher-
level executives, and people at various points elsewhere in the organization at
the very least. Many are expected to network even more broadly, such as with
customers, suppliers, and community representatives.
Social capital is the capacity to attract support and help from others in order to get things done.
Networking involves building and maintaining positive relationships with other people.
Agenda setting identifi es important action priorities.
||| Managers pursue action agendas and engage in networking.
While we are discussing workday realities, consider this description of just one
incident from the life of a general manager. 19
On the way to a scheduled meeting, a general manager met a staff
member who did not report to him. They exchanged “hellos” and in a two-
minute conversation the manager: (a) asked two questions and received
helpful information; (b) reinforced his relationship with the staff member
by sincerely complimenting her on recent work; and (c) enlisted the staff
member’s help on another project.
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Managers and the Management Process ■ Chapter 1 15
||| Managers use a variety of technical, human, and conceptual skills.
Th e discussion of roles, agendas, and networking is but a starting point for in-
quiry into your personal portfolio of management skills. Another step forward is
found in the work of Harvard scholar Robert L. Katz. He classifi ed the essential
skills of managers into three categories—technical, human, and conceptual. As
shown in Figure 1.4, the relative importance of each skill varies by level of mana- gerial responsibility.
21
Technical Skill A technical skill is the ability to use a special profi ciency or expertise to per- form particular tasks. Accountants, engineers, market researchers, fi nancial
planners, and systems analysts, for example, possess obvious technical skills.
Other baseline technical skills for any college graduate today include such
things as written and oral communication, computer literacy, and math and
numeracy.
In Katz’s model, technical skills are very important at career entry levels. So
how do you get them? Formal education is an initial source for learning these
skills, but continued training and job experiences are important in further de-
veloping them. Why not take a moment to inventory your technical skills, the
ones you have and the ones you still need to learn for your future career? Katz
tells us that the technical skills are especially important at job entry and early
career points. Surely, you want to be ready the next time a job interviewer asks
the bottom-line question: “What can you really do for us?”
Human Skill Th e ability to work well with others is a human skill, and it is a foundation for managerial success. How can we excel at networking, for example, without an
A human skill is the ability to work well in cooperation with other people.
A technical skill is the ability to use expertise to perform a task with profi ciency.
FIGURE 1.4 What Are Th ree Essential Managerial Skills and How Does Th eir Importance Vary Across Levels? All managers need essential technical, human, and conceptual skills. At lower levels of
management, the technical skills are more important than conceptual skills, but at higher
levels of management, the conceptual skills become more important than technical skills.
Because managerial work is so heavily interpersonal, human skills are equally important
across all management levels.
Conceptual skills—The ability to think analytically and achieve integrative problem solving
Human skills—The ability to work well in cooperation with other persons; emotional intelligence the ability to manage ourselves and relationships effectively
Technical skills—The ability to apply expertise and perform a special task with proficiency
Lower level
managers
Middle level
managers
Top level
managers
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EXPLORING MANAGEMENT16
ability and willingness to relate well with other people? How can we develop so-
cial capital without it? A manager with good human skills will have a high degree
of self-awareness and a capacity to understand or empathize with the feelings of
others. You would most likely observe this person working with others in a spirit
of trust, enthusiasm, and genuine involvement.
A manager with good human skills is also likely to be high in emotional intelligence. Considered an important leadership attribute, EI is defi ned by scholar and consultant Daniel Goleman as the “ability to manage ourselves and
our relationships eff ectively.” 22
He believes that emotional intelligence is built
upon the following fi ve foundations.
1. Self-awareness—understanding moods and emotions 2. Self-regulation—thinking before acting; controlling disruptive impulses
3. Motivation—working hard and persevering
4. Empathy—understanding the emotions of others
5. Social skills—gaining rapport and building good relationships
Given the highly interpersonal nature of managerial work, it is easy to see why
human skills and emotional intelligence are so helpful. Katz believes they are
consistently important across all the managerial levels.
Conceptual Skill Th e ability to think critically and analytically is a conceptual skill. It involves the capacity to break down problems into smaller parts, see the relations between
the parts, and recognize the implications of any one problem for others.
As Figure 1.4 previously showed, Katz believes conceptual skills gain in rela-
tive importance as we move from lower to higher levels of management. Th is is
because the problems faced at higher levels of responsibility are often ambiguous
and unstructured, accompanied by many complications and interconnections,
and full of longer-term consequences for people and organizations. In respect to
personal development, the question to ask is: “Am I developing the strong critical
thinking and problem solving capabilities I will need for sustained career suc-
cess?” Th e Steps for Further Learning selections at the end of each chapter are
good ways to test your conceptual skills in a management context.
||| Managers can and should learn from experience.
Functions, roles, agendas, networks, skills! How can anyone develop and be con-
sistently good at all of these things? How can the capacity to do them all well be
developed and maintained for long-term career success?
Th is book can be a good starting point for career development, a foundation
for the future. Take your time and give some thought to answering the questions
that I ask as you read. Consider also how you might apply what you are learning
to your current situations—school, work, and personal. And then ask what you
can learn from these situations in turn. It is well recognized that successful man-
agers do this all the time. We call it learning from experience.
Th e challenge for all of us is to be good at lifelong learning—the process of continuously learning from our daily experiences and opportunities. Consider
the following point by State Farm CEO Edward B. Rust, Jr. 23
A conceptual skill is the ability to think analytically and solve complex problems.
Emotional intelligence is the ability to manage ourselves and our relationships eff ectively.
Lifelong learning is continuous learning from daily experiences.
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Managers and the Management Process ■ Chapter 1 17
I think the whole concept of lifelong learning is more relevant today than
ever before. It’s scary to realize that the skill sets we possess today are
likely to be inadequate fi ve years from now, just due to the normal pace
of change. As more young people come into the workforce, they need a
deeper, fundamental understanding of the basic skills—not just to get a job,
but to grow with the job as their responsibilities change over their lifetimes.
Does Rust’s assessment of lifelong learning sound daunting? Or is it a chal-
lenge you are confi dent in meeting? Do you agree that this is an accurate descrip-
tion of today’s career environment? If you do, and I believe you should, you’ll also
have to admit that learning, learning, and more learning are top priorities in our
lives. Why not use Table 1.1, Six “Must Have” Managerial Skills, as a preliminary checklist for assessing your managerial learning and career readiness? How do
you stack up?
Table 1.1 Six “Must Have” Managerial Skills
Teamwork Able to work eff ectively as team member and leader; strong on team contri- butions, leadership, confl ict management, negotiation, consensus building
Self-Management Able to evaluate self, modify behavior, and meet obligations; strong on ethical reasoning, personal fl exibility, tolerance for ambiguity, performance
responsibility
Leadership Able to infl uence and support others to perform complex and ambiguous tasks; strong on diversity awareness, project management, strategic action
Critical Th inking Able to gather and analyze information for problem solving; strong on information analysis and interpretation, creativity and innovation, judgment, and
decision making
Professionalism Able to sustain a positive impression and instill confi dence in others; strong on personal presence, initiative, and career management
Communication Able to express self well in communication with others; strong on writing, oral presentation, giving and receiving feedback, technology utilization
With the prior list as a starting point, the rest of this book should be even more
meaningful for your personal development. And in this regard, another ques-
tion is worth asking. Given all the hard work and challenges that it involves, why
would anyone want to be a manager? Beyond the often-higher salaries, there is
one very compelling answer—pride! As pointed out by management theorist
Henry Mintzberg, being a manager is an important and socially responsible job 24
:
No job is more vital to our society than that of the manager. It is the
manager who determines whether our social institutions serve us well or
whether they squander our talents and resources. It is time to strip away
the folklore about managerial work, and time to study it realistically so that
we can begin the diffi cult task of making signifi cant improvement in its
performance.
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EXPLORING MANAGEMENT18
Takeaway 1.2 What Do Managers Do and
What Skills Do Th ey Use?
Rapid Review • Th e daily work of managers is often intense and stressful, involving long hours and
continuous performance pressures.
• In the management process, planning sets the direction, organizing assembles the human and material resources, leading provides the enthusiasm and direction,
and controlling ensures results.
• Managers perform interpersonal, informational, and decision-making roles while pursuing high-priority agendas and engaging in successful networking.
• Managers rely on a combination of technical skills (ability to use special expertise), human skills (ability to work well with others), and conceptual skills (ability to
analyze and solve complex problems).
• Everyday experience is an important source of continuous lifelong learning for managers.
Questions for Discussion 1. Is Mintzberg’s view of the intense and demanding nature of managerial work
realistic and, if so, why would you want to do it?
2. If Katz’s model of how diff erent levels of management use essential skills is accurate, what are its career implications for you?
3. Why is emotional intelligence an important component of one’s human skills?
Be Sure You Can • describe the intensity and pace of a typical workday for a manager • give examples of each of the four management functions • list the three managerial roles identifi ed by Mintzberg • explain how managers use agendas and networks in their work • give examples of a manager’s technical, human, and conceptual skills • explain how these skills vary in importance across management levels • explain the importance of experience as a source of managerial learning
What Would You Do? It’s time now to take a fi rst interview for your “dream” job. Th e interviewer is sitting
across the table from you. She smiles, looks you in the eye, and says: “You have a
very nice academic record, and we’re impressed with your extracurricular activi-
ties. Now tell me, exactly what can you do for us that will add value to the organi-
zation right from day one if you were to be off ered this job?” How do you respond
in a way that clearly shows you are “job ready” with strong technical, human, and
conceptual skills?
STUDY GUIDE
Terms to Defi ne
Agenda setting
Conceptual skill
Controlling
Emotional intelligence
Human skill
Leading
Lifelong learning
Management process
Networking
Organizing
Planning
Social capital
Technical skill
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Managers and the Management Process ■ Chapter 1 19
Takeaway 1.3 What Are Some Important Career
Issues in the New Workplace?
ANSWERS TO COME
■ Globalization and job migration are changing the world of work.
■ Failures of ethics and corporate governance are troublesome.
■ Diversity and discrimination are continuing social priorities.
■ Intellectual capital and self-management skills are essential for career success.
You might already have noticed that this text may differ from others
you’ve read. I’m going to ask you a lot of questions and expose you to diff erent
viewpoints and possibilities. Th is process of active inquiry begins with the rec-
ognition that we live and work in a time of great changes, ones that are not only
socially troublesome and personally challenging, but also ones that are likely to
increase, not decrease, in number, intensity, and complexity in the future. Are
you ready for the challenges ahead? Are you informed about the issues and con-
cerns that complicate our new workplace? Are you willing to admit that this is
no time for complacency?
||| Globalization and job migration are changing the world of work.
Look around—there’s hardly a person you know who hasn’t been touched in
some way or another by the recession. Many have lost jobs, savings, and even
homes. Today’s students wonder what the future holds for them after graduation;
parents worry about how they can help pay for their childrens’ college educa-
tions. And at the very time that our domestic economy is suff ering, other coun-
tries are struggling as well. We’re all interconnected now, and the fortunes and
misfortunes of one country easily spill over to aff ect others.
Speaking of the global economy, do you know where your favorite athletic
shoes or the parts for your computer and cell phone were manufactured? Can
you go to the store and buy a toy or piece of apparel that is really “Made in America”?
And whom do you speak with when calling a service center with computer prob-
lems, trying to track a missing package, or seeking information on how to change
an airline ticket? More likely than not, the person serving you is on the phone
from India, the Philippines, Ireland, or even Ghana.
Japanese management consultant Kenichi Ohmae calls this a “borderless
world” where national boundaries have largely disappeared in world business. 25
Take the example of Hewlett-Packard. 26
It operates in 178 countries and most of
its 304,000 employees work outside of the United States. It is the largest technol-
ogy company in Europe, the Middle East, and Russia. Although headquartered
in Palo Alto, California, one has to wonder : Is HP truly an American company
anymore?
What we are talking about is globalization, the worldwide interdependence of resource fl ows, product markets, and business competition.
27 In the global
Globalization is the worldwide interdependence of resource fl ows, product markets, and business competition.
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EXPLORING MANAGEMENT20
economy, businesses sell goods and services to customers around the world. Th ey
also search the world to buy the things they need wherever they can be found at
the lowest price. Th is is global sourcing—hiring workers and contracting for sup- plies and services in other countries. Th e fi rms save money by manufacturing and
getting jobs done in countries with lower costs of labor. When, for example, a shoe
that costs $12 to make in the United States can be made in China for less than a
dollar, doesn’t it make business sense for Ohio-based Rocky Brands to shut down its
American production line and outsource in China? Or is there more to the story? 28
One controversial side eff ect to global sourcing is job migration, the shifting of jobs from one country to another. At present, the U.S. economy is a net loser to such
job migration. By contrast, countries such as China, India, and the Philippines are
net gainers. And such countries aren’t just sources of unskilled labor anymore. Th ey
are now able to off er highly trained workers—engineers, scientists, accountants,
health professionals—for as little as one-fi fth the cost of an equivalent U.S. worker.
Politicians and policymakers regularly debate how best to deal with the high
costs of job migration, as local workers lose their jobs and their communities lose
economic vitality. One side looks for new government policies to stop job migra-
tion by protecting the jobs of U.S. workers. Th e other side calls for patience, be-
lieving that the global economy will readjust in the long run and create new jobs
for U.S. workers. Recent data suggest, in fact, that this is starting to happen as ris-
ing labor and transportation costs make manufacturing at home more attractive.
Which side are you on—more regulation, or let markets take care of themselves?
||| Failures of ethics and corporate governance are troublesome.
When Bernard Madoff was sentenced to 150 years in jail for crimes committed
during the sensational collapse of his investment company and its $60� billion
fraudulent Ponzi scheme, the message was crystal clear. 29
Th ere is
no excuse for senior executives in any organization to act illegally
and tolerate management systems that enrich the few while dam-
aging the many.
Th e harm done by Madoff touched individuals who lost lifelong
and retirement savings, charitable foundations that had invested
monies with his fi rm, and the employees of his fi rm and others that
went out of business as a result of the fraud. You could also argue that
society at large paid a price when faith in the nation’s business sys-
tem was damaged by the scandal. 30
Worse yet, Madoff is not alone.
All too often we learn about more scandals aff ecting banks and other
fi nancial institutions, as well as businesses and organizations of many other
types. How would you recover if an employer bankruptcy or major business fraud
aff ected you?
At the end of the day we depend on individual people, working at all levels of
organizations, to act ethically. Ethics is a code of moral principles that sets stan- dards of conduct for what is “good” and “right” as opposed to “bad” or “wrong.”
Given all the scandals, you might be cynical about ethical behavior in organi-
zations. But even though ethics failures get most of the publicity, there is still a
lot of good happening in the world of work. Look around. You’ll also fi nd stronger
corporate governance, described earlier as the active oversight of management
Ethics set moral standards of what is “good” and “right” behavior in organizations and in our personal lives.
Job migration occurs when global outsourcing shifts from one country to another.
Corporate governance is oversight of a company’s management by a board of directors.
Global sourcing involves contracting for work that is performed in other countries.
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Managers and the Management Process ■ Chapter 1 21
decisions, corporate strategy, and fi nancial reporting by a company’s board of
directors. 31
Many people and organizations exemplify a new ethical reawakening,
one that places high value on personal integrity and moral leadership.
In a book entitled Th e Transparent Leader, Herb Baum, former CEO of Dial
Corporation, argues that integrity is a major key to ethics in leadership. He also
tries to walk the talk—no reserved parking place, open door, honest commu-
nication, careful listening, and hiring good people. Believing that most CEOs
are overpaid, he once gave his annual bonus to the fi rm’s lowest-paid workers.
He also tells the story of an ethical role model—a rival CEO, Reuben Mark of
Colgate Palmolive. Mark called him one day to say that a newly hired executive
had brought with him to Colgate a disk containing Dial’s new marketing cam-
paign. Rather than read it, he returned the disk to Baum—an act Baum called
“the clearest case of leading with honor and transparency I’ve witnessed in my
career.” 32
And as for you, why not make ethics a personal priority? Don’t forget to
read and consider the situations presented in Ethics Check for each chapter
of this book.
Scene: Corporate headquarters of PepsiCo. A young executive is gesturing excitedly, and three more obviously senior ones lis- ten attentively. The CEO sits at her desk, swiveling occasionally in the chair while listening carefully to the conversation.
Young executive [acting a bit proud to be there]: It started with a telephone call. I agreed to meet with a former employee of Coca-Cola at his request. We met and, lo and behold, he offered me the “secret formula.”
One of the senior executives [cautiously]: Let me be sure I un- derstand. You received a call from someone who said they used to work at Coke, and that person was requesting a face-to-face meeting. Correct?
Young executive [quickly and proudly]: Right!
Senior executive [with a bit of challenge]: Why? Why would you meet with someone that said they just left Coke?
Young executive [tentative now]: Well . . . I . . . uh . . . It seemed like a great chance to get some competitive infor- mation and maybe even hire someone who really knows their strategies.
Second senior executive: So, what happened next?
Young executive [excited again]: Well, after just a minute or two conversing, he said that he had the formula!
Second senior executive: And . . .?
Young executive [uncertain all of a sudden and now speaking softly]: He said it was “for sale.”
Third senior executive [with a bit of edge in her voice]: So what did you say?
Young executive [looking down and shuffl ing slightly back- ward]: I said that I’d take it “up the ladder.” I’m supposed to call him back . . .
CEO [breaking into the conversation (Note: As CEO speaks, other senior executives move over to stand behind her. Ev- eryone looks in the direction of the young executive)]: And we’re glad you did “bring it up the ladder,” as you say. But now that you have, what do you propose we do about this opportunity to buy Coke’s most important secret?
YOU DECIDE
What do you think this junior executive will recommend? His or her career might rest on the answer. Better yet, how would you respond?
■ COKE’S SECRET FORMULA A TEMPTING TARGET
Ethics Check THE YOUNG EXECUTIVE REALLY
WANTS TO IMPRESS THE “BIG” BOSS. {
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EXPLORING MANAGEMENT22
||| Diversity and discrimination are continuing social priorities.
Th e term workforce diversity describes the composition of a workforce in terms of diff erences among people on gender, age, race, ethnicity, religion, sexual orientation,
and physical ability. 33
Th e diversity trends of changing demographics are well recog-
nized. Minorities now constitute more than one-third of the U.S. population and the
proportion is growing. Th e U.S. Census Bureau predicts that by 2050 whites will be in
the minority and the combined populations of African Americans, Native Americans,
Asians, and Hispanics will be the new majority. Hispanics are now the largest minor-
ity group and the fastest growing—over 50 million and up 43% since 2000. By 2030,
more than 20% of the population of the United States will be aged 65� years. And,
more seniors presently at work are deciding to postpone retirement. 34
Even though our society is diverse, many diversity issues in employment remain
as open challenges. Look at the diversity facts in the nearby box and ask how they
can be explained. Consider also how to explain research in which résumés with
white-sounding fi rst names, like Brett, received 50% more responses from potential
employers than those with black-sounding fi rst names, such as Kareem. 35
Th e fact
that these résumés were created with equal credentials suggests diversity bias.
U.S. laws strictly prohibit the use of demographic characteristics when human
resource management decisions such as hiring, promotion, and fi ring are made.
But laws are one thing, actions are yet another. Do you ever wonder why women
and minorities hold few top jobs in large companies? One explanation is a
subtle form of discrimination known as the glass ceiling eff ect. It occurs when an
Workforce diversity describes diff erences among workers in gender, race, age, ethnicity, religion, sexual orientation, and able-bodiedness.
The nonprofi t research group Catalyst points out: “Now more than ever, as companies examine how to best weather an economy in crisis, we need talented business leaders, and many of these lead- ers, yet untapped, are women.” But research studies and news reports show contradictions in workforce diversity. • Women earn some 60% of college degrees, hold 50.6% of
managerial jobs, and hold 15.7% of board seats at Fortune 500 companies; women of color hold 3.2% of board seats, and only 4% of fi rms have two women of color on their boards.
• The median compensation of female CEOs in North Ameri- can fi rms is 85% that of males; in the largest fi rms it is 61%.
• For each $1 earned by male managers, female managers earn 79 cents; female managers in fi nance earn only 58.8 cents for each $1 earned by male managers.
• For each $1 earned by men, African-American women earn 64 cents and Hispanic women earn 52 cents.
• African Americans are 11.5% of the workforce and hold 8.3% of managerial and professional jobs.
• Asian Americans are 4.7% of the workforce and hold 6.3% of managerial and professional jobs.
• Hispanics are 11.1% of the workforce and hold 5% of mana- gerial jobs.
YOUR THOUGHTS?
How can these data be explained? What are the implications for you and your career aspirations? What other contradic- tions in workforce diversity can you spot, and how can they be justifi ed?
■ EMPLOYMENT CONTRADICTIONS IN WORKFORCE DIVERSITY
Facts to Consider THE PAY GAP FOR WOMEN IN FINANCIAL
SERVICES IS THE LARGEST FOR ANY INDUSTRY. {
Th e glass ceiling eff ect is an invisible barrier limiting career advancement of women and minorities.
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Managers and the Management Process ■ Chapter 1 23
invisible barrier, or “ceiling,” prevents members of diverse populations from ad-
vancing to high levels of responsibility in organizations. 36
Th ere is little doubt that women and minorities still face special work and ca-
reer challenges in our society at large. 37
Although progress is being made—for
example more corporate board seats going to women—diversity bias still exists
in too many of our work settings. 38
Th is bias begins with prejudice, the holding of negative, irrational attitudes regarding people who are diff erent from us. It may
surprise you, but an example is lingering prejudice against working mothers. Th e
nonprofi t Families and Work Institute reports that in 1977 only 49% of men and
71% of women believed that mothers could be good employees; in 2008 the fi g-
ures had risen to 67% and 80% respectively. 39
Don’t you wonder why the fi gures
don’t show 100% support of working mothers?
Prejudice becomes active discrimination when people in organizations treat minority members unfairly and deny them full membership benefi ts. Discrimi-
nation was evident in the résumés study described earlier. And prejudice also
becomes discrimination when a male or female manager refuses to promote a
working mother in the belief that “she has too many parenting responsibilities
to do a good job at this level.” Scholar Judith Rosener suggests that employment
discrimination of any form comes at a high cost—not just to the individuals in-
volved, but also to society. Th e organization’s loss for any discriminatory prac-
tices, she says, is “undervalued and underutilized human capital.” 40
Many voices call diversity a “business imperative,” meaning that today’s
increasingly diverse and multicultural workforce should be an asset that, if
tapped, creates opportunities for performance gains. But even with such aware-
ness existing, consultant R. Roosevelt Th omas says that too many employers
still address diversity with the goal of “making their numbers.” 41
A female vice
president at Avon once described the challenges of truly valuing and managing
diversity this way: “Consciously creating an environment where everyone has an
equal shot at contributing, participating, and most of all advancing.” 42
||| Intellectual capital and self-management skills are essential for career success.
No matter how you look at it, the future poses a complex setting for career suc-
cess. And if current trends continue, it will be more and more of a
free-agent economy. Like professional athletes, many of us will be changing jobs more often and even working on fl exible contracts
with a shifting mix of employers over time. 43
British scholar and
consultant Charles Handy uses the analogy of the shamrock orga- nization, shown here, to describe the implications.44 Each leaf in the shamrock organization represents a diff erent group of workers.
Th e fi rst leaf in Handy’s shamrock organization is a core group
of permanent, full-time employees with critical skills, who follow
standard career paths. Th e second leaf consists of workers hired
as freelancers and independent contractors. Th ey provide organi-
zations with specialized skills and talents for specifi c projects and
then change employers when projects are completed. An increas-
ing number of jobs in the new economy fall into this category. Some
call this a time of giganomics, where even well-trained professionals
Prejudice is the display of negative, irrational attitudes toward women or minorities.
Discrimination actively denies women and minorities the full benefi ts of organizational membership.
The shamrock organization
Full-time core
workers
Part-time emporaries
Independent contractors
In a free-agent economy, people change jobs more often, and many work on independent contracts with a shifting mix of employers.
A shamrock organization operates with a core group of full-time long-term workers supported by others who work on contracts and part time.
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EXPLORING MANAGEMENT24
make their livings moving from one “gig” to the next, instead of holding a tra-
ditional full-time job. 45
Th e third leaf is a group of temporary part-timers. Th eir
hours of work increase or decrease as the needs of the business rise or fall. Th ey
often work without benefi ts and are the fi rst to lose their jobs when an employer
runs into economic diffi culties.
As you might guess, today’s college graduates must be prepared to succeed
in the second and third leaves of Handy’s shamrock organization, not just the
fi rst. And to achieve success, Handy advises everyone to maintain a portfolio of
skills that is always up-to-date and attractive to potential employers, regardless
of where in the shamrock your goals may center.
You might begin by thinking seriously about your intellectual capital—what you can off er an employer in terms of brainpower, skills, and capabilities. Ideally,
these will be things valued by the employer that also diff erentiate you a bit from
others who might want the same job. A good way to address the issue is to use this
intellectual capital equation: 46
Intellectual Capital � Competency � Commitment.
Competency represents our talents or job-relevant capabilities, while com-
mitment represents our willingness to work hard in applying them to important
tasks. Obviously, both are essential. One without the other is not enough to meet
Intellectual capital is the collective brainpower or shared knowledge of a workforce.
WHAT ARE YOU GOING TO BE
WHEN YOU GROW-DOWN?
“What are you going to be when you grow up?” Those words echo through the mind starting in child-
hood and grow louder as adulthood approaches. The moment of truth fi nally arrives. Or has it? According to Tony Hsieh, au- thor of the book Delivering Happiness (2010, Business Plus), ‘being’ something is more of a mindset than an occupation. He thinks the question is answered by simply asking yourself “what makes you happy?”
Hsieh thinks rules in business are just like rules about hob- bies and friends—do what makes you happy with people you like. Hsieh translated youthful interests and associations into two profi table ventures. He founded two Internet start-ups with college friends—LinkExchange and Zappos.com— selling them for $256 million and $1.2 billion, respectively.
As Zappos’ CEO, Hsieh cultivates a culture in which custom- ers and employees are treated as friends. He considers this the Zappos brand and its secret to success. He emphasizes customer service and employee training, and says adults work best when they playfully share discoveries together, much like children do. Fun events sponsored during work hours enable social ties to cultivate.
Zappos welcomes customer calls and online chats as oppor- tunities to create friendly bonds. They aren’t timed, no script is used, and agents are guided by personal judgment. Zappos’ mission is to ‘Deliver WOW’ and loyal customers receive sur- prise upgrades to overnight shipping.
Employees control career progression by choosing which company-designed courses to take and when to complete them. They receive incremental title and pay boosts rather than infrequent employer-driven reviews. This creates a pipeline of wide- ranging talent. Hsieh believes people must decide when and how to advance based on their happiness at each level.
Finding purpose in work comes with fi nding happiness; stay- ing connected with others in common purpose beyond self- serving needs feels more like play than work. Hsieh refl ects on his childhood worm farm and college pizza business as examples where work and friendship merged meaningfully. He stays busy having fun rather than growing up to be “something.”
REFLECT AND REACT
Is Hsieh on to something here? How do you think the rules of work compare or contrast to the rules of play? Do you view play and work as individual pursuits or group undertakings? How are friends and coworkers similar or different? What are your pathways to happiness?
■ DELIVERING HAPPINESS: A PATH TO PROFITS, PASSION,
AND PURPOSE
Manager’s Library
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Managers and the Management Process ■ Chapter 1 25
anyone’s career needs or any organization’s performance requirements. Max
DePree, former CEO of Herman Miller, puts it this way: “We talk about the diff er-
ence between being successful and being exceptional. Being successful is meet-
ing goals in a good way—being exceptional is reaching your potential.” 47
When it comes to human potential, the workplace is well into the information
age dominated by knowledge workers. Th ese are persons whose minds, not just physical capabilities, are critical assets.
48 And things are not standing still. Futurist
Daniel Pink says that we are already moving toward a conceptual age in which intel-
lectual capital rests with people who are both “high concept”—creative and good
with ideas, and “high touch”—joyful and good with relationships. 49
Pink believes
the future will belong to those with “whole-mind” competencies, ones that com-
bine left-brain analytical thinking with right-brain intuitive thinking.
Th ere is no doubt that the free-agent economy places a premium on your ca-
pacity for self-management, realistically assessing yourself and actively manag- ing your personal development. It means showing emotional intelligence, exer-
cising initiative, accepting responsibility for accomplishments and failures, and
continually seeking new learning opportunities and experiences. Take a look
at the Explore Yourself feature. It’s in each chapter and is designed to help you
become better acquainted with your managerial skills and the implications for
your career readiness. Th e fi rst one is on self-management and the question you
should be asking when reading it is: How well do I stack up?
Th e fact is that what happens from this point forward in your career is
largely up to you. Would you agree that there is no better time than the present
to start taking charge of what can be called your “personal brand”—a unique
and timely package of skills and capabilities of real value to a potential em-
ployer? Management consultant Tom Peters advises that your brand should
be “remarkable, measurable, distinguished, and distinctive” relative to the
competition—others who want the same career opportunities that you do. 50
Have you thought about what employers want? Are you clear and confi dent
about the brand called “You”? Does your personal portfolio include new work-
place survival skills?
Self-management is the ability to understand oneself, exercise initiative, accept responsibility, and learn from experience.
Knowledge workers use their minds and intellects as critical assets to employers.
When it comes to doing well as a student and in a career, a lot rests on how well you know yourself and what you do with this knowl- edge. Self-management involves acting with a strong sense of self-awareness, something that helps us build on strengths, over- come weaknesses, and avoid viewing ourselves more favorably than is justifi ed. This capacity is an important career skill.
It can be easy to talk about self-management but much harder to master it. Why not use the many self-assessments in
this book to get in better touch with this and other important career skills?
■ SELF-MANAGEMENT
Explore Yourself SELF-MANAGEMENT HELPS US AVOID VIEWING
OURSELVES MORE FAVORABLY THAN IS JUSTIFIED. {
Get to know yourself better by taking the self-assessment on
Personal Career Readiness and completing the other activi- ties in the Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT26
STUDY GUIDE
Takeaway 1.3 What Are Some Important Career
Issues in the New Workplace?
Rapid Review • Globalization has brought increased use of global outsourcing by businesses and
concern for the adverse eff ects of job migration.
• Society increasingly expects organizations and their members to perform with high ethical standards and in socially responsible ways.
• Organizations operate with diverse workforces, and each member should be re- spected for her or his talents and capabilities.
• Work in the new economy is increasingly knowledge-based, relying on people with valuable intellectual capital to drive high performance.
• Careers in the new economy are becoming more fl exible, requiring personal initia- tive to build and maintain skill portfolios that are always up-to-date and valued by
employers.
Questions for Discussion 1. How are current concerns about ethics in business, globalization, and changing
careers addressed in your courses and curriculum?
2. Is it possible for members of minority groups to avoid being hurt by prejudice, discrimination, and the glass ceiling eff ect in their careers?
3. In what ways can the capacity for self-management help you to prosper in a free- agent economy?
Be Sure You Can • describe how corporate governance infl uences ethics in organizations • explain how globalization and job migration are changing the economy • diff erentiate prejudice, discrimination, and the glass ceiling eff ect • state the intellectual capital equation • discuss career opportunities in the shamrock organization • explain the importance of self-management to career success
What Would You Do? One of the plus sides of globalization is that a growing number of locals are now
working domestically for foreign employers that have established businesses
in their local communities. How about you? Does it make any diff erence if you
receive a job off er from a foreign employer such as Haier—a Chinese fi rm that
makes popular home appliances—or a domestic employer? What are the “pluses
and minuses” of working at home for a foreign employer? Do the pluses outweigh
the minuses for you?
Terms to Defi ne
Corporate governance
Discrimination
Ethics
Free-agent economy
Glass ceiling eff ect
Global sourcing
Globalization
Intellectual capital
Job migration
Knowledge workers
Prejudice
Self-management
Shamrock organization
Workforce diversity
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Managers and the Management Process ■ Chapter 1 27
1. If a sales department supervisor is held accountable
by a middle manager for the department’s perfor-
mance, on whom is the department supervisor
dependent in making this performance possible?
(a) board of directors
(b) top management
(c) customers or clients
(d) department sales persons
2. Th e management function of is being
activated when a bookstore manager measures
daily sales in the magazine section and compares
them with daily sales targets.
(a) planning
(b) agenda setting
(c) controlling
(d) delegating
3. Th e process of building and maintaining good work-
ing relationships with others who may someday
help a manager implement his or her work agendas
is called .
(a) governance
(b) networking
(c) emotional intelligence
(d) entrepreneurship
4. According to Robert Katz, skills are
more likely to be emphasized by top managers than
by fi rst-line managers.
(a) human (b) conceptual
(c) informational (d) technical
5. An eff ective manager is someone who helps others
to achieve high levels of both and
.
(a) pay; satisfaction
(b) performance; satisfaction
(c) performance; pay
(d) pay; quality work life
6. is the active oversight by boards of di-
rectors of top management decisions in such areas
as corporate strategy and fi nancial reporting.
(a) Value chain analysis
(b) Productivity
(c) Outsourcing
(d) Corporate governance
7. When a manager denies promotion to a quali-
fi ed worker simply because of personally disliking
her because she is Hispanic, this is an example of
.
(a) discrimination
(b) workforce diversity
(c) self-management
(d) a free-agent economy
8. A company buys cloth in one country, has designs
made in another country, has the garments sewn in
another country, and sells the fi nished product in
yet other countries. Th is fi rm is actively engaging in
the practice of .
(a) job migration
(b) performance eff ectiveness
(c) value creation
(d) global sourcing
9. Th e intellectual capital equation states: Intellectual
Capital � � Commitment.
(a) Diversity
(b) Confi dence
(c) Competency
(d) Communication
10. If the direction in managerial work today is away
from command and control, what is it toward?
(a) coaching and facilitating
(b) telling and selling
(c) pushing and pulling
(d) carrot and stick
C H
A PTER 1
TP
Multiple-Choice Questions
TestPrep 1
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EXPLORING MANAGEMENT28
11. Th e manager’s role in the “upside-down pyramid”
view of organizations is best described as providing
so that operating workers can directly
serve .
(a) direction; top management
(b) leadership; organizational goals
(c) support; customers
(d) agendas; networking
12. When a team leader clarifi es desired work targets
and deadlines for a work team, he or she is fulfi lling
the management function of .
(a) planning
(b) delegating
(c) controlling
(d) supervising
13. Th e research of Mintzberg and others concludes
that most managers .
(a) work at a leisurely pace
(b) have blocks of private time for planning
(c) always live with the pressures of performance
responsibility
(d) have the advantages of short workweeks
14. Emotional intelligence helps us to manage ourselves and our relationships eff ectively. Someone that is
high in emotional intelligence will have the capacity
to , an ability to think before acting
and to control potentially disruptive emotions and
actions.
(a) set agendas
(b) show motivation
(c) self-regulate
(d) act as a leader
15. Which of the following is a responsibility that is
most associated with the work of a CEO, or chief
executive offi cer, of a large company?
(a) linking the company with the external
environment
(b) reviewing annual pay raises for all employees
(c) monitoring short-term performance by task
forces and committees
(d) conducting hiring interviews for new college
graduates
Short-Response Questions
16. What is the diff erence between prejudice and workplace discrimination?
17. How is the emergence of a free-agent economy changing career and work opportunities?
18. In what ways will the job of a top manager typically diff er from that of a fi rst-line manager?
19. How does planning diff er from controlling in the management process?
Integration and Application Question
20. Suppose you have been hired as the new supervisor of an audit team for a national accounting fi rm. With four
years of auditing experience, you feel technically well prepared. However, it is your fi rst formal appointment
as a manager. Th e team has 12 members of diverse demographic and cultural backgrounds, and varying work
experience. Th e workload is intense, and there is a lot of performance pressure.
Questions: In order to be considered eff ective as a manager, what goals will you set for yourself in the new job? What skills will be important to you, and why, as you seek success as the audit team supervisor?
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Managers and the Management Process ■ Chapter 1 29
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 1: Personal Career Readiness
■ CLASS EXERCISE 1: My Best Manager
■ TEAM PROJECT 1 : Managing Millennials
C H
A PTER 1
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Case Snapshot It’s just an average day at Trader Joe’s, the gourmet, specialty, and natural-foods store that off ers
staples such as milk and eggs along with curious, one-
of-a-kind foods at below-average prices in almost thirty
states. Foodies, hipsters, and recessionistas alike are at-
tracted to the chain’s charming blend of low prices, tasty
treats, and laid-back but enthusiastic customer service.
Shopping at Trader Joe’s is less a chore than it is
immersion into another culture. In keeping with its
whimsical faux-nautical
theme, crew members and
managers wear loud tropical-print shirts. Chalkboards
around every corner unabashedly announce slogans
such as, “You don’t have to join a club, carry a card, or
clip coupons to get a good deal.” Take a walk down the
aisle of Trader Joe’s and learn how sharp attention to the
fundamentals of retail management made this chain
more than the average Joe.
Take advantage of this Selection from Cases for Critical Thinking
■ CHAPTER 1 CASE Trader Joe’s—Managing with a Cool Edge
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 1
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Great management isn’t new, and it isn’t all high tech . . . it is
part of our history.
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Explore Yourself More on learning styles
Role Models Carol Bartz used executive
experience to create change at
Yahoo!
Ethics Check Employment agreements
can be tricky
Facts to Consider Generations diff er when rating
their bosses
Manager’s Library Outliers by
Malcolm Gladwell
2 Management
Learning
Great Th ings Grow from Strong Foundations
1. Understand the
lessons of the
classical management
approaches.
2. Identify the
contributions of
the behavioral
management
approaches.
3. Recognize the
foundations of modern
management thinking.
YOUR CHAPTER 2
TAKEAWAYS
Management Live
Learning Style and Mr. Holland’s Opus
G lenn Holland (Richard Dreyfus) is an aspiring musician
who wants to compose. He takes a job as a high school
music teacher to gain more time for composition. One day
he has an epiphany—he realizes his students do not learn music the way he did.
Gertrude Lang (Alicia Witt) desperately wants to play the clarinet because
everyone else in her family excels at something. As much as she practices, she
never improves. Mr. Holland helps her understand that music is about heart
and feeling and that she needs to trust herself in order to play eff ectively. So, she
learns to play by imagining a song as a sunset.
Louis Russ (Terrence Howard) must learn to play the bass drum to remain
eligible for sports. Th e way he learns is diff erent; he needs action and a model
to follow. Mr. Holland gets Russ to understand timing and rhythm by imitating
his beat.
Each of us has a preferred learning style, a set of ways through which we like to learn by receiving, processing, and recalling new information. For Gertrude
Lang, it was being able to create a mental image that allowed music to fl ow
from her heart to her fi ngertips. Lou Russ’s style involved physically feeling and
duplicating the rhythm being tapped by his teacher. As in these examples, we can
often learn better when our styles are understood. How about you? Are you in
touch with your learning style?
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
31
M L O
M
M
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EXPLORING MANAGEMENT32
Historians trace management as far back as 5000 b.c., when ancient
Sumerians used written records to assist in governmental and commercial
activities. 1 Management contributed to the construction of the Egyptian pyra-
mids, the rise of the Roman Empire, and the commercial success of 14th-century
Venice. During the Industrial Revolution in the 1700s, great social changes helped
to prompt a leap forward in the manufacture of basic staples and consumer
goods. Adam Smith’s ideas of effi cient production through specialized tasks and
the division of labor further accelerated industrial development.
By the turn of the 20th century, Henry Ford and others were making mass
production a mainstay of the emerging economy. 2 What we now call the clas-
sical school was launching a path of rapid and continuing development in
the science and practices of management. 3 Prominent representatives of this
school and their major contributions to management thinking include Frederick
Taylor—scientifi c management, Max Weber—bureaucracy, and Henri Fayol—
administrative principles.
Takeaway 2.1 What Are the Lessons of the Classical
Management Approaches?
ANSWERS TO COME
■ Taylor’s scientifi c management sought effi ciency in job performance.
■ Weber’s bureaucratic organization is supposed to be effi cient and fair.
■ Fayol’s administrative principles describe managerial duties and practices.
CLASSICAL
APPROACHES
Assumption: People are rational
Administrative
Principles
Frederick Taylor Henri Fayol
Bureaucratic
Organization
Max Weber
Scientific
Management
||| Taylor’s scientifi c management sought effi ciency in job performance.
In 1911, Frederick W. Taylor stated the following in his book Th e Principles of Scientifi c
Management: “Th e principal object of management should be to secure maximum
prosperity for the employer, coupled with the maximum prosperity for the employee.” 4
Taylor had noticed that many workers did their jobs in their own way—perhaps
haphazard—and without consistent supervision. And it seemed to him that a lack
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Management Learning ■ Chapter 2 33
of clear and uniform methods caused workers to lose effi ciency and perform below
their true capacities. As a result, their organizations also underperformed.
To correct this problem, Taylor believed that jobs should be studied to iden-
tify their basic steps and motions as well as determine the most effi cient ways
of doing them. Once this job “science” was defi ned, workers could be trained to
follow it, and supervisors could be trained to support and encourage workers to
perform to the best of their abilities. Th is approach became known as scientifi c management and it included these four core principles.
1. Develop a “science” for each job—rules of motion, standard work tools, and
proper work conditions.
2. Hire workers with the right abilities for the job.
3. Train and motivate workers to do their jobs according to the science.
4. Support workers by planning and assisting their work according to the science.
One of the most enduring legacies of the scientifi c management approach
grew out of Taylor’s fi rst principle and involves motion study, the science of re- ducing a job or task to its basic physical motions. Two of Taylor’s contemporaries,
Frank and Lillian Gilbreth, pioneered the use of motion studies as a management
tool. 5 In one famous case, they reduced the number of motions used by bricklay-
ers and tripled their productivity. 6
Are you clear about the principles of scientifi c management? Th ink about what hap-
pens when a top coach trains a group of soccer players. If the coach teaches players the
techniques of their positions and how the positions fi t into the overall team strategy,
the team will probably do better in its games, right? In the same way, Taylor hoped to
improve the productivity of workers and organizations. With a stopwatch and note-
book in hand, he analyzed tasks and motions to describe the most effi cient ways to
perform them. 7 He then linked these requirements with job training, monetary incen-
tives for performance success, and better direction and assistance from supervisors.
A ready example of how Taylor’s ideas are still used is United Parcel Service.
Sorters at regional centers are timed according to strict task requirements and are
expected to load vans at a set number of packages per hour. GPS technology plots
the shortest routes; delivery stops are studied and carefully timed; supervisors
generally know within a few minutes how long a driver’s pickups and deliveries
will take. Industrial engineers also devise precise routines for drivers. Th e point
in classic scientifi c management fashion is that savings of seconds on individual
stops adds up to signifi cant increases in productivity.
Scientifi c management emphasizes careful selection and training of workers and supervisory support.
Motion study is the science of reducing a job or task to its basic physical motions.
• Make results-based compensation a performance incentive. • Carefully design jobs with effi cient work methods. • Carefully select workers with the abilities to do these jobs.
• Train workers to perform jobs to the best of their abilities. • Train supervisors to support workers to best perform their
jobs.
■ SCIENTIFIC MANAGEMENT LESSONS FOR TODAY ’S MANAGERS
Tips to Remember
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EXPLORING MANAGEMENT34
||| Weber’s bureaucratic organization is supposed to be effi cient and fair.
The purely bureaucratic type of administrative organization . . . is from a
purely technical point of view capable of attaining the highest degree of
effi ciency. . . . It is superior to any other form in precision, in stability, in
the stringency of its discipline, and in its reliability. It thus makes possible
a particularly high degree of calculability of results for the heads of the
organization and for those acting in relation to it. It is fi nally superior both
in intensive effi ciency and in the scope of its operations and is formally
capable of application to all kinds of administrative tasks.
Max Weber, The Theory of Social Economic Organization
Max Weber was a late-19th-century German intellectual whose insights have
made a signifi cant impact on the fi eld of management and the sociology of or-
ganizations. 8 Like Taylor, his ideas developed somewhat in reaction to what he
considered to be poor performance by the organizations of his day. He was espe-
cially concerned that people were in positions of authority not because of their
job-related capabilities but because of their social standing or “privileged” status
in German society.
Have you seen similar problems? Have you ever been upset that people
rise to positions of major responsibility in organizations not because of their
competencies, but because of whom they know or how well they play political
games? Look around, talk to friends and relatives. Are Weber’s concerns at all
relevant today?
At the heart of Weber’s proposal for correcting performance problems with
organizations was a specifi c approach he called a bureaucracy.9 When staff ed and structured along the lines listed in Table 2.1, Characteristics of an Ideal Bureaucracy, he believed organizations could be both highly effi cient and very
fair in treating their members and clients. For Weber, an organization of this
type—the bureaucracy—was ideal and rational. And in eff ect, he was recom-
mending that this is how all organizations should be run.
Table 2.1 Characteristics of an Ideal Bureaucracy
Clear Division of Labor Jobs are well defi ned, and workers become highly skilled at performing them.
Clear Hierarchy of Authority Authority and responsibility are well defi ned, and each position reports to a higher-level one.
Formal Rules and Procedures Written guidelines describe expected behavior and decisions in jobs; written fi les are kept for the historical record.
Impersonality Rules and procedures are impartially and uniformly applied; no one gets preferential treatment.
Careers Based on Merit Workers are selected and promoted on ability and perfor- mance; managers are career employees of the organization.
A bureaucracy is a rational and effi cient form of organization founded on logic, order, and legitimate authority.
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Management Learning ■ Chapter 2 35
A bureaucracy works well, in theory at least, because of its reliance on logic,
order, and legitimate authority. It also works well because people are selected
for their jobs because of competency and are only promoted to higher-level ones
because of demonstrated performance. But if it is so good, why do we so often
hear the terms “bureaucracy” and “bureaucrat” used negatively? Th at’s because
bureaucracies don’t always live up to Weber’s expectations.
Th ink of the last time you were a client of a traditional bureaucracy, perhaps
a government agency or the registrar at your school. Would you agree that they
are sometimes slow in handling problems, making changes, and adapting to
new customer or client needs? As a customer, have you sometimes encountered
employees who seem disconnected, hesitant to make a decision, resistant to
change, and even apathetic in relating to you? When was the last time you were
frustrated at the service you received and complained about an organization’s
excessive “red tape”?
Th ese and other disadvantages of bureaucracy are most likely to limit per-
formance and cause problems for organizations that must be fl exible and
quick in adapting to changing times —a common situation today. And they are
irritants for demanding customers, perhaps like you, who want quick service
and a quality customer experience.
Th e bureaucratic model isn’t the best choice for all organizations. It works
well sometimes, but not all of the time. In fact, a major challenge for research
on organizational design is to identify when and under what conditions bureau-
cratic features work well and what the best alternatives are when they don’t.
Later in the module we’ll call this “contingency thinking.”
Would it surprise you that Millennials (born 1982–1996) have somewhat different views of their bosses than their Generation X and Baby Boomer co-workers? Check out these data from a Kenexa survey that asked 11,000 respondents to rate their managers’ performance. • Overall performance positive—Boomers 55%, Gen Xers 59%,
Millennials 68% • People management positive—Boomers 50%, Gen Xers
53%, Millennials 62% • Work management positive—Boomers 52%, Gen Xers 55%,
Millennials 63% • Keeping commitments positive—Boomers 59%, Gen Xers
60%, Millennials 65%
• Outstanding leader—Boomers 39%, Gen Xers 43%, Millen- nials 51%
YOUR THOUGHTS?
A Kenexa researcher says that Millennials are “more willing to take direction and accept authority” while “as we grow older, our ideas become more concrete and less fl exible.” Does this seem like an accurate conclusion? How can these generational differences in evaluating managers be explained? And, by the way, what do these data suggest if you are managing people from these different generations?
■ GENERATIONS DIFFER WHEN RATING THEIR BOSSES
Facts to Consider THE MILLENNIAL GENERATION IS MORE POSITIVE THAN
BABY BOOMERS ABOUT BOSSES’ PERFORMANCE. {
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EXPLORING MANAGEMENT36
||| Fayol’s administrative principles describe managerial duties and practices.
Another branch in the classical approaches to management includes attempts
to document and understand the experiences of successful managers. Th e most
prominent writer in this realm is Henri Fayol.
In 1916, after a career in French industry, Henri Fayol published Administration
Industrielle et Générale. 10
Th e book outlines his views on the proper management of
organizations and the people within them. It identifi es fi ve “rules” or “duties” of man-
agement in respect to foresight, organization, command, coordination, and control:
• Foresight—complete a plan of action for the future.
• Organization—provide and mobilize resources to implement plan.
• Command—lead, select, and evaluate workers.
• Coordination—fi t diverse eff orts together, ensure information is shared and
problems are solved.
• Control—make sure things happen according to plan, take necessary correc-
tive action.
Look closely at Fayol’s duties. Do you see how they resemble the four func-
tions of management that we talk about today—planning, organizing, leading,
and controlling? Importantly, Fayol believed that managers could be taught to
put these functions into practice in the best ways. For example, he off ered the
following “principles” as guides to managerial action. You’ll still hear them talked
about in the vocabulary of everyday management. Fayol’s scalar chain principle stated that there should be a clear and unbroken line of communication from the
top to the bottom in the organization. His unity of command principle stated that each person in an organization should receive orders from only one boss.
Would you say that these principles still make sense today?
Th e scalar chain principle states that organizations should operate with clear and unbroken lines of communication top to bottom.
Th e unity of command principle states that a worker should receive orders from only one boss.
Nelsonville, Ohio—Rocky Brands chief executive Mike Brooks fi led a suit in Athens County Common Pleas Court against Joe P. Marciante, former regional vice president for sales. Marciante had resigned from Rocky, and Brooks believed he was going to work for a competitor. The suit claimed Marciante violated a “no-compete” agreement he had signed, which stipulated he would not go to work for a com- petitor for one year after leaving Rocky Brands. The court was asked to enforce the one-year waiting period and require that Marciante return all materials in his possession that contained inside information on Rocky Brands.
YOU DECIDE
No-compete clauses and nondisclosure agreements are in- creasingly common in employment contracts. Chances are that you will be asked to sign one someday. Is it ethical for a fi rm to ask a new hire to sign such an agreement? Is it ethical for someone leaving a fi rm to try to break such an agreement? Ask your friends, co-workers, and family for their views and even their personal experiences. What advice about employ- ment agreements is available from the professionals and per- haps from your college or campus placement services?
■ EMPLOYMENT AGREEMENTS CAN BE TRICKY
Ethics Check SOME EMPLOYERS HAVE POLICIES THAT REQUIRE
NEW HIRES TO SIGN “NO-COMPETE” AGREEMENTS. {
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Management Learning ■ Chapter 2 37
Takeaway 2.1 What Are the Lessons of the Classical
Management Approaches?
Rapid Review • Taylor’s principles of scientifi c management focused on the need to carefully se-
lect, train, support, and reward workers in their jobs.
• Weber considered bureaucracy, with its clear hierarchy, formal rules, well-defi ned jobs, and competency-based staffi ng, to be a form of organization that is effi cient
and fair.
• Fayol suggested that managers learn and fulfi ll duties we now call the manage- ment functions of planning, organizing, leading, and controlling.
Questions for Discussion 1. How did Taylor and Weber diff er in the approaches they took to improving the
performance of organizations?
2. Should Weber’s concept of the bureaucratic organization be scrapped, or does it
still have potential value today?
3. What are the risks of accepting the “lessons of experience” off ered by successful
executives such as Fayol?
Be Sure You Can • list the principles of Taylor’s scientifi c management • list key characteristics of bureaucracy • explain why Weber considered bureaucracy an ideal form of organization • list possible disadvantages of bureaucracy • describe how Fayol’s “duties” overlap with the four functions of management
What Would You Do? It’s summer job time and you’ve found something that just might work—handling
customer service inquiries at a local Internet provider. Th e regular full-time employ-
ees are paid by the hour. Summer hires like you fi ll in when they go on vacation. You
will be paid by the call, $1.25 for each customer that you handle. How will this pay
plan aff ect your behavior as a customer service representative? Is this pay plan a
good choice for the Internet provider to use for its summer hires?
STUDY GUIDE
Terms to Defi ne
Bureaucracy
Motion study
Scalar chain principle
Scientifi c management
Unity of command
principle
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EXPLORING MANAGEMENT38
Hawthorne studies
Elton Mayo
Theory of human needs
Abraham Maslow
Theory X and Theory Y
Douglas McGregor
Personality and organization
Chris Argyris
HUMAN RESOURCE
APPROACHES
Assumption: People are social
and self-actualizing
Organizations as communities
Mary Parker Follett
FIGURE 2.1 Who Are the Major Contributors to the Behavioral or Human Resource Approaches to Management Th inking? Th e human resource approaches
shifted management thinking
away from physical factors and
work structures and toward the
human side of organizations.
Th e contributors shown here
each focused on people as
individuals and how their needs
may infl uence their attitudes
and behavior at work.
Takeaway 2.2 What Are the Contributions of the
Behavioral Management Approaches?
ANSWERS TO COME
■ Follett viewed organizations as communities of cooperative action.
■ Th e Hawthorne studies focused attention on the human side of organizations.
■ Maslow described a hierarchy of human needs with self-actualization at the top.
■ McGregor believed managerial assumptions create self-fulfi lling prophecies.
■ Argyris suggests that workers treated as adults will be more productive.
During the 1920s, emphasis on the human side of the workplace influenced
the emergence of behavioral management approaches. As shown in Figure 2.1, this new school of thought included Follett’s notion of the organization as a
community, the well-known Hawthorne studies, and Maslow’s theory of human
needs, as well as theories generated from the work of Douglas McGregor and
Chris Argyris. Th e underlying assumptions are that people are social and self-
actualizing, and that workers seek satisfying social relationships, respond to
group pressures, and search for personal fulfi llment. Does that sound like you?
||| Follett viewed organizations as communities of cooperative action.
On her death in 1933, Mary Parker Follett was eulogized as “one of the most im-
portant women America has yet produced in the fi elds of civics and sociology.” 11
She has been called a “prophet” of management, and her work is a reminder that
good things really do grow from strong foundations. 12
Even though Follett’s ideas were expressed more than 80 years ago, many
would consider them very farsighted indeed. 13
Her ideas still off er the wisdom
of history. She advocated social responsibility, respect for workers, and better
cooperation throughout organizations; she warned against the dangers of too
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Management Learning ■ Chapter 2 39
much hierarchy and called for visionary leadership. Many of these themes are
still central to management theory, even though we describe them by terms such
as “empowerment,” “involvement,” “fl exibility,” “self-management,” and “transfor-
mational leadership.”
Follett suggested that making every employee an owner in the business
would create feelings of collective responsibility. Today, we address the same
issues as “employee ownership,” “profi t sharing,” and “gain-sharing plans.” Follet
believed that business problems involve a wide variety of factors that must be
considered in relationship to one another. Today, we talk about “systems” when
describing the same phenomenon. Follett viewed businesses as services, orga-
nizations that should always consider making profi ts vis-á-vis the public good.
Today, we pursue the same issues as “managerial ethics” and “corporate social
responsibility.”
And what can be said about executive success today? 14
I wonder what Follett
would say? My guess is that Follett would agree that the successful 21st-century
executive must be an inspiring leader who attracts talented people and motivates
them in a setting where everyone can do his or her best work. She would argue
that every manager, regardless of level, should be an ethical role model—always
acting ethically, setting high ethical standards, and infusing ethics throughout
the organization. And she would point out that anyone aspiring to managerial
success must be an active doer, someone ready to make things happen, focus at-
tention on the right things, and make sure that they really get done.
“Life Is Good” Means Business
Happiness May Be Your Guide to Career Building
Imagine! Yes, you can! Go for it! Life is good. Well, make that: Life is really good!
Th ese are thoughts that turn dreams into realities. Th ey’re also part and parcel
of the $80 million company named Life Is Good. It began with two brothers, Bert
and John Jacobs, making T-shirts for street sales and has grown into a 200�
employee company selling a variety of fun apparel and related products in 14 or
more countries. Inc. magazine calls it a “fi ne small business that only wants to
make me happy.”
Bert, Chief Executive Optimist, and Jake, Chief Creative Optimist, built
a company devoted to humor and humility. John says: “It’s important that
we’re saying ‘Life is good,’ not ‘Life is great’ or ‘Life is perfect,’ there’s a big
difference. . . . Don’t determine that you’re going to be happy when you get
the new car or the big promotion or meet that special person. You can de-
cide that you’re going to be happy today.” And that’s the message of the Life
Is Good brand.
Bert and Jake have stuck to their values on this journey to business
success. Th ey live the brand, enjoying leisure pursuits such as kayaking and
ultimate Frisbee; they support philanthropies such as Camp Sunshine for
children with serious illnesses and Project Joy for traumatized children;
and the company runs seasonal Life Is Good festivals to help raise money
for charities.
Bert and John didn’t start
with business degrees or
experience, but they had
good instincts, creativity,
and positive views on life.
And they learned as they
progressed. Each step
forward was a chance
to capture business and
management experience,
learn from it, and keep
getting better. How about
you? Can we say that you’re
a student of history and use
past experiences to improve
in the future?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT40
||| Th e Hawthorne studies focused attention on the human side of organizations.
In 1924, the Western Electric Company commissioned a study of individual
productivity at the Hawthorne Works of the fi rm’s Chicago plant. 15
Th e initial
“Hawthorne studies,” with a research team headed by Elton Mayo of Harvard
University, sought to determine how economic incentives and the physical con-
ditions of the workplace aff ected the output of workers. But their results were
perplexing. After failing to fi nd that better lighting in the manufacturing facili-
ties would improve productivity, they concluded that unforeseen “psychological
factors” somehow interfered with their study. Yet similar results occurred when
they conducted further tests.
After isolating six relay-assembly workers in a special room, Mayo and his
team measured the eff ect on outputs of various rest pauses as well as lengths of
workdays and workweeks. Th ey found no direct relationship between changes
in physical working conditions and performance; productivity increased regard-
less of the changes made. Th e researchers concluded that these results were
caused by the new “social setting” in the test room. Th e six workers in the test
room shared pleasant conversations with one another and received more at-
tention from the researchers than they got from supervisors in their usual jobs.
As a result, they tried to do what they thought the researchers wanted them to
do—a good job.
Th is tendency to try to live up to expectations became known as the
Hawthorne eff ect. One of its major implications is the possibility that people’s performance will be aff ected by the way they are treated by their managers.
Have you noticed that people given special attention will tend to perform as ex-
pected? Could the Hawthorne eff ect explain why some students, perhaps you,
do better in smaller classes or for instructors who pay more attention to them
in class?
Th e Hawthorne studies continued until the economic conditions of the De-
pression forced their termination. By then, interest in the human factor had
broadened to include employee attitudes, interpersonal relations, and group
relations. For example, over 21,000 employees were interviewed to learn what
they liked and disliked about their work environment. “Complex” and “baf-
fl ing” results led the researchers to conclude that the same things that satisfi ed
some workers—such as work conditions or wages—led to dissatisfaction for
others. And a “surprise” fi nding in a fi nal study was that people would restrict
their output in order to avoid the displeasure of the group, even if it meant sac-
rifi cing increased pay. Mayo and his team had recognized fi rsthand what most
of us realize already : that groups can have strong negative, as well as positive,
infl uences on the behaviors of their members.
Scholars have criticized the Hawthorne studies for poor research design, weak
empirical support for the conclusions drawn, and overgeneralized fi ndings. 16
And
there is no doubt that management research has moved on with greater care in
the use of scientifi c methods. But the Hawthorne studies were signifi cant turning
points in the evolution of management thought. Th ey helped shift the attention
of managers and researchers away from the technical and structural concerns of
the classical approaches and toward social and human concerns as important
keys to workplace productivity.
Th e Hawthorne eff ect is the tendency of persons singled out for special attention to perform as expected.
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Management Learning ■ Chapter 2 41
||| Maslow described a hierarchy of human needs with self-actualization at the top.
Th e work of psychologist Abraham Maslow in the area of human needs
emerged as a key component of the new direction in management think-
ing. 17
He began with the notion of the human need, a physiological or psy- chological defi ciency that a person feels compelled to satisfy. Why, you
might ask, is this a signifi cant concept for managers? Th e answer is be-
cause needs create tensions that can infl uence a person’s work attitudes
and behaviors.
What needs, for example, are important to you? How do they infl uence your
behavior, the way you study and the way you work? You probably already know
that Maslow described the fi ve levels of human needs shown in Figure 2.2. Th ey are grouped as lower-order needs—physiological, safety, and social, and higher-
order needs—esteem and self-actualization.
A need is a physiological or psychological defi ciency that a person wants to satisfy.
Self-actualization needs
HIGHER-ORDER
NEEDS
Highest level: need for self-fulfillment; to grow and use abilities to fullest and most creative extent
Esteem needs
Need for esteem in eyes of others; need for respect, prestige, recognition and self-esteem, personal sense of competence, mastery
Social needs
Need for love, affection, sense of belongingness in one’s relationships with other people
Safety needs
Need for security, protection, and stability in the events of day-to-day life
Physiological needs
Most basic of all human needs: need for biological maintenance; food, water, and physical well-being
LOWER-ORDER
NEEDS
FIGURE 2.2 How Does Maslow’s Hierarchy of Human Needs Operate? In Abraham Maslow’s theory,
human needs are satisfi ed in a
step-by-step progression. People
fi rst satisfy the lower-order
needs: physiological, safety, and
social. Once these are satisfi ed,
they focus on the higher-order
ego and self-actualization needs.
A satisfi ed need no longer
motivates behavior, except at
the level of self-actualization.
At this top level, the need grows
stronger the more it is satisfi ed.
According to Maslow, people try to satisfy the fi ve needs in sequence,
moving step-by-step from the lowest to the highest. He called this the
progression principle—a need only becomes activated after the next-lower- level need is satisfi ed. Once a need is activated, it dominates attention and
Maslow’s progression principle is that a need at any level becomes activated only after the next-lower-level need is satisfi ed.
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EXPLORING MANAGEMENT42
Th eory X assumes people dislike work, lack ambition, are irresponsible, and prefer to be led.
Th eory Y assumes people are willing to work, accept responsibility, are self-directed, and are creative.
A self-fulfi lling prophecy occurs when a person acts in ways that confi rm another’s expectations.
determines behavior until it is satisfi ed. But then it no longer motivates behavior.
Maslow called this the defi cit principle—people act to satisfy deprived needs for which a satisfaction “defi cit” exists. Only at the highest level of self-actualization
do the defi cit and progression principles cease to operate. Th e more this need is
satisfi ed, the stronger it grows.
Maslow’s theory can help us to better understand people’s needs and help
fi nd ways to satisfy them through their work. Of course, this is easier said than
done. If it were easy, we wouldn’t have so many cases of workers going on strike
against their employers, complaining about their jobs, or quitting to fi nd bet-
ter ones. Consider also the case of volunteers working for the local Red Cross,
a community hospital, or a youth soccer league. Our society needs volunteers;
most nonprofi t organizations depend on them. But what needs move people to
do volunteer work? How can one keep volunteers involved and committed in
the absence of pay?
||| McGregor believed managerial assumptions create self-fulfi lling prophecies.
Maslow’s work, along with the Hawthorne studies, surely influenced another
prominent management theorist, Douglas McGregor. His classic book, The
Human Side of Enterprise, suggests that managers should pay more attention
to the social and self-actualizing needs of people at work. 18
He framed his
argument as a contrast between two opposing views of human nature: a set
of negative assumptions he called “Theory X” and a set of positive ones he
called “Theory Y.”
Managers holding Th eory X assumptions expect people to generally dislike work, lack ambition, act irresponsibly, resist change, and prefer to follow rather
than to lead. McGregor considered such thinking wrong, believing that Th eory Y assumptions are more appropriate and consistent with human potential. Man-
agers holding Th eory Y assumptions expect people to be willing to work, capable
of self-control and self-direction, responsible, and creative.
Can you spot diff erences in how you behave or react when treated in a Th e-
ory X way or a Th eory Y way? McGregor strongly believed that these assump-
tions create self-fulfi lling prophecies. Th at is, as with the Hawthorne eff ect, people end up behaving consistently with the assumptions. Managers holding
Th eory X assumptions are likely to act in directive “command-and-control”
ways, often giving people little say over their work. Th is in turn often creates
passive, dependent, and reluctant subordinates who do only what they are
told to do. Have you ever encountered a manager or instructor with a Th eory
X viewpoint?
Managers with Theory Y assumptions behave quite differently. They are
more “participative,” likely giving others more control over their work. This
creates opportunities to satisfy higher-order esteem and self-actualization
needs. In response, the workers are more likely to act with initiative, respon-
sibility, and high performance. The self-fulfilling prophecy occurs again, but
this time it is a positive one. You should find Theory Y thinking reflected in
a lot of the ideas and developments discussed in this book, such as valuing
diversity, employee involvement, job enrichment, empowerment, and self-
managing teams. 19
Maslow’s defi cit principle is that people act to satisfy needs for which a satisfaction defi cit exists; a satisfi ed need doesn’t motivate behavior.
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Management Learning ■ Chapter 2 43
||| Argyris suggests that workers treated as adults will be more productive.
Ideas set forth by the well-regarded scholar and consultant Chris
Argyris also refl ect the positive views of human nature advanced
by Maslow and McGregor. In his book Personality and Organiza-
tion, Argyris contrasts the management practices found in tradi-
tional and hierarchical organizations with the needs and capabili-
ties of mature adults. 20
Argyris clearly believes that when problems such as employee
absenteeism, turnover, apathy, alienation, and low morale plague
organizations, they may be caused by a mismatch between man-
agement practices and the adult nature of their workforces. His
basic point is that no one wants to be treated like a child, but
that’s just the way many organizations treat their workers. Th e re-
sult, he suggests, is a group of stifl ed and unhappy workers who perform below
their potential.
Does Argyris seem to have a good point? For example, scientifi c management
assumes that people will work more effi ciently on better-defi ned tasks. Argyris
would likely disagree, believing that simplifi ed jobs limit opportunities for self-
actualization in one’s work. In a Weberian bureaucracy, typical of many of our
government agencies, people work in a clear hierarchy of authority, with higher
levels directing and controlling the work of lower levels. 21
Th is is supposed to be
an effi cient way of doing things. Argyris would worry that workers lose initiative
and end up being less productive. Also, Fayol’s administrative principles assume
that effi ciency will increase when supervisors plan and direct a person’s work.
Argyris might suggest that this sets up conditions for psychological failure; psy-
chological success is more likely when people defi ne their own goals.
Each of us has a preferred learning style, a set of ways through which we like to learn by receiving, processing, and recalling new information. Hopefully, you take advantage of this book to gain insights into your style and where and how it works best.
Given that learning is any change of behavior that results from experience, one of our most signifi cant challenges is to always embrace experiences—at school, at work, and in every- day living—and try our best to learn from them. The same can be said about unlocking the wisdom of history. This chapter is
a reminder about management history and how the achieve- ments of the past can still provide insights that can help us deal with the present.
■ LEARNING STYLE
Explore Yourself ONE OF OUR MOST SIGNIFICANT CHALLENGES IS TO EMBRACE
LEARNING FROM EVERYDAY EXPERIENCES. {
Get to know yourself better by taking the self-assessment
on Managerial Assumptions and completing the other
activities in the Exploring Management Skill-Building
Portfolio.
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EXPLORING MANAGEMENT44
Takeaway 2.2 What Are the Contributions of the
Behavioral Management Approaches?
Rapid Review • Follett’s ideas on groups, human cooperation, and organizations that served social
purposes foreshadowed current management themes.
• Th e Hawthorne studies suggested that social and psychological forces infl u- ence work behavior and that good human relations may lead to improved work
performance.
• Maslow’s hierarchy of human needs suggested the importance of self-actualization and the potential for people to satisfy important needs through their work.
• McGregor criticized negative Th eory X assumptions about human nature and ad- vocated positive Th eory Y assumptions that view people as independent, respon-
sible, and capable of self-direction in their work.
• Argyris pointed out that people in the workplace are mature adults who may react negatively when management practices treat them as if they were immature.
Questions for Discussion 1. How did insights from the Hawthorne studies redirect thinking from the classical
management approaches and toward something quite diff erent?
2. If Maslow’s hierarchy of needs theory is correct, how can a manager use it to
become more eff ective?
3. Where and how do McGregor’s notions of Th eory X and Th eory Y overlap with
Argyris’s ideas regarding adult personalities?
Be Sure You Can • explain why Follett’s ideas were quite modern in concept • summarize fi ndings of the Hawthorne studies • explain and illustrate the Hawthorne eff ect • explain Maslow’s defi cit and progression principles • distinguish between McGregor’s Th eory X and Th eory Y assumptions • explain the self-fulfi lling prophecies created by Th eory X and Th eory Y • explain Argyris’s concern that traditional organizational practices are inconsistent
with mature adult personalities
What Would You Do? As a manager in a small local fi rm, you’ve been told that because of the poor econo-
my workers can’t be given any pay raises this year. You have some really hardwork-
ing and high-performing people on your team, and you were counting on giving
them solid raises. Now what can you do? How can you use insights from Maslow’s
hierarchy of needs to solve this dilemma? Is it really possible to fi nd suitable re-
wards other than pay for team members’ high performance?
STUDY GUIDE
Terms to Defi ne
Defi cit principle
Hawthorne eff ect
Need
Progression principle
Self-fulfi lling
prophecies
Th eory X
Th eory Y
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Management Learning ■ Chapter 2 45
Takeaway 2.3 What Are the Foundations of Modern
Management Thinking?
ANSWERS TO COME
■ Managers use quantitative analysis and tools to solve complex problems.
■ Organizations are open systems that interact with their environments.
■ Contingency thinking holds that there is no one best way to manage.
■ Quality management focuses attention on continuous improvement.
■ Evidence-based management seeks hard facts about what really works.
The next step in the timeline of management history sets the stage for
a stream of new developments that are continuing to this day. Loosely called the
modern management approaches, they share the assumption that people and
organizations are complex, growing and changing over time in response to new
problems and opportunities in their environments. Th e many building blocks of
modern management include use of quantitative tools and techniques, recogni-
tion of the inherent complexity of organizations as systems, contingency thinking
that rejects the search for universal management principles, attention to quality
management, and the desire to ground management practice in solid scientifi c
evidence.
||| Managers use quantitative analysis and tools to solve complex problems.
About the same time that some scholars were developing human resource ap-
proaches to management, others were investigating how quantitative tech-
niques could improve managerial decision making. Th e foundation of these
analytical decision sciences approaches is the assumption that mathematical
techniques can be used for better problem solving. At Google, for example, a
math formula has been developed to aid in retaining talent. It pools informa-
tion from performance reviews and surveys, promotions, and pay histories to
identify employees who might feel underutilized and be open to off ers from
other fi rms. Human resource management plans are then developed to try and
retain them. 22
In our world of vast computing power and the easy collection and storage
of data, there is renewed emphasis on how to use available data to make bet-
ter management decisions. Th is is an area of management practice known as
analytics, the use of data to solve problems and make informed decisions using systematic analysis.
23 And in respect to analytics, scholars are very interested in
learning how managers can use mathematical tools to conduct quantitative and
statistical analyses.
Th e terms management science and operations research are often used in- terchangeably to describe the use of mathematical techniques to solve manage-
ment problems. A typical quantitative approach proceeds as follows. A problem
Analytics is the systematic use and analysis of data to solve problems and make informed decisions.
Management science and operations research apply mathematical techniques to solve management problems.
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EXPLORING MANAGEMENT46
is encountered, it is systematically analyzed, appropriate mathematical models
and computations are applied, and an optimum solution is identifi ed. Consider
these examples.
Operations management is the study of how organizations produce goods and services.
An open system transforms resource inputs from the environment into product outputs.
Architect
Foundation
Framing
Finishing
3 6
Time in months
9 12 18 24
Problem A real estate developer wants to control costs and
fi nish building a new apartment complex on time. Quan-
titative approach: Network models like the Gantt chart pic-
tured nearby break large tasks into smaller components
to track completion of many diff erent activities on the re-
quired timetables.
Problem An oil exploration company is worried about fu-
ture petroleum reserves in various parts of the world.
Quantitative approach: Mathematical forecasting helps make future pro-
jections for reserve sizes and depletion rates that are useful in the plan-
ning process.
Problem A big box retailer is trying to deal with pressures on profi t mar-
gins by minimizing costs of inventories while never being “out of stock”
for customers. Quantitative approach: Inventory analysis helps control
inventories by mathematically determining how much to automatically
order and when.
Problem A grocery store is getting complaints from customers that waiting
times are too long for checkouts during certain times of the day. Quantita-
tive approach: Queuing theory helps allocate service personnel and work-
stations based on alternative workload demands and in a way that mini-
mizes both customer waiting times and costs of service workers.
Problem A manufacturer wants to maximize profi ts for producing three diff er-
ent products on three diff erent machines, each of which can be used for dif-
ferent periods of times and at diff erent costs. Quantitative approach: Linear
programming is used to calculate how best to allocate production among
diff erent machines.
An important counterpart to these management science approaches is opera- tions management, which focuses on how organizations produce goods and ser- vices effi ciently and eff ectively. Th e emphasis is on the study and improvement
of operations, the transformation process through which goods and services are
actually created. Th e essentials of operations management include such things
as business process analysis, workfl ow designs, facilities layouts and locations,
work scheduling and project management, production planning, inventory man-
agement, and quality control.
||| Organizations are open systems that interact with their environments.
Th e concept of system is a key ingredient of modern management thinking.
Figure 2.3 shows that organizations are open systems that interact with their environments to obtain resources—people, technology, information, money, and
supplies—that are transformed through work activities into goods and services
for their customers and clients. All organizations, from IBM to the U.S. Postal
Service to your college or university and the local bookstore, can be described
this way.
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Management Learning ■ Chapter 2 47
A subsystem is a smaller component of a larger system.
Th e open-systems concept helps explain why there is so much emphasis to-
day on organizations being customer-driven. Th is means they try hard to focus
their resources, energies, and goals on continually satisfying the needs of their
customers and clients. Look again at Figure 2.3 and you should recognize the
logic. Can you see how customers hold the keys to the long-term prosperity and
survival of a business, such as an auto manufacturer? Th eir willingness to buy
products or use services provides the revenues needed to obtain resources and
keep the cycle in motion. And as soon as the customers balk or start to complain,
someone should be listening. Th is feedback is a warning that the organization
needs to change and do things better in the future.
Any organization also operates as a complex network of subsystems, or smaller components, whose activities individually and collectively support the work of the
larger system. 24
Figure 2.4 shows the importance of cooperation among organiza- tional subsystems.
25 In the fi gure, for example, the operations and service manage-
ment systems serve as a central point. Th ey provide the integration among other
subsystems, such as purchasing, accounting, sales, and information, all of which
are essential to the work, and the success, of the organization. But the reality is
that the cooperation is often imperfect and could be improved upon. Just how
organizations achieve this, of course, is a major management challenge.
ORGANIZATIONAL
NETWORK OF SUBSYSTEMS
Purchasing and inventory systems
Marketing, sales, and distribution
systems
Accounting and financial
systems
Information and technology
systems
Operations and service
management systems
Inputs Outputs
SUPPLIERS CUSTOMERS
FIGURE 2.4 How Do Organizations Operate as Complex Networks of Subsystems? Externally, organizations interact
with suppliers and customers in
their environments. Internally,
many diff erent subsystems must
interact and work well together
so that high-quality inputs are
transformed into products satis-
fying customers’ needs. Common
subsystems of a business include
purchasing, information technol-
ogy, operations management,
marketing and sales, distribution,
human resources, and account-
ing and fi nance.
The environment
supplies
The organization
creates
Consumer feedback
Resource inputs
People Money Materials Technology Information
The environment
consumes
Product outputs
Finished goods and/or services
Work activities
turn resources into outputs
Transformation process
FIGURE 2.3 How Do Organizations as Open Systems Interact with Th eir External Environments? As open systems, organizations
continually interact with their
external environments to obtain
resource inputs, transform those
inputs through work activities
into goods and services, and
deliver fi nished products to
their customers. Feedback from
customers indicates how well
they are doing.
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EXPLORING MANAGEMENT48
||| Contingency thinking holds that there is no one best way to manage.
Rather than try to fi nd the one best way to manage in all circumstances, modern
management adopts contingency thinking. Th at is, it recognizes organizational complexities and attempts to identify practices that best fi t with the unique de-
mands of diff erent situations.
Consider again the concept of bureaucracy. Weber off ered it as an ideal form of
organization. But from a contingency perspective, the strict bureaucratic form is
only one possible way of organizing things. What turns out to be the best struc-
ture in any given situation will depend on many factors, including environmen-
tal uncertainty, available technology, staff competencies, and more. Contingency
thinking recognizes that the structure that works well for one organization may
not work well for another in diff erent circumstances. Also, what works well at one
point in time may not work as well in the future if circumstances have changed. 26
You should fi nd a lot of contingency thinking in this book. Its implications
extend to all of the management functions—from planning and controlling for
diverse environmental conditions, to organizing for diverse workforces and mul-
tiple tasks, to leading in diff erent performance situations. And this is a good re-
fl ection of everyday realities. Don’t you use a lot of contingency thinking when
solving problems and otherwise going about your personal aff airs?
Contingency thinking tries to match management practices with situational demands.
When Carol Bartz was interviewed by the Wall Street Journal regarding her leadership as the new CEO of Yahoo, Inc., she said: “Fair but tough. We all work hard, and work has to be an interesting, fun place. And that has to start at the top. You have to be willing to say, ’I don’t know,’ ’I made mistakes,’ and change. When somebody tells me they’re going to do something, I want them to do it or tell me they’re not going to do it.”
With plenty of technology and executive experience, she is known for being strong and insightful. Bartz’s management style has been described by others as mixing “bluntness” and “humor.” One of her former executives at Autodesk points out that “she could get the best out of people.” She says that the fi rst thing she did when taking the lead at Yahoo was “set up 45-minute sessions with as many people as I could.” Accord- ing to Bartz, “If you sit quiet long enough, you fi nd out what people really think.”
Throughout her career, Bartz has fought the glass ceiling, making no bones about what she considered discrimination
from a business community ruled by men. She cites an incident that occurred in a meeting with U.S. Senators. One turned to Carol Bartz and said: “So, how are we going to start the meet- ing?” Looking back on it, she says: “He thought I must be the moderator. It’s annoying. I don’t have time for these guys, but when it’s ridiculous, I call them on it.”
Within six weeks of being appointed as CEO of Yahoo, Bartz was “preparing a company-wide reorganization.” She calls Yahoo an “important property and such a great name” that needs “structure.” And as for herself, she says, “I think managing is a real job, something you should always work at and try to do better.”
WHAT’S THE LESSON HERE?
Whatever you might think about Bartz’s style, do you agree that she certainly is confi dent and decisive? And what about her career experiences as a woman in top management? What does it take to do well at the top? Do you think it takes some- thing “extra” if you are a woman?
■ CAROL BARTZ USED EXECUTIVE EXPERIENCE TO CREATE CHANGE AT YAHOO!
Role Models “I THINK MANAGING IS A REAL JOB, SOMETHING YOU
SHOULD ALWAYS WORK AT AND TRY TO DO BETTER.” {
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Management Learning ■ Chapter 2 49
||| Quality management focuses attention on continuous improvement.
Th e work of W. Edwards Deming is a cornerstone of the quality movement in man-
agement. 27
His story began in 1951, when he was invited to Japan to explain quality
control techniques that had been developed in the United States. “When Deming
spoke,” we might say, “the Japanese listened.” Th e principles he taught the Japanese
were straightforward, and they worked: Tally defects, analyze and trace them to the
source, make corrections, and keep a record of what happens afterward. Deming’s
approach to quality emphasizes constant innovation, use of statistical methods,
and commitment to training in the fundamentals of quality assurance. 28
One outgrowth of Deming’s work was the emergence of total quality manage- ment, or TQM. Th is process makes quality principles part of the organization’s strategic objectives, applying them to all aspects of operations and striving to
meet customers’ needs by doing things right the fi rst time. Most TQM approaches
begin with an insistence that the total quality commitment applies to everyone
in an organization, from resource acquisition and supply chain management,
through production and into the distribution of fi nished goods and services, and
ultimately to customer relationship management.
Th e search for and commitment to quality is now tied to the emphasis modern
management gives to the notion of continuous improvement—always looking for new ways to improve on current performance.
29 Th e goal is that one can never
be satisfi ed; something always can and should be improved upon.
Total quality management is managing with an organization- wide commitment to continuous improvement, product quality, and customer needs.
Continuous improvement involves always searching for new ways to improve work quality and performance.
WHAT IS YOUR PATH TO
SUCCESS?
Studies of individual greatness lead many observers to the ad- age “great leaders are born, not made.” But according to author Malcolm Gladwell in the book
Outliers (2008, Little, Brown and Company), extraordinary people—or outliers—are made, not born. Ingredients like practice, social savvy, and positive attitude are needed along with opportunity to nurture these skills.
Gladwell insists that high IQ cannot predict success and instead a minimum threshold is necessary. Your environment provides more critical elements, and he cites the “10,000 hour rule” that defi nes the amount of work logged by even- tual masters of various disciplines. Gladwell contends that you must practice to become great, not simply once you be- come great. He contends achievement-oriented individuals possess a can-do attitude, and persist through diffi culty when
others give up. He recommends you choose complex and meaningful interests that promote self-direction. By exerting and refl ecting on your progress you can train yourself to be- come a master.
Gladwell argues that success is not an innate ability but something that most can achieve given the right chance. He laments that we select individuals with exceptional ability over those with threshold ability. Those born bright often fail to make themselves successful, while those born with modest intellect could fl ourish given the opportunity to make them- selves great.
REFLECT AND REACT
Are you destined for greatness? How much time do you spend on your favorite activity? Are you entitled to good things in life and how do you assert yourself? When you do poorly on something do you give up or try until you do well? Is someone with a high GPA more likely to succeed than someone who leads a student organization and works twenty hours a week?
■ OUTLIERS BY MALCOLM GLADWELL
Manager’s Library ACHIEVEMENT-ORIENTED INDIVIDUALS POSSESS CAN-DO ATTITUDES
AND PERSIST THROUGH DIFFICULTY WHEN OTHERS GIVE UP. {
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EXPLORING MANAGEMENT50
||| Evidence-based management seeks hard facts about what really works.
Looking back on the historical foundations of management, one thing that
stands out is criticism by today’s scholars of the scientifi c rigor of some histori-
cal cornerstones, among them Taylor’s scientifi c management approach and the
Hawthorne studies. Th e worry is that we may be too quick in accepting as factual
the results of studies that are based on weak or even shoddy empirical evidence.
And if the studies are fl awed, perhaps more care needs to be exercised when
trying to apply their insights to improve management practices. Th is problem
isn’t limited to the distant past. 30
A book by Jim Collins, Good to Great, achieved great acclaim and best-seller sta-
tus for its depiction of highly successful organizations. 31
But Collins’s methods and
fi ndings have since been criticized by researchers. 32
And after problems appeared at
many fi rms previously considered by him to be “great,” he wrote a follow-up book
called How the Mighty Fall. 33
Th e point here is not to discredit what keen observers
of management practice like Collins and others report. But it is meant to make you
cautious and a bit skeptical when it comes to separating fads from facts and conjec-
ture from informed insight.
Today’s management scholars are trying to move beyond generalized im-
pressions of excellence to understand more empirically the characteristics
of high-performance organizations—ones that consistently achieve high- performance results while also creating high quality-of-work-life environments
for their employees. Following this line of thinking, Jeff rey Pfeff er and Robert Sut-
ton make the case for evidence-based management, or EBM. Th is is the pro- cess of making management decisions on “hard facts”—that is, about what really
works—rather than on “dangerous half-truths”—things that sound good but lack
empirical substantiation. 34
Using data from a sample of some 1,000 fi rms, for example, Pfeff er and a
colleague found that fi rms using a mix of well selected human resource man-
agement practices had more sales and higher profi ts per employee than those
that didn’t. 35
Th ose practices included employment security, selective hiring,
self-managed teams, high wages based on performance merit, training and skill
development, minimal status diff erences, and shared information. Examples of
other EBM fi ndings include challenging goals accepted by an employee are likely
to result in high performance, and that unstructured employment interviews are
unlikely to result in the best person being hired to fi ll a
vacant position. 36
Scholars pursue a variety of solid empirical stud-
ies using proven scientifi c methods in many areas of
management research. Some carve out new and inno-
vative territories, while others build upon and extend
knowledge that has come down through the history
of management thought. By staying abreast of such
developments and fi ndings, managers can have more
confi dence that they are approaching decisions from a
solid foundation of evidence rather than mere specu-
lation or hearsay.
A high-performance organization consistently achieves excellence while creating a high-quality work environment.
Evidence-based management involves making decisions based on hard facts about what really works.
Basic Scientifi c Methods
• A research question or problem is identifi ed.
• Hypotheses, or possible explanations, are stated.
• A research design is created to systematically
test the hypotheses.
• Data gathered in the research are analyzed and
interpreted.
• Hypotheses are accepted or rejected based upon
the evidence.
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Management Learning ■ Chapter 2 51
Takeaway 2.3 What Are the Foundations of Modern
Management Th inking?
Rapid Review • Advanced quantitative techniques in decision sciences and operations manage-
ment help managers solve complex problems.
• Th e systems view depicts organizations as complex networks of subsystems that must interact and cooperate with one another if the organization as a whole is to
accomplish its goals.
• Contingency thinking avoids “one best way” arguments, recognizing instead that managers need to understand situational diff erences and respond appropriately
to them.
• Quality management focuses on making continuous improvements in processes and systems.
• Evidence-based management uses fi ndings from rigorous scientifi c research to identify management practices for high performance.
Questions for Discussion 1. Can you use the concepts of open system and subsystem to describe the opera-
tions of an organization in your community?
2. In addition to the choice of organization structures, in what other areas of man-
agement decision making do you think contingency thinking plays a role?
3. Does evidence-based management allow for managers to learn from their own
experiences as well as the experiences of others?
Be Sure You Can • discuss the importance of quantitative analysis in management decision making • use the terms “open system” and “subsystem” to describe how an organization
operates
• explain how contingency thinking might infl uence a manager’s choices of organi- zation structures
• describe the role of continuous improvement in total quality management • give examples of workplace situations that can benefi t from evidence-based
management
What Would You Do? You’ve just come up with a great idea for improving productivity and morale in a
shop that silk-screens T-shirts for Life is Good ( featured earlier in the chapter). You
will allow workers to work four 10-hour days if they want instead of the normal
fi ve-day/40-hour week. With the added time off , you reason, they’ll he happier and
more productive while working. But your boss isn’t so sure. “Show me some evi-
dence,” she says. Can you design a research study that can be done in the shop to
show whether or not your proposal is a good one?
STUDY GUIDE
Terms to Defi ne
Analytics
Contingency thinking
Continuous
improvement
Evidence-based
management
High-performance
organization
Management science
Open system
Operations
management
Operations research
Subsystem
Total quality
management
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EXPLORING MANAGEMENT52
1. A management consultant who advises managers
to carefully study jobs, train workers to do them
with efficient motions, and tie pay to job perfor-
mance is using ideas from .
(a) scientifi c management (b) contingency thinking
(c) Henri Fayol (d) Th eory Y
2. Th e Hawthorne studies were important in manage-
ment history because they raised awareness about
the infl uence of on productivity.
(a) organization structures (b) human factors
(c) physical work conditions (d) pay and rewards
3. If Douglas McGregor heard an instructor complain-
ing that her students were lazy and irresponsible, he
would say these assumptions .
(a) violated scientifi c management ideas
(b) focused too much on needs
(c) would create a negative self-fulfi lling prophecy
(d) showed contingency thinking
4. If your local bank or credit union is a complex
system, then the loan-processing department of the
bank would be considered a .
(a) subsystem (b) closed system
(c) learning organization (d) bureaucracy
5. When a manager puts Kwabena in a customer rela-
tions job because he has strong social needs and
gives Sherrill lots of daily praise because she has
strong ego needs, he is displaying .
(a) systems thinking
(b) Th eory X
(c) contingency thinking
(d) administrative principles
6. Which of the following is one of the characteristics
of Weber’s ideal bureaucracy?
(a) few rules and procedures (b) impersonality
(c) promotion by privilege not by merit
(d) ambiguous hierarchy of authority
7. Which principle states that a person should only
receive orders from one boss in an organization?
(a) scalar (b) contingency
(c) Hawthorne (d) unity of command
8. One of the conclusions from the Hawthorne studies
was that .
(a) motion studies could improve performance
(b) groups can sometimes restrict the productivity
of their members
(c) people respond well to monetary incentives
(d) supervisors should avoid close relations with
their subordinates
9. If an organization was performing poorly, what
would Henri Fayol most likely advise as a way to
improve things?
(a) teach managers to better plan, organize, lead,
and control
(b) give workers better technology
(c) promote only the best workers to management
(d) fi nd ways to improve total quality management
10. When a worker has a family, makes car payments,
and is active in local organizations, how might
Argyris explain her poor work performance?
(a) She isn’t treated as an adult at work.
(b) Managers are using Th eory Y assumptions.
(c) Organizational subsystems are ineffi cient.
(d) She doesn’t have the right work skills.
11. management assumes people are
complex, with widely varying needs.
(a) Classical (b) Neoclassical
(c) Behavioral (d) Modern
12. Confl ict between the mature adult personality
and a rigid organization was a major concern of
.
(a) Argyris (b) Follett
(c) Gantt (d) Fuller
C H
A
PTER 2
TP
Multiple-Choice Questions
TestPrep 2
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Management Learning ■ Chapter 2 53
13. Th e highest level in Maslow’s hierarchy is
.
(a) safety (b) esteem
(c) self-actualization (d) physiological
14. If an organization is considered an open system,
work activities that turn resources into outputs are
part of the process.
(a) input (b) transformation
(c) output (d) feedback
15. When managers make decisions based on
solid facts and information, this is known as
.
(a) continuous improvement
(b) evidence-based management
(c) Th eory Y
(d) Th eory X
Short-Response Questions
16. Give an example of how principles of scientifi c management can apply in organizations today.
17. How do the defi cit and progression principles operate in Maslow’s hierarchy?
18. Compare the Hawthorne eff ect with McGregor’s notion of self-fulfi lling prophecies.
19. Explain by example several ways a manager might use contingency thinking in the management process.
Integration and Application Question
20. Enrique Temoltzin is the new manager of a college bookstore. He wants to do a good job and decides to operate
the store on Weber’s concept of bureaucracy. Question: Is bureaucracy the best approach here? What are its potential advantages and disadvantages? How could Enrique use contingency thinking in this situation?
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 2: Managerial Assumptions
■ CLASS EXERCISE 2: Evidence-Based Management Quiz
■ TEAM PROJECT 2: Management in Popular Culture
C H
A
PTER 2
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot Shoppers in 77 countries are fans of Zara’s knack for bringing the latest styles from sketchbook to
clothing rack at lightning speed—and reasonable prices.
Low prices and a rapid response to fashion trends give
Zara a top ranking among global clothing vendors. Th e
chain specializes in quick turnarounds of the latest
designer trends at prices
tailored to the young—
about $27 an item. Louis Vuitton fashion director Daniel
Piette described Zara as “possibly the most innovative
and devastating retailer in the world.”
Don’t Miss This Selection from Cases for Critical Thinking
tt f hi di t D i l
■ CHAPTER 2 CASE Zara International: Fashion at the Speed of Light
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“How do you excuse betraying thousands,” said Bernard Madoff
when sentenced to 150 years in jail for a multi-billion dollar
fi nancial fraud.
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Explore Yourself More on individual character
Role Models Gary Hirshberg goes for
triple bottom line at
Stonyfi eld Farm
Ethics Check Committing to a green supply
chain
Facts to Consider Behavior of managers key to an
ethical workplace
Manager’s Library Creating a World
Without Poverty
by Muhammad
Yunus
3 Ethics and Social
Responsibility
Character Doesn’t Stay Home When We Go to Work
1. Understand how
ethics and ethical
behavior play out in
the workplace.
2. Know how to maintain
high standards of
ethical conduct.
3. Identify when
organi zations are
and are not acting in
socially responsible
ways.
YOUR CHAPTER 3
TAKEAWAYS
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
55
M L C
W
b
Y
M
Management Live
Individual Character and The Blind Side
I n Th e Blind Side, Academy Award winner Sandra Bullock
plays Leigh Anne Tuohy, a strong-willed southern woman.
She reaches out to help an African-American high school
student with no stable home, a history of academic underachievement, and
raw athletic talent.
Th e movie is based on real-life events. It shows how Tuohy fi rst met Michael
Oher on a cold, rainy night following a school play. Th e story quickly moves to
the point where she persuaded her family to take him in and eventually become
his legal guardians.
Oher thrives with Tuohy and her family, going on to become a standout high
school and college football player. He was eventually picked in the fi rst round of
the National Football League draft by the Baltimore Ravens.
What Leigh Anne Tuohy showed in terms of individual character and integ-
rity in the situation can be an inspiration for us all. Our individual character isn’t something to think about only on occasion. Along with its foundation of
personal integrity, individual character deserves constant attention.
Watch the movie, read this chapter on ethics and social responsibility, and
think about the many ways you might help those around you.
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EXPLORING MANAGEMENT56
Takeaway 3.1 How Do Ethics and Ethical Behavior
Play Out in the Workplace?
ANSWERS TO COME
■ Ethical behavior is values driven.
■ What is considered ethical varies among moral reasoning approaches.
■ What is considered ethical can vary across cultures.
■ Ethical dilemmas arise as tests of personal ethics and values.
■ People tend to rationalize unethical behaviors.
Does learning about bad business behavior shock and dismay you? “Madoff
fraud bankrupts charities.” “Madoff gets 150 years in prison.” “Worldcom CEO sen-
tenced to 25 years in prison.” “Owner of peanut factory refuses to testify at congres-
sional hearing into Salmonella deaths.” Such headlines and their underlying
scandals are all too frequent in the news. And the stories underlying them aren’t
ones of incompetence; they tell tales of personal failures and greed. 1 With bleak
reports like these, it’s understandable that some people, perhaps a lot of them, are
left feeling cynical, pessimistic, and even helpless regarding the state of executive
leadership in our society. 2
So what can be done? For starters, would you say that it is time to get serious about
the moral aspects and social implications of behavior in and by organizations? Can
we agree here that in your career and for any manager the goal should always be to
achieve performance objectives through ethical and socially responsible actions? As
you think about these questions, keep in mind this advice from Desmond Tutu, arch-
bishop of Capetown, South Africa, and winner of the Nobel Peace Prize. 3
You are powerful people. You can make this world a better place where
business decisions and methods take account of right and wrong as
well as profi tability. . . . You must take a stand on important issues: the
environment and ecology, affi rmative action, sexual harassment, racism
and sexism, the arms race, poverty, the obligations of the affl uent West
to its less-well-off sisters and brothers elsewhere.
It is tempting to say that any behavior that is legal can also be considered ethical.
But this is too easy; the “letter of the law” does not always translate into what oth-
ers would consider to be ethical actions. 4 U.S. laws once allowed slavery, permitted
only men to vote, and allowed young children to work full-time jobs. Today we
consider such actions unethical.
Ethics is defi ned as the code of moral principles that sets standards of good or bad, or right or wrong, in our conduct.
5 Personal ethics are guides for behavior,
helping people make moral choices among alternative courses of action. Most
typically, we use the term ethical behavior to describe what we accept as “good” and “right” as opposed to “bad” or “wrong.”
Ethics sets standards of good or bad, or right or wrong, in our conduct.
Ethical behavior is “right” or “good” in the context of a governing moral code.
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Ethics and Social Responsibility ■ Chapter 3 57
||| Ethical behavior is values driven. It’s one thing to look back and make ethical judgments; it is a bit harder to make
them in real time. Is it truly ethical for an employee to take longer than necessary
to do a job . . . to make personal telephone calls on company time . . . to call in sick
and go on vacation instead? While not strictly illegal, many people would con-
sider any one or more of these acts to be unethical. How about you? How often
and in what ways have you committed or observed acts that could be considered
unethical in your school or workplace? 6
Many ethical problems arise at work when people are asked to do something
that violates their personal beliefs. For some, if the act is legal, they proceed
with confi dence and consider their behavior ethical. For others, the ethical test
goes beyond legality and extends to personal values—underlying beliefs and judgments regarding what is right or desirable and that infl uence individual
attitudes and behaviors.
The psychologist Milton Rokeach distinguishes between “terminal” and
“instrumental” values. 7 Terminal values focus on desired ends, such as the goal of
lifelong learning. Examples of terminal values considered important by managers
include self-respect, family security, freedom, inner harmony, and happiness. Instru- mental values focus on the means for accomplishing these ends, such as the role of intellectual curiosity in lifelong learning. Instrumental values held important by
managers include honesty, ambition, courage, imagination, and self-discipline.
Although terminal and instrumental values tend to be quite enduring for any
one individual, they can vary considerably from one person to the next. A con-
trast of such values might help to explain why diff erent people respond quite
diff erently to the same situation. Although two people might share the terminal
Values are broad beliefs about what is appropriate behavior.
Terminal values are preferences about desired end states.
Instrumental values are preferences regarding the means to desired ends.
Managers make a big difference in ethical behavior at work, according to a survey conducted for Deloitte & Touche USA. Some fi ndings include: • 42% of workers say the behavior of their managers is a major
infl uence on an ethical workplace. • The most common unethical acts by managers and supervi-
sors include verbal, sexual, and racial harassment; misuse of company property; and giving preferential treatment.
• 91% of workers are more likely to behave ethically when they have work-life balance; 30% say they suffer from poor work- life balance.
• Top reasons for unethical behavior are lack of personal integ- rity (80%) and lack of job satisfaction (60%).
• Most workers consider it unacceptable to steal from an em- ployer, cheat on expense reports, take credit for another’s accomplishments, and lie on time sheets.
• Most workers consider it acceptable to ask a work colleague for a personal favor, take sick days when not ill, and use com- pany technology for personal affairs.
YOUR THOUGHTS?
Are there any surprises in these data? Is this emphasis on man- ager and direct supervisor behavior justifi ed as the key to an ethical workplace? Would you make any changes to what the workers in this survey report as acceptable and unacceptable work behaviors?
■ THE BEHAVIOR OF MANAGERS IS KEY TO AN ETHICAL WORKPLACE
Facts to Consider THE MOST COMMON UNETHICAL ACTS BY MANAGERS INCLUDE
VERBAL, SEXUAL, AND RACIAL HARASSMENT. {
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EXPLORING MANAGEMENT58
FIGURE 3.1 How Do Alternative Moral Reasoning Approaches View Ethical Behavior? People often diff er in the
approaches they take toward
moral reasoning, and they may
use diff erent approaches at
diff erent times and situations.
Four ways to reason through the
ethics of a course of action are
utilitarianism, individualism,
moral rights, and justice. Each
approach can justify an action
as ethical, but the reasoning will
diff er from that of the other views.
Moral rights view
Individualism view
Does a decision or behavior maintain the fundamental rights of all human beings?
Utilitarian view
Does a decision or behavior do the greatest good for the most people?
Does a decision or behavior promote one’s long-term self-interests?
Justice view
Does a decision or behavior show fairness and impartiality?
Utilitarian View Th e utilitarian view considers ethical behavior to be that which delivers the greatest good to the greatest number of people. Founded in the work of 19th-
century philosopher John Stuart Mill, this results-oriented view tries to assess
the moral implications of our actions in terms of their consequences. Business
executives, for example, might use profi ts, effi ciency, and other performance cri-
teria to judge what decision is best for the most people.
An example of the utilitarian view toward ethical behavior is the manager who
decides to cut 30% of a plant’s workforce in order to keep the plant profi table and
save the remaining jobs, rather than lose them all to business failure. Th is deci-
sion seems defensible from a utilitarian perspective, but we also have to be care-
ful. Utilitarian thinking relies on the assessment of future outcomes that are often
In the utilitarian view, ethical behavior delivers the greatest good to the most people.
value of career success, they might disagree on how to balance the instrumental
values of honesty and ambition in accomplishing it.
Talk with some of your friends or classmates about their terminal values (what
you and they want to achieve) and instrumental values (how you and they are
willing to do it). Don’t be surprised to fi nd values diff erences, and don’t be sur-
prised to fi nd that these diff erences create confl icts. Some of them may rest on
signifi cant diff erences in what behaviors are and are not considered ethical.
Consider this situation. About 10% of an MBA class at Duke University was once
caught cheating on a take-home fi nal exam. 8 Th e “cheaters” averaged 29 years of
age and six years of work experience; they were also big on music downloads, fi le
sharing, open-source software, text messaging, and electronic collaboration. Some
say what happened is a good example of “postmodern learning” where students are
taught to collaborate, work in teams, and utilize the latest communication tech-
nologies. For others, there is no doubt—it was an individual exam and those
students cheated.
||| What is considered ethical varies among moral reasoning approaches.
Figure 3.1 shows four diff erent philosophical views of ethical behavior, with each representing an alternative approach to moral reasoning.
9 Th ey are the utilitar-
ian, individualism, justice, and moral rights views.
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Ethics and Social Responsibility ■ Chapter 3 59
diffi cult to predict and that are tough to measure accurately. What is the eco-
nomic value of a human life when deciding how rigid safety regulations need to
be on an off shore drilling rig, for example? Is it even appropriate to try to put an
economic value on the potential loss of human life?
Individualism View Whereas in the utilitarian view ethical behavior delivers the greatest good to the
most people, the individualism view focuses on the long-term advancement of self-interests. Th e notion is people become self-regulating as they strive for indi-
vidual advantage over time; ethics are maintained in the process. Suppose, for
example, that you consider cheating on your next test. You also realize this quest
for short-term gain might lead to a long-term loss if you get caught and expelled.
Th is reasoning shows an individualism view toward ethical behavior and should
cause you to quickly reject the original inclination to cheat on the exam.
Not everyone, as you might expect, agrees that decisions based on the individual-
ism view will result in honesty and integrity. One complaint is that individualism in
business practice too often results in a pecuniary ethic. Th is has been described by
one executive as a tendency to “push the law to its outer limits” and “run roughshod
over other individuals to achieve one’s objectives.” 10
Th e individualism view also pre-
sumes that individuals are self- regulating. But we know that not everyone has the
same capacity or desire to control their behaviors. Even if only a few individuals take
unethical advantage of the freedom allowed under this perspective, such instances
can disrupt the degree of trust that exists within a business community and make it
diffi cult to predict how others will act.
Justice View Th e justice view of moral reasoning considers a behavior ethical when people are treated impartially and fairly, according to legal rules and standards. It
judges the ethical aspects of any decision on the basis of how equitable it is for
everyone aff ected. 11
Today, researchers often speak about four types of work-
place justice—procedural, distributive, interactional, and commutative.
Procedural justice involves the fair administration of policies and rules. For example, does a sexual harassment charge levied against a senior executive re-
ceive the same full hearing as one made against a fi rst-level supervisor? Distribu- tive justice involves the allocation of outcomes without respect to individual characteristics, such as those based on ethnicity, race, gender, or age. For exam-
ple, does a woman with the same qualifi cations and experience as a man receive
the same consideration for hiring or promotion?
Interactional justice focuses on treating everyone with dignity and respect. For example, does a bank loan offi cer take the time to fully explain to an appli-
cant why he or she was turned down for a loan? 12
Commutative justice focuses on the fairness of exchanges or transactions. An exchange is deemed to be fair if
all parties enter into it freely, have access to relevant and available information,
and obtain some type of benefi t from the transaction. 13
You should notice that the justice view of ethical reasoning places an emphasis
on fairness and equity. But which type of justice is paramount? Is it more important
to ensure that everyone is treated exactly the same way—creating procedural jus-
tice, or to ensure that those from diff erent backgrounds are adequately represented
in terms of the fi nal outcome—creating distributive justice?
In the individualism view, ethical behavior advances long-term self-interests.
In the justice view, ethical behavior treats people impartially and fairly.
Procedural justice focuses on the fair application of policies and rules.
Distributive justice focuses on treating people the same regardless of personal characteristics.
Interactional justice is the degree to which others are treated with dignity and respect.
Commutative justice focuses on the fairness of exchanges or transactions.
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EXPLORING MANAGEMENT60
Moral Rights View Finally, a moral rights view considers behavior to be ethical when it respects and protects the fundamental rights of people. Based on the teachings of John Locke
and Th omas Jeff erson, this view believes all people have rights to life, liberty, and
fair treatment under the law. In organizations, this translates into protecting the
rights of employees to privacy, due process, free speech, free consent, health and
safety, and freedom of conscience.
Th e moral rights view of ethical reasoning protects
individual rights, but it doesn’t guarantee that the out-
comes will be benefi cial to broader society. What hap-
pens, for example, when someone’s right to free speech
conveys messages hurtful to others?
Compounding this problem is the fact that various
nations have diff erent laws and cultural expectations.
As we grapple with the complexities of global society,
human rights are often debated. Even though the
United Nations stands by the Universal Declaration of
Human Rights passed by the General Assembly in
1948, business executives, representatives of activist
groups, and leaders of governments still argue and dis-
agree over rights issues in various circumstances. 14
And without doubt, one of the areas where human
rights can be most controversial is the arena of inter-
national business.
In the moral rights view, ethical behavior respects and protects fundamental rights.
Excerpts from the Universal Declaration of Human Rights,
United Nations
• Article 1—All human beings are born free and
equal in dignity and right.
• Article 18—Everyone has the right to freedom of
thought, conscience, and religion.
• Article 19—Everyone has the right to freedom of
opinion and expression.
• Article 23—Everyone has the right to work, to free
choice of employment, to just and favorable condi-
tions of work.
• Article 26—Everyone has the right to education.
||| What is considered ethical can vary across cultures.
Situation: A 12-year-old boy is working in a garment factory in Bangladesh. He is the sole income earner for his family. He often works 12-hour days and was once burned quite badly by a hot iron. One day he is told he can’t work. His employer was given an ultimatum by the fi rm’s major American customer—”no child workers if you want to keep our contracts.” The boy says: “I don’t understand. I could do my job very well. My family needs the money.”
“Should this child be allowed to work?” Th is question is but one example among
the many ethics challenges faced in international business. Robert Haas, former
Levi CEO, once said that an ethical problem “becomes even more diffi cult when
you overlay the complexities of diff erent cultures and values systems that exist
throughout the world.” 15
It would probably be hard to fi nd a corporate leader or
business person engaged in international business who would disagree. Put your-
self in their positions. How would you deal with an issue such as child labor in a
factory owned by one of your major suppliers?
Th ose who believe that behavior in foreign settings should be guided by the
classic rule of “when in Rome, do as the Romans do” refl ect an ethical position of
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Ethics and Social Responsibility ■ Chapter 3 61
cultural relativism.16 Th is is the belief that there is no one right way to behave and that ethical behavior is always determined by its cultural context. An American
international business executive guided by rules of cultural relativism, for exam-
ple, would argue that the use of child labor is okay in another country as long as it
is consistent with local laws and customs.
Figure 3.2 contrasts cultural relativism with the alternative of moral absolut- ism. Th is is a universalist ethical position suggesting that if a behavior or practice is not okay in one’s home environment, it is not acceptable practice anywhere
else. In other words, ethical standards are absolute and should apply universally
across cultures and national boundaries. In the former example, the American
executive would not do business in a setting where child labor was used, since it
is unacceptable at home. Critics of the universal approach claim it is a form of
ethical imperialism, or the attempt to externally impose one’s ethical standards on others.
Cultural relativism suggests there is no one right way to behave; cultural context determines ethical behavior.
Moral absolutism suggests ethical standards apply universally across all cultures.
Ethical imperialism is an attempt to impose one’s ethical standards on other cultures.
Moral
Absolutism
Cultural
Relativism
Don’t do anything you
wouldn’t do at home.
When in Rome, do as
the Romans do.
Certain absolute truths apply everywhere. Universal values transcend cultures
in determining what is right or wrong.
No culture’s ethics are superior. The values and practices of the local setting determine what is right or wrong.
FIGURE 3.2 How Do Cultural Relativism and Moral Absolutism Infl uence International Business Ethics? Th e international business world is one of the most challenging settings in respect to ethical decision making. Th is fi gure identifi es two
diametrically opposed extremes. Cultural relativism justifi es a decision if it conforms to local values, laws, and practices. Moral
absolutism justifi es a decision only if it conforms to the ways of the home country.
(Source: Developed from Th omas Donaldson, “Values in Tension: Ethics Away from Home,” Harvard Business Review, vol. 74 (September/October 1996),
pp. 48–62.)
Business ethicist Thomas Donaldson finds fault with both cultural relativ-
ism and moral absolutism. He argues instead that fundamental human rights
and ethical standards can be preserved while values and traditions of a local
culture are respected. 17
The core values or “hyper-norms” that must travel
across cultural and national boundaries focus on human dignity, basic rights,
and good citizenship. But once these core values have been met, Donaldson
believes that international business behaviors can be tailored to local cul-
tures. In the case of child labor, the American executive might ensure that any
children employed in a factory under contract to his or her business work in
safe conditions, and are provided regular schooling during scheduled work
hours. 18
||| Ethical dilemmas arise as tests of personal ethics and values.
It’s all well and good to discuss cases about ethical behavior in theory and in the
safety of the college classroom. Th e tough personal test, however, occurs when
we encounter a real-life situation that challenges our ethical beliefs and stan-
dards. Sooner or later, we all will. Often ambiguous and unexpected, these ethi-
cal challenges are inevitable. Th ink ahead to your next job search. Suppose you
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EXPLORING MANAGEMENT62
have accepted a job off er only to get a better one from another employer two
weeks later. Should you come up with an excuse to back out of the fi rst job so that
you can accept the second one instead?
An ethical dilemma is a situation requiring a decision about a course of ac- tion that, although off ering potential benefi ts, may be considered unethical. As a
further complication, there may be no clear consensus on what is “right” and
“wrong.” In these circumstances, one’s personal values are often the best indica-
tors that something isn’t right. An engineering manager speaking from experi-
ence sums it up this way: “I defi ne an unethical situation as one in which I have
to do something I don’t feel good about.” 19
Take a look at Table 3.1—Common Examples of Unethical Behavior at Work.20 Have you been exposed to anything like this? Are you ready to deal with these
situations and any ethical dilemmas that they may create?
An ethical dilemma is a situation that, although off ering potential benefi t or gain, is also unethical.
Table 3.1 Common Examples of Unethical Behavior at Work
Discrimination: Denying people a promotion or job because of their race, religion, gen-
der, age, or another reason that is not job-relevant
Sexual harassment: Making a co-worker feel uncomfortable because of inappropriate
comments or actions regarding sexuality, or by requesting sexual favors in return for
favorable job treatment
Confl icts of interest: Taking bribes, kickbacks, or extraordinary gifts in return for making
decisions favorable to another person
Customer confi dence: Giving someone privileged information regarding the activities of
a customer
Organizational resources: Using offi cial stationery or a business e-mail account to com-
municate personal opinions or to make requests from community organizations
Managers responding to a Harvard Business Review survey reported that
many of their ethical dilemmas arise out of confl icts with superiors, customers,
and subordinates. 21
Th e most frequent issues involve dishonesty in advertising
and in communications with top management, clients, and government agen-
cies. Other ethics problems involve dealing with special gifts, entertainment
expenses, and kickbacks.
Isn’t it interesting that managers single out their bosses as frequent causes of
ethical dilemmas? Th ey complain about bosses who engage in various forms of
harassment, misuse organizational resources, and give preferential treatment to
certain persons. 22
Th ey report feeling pressured at times to support incorrect view-
points, sign false documents, overlook the boss’s wrongdoings, and do business with
the boss’s friends. A surprising two-thirds of chief fi nancial offi cers in a Newsweek
survey, for example, said that they had been asked by their bosses to falsify fi nancial
records. Of them, 45% said they refused the directive, while 12% said they complied. 23
Often at the top of lists of bad boss behaviors is holding people accountable
for unrealistically high performance goals. 24
When individuals feel extreme per-
formance pressures, they sometimes act incorrectly and engage in questionable
practices in attempting to meet these expectations. As scholar Archie Carroll
says: “. . . otherwise decent people start cutting corners on accuracy or quality, or
start covering up incidents, lying or deceiving customers.” 25
Th e management les-
son is to be realistic and supportive in what you request of others. In Carroll’s
words again: “Good management means that one has to be sensitive to how pres-
sure to perform might be perceived by those who want to please the boss.” 26
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Ethics and Social Responsibility ■ Chapter 3 63
||| People have tendencies to rationalize unethical behaviors.
What happens after someone commits an unethical act? Most of us generally view
ourselves as “good” people. When we do something that is or might be “wrong,” it
leaves us doubtful, uncomfortable, and anxious. A common response is to rationalize
the questionable behavior to make it seem acceptable in our minds. Although ratio-
nalizations might give us a false sense of justifi cation, they come at a high cost. 27
A rationalizer might say : It’s not really illegal. Th is implies that the behavior
is acceptable, especially in ambiguous situations. When dealing with shady or
borderline situations, you may not be able to precisely determine right from
wrong. In such cases, it is important to stop and reconsider things. When in
doubt about the ethics of a decision, the best advice is: Don’t do it.
A rationalizer might also say: It’s in everyone’s best interests. Th is response sug-
gests that just because someone might benefi t from the behavior, it is okay. To
overcome this “ends justify the means” rationalization, we need to look beyond
short-run results and carefully assess longer-term implications.
Sometimes a rationalizer uses a third excuse: No one will ever know about it.
Th is implies that something we do is wrong only if it is discovered. Lack of ac-
countability, unrealistic pressures to perform, and a boss who prefers “not to
know” can all reinforce this tendency. But especially in today’s world of great
transparency, such thinking is risky and hard to accept.
Finally, a rationalizer might try to justify a questionable action on the belief that
the organization will stand behind me. Th is is misperceived loyalty. Th e individual
believes that the organization’s best interests stand above all others, that top man-
agers will protect the individual from harm. But if caught doing something wrong,
would you want to count on the organization going to bat for you? And when you
read about people who have done wrong and then try to excuse it by saying “I only
did what I was ordered to do,” how sympathetic are you?
Character is something that people tend to think more about during presidential election years or when famous people, such as professional athletes or politicians, commit unethical acts. But, the fact is that individual character can’t be given only an occasional concern.
Along with its foundation of personal integrity, individual character deserves constant attention. Indeed, it is often test- ed by ethics and social responsibility situations in organiza- tions today. Ethical dilemmas can arise unexpectedly. To deal with them we have to know ourselves and our personal values
well enough to make principled decisions, ones that we can be proud of and that others will respect. After all, it’s the character of people making key decisions that determines whether our organizations act in socially responsible or irresponsible ways.
■ INDIVIDUAL CHARACTER
Explore Yourself
Get to know yourself better by taking the self-assessment
on Terminal Values and completing the other activities in the Exploring Management Skill-Building Portfolio.
WE HAVE TO KNOW OURSELVES AND OUR PERSONAL VALUES
WELL ENOUGH TO MAKE PRINCIPLED DECISIONS. {
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EXPLORING MANAGEMENT64
Takeaway 3.1 How Do Ethics and Ethical Behavior
Play Out in the Workplace?
Rapid Review • Ethical behavior is that which is accepted as “good” or “right” as opposed to
“bad” or “wrong.”
• Th e utilitarian, individualism, moral rights, and justice views off er diff erent ap-
proaches to moral reasoning; each takes a diff erent perspective of when and
how a behavior becomes ethical.
• Cultural relativism argues that no culture is ethically superior to any other;
moral absolutism believes there are clear rights and wrongs that apply univer-
sally, no matter where in the world one might be.
• An ethical dilemma occurs when one must decide whether to pursue a course
of action that, although off ering the potential for personal or organizational
gain, may be unethical.
• Ethical dilemmas faced by managers often involve confl icts with superiors, cus-
tomers, and subordinates over requests that involve some form of dishonesty.
• Common rationalizations for unethical behavior include believing the behav-
ior is not illegal, is in everyone’s best interests, will never be noticed, or will be
supported by the organization.
Questions for Discussion 1. For a manager, is any one of the moral reasoning approaches better than the others?
2. Will a belief in cultural relativism create inevitable ethics problems for interna-
tional business executives?
3. Are ethical dilemmas always problems, or can they be opportunities?
Be Sure You Can • diff erentiate between legal behavior and ethical behavior
• diff erentiate between terminal and instrumental values, and give examples of each
• list and explain four approaches to moral reasoning
• illustrate distributive, procedural, interactive, and commutative justice in
organizations
• explain the positions of cultural relativism and moral absolutism in interna-
tional business ethics
• illustrate the types of ethical dilemmas common in the workplace
• explain how bad management can cause ethical dilemmas
• list four common rationalizations for unethical behavior
What Would You Do? Perhaps you’ve been here before and perhaps not. You have just seen one of your
classmates snap a cell phone photo of the essay question on the exam everyone is
taking. Th e instructor has missed this, and you’re not sure if anyone else observed
what just happened. You know that the instructor is giving an exam to another sec-
tion of the course starting next class period. Do you let this pass and pretend it isn’t
all that important? Or, do you take some action?
STUDY GUIDE
Terms to Defi ne
Commutative justice
Cultural relativism
Distributive justice
Ethical behavior
Ethical dilemmas
Ethical imperialism
Ethics
Individualism view
Instrumental values
Interactional justice
Justice view
Moral rights view
Procedural justice
Terminal values
Moral absolutism
Utilitarian view
Values
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Ethics and Social Responsibility ■ Chapter 3 65
As quick as we are to recognize the bad news and problems about ethical
behavior in organizations, we shouldn’t forget that there is a lot of good news, too.
Th ere are many organizations out there whose leaders and members set high
ethical standards for themselves and others, and engage in a variety of methods
to encourage consistent ethical behaviors. John Mackey, for example, built Whole
Foods with a commitment to “whole food, whole people, and whole planet.” 28
Look around. You’ll see many people and organizations operating in ethical
and socially responsible ways. Some are quite well known, like Patagonia as
featured in the recommended chapter case study. Others are less visible, but still
performing every day with high ethical standards. Surely there are examples right
in your local community of how “profi ts with principles” can be achieved. But
even as you think about organizations that do good things, don’t forget that the
underlying foundations rest with the people who run them— individuals like you
and me.
||| Personal character and moral development infl uence ethical decision making.
Th ere are many possible infl uences on our personal ethics and how we apply
them at work. One set traces to who we are as a person, what might be called our
“character,” as described in the Explore Yourself feature that ended the last sec-
tion. Our character is refl ected in how we behave and what we stand for. It is a
product of family infl uences, religious beliefs, personal standards, personal val-
ues, and even past experiences.
As the chapter subtitle says: Character shouldn’t stay home when we go to
work. But we also know that it isn’t always easy to stand up for what you believe.
Th is problem grows when we are exposed to extreme pressures, when we get con-
tradictory or just plain bad advice, and when our career is at stake. “Do this or
lose your job!” is a terribly intimidating message. So it may be no surprise that
56% of U.S. workers in one survey reported feeling pressured to act unethically in
their jobs. 29
Sadly, the same survey also revealed that 48% of respondents had
themselves committed questionable acts within the past year.
Problems become more manageable when we have solid ethical frameworks, or well-thought-out personal rules and strategies for ethical decision making.
Ethical frameworks are well-thought-out personal rules and strategies for ethical decision making.
Takeaway 3.2 How Can We Maintain High Standards
of Ethical Conduct?
ANSWERS TO COME
■ Personal character and moral development infl uence ethical conduct.
■ Training in ethical decision making can improve ethical conduct.
■ Protection of whistleblowers can encourage ethical conduct.
■ Managers as positive role models can inspire ethical conduct.
■ Formal codes of ethics set standards for ethical conduct.
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EXPLORING MANAGEMENT66
Th ey can help us to act consistently and confi dently. Ethical anchors that give
high priority to such virtues as honesty, fairness, integrity, and self-respect can
help us make correct decisions even under the most diffi cult conditions.
Th e many personal infl uences on ethical decision making come together in
the three levels of moral development described by Lawrence Kohlberg and
shown in Figure 3.3.30 Kohlberg believes that we move step-by-step through the levels and their stages as we grow in maturity and education. Not everyone, in
fact perhaps only a few of us, reaches the postconventional level.
• Stage 2—Make deals for personal gain. • Stage 1—Avoid harm or punishment.
Preconventional Level
Self-Centered Behavior
• Stage 4—Follow rules, meet obligations. • Stage 3—Act consistently with peers, others.
Conventional Level
Social-Centered Behavior
• Stage 6—Act according to internal principles. • Stage 5—Live up to societal expectations.
Postconventional Level
Principle-Centered Behavior
FIGURE 3.3 What Are the Stages in Kohlberg’s Th ree Levels of Moral Development? At the preconventional level of moral development, the individual focuses on self-interests,
avoiding harm and making deals for gain. At the conventional level, attention becomes more
social-centered, and the individual tries to be consistent and meet obligations to peers. At the
postconventional level of moral development, principle-centered behavior results in the
individual living up to societal expectations and personal principles.
In Kohlberg’s preconventional stage of moral development the individual is
self-centered. Moral thinking is largely limited to issues of punishment, obedi-
ence, and personal interest. Decisions made in the preconventional stage are
likely to be directed toward personal gain and based on obedience to rules.
In the conventional stage, by contrast, attention broadens to include more
social concerns. Decisions made in this stage are likely to be based on following
social norms, meeting the expectations of others, and living up to agreed-upon
obligations.
In the postconventional stage of moral development, also referred to as the
principled stage, the individual is strongly driven by core principles and personal
beliefs. A strong ethics framework is evident and the individual is willing to break
with norms and conventions, even laws, to act consistent with personal princi-
ples. An example is the student who passes on an opportunity to cheat on a take-
home examination because he or she believes it is wrong, even though the
consequence will be a lower grade. Another example is someone who refuses to
use pirated computer software, preferring to purchase it and show respect for
intellectual property rights.
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Ethics and Social Responsibility ■ Chapter 3 67
||| Training in ethical decision making can improve ethical conduct.
It would be nice if people had access through their employers to ethics train- ing that helps them understand and best deal with ethical aspects of decision making. Although not all will have this opportunity, more and more are getting
it, including college students. Most business schools, for example, now off er
required and elective courses on ethics or integrate ethics into courses on other
subjects. 31
In college or in the workplace, however, we should keep ethics training in per-
spective. It won’t work for everyone; it won’t provide surefi re answers to all ethi-
cal dilemmas; it won’t guarantee ethical behavior for every person or throughout
an organization. But it does help. An executive at Chemical Bank once put it this
way: “We aren’t teaching people right from wrong—we assume they know that.
We aren’t giving people moral courage to do what is right—they should be able to
do that anyhow. We focus on dilemmas.” 32
One of the biggest diff erences between facing an ethical dilemma in a training
seminar or as part of class discussions is pressure. Many times we must, or be-
lieve we must, move fast. Tips to Remember off ers a reminder that it often helps
to pause and double-check important decisions before taking action in uncom-
fortable circumstances. It presents a seven-step checklist that is used in some
corporate training workshops.
Would you agree that the most powerful of the steps in the decision checklist
is Step 6? Th is is what some call the test of the spotlight questions. You might think of it as highlighting the risk of public disclosure for your actions. Asking and
answering the spotlight questions about how you would feel if family, friends, and
role models learn of your actions is a powerful way to test whether a decision is
consistent with your ethical standards. 33
By the way, never underestimate the
risk of Internet exposure. Hardly a day goes by that we don’t hear of someone,
even public offi cials, who are publicly embarrassed to the point of career damage
by something they said or photos they posted on the Web.
Ethics training seeks to help people understand the ethical aspects of decision making and to incorporate high ethical standards into their daily behavior.
Spotlight questions highlight the risks from public disclosure of one’s actions.
■ CHECKLIST FOR DEALING WITH ETHICAL DILEMMAS
Tips to Remember “HOW WOULD I FEEL IF MY FAMILY FOUND OUT
ABOUT MY DECISION?” {
Step 1. Recognize the ethical dilemma. Step 2. Get the facts. Step 3. Identify your options. Step 4. Test each option: Is it legal? Is it right? Is it benefi cial? Step 5. Decide which option to follow. Step 6. Ask spotlight questions to double-check your decision. Step 7. Take action.
• “How would I feel if my family found out about my decision?”
• “How would I feel if my decision is reported in the local newspaper or posted on the Internet?”
• “What would the person I know who has the strongest character and best ethical judgment say about my decision?”
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EXPLORING MANAGEMENT68
||| Protection of whistleblowers can encourage ethical conduct.
Agnes Connolly pressed her employer to report two toxic chemical accidents.
Dave Jones reported that his company was using unqualifi ed suppliers in con-
structing a nuclear power plant.
Margaret Newsham revealed that her fi rm allowed workers to do personal
business while on government contracts.
Herman Cohen charged that the ASPCA in New York was mistreating animals.
Barry Adams complained that his hospital followed unsafe practices.
Who are these people? Th ey are whistleblowers, persons who expose organi- zational misdeeds in order to preserve ethical standards and protect against
wasteful, harmful, or illegal acts. 34
Th ey were also fi red from their jobs.
Whistleblowers take signifi cant career risks when they expose wrongdoing in
organizations. Although there are federal and state laws that off er whistleblow-
ers some defense against “retaliatory discharge,” the protection is still inadequate
overall. Laws vary from state to state, and the federal laws mainly protect govern-
ment workers. Furthermore, even with legal protection, there are other reasons
why potential whistleblowers might hesitate to act.
Have you ever encountered a student cheating on an exam or homework as-
signment? If so, did you blow the whistle by informing the instructor? A survey by
the Ethics Resource Center reports that some 44% of U.S. workers fail to report
the wrongdoings they observe at work. Th e top reasons for not reporting are “the
belief that no corrective action would be taken, and the fear that reports would
not be kept confi dential.” 35
Another reason we don’t hear about more whistleblowing is that the very nature
of organizations as power structures creates potential barriers that discourage
the practice. A strict chain of command can make it hard to bypass the boss if he or
she is the one doing something wrong. Strong work group identities can discourage
whistleblowing and encourage loyalty and self-censorship. And, working under con-
ditions of ambiguous priorities can sometimes make it hard to distinguish right
from wrong. 36
||| Managers as positive role models can inspire ethical conduct.
While still a college student, Gabrielle Melchionda started Mad Gab’s Inc., an
all-natural skin-care business in Portland, Maine. After her sales had risen to
over $300,000, an exporter offered to sell $2 million of her products abroad.
She turned it down. Why? The exporter also sold weapons, something that
contradicted her sense of ethical behavior. Melchionda’s personal values
guide all of her business decisions, from offering an employee profit-sharing
plan to hiring disabled adults to using only packaging designs that minimize
waste. 37
Th e way business owners and top managers approach ethics can make a big
diff erence in what happens in their organizations. Th ey have a lot of power to
shape an organization’s policies and set its moral tone. Some of this power
works through the attention given to policies that set high ethics standards—
Whistleblowers expose misconduct of organizations and their members.
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Ethics and Social Responsibility ■ Chapter 3 69
and to their enforcement. Another and signifi cantly large part of this power
works through the personal examples those at the top set as role models. In
order to have a positive impact on ethical conduct throughout an organization,
they, like Gabrielle Melchionda, must walk the talk.
Of course, it’s not just the owners and top managers who have the power to
shape ethical behavior and the responsibility to use that power well. Managers at
all levels have more power than they realize to infl uence the ethical behavior of
others. Again, part of this power is walking the talk, setting the example, and act-
ing as an ethical role model. Another part is just practicing good management
day-by-day, keeping goals and performance expectations realistic and achievable
for example. A Fortune survey reported that 34% of its respondents felt a com-
pany president can help to create an ethical climate by setting reasonable goals
“so that subordinates are not pressured into unethical actions.” 38
As you think about managers as ethics role models, consider these ideas from
management scholar Archie Carroll. He makes the distinction between amoral, im-
moral, and moral managers as shown here. 39
Immoral manager
Chooses to
behave
unethically
Amoral manager
Fails to
consider
ethics
Moral manager
Makes ethical
behavior a
personal goal
Th e immoral manager in Carroll’s view chooses to behave unethically. He or she does something purely for personal gain and intentionally disregards the ethics of
the action or situation. Th e amoral manager also disregards the ethics of an act or decision, but does so unintentionally. Th is manager simply fails to consider the
ethical consequences of his or her actions.
In contrast to both prior types, the moral manager considers ethical behavior as a personal goal. He or she always makes decisions and acts in full consider-
ation of ethical issues. We can say that this manager has a strong ethical frame-
work and moral individual character. In Kohlberg’s terms, this manager operates
at the postconventional or principled stage of moral development. 40
Although it may seem surprising, Carroll suggests that most of us act amorally
as managers and in work roles. Although well intentioned, we remain mostly un-
informed or undisciplined in considering the ethical aspects of our behavior.
Should we just accept this as some natural human tendency? Or is Carroll’s ob-
servation better considered a call to action—a challenge to seek the moral high
ground at work and in our personal lives?
||| Formal codes of ethics set standards for ethical conduct.
At Gap Inc., global manufacturing is governed by a formal Code of Vendor
Conduct. 41
You’ll fi nd statements like these in the code.
• Discrimination—“Factories shall employ workers on the basis of their ability to
do the job, not on the basis of their personal characteristics or beliefs.”
• Forced labor—“Factories shall not use any prison, indentured or forced labor.”
An immoral manager chooses to behave unethically.
An amoral manager fails to consider the ethics of her or his behavior.
A moral manager makes ethical behavior a personal goal.
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EXPLORING MANAGEMENT70
• Working conditions—“Factories must treat all workers with respect and dignity
and provide them with a safe and healthy environment.”
• Freedom of association—“Factories must not interfere with workers who wish
to lawfully and peacefully associate, organize or bargain collectively.”
Many, if not most, organizations now operate with a code of ethics that for- mally states the values and ethical principles members are expected to display.
Some employers even require new hires to sign and agree to their ethics code as
a condition of employment. Don’t be surprised if you are asked to do this some-
day. Ethics codes may be specifi c on how to behave in situations susceptible to
ethical dilemmas—such as how sales representatives and purchasing agents
should handle giving and receiving gifts. Th ey might also specify consequences
for unethical acts like taking bribes and kickbacks.
Ethics codes are common in the complicated world of international business.
Global fi rms like the Gap rely on them where situations such as use of child labor
and unfair or unsafe work conditions by contractors are possible and perplex-
ing. 42
Now that corporate executives realize customers and society hold them ac-
countable for the actions of their foreign suppliers, they are much stricter in
using ethics codes and policing their international operations. 43
But don’t forget that you have to be careful in expecting too much of ethics codes.
Th ey set forth nice standards but they can’t guarantee good conduct. 44
Th at, we
might say, depends once again on employing people with the right moral character
and putting them in a work environment where they are led by strong and positive
ethics role models. Would you agree that inspiration can be found at Whole Foods?
A code of ethics is a formal statement of values and ethical standards.
Whole Foods Is a Natural
CEO Makes the Planet a Business Priority
From the day Whole Foods Market opened its doors in 1980 in
Austin, Texas, it was an immediate success in the natural foods
industry. Founder and CEO John Mackey still leads the fi rm with a
commitment to nutrition, people, and the environment.
If you ask, Mackey will tell you he runs the company on three
principles—“whole food, whole people, and whole planet.” He also
says “Whole Foods off ers tasty, natural, and organic food within a
decentralized and self-directed team culture to create a respectful
workplace where employees are treated fairly and are highly moti-
vated to succeed.” Th at’s a real mouthful, but it’s classic Mackey.
Whole Foods is a regular on Fortune magazine’s list of the “100 Best
Companies to Work For.” Th e company pays better than most retail-
ers, off ers good benefi ts, and shares fi nancial data with employees.
And would it surprise you that Mackey is a great critic of extremes in
CEO pay? Indeed, he pays himself $1 a year. “I’m an owner . . . . If the
business prospers, I prosper. If the business struggles, I struggle,” he
declares. “It’s good for morale.”
Mackey believes a business should do more than make money. He
talks about a “noble purpose” through which any business or organi-
zation ultimately “serves society” through its day-to-day activities.
What is it about Whole
Foods as an organization
and Mackey as a leader
that might be inspiring to
employees? Is it possible
that organizations that
serve a “noble purpose”
will have highly motivated
employees? Who are the
best employers in your
community and what do
they do diff erent from the
“also-rans”?
F I N D I N S P I R A T I O N
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Ethics and Social Responsibility ■ Chapter 3 71
Takeaway 3.2 How Can We Maintain High Standards
of Ethical Conduct?
Rapid Review • Ethical behavior is infl uenced by an individual’s character and represented by
core values and beliefs.
• Kohlberg describes three levels of moral development—preconventional, con-
ventional, and postconventional—with each of us moving step-by-step through
the levels as we grow ethically over time.
• Ethics training can help people better understand how to make decisions when
dealing with ethical dilemmas at work.
• Whistleblowers who expose the unethical acts of others have incomplete pro-
tection from the law and can face organizational penalties.
• All managers are responsible for acting as ethical role models for others.
• Immoral managers choose to behave unethically; amoral managers fail to con-
sider ethics; moral managers make ethics a personal goal.
• Formal codes of conduct spell out the basic ethical expectations of employers
regarding the behavior of employees and other contractors.
Questions for Discussion 1. Is it right for organizations to require ethics training of employees?
2. Should whistleblowers have complete protection under the law?
3. Should all managers be evaluated on how well they serve as ethical role models?
Be Sure You Can • explain how ethical behavior is infl uenced by personal factors
• list and explain Kohlberg’s three levels of moral development
• explain the term “whistleblower”
• list three organizational barriers to whistleblowing
• compare and contrast ethics training, ethics role models, and codes of conduct
for their infl uence on ethics in the workplace
• state the spotlight questions for double-checking the ethics of a decision
• describe diff erences between the inclinations of amoral, immoral, and moral
managers when facing diffi cult decisions
What Would You Do? One of your fi rst assignments as a summer intern for a corporate employer is to
design an ethics training program for the fi rm’s new hires. Your boss says that the
program should familiarize the participants with the corporate code of ethics for
sure. But it should go beyond this to provide each new employee with a foundation
for handling ethical dilemmas in a confi dent and moral way. What would your pro-
posed training program look like?
STUDY GUIDE
Terms to Defi ne
Amoral manager
Code of ethics
Ethical frameworks
Ethics training
Immoral manager
Moral manager
Spotlight questions
Whistleblowers
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EXPLORING MANAGEMENT72
The organizations, groups, and persons with whom an organization
interacts and conducts business are known as its stakeholders because they have a direct “stake” or interest in its performance. Th ey are aff ected in one way
or another by what the organization does and how it performs. As Figure 3.4 shows, the stakeholders include customers, suppliers, competitors, regulators,
investors/owners, employees, as well as future generations.
Importantly, an organization’s stakeholders can have diff erent interests.
Customers typically want value prices and quality products; owners want
profi ts as returns on their investments; suppliers want long-term business re-
lationships; communities want good corporate citizenship and support for
public services; employees want good wages, benefi ts, security, and satisfac-
tion in their work.
Stakeholders are people and institutions most directly aff ected by an organization’s performance.
Takeaway 3.3 What Should We Know About the Social
Responsibilities of Organizations?
ANSWERS TO COME
■ Social responsibility is an organization’s obligation to best serve society.
■ Scholars argue cases for and against corporate social responsibility.
■ Social responsibility audits measure the social performance of organizations.
■ Sustainability is an important social responsibility goal.
■ Social business and social entrepreneurs point the way in social responsibility.
FIGURE 3.4 Who Are the Stakeholders of Organizations? Stakeholders are the individuals, groups, and other organizations that have a direct interest in
how well an organization performs. A basic list of stakeholders for any organization would begin
with the employees and contractors who work for the organization, customers and clients who
consume the goods and services, suppliers of needed resources, owners who invest capital,
regulators in the form of government agencies, and special-interest groups such as community
members and activists.
BUSINESS
FIRM
BUSINESS
FIRM
Stockholders
Suppliers
Customers
Competitors
Labor unions
Employees
Financial institutions
Legal institutions
Future generations
Public-interest groups
Educational institutions
Federal, state, local
governments
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Ethics and Social Responsibility ■ Chapter 3 73
||| Social responsibility is an organization’s obligation to best serve society.
Th e way organizations behave in relationship with their many stakeholders is a
good indicator of their underlying ethical characters. When we talk about the
“good” and the “bad” in business and societal relationships, corporate social responsibility is at issue. Often called CSR, it is defi ned as an obligation of the organization to act in ways that serve both its own interests and the interests of
its stakeholders, representing society at large.
Even though corporate “irresponsibility” seems to get most of the media’s at-
tention, we can’t forget that there is a lot of responsible behavior taking place as
well. Increasingly this has become part of what is called the triple bottom line— how well an organization performs when measured not only on fi nancial criteria
but also on social and environmental ones. Some call this triple bottom line the
3 Ps of organizational performance—profi t, people, and planet.45 Th e triple bot- tom line in business decision making is checked by asking these questions: Is the
decision economically sound? Is the decision socially responsible? Is the decision
environmentally sound?
Showing CSR and concerns for the triple bottom line is most likely the way
you’d like your future employers to behave. “Students nowadays want to work for
companies that help enhance the quality of life in their surrounding community,”
says an observer. 46
In one survey, 70% of students report that “a company’s reputa-
tion and ethics” was “very important” when deciding whether or not to accept a
job off er; in another survey, 79% of 13- to 25-year-olds say they “want to work for a
company that cares about how it aff ects or contributes to society.” 47
Corporate social responsibility is the obligation of an organization to serve its own interests and those of its stakeholders.
Th e triple bottom line of organizational performance includes fi nancial, social, and environmental criteria.
Th e 3 Ps of organizational performance are profi t, people, and planet.
President, CEO, and co-founder of Stonyfi eld Farm, Gary Hirshberg, makes a career out of organic yogurt. He’s also a fi rm believer that “business is the most powerful force in the world.” Considered a social entrepreneur, Hirshberg has al- ways been at the forefront of movements for environmental and social transformation. He studied climate change at Hampshire College, built energy-producing windmills, and worked at a nonprofi t research center.
At Stonyfi eld Farm he’s helping craft a clear mission: “Offer a pure and healthy product that tastes good and earn a profi t without harming the environment.” Indeed, Hirshberg says “we factor the planet into all of our decisions.”
Stonyfi eld Farm focuses on the triple bottom line of be- ing economically, socially, and environmentally responsible—
what some call profi t, people, and planet. “It’s a simple strat- egy but a powerful one,” says Hirshberg proudly. “Going green is not just the right thing to do, but a great way to build a successful business.” His results speak for themselves. Stonyfi eld Farm is now the number-one maker of organic yogurt in the world.
WHAT’S THE LESSON HERE?
Granted, Stonyfi eld Farm has succeeded with Hirshberg’s so- cial business model and a commitment to the 3 Ps of profi t, people, and planet. But can something like this be done only when starting a fi rm from scratch? Can an existing fi rm be turned in this direction? What does it take to lead organiza- tions with a commitment to ethics and social responsibility?
■ GARY HIRSHBERG GOES FOR TRIPLE BOTTOM LINE AT STONYFIELD FARM
Role Models “OFFER A PURE AND HEALTHY PRODUCT THAT TASTES GOOD AND
EARN A PROFIT WITHOUT HARMING THE ENVIRONMENT.” {
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EXPLORING MANAGEMENT74
||| Scholars argue cases for and against corporate social responsibility.
It may seem that corporate social responsibility, or CSR, is one of those concepts
and goals that most everyone agrees upon. Th ere are, however, two contrasting
views that stimulate debate in academic and public-policy circles. Th e classical
view takes a stand against making corporate social responsibility a business
priority, while the socioeconomic view advocates for it. 48
Th e classical view of CSR holds that management’s only responsibility in run- ning a business is to maximize profi ts and shareholder value. It puts the focus on
the single bottom line of fi nancial performance. In other words: “Th e business of
business is business.” Th is narrow stakeholder perspective is represented in the
views of the late Milton Friedman, a respected economist and Nobel Laureate.
He says: “Few trends could so thoroughly undermine the very foundations of our
free society as the acceptance by corporate offi cials of social responsibility other
than to make as much money for their stockholders as possible.” 49
Th e arguments against corporate social responsibility include fears that its pur-
suit will reduce business profi ts, raise business costs, dilute business purpose, and
give business too much social power. Yet events such as the huge BP oil spill in the
Gulf of Mexico seem to argue otherwise. Concerns for the natural environment are
now high among societal values. Th e public was outraged about the oil spill, and
BP’s CEO was the target of lots of criticism for his company’s actions. Demands
were quickly made for stronger government oversight and control over corporate
practices such as deep-water oil drilling that might put our natural world at risk.
Th e socioeconomic view of CSR holds that management of any organization should be concerned for the broader social welfare, not just corporate profi ts.
Th is broad stakeholder perspective puts the focus on the expanded triple bot-
tom line of not just fi nancial performance, such as shareholder returns, but
also social and environmental performance. It is supported by Paul Samuel-
son, another distinguished economist and also a Nobel Laureate.
Th ose in favor of corporate social responsibility argue that it will add long-run
profi ts for businesses, improve their public images, and help them avoid govern-
ment regulation. And because businesses often have vast resources with the
potential for great social impact, business executives have ethical obligations to
ensure that their fi rms act in socially responsible ways. Th e public at large seems
to want businesses and other organizations to act with genuine social responsibil-
ity. And, many stakeholders are demanding that organizations integrate social
responsibility into core values and daily activities.
What’s your position on these alternative views of corporate social responsi-
bility? At the very least, it is hard to argue that social responsibility will hurt the
fi nancial bottom line. A worst-case scenario seems to be that it has no adverse
impact. 50
And, there is evidence for the existence of a virtuous circle where cor- porate social responsibility leads to improved fi nancial performance that leads
to more socially responsible actions in the future. 51
Th is is consistent with the
notion of shared value as advocated by Michael Porter and Mark Kramer.52 It basically means that business executives should make decisions that show full
understanding that economic and social progress are fundamentally intercon-
nected. An example might be the “cradle-to-grave” manufacturing approach fea-
tured in the nearby ethics check.
Th e classical view of CSR is that business should focus on the pursuit of profi ts.
Th e socioeconomic view of CSR is that business should focus on contributions to society, not just making profi ts.
A virtuous circle exists when corporate social responsibility leads to improved fi nancial performance that leads to more social responsibility.
Shared value approaches business decisions with understanding that economic and social progress are interconnected.
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Ethics and Social Responsibility ■ Chapter 3 75
||| Social responsibility audits measure the social performance of organizations.
If we are to get serious about social responsibility, we need to get rigorous about
measuring corporate social performance and holding business leaders account-
able for the results. A social responsibility audit can be used at regular intervals to report on and systematically assess an organization’s performance in various
areas of corporate social responsibility.
Th e social performance of business fi rms varies along a continuum that
ranges from compliance—acting to avoid adverse consequences, to conviction—
acting to create positive impact. 53
As
shown in the fi gure, an audit of corpo-
rate social performance might cover
the organization’s performance on four
criteria for evaluating socially responsi-
ble practices: economic, legal, ethical,
and discretionary. 54
An organization is meeting its eco-
nomic responsibility when it earns a profi t through the provision of goods and
services desired by customers. While it might seem unusual to focus on fi nancial
A social responsibility audit measures and reports on an organization’s performance in various areas of corporate social responsibility.
It’s called “cradle-to-grave manufacturing,” and you might wonder why more companies aren’t involved. The basic prin- ciple is that you must start with “nonhazardous” materials and then build products that are disassembled at the end of their lives to become biodegradable waste or new products. The approach was adopted by Stef Kranendijk, CEO of Desso, a carpet manufacturer, when he set new sustainability goals for his fi rm. He saw it as a potential stimulus to innovation and a way to differentiate his company from the competition. In his words: “We launched it as a design and quality initiative that would boost our innovation capability with positive effects on the environment and public health.
The pathways to cradle-to-grave manufacturing aren’t easy. Shareholders and owners have to agree on the goals and benefi ts; suppliers have to join in the quest for sustainable materials; designs have to be created to meet the end of prod- uct life goals. But Kranendijk found that Desso’s employees
were highly supportive and reported increased satisfaction. He also said the fi rm experienced “so much innovation that we saw a swift pay out.”
YOU DECIDE
Desso’s commitment to cradle-to-grave manufacturing re- quires lots of investment, both monetary and otherwise, from the manufacturer and its supply chain members. But is it ethi- cal for a business to turn its back on such possibilities? Should we as consumers push for these types of sustainability initia- tives? Or, is it unethical to try to force businesses to pursue green goals before the market as a whole does it for us? And while you are thinking about the issues, is it ethical to claim social responsibility for pursuing environmentally friendly prac- tices only to avoid government regulation or adverse publicity? In other words, does it make a difference if a fi rm does “good things” for selfi sh reasons?
■ COMMITTING TO A GREEN SUPPLY CHAIN
Ethics Check AFTER INVESTING IN CRADLE-TO-GRAVE MANUFACTURING, THE FIRM
EXPERIENCED “SO MUCH INNOVATION THAT WE SAW A SWIFT PAY OUT.” {
Discretionary Responsibility: Contribute to Community
Ethical Responsibility:
Do What Is Right
Legal Responsibility: Obey the Law
Economic Responsibility: Be Profitable
Zone of ConvictionZone of Compliance
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EXPLORING MANAGEMENT76
performance as a component of CSR, a fi rm’s economic performance provides
the foundation upon which all the other types of responsibility rest. If a fi rm is
not fi nancially viable, it will not be able to take care of its owners or employees or
engage in any of the other aspects of CSR. Legal responsibility is fulfi lled when an
organization operates within the law and according to the requirements of vari-
ous external regulations. An organization meets its ethical responsibility when its
actions voluntarily conform not only to legal expectations but also to the broader
values and moral expectations of society.
Th e highest level of social performance comes through the satisfaction of dis-
cretionary responsibility. At this level, the organization moves beyond basic eco-
nomic, legal, and ethical expectations to provide leadership in advancing the
well-being of individuals, communities, and society as a whole. An example is
found at the Bellisio Foods plant in Jackson, Ohio. Ryan Wright is the manager in
charge of utility and sustainability, and he’s found a number of ways to “green up”
a manufacturing facility. A large treatment plant digests food waste, using bioor-
ganisms to create the methane that becomes fuel to run the factory’s boilers.
Wright believes the process cuts CO 2 output by 43,000 tons per year by saving on
costs of natural gas and transporting waste to a landfi ll. Although the price of the
system was $4.65 million, he says: “It’s a great project; we’re proud of it; it’s the
right thing to do.” 55
||| Sustainability is an important social responsibility goal.
The BP oil spill in the Gulf of Mexico and the nuclear power plant disaster in
Fukushima, Japan, certainly made the link between organizations and our nat-
ural environment a front-page issue. Th ese cases should cause you to wonder
about the extent to which business practices pose risks, present and future, to
humankind and the natural environment. And it should prompt you to be con-
cerned about the extent to which we are abusing versus protecting, and consuming
versus conserving, the world’s resources.
United Nations Encourages Global Business Leaders on Sustainability Goals
The UN Global Leaders Compact brings together some corporate CEOs
worldwide to discuss how responsible business behavior and investment
can assist in global sustainability. At a recent conference the United Nations
General Secretary Ban Ki-moon told the business leaders: “You are at the
forefront of globalization. That means emphasizing sustainability across
your operations and in your investment strategies.” He further stated that
“corporate sustainability is becoming a byword” and that “principles and
profi ts are two sides of the same coin.”
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Ethics and Social Responsibility ■ Chapter 3 77
Sustainable Business Th ink about the issues of our day—things like resource scarcity, climate change,
carbon footprints, and alternative energy. Th ink about popular terms and slogans—
ones like renew, recycle, conserve, and preserve. Th ey all refl ect the importance of
sustainability as a priority of the times, aff ecting all of us and all institutions of our society. You can think of it as a goal, one that addresses the rights of both
present and future generations as stakeholders of the world’s natural resources—
everything from the air that we breathe to the precious metals that give life to our
many electronic devices.
Gavin Neath, vice president for Unilever, poses the sustainability issue this way.
“With a global population at 6.5 billion,” he says, “we are already consuming re-
sources at a rate far in excess of nature’s capacity to replenish them. Water is be-
coming scarce and global warming and climate change are accelerating.” 56
Under
such conditions, it is little wonder that 93% of CEOs in a recent survey admit that
the future success of their fi rms depends in part on how well they meet sustain-
ability challenges. 57
And as United Nations General Secretary Ban Ki-moon says,
“It means thinking diff erently about how and where we invest, thinking diff erently
about creating markets of the future, and creating opportunities for growth.” 58
Th ese points and ideas introduce the notion of sustainable business, where fi rms operate in ways that both meet the needs of customers and protect or advance the
well-being of our natural environment. 59
You can think of a sustainable business
as one that operates in harmony with nature rather than by exploiting nature. Its
actions produce minimum negative impact on the environment and help pre-
serve it for future generations. Th e hallmarks of sustainable business practices
include less waste, less toxic materials, more resource effi ciency, more energy ef-
fi ciency, and more renewable energy.
Sustainable Development If sustainability is a goal for businesses and other organizations, just what is
sustainable development? Most often, the term describes practices that make use of environmental resources to support societal needs today while also pre-
serving and protecting the environment for future use. Th e World Business Coun-
cil for Sustainable Development, whose membership includes the CEOs of global
corporations, defi nes sustainable development as “forms of progress that meet
the needs of the present without compromising the ability of future generations
to meet their needs.” 60
Th e conversation about our planet and sustainable development stands at the
interface between how people live and how organizations operate, and the
capacity of the natural environment to support them. Simply put, we want pros-
perity, convenience, comfort, and luxury in our everyday lives. But we are also
more aware that attention must be given to the “costs” of these aspirations and
how those costs can be borne in a way that doesn’t impair the future. At PepsiCo,
for example, CEO Indra Nooyi has said that her fi rm’s “real profi t” should be
assessed in the following way: Revenue less Cost of Goods Sold less Costs to
Society. “All corporations operate with a license from society,” says Nooyi. “It’s
critically important that we take that responsibility very, very seriously; we have
to make sure that what corporations do doesn’t add costs to society.” 61
An increasingly popular and useful term in conversations about sustainable de-
velopment is environmental capital or natural capital. It refers to the available
Sustainability is a goal that addresses the rights of present and future generations as co-stakeholders of present day natural resources.
Sustainable business is where fi rms operate in ways that both meet the needs of customers and protect or advance the well-being of our natural environment.
Sustainable development is making use of natural resources to meet today’s needs while also preserving and protecting the environment for use by future generations.
Environmental capital or natural capital is the storehouse of natural resources— atmosphere, land, water, and minerals—that we use to sustain life and produce goods and services for society.
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EXPLORING MANAGEMENT78
storehouse of natural resources that exist in the atmosphere, land, water, and
minerals that we use to sustain life and produce goods and services for society. 62
Th e importance of environmental capital is refl ected in ISO 14001, a global qual- ity standard that requires certifi ed organizations to set environmental objectives
and targets; account for the environmental impact of their activities, products, or
services; and continuously improve environmental performance. 63
Human Sustainability Th e notion of sustainability and the pursuit of sustainable development goals can be
made much broader than a focus on the natural environment alone. Scholar Jeff rey
Pfeff er off ers a strong case in favor of giving management attention not only to issues
of ecological and environmental sustainability—traditional green management
themes—but also to social and human sustainability. He says: “Just as there is con-
cern for protecting natural resources, there could be a similar level of concern for
protecting human resources. . . . Being a socially responsible business ought to en-
compass the eff ect of management practices on employee physical and psychological
ISO 14001 is a global quality standard that certifi es organizations that set environmental objectives and targets, account for the environmental impact of their activities, and continuously improve environmental performance.
CAN BUSINESS LEND A
HELPING HAND?
Some argue that businesses have an obligation to ‘give back’ to so- ciety. Their products and services improve consumers’ lives and
their well-paying jobs give employees means, but could busi- nesses balance the pursuit of profi t with genuine aims toward public goodwill? Corporate social responsibility today im- plies that businesses strive to overcome social ills such as pollution, poverty, and sickness, among others. Perhaps the social science of business in the 21st century will incorporate new methods to eliminate these social ills?
In the book Creating a World Without Poverty (2007, Pub- licAffairs), author Muhammad Yunus outlines a transforma- tional business model designed to eliminate global poverty and solve other enduring social problems. Yunus creates a ‘social business’ model in which company products or ser- vices target and benefi t only specifi c stakeholders who suffer from social ills. He started the world’s fi rst multinational social business, Grameen Danone, in collaboration with German yogurt maker Danone. It manufactures nutritional yogurt tar- geted and sold at cost to the poor in Bangladesh.
Yunus laments that current methods to address poverty and other social problems are fl awed. Corporate initiatives,
government actions, and private efforts may perpetuate rather than reduce these public burdens. Multinational com- panies exploit cheap labor globally. Governments provide handouts to the poor, reinforcing a form of reliance. And pri- vate philanthropies contribute in sporadic streams in critical times and economic downturns.
Yunus’s social business model entails that businesses pro- vide venture capital and know-how for new products or ser- vices targeting specifi c groups that suffer from social ills. Profi ts are then reinvested, not paid out as dividends. Busi- nesses recover initial investments, but no more. Further prof- its go to cheaper and better goods and services or expanding access to more users. A second type of social business allows target groups to assume shareholder control from the ventur- ing business and receiving paid dividends. Yunus’s ventures have reduced poverty, homelessness, and sickness, and he has targeted pollution, disease, and crime in future aims.
REFLECT AND REACT
Does business have an obligation to ‘give back’ to society? Can business balance the pursuit of profi t and public good- will? Are corporate social responsibility efforts genuine or just for show? And by the way, do you agree that corpora- tions, governments, and philanthropies perpetuate rather than eliminate social problems?
■ CREATING A WORLD WITHOUT POVERTY
BY MUHAMMAD YUNUS
Manager’s Library
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Ethics and Social Responsibility ■ Chapter 3 79
well-being.” 64
You might think of Pfeff er’s point this way: While valuing the “planet,”
don’t forget that “people” are also part of the 3 Ps of organizational performance.
||| Social business and social entrepreneurs point the way in social responsibility.
Take a good look at the example of Muhammad Yunus just featured in the Manager’s
Library. On one level, his work with the Grameen Bank was a business innova-
tion—bringing microcredit lending into the forefront. But at another level it is a
social business in that the underlying business model directly addresses a social problem—using microcredit lending to help fi ght poverty. And in the expanding
domain of social business, Yunus’s ideas and examples have set benchmarks. In
fact, they earned him a Nobel Prize. 65
Social businesses are profi t driven. But, instead of the profi ts being returned
to investors or owners, they are used to pay off initial start-up costs and then
reinvested to expand the social business to serve more clients and customers.
Th ese businesses are developed by social entrepreneurs, people who take busi- ness risk with the goal of fi nding novel ways to solve pressing social problems at
home and abroad. 66
Social entrepreneurs are like business entrepreneurs with
one big diff erence: Th ey are driven by a social mission, not fi nancial gain. 67
Th ey
pursue original thinking and innovations to help solve social problems and
make lives better for people who are disadvantaged.
You’ll be hearing and reading a lot more about social businesses and social entre-
preneurs. Th ey are already being called the new “fourth sector” of our economy—
joining private for-profi t businesses, public government organizations, and
nonprofi ts. 68
As the late management guru Peter Drucker once said: “Every single
social and global issue of our day is a business opportunity in disguise.” 69
Housing and job training for the homeless . . . Bringing technology to poor fami-
lies . . . Improving literacy among disadvantaged youth . . . Bringing expanded
health-care to impoverished communities . . . and more. Th ink of all the possibilities.
Could social business and social entrepreneurship be part of your future some day?
A social business is one in which the underlying business model directly addresses a social problem.
Social entrepreneurs take business risks to fi nd novel ways to solve pressing social problems.
Social Entrepreneurs Need Support Too
And they can get it if they catch the attention of Vanessa Kirsch and the
organization she founded—New Profi t Inc. She developed the idea while
traveling to interview social entrepreneurs around the world. After seeing so
many great ideas struggle to achieve broad scale, but fi nding a bottle of Coke
pretty much everywhere, Kirsch wondered: “What prevents social entrepreneurs
from scaling their innovations at the same pace and quality as Coca-Cola?”
That’s now the ultimate goal of New Profi t—to strengthen, connect, and amplify
the potential of visionary leaders, removing obstacles to impact and building
networks of excellence that multiply their efforts. Social entrepreneurs selected
by New Profi t receive multi-year growth capital grants and strategic support to
help achieve new results and opportunities across the country.
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EXPLORING MANAGEMENT80
Takeaway 3.3 What Should We Know About the Social
Responsibilities of Organizations?
Rapid Review • Corporate social responsibility is an obligation of the organization to act in
ways that serve both its own interests and the interests of its stakeholders.
• In assessing organizational performance today, the concept of the triple bot-
tom line evaluates how well organizations are doing on economic, social, and
environmental performance criteria.
• Criteria for evaluating corporate social performance include how well it meets
economic, legal, ethical, and discretionary responsibilities.
• Th e argument against corporate social responsibility says that businesses
should focus on making profi ts; the argument for corporate social responsibil-
ity says that businesses should use their resources to serve broader social con-
cerns.
• Th e concept of sustainable development refers to making use of environmental
resources to support societal needs today while also preserving and protecting
the environment for use by future generations.
• Social businesses and social entrepreneurs pursue business models that help
to directly address important social problems.
Questions for Discussion 1. Choose an organization in your community. What questions would you ask to
complete an audit of its social responsibility practices?
2. Is the logic of the virtuous circle a convincing argument in favor of corporate
social responsibility?
3. Should government play a stronger role in making sure organizations commit to
sustainable development?
Be Sure You Can • explain the concept of social responsibility
• summarize arguments for and against corporate social responsibility
• illustrate how the virtuous circle of corporate social responsibility might work
• explain the notion of social business
What Would You Do? It’s debate time and you’ve been given the task of defending corporate social respon-
sibility, or CSR. Make a list of all possible arguments for making CSR an important
goal for any organization. For each item on the list, fi nd a good current example that
confi rms its importance based on real events. In what order of priority will you
present your arguments in the debate? And, what arguments “against” CSR will
you be prepared to defend against?
STUDY GUIDE
Terms to Defi ne
3 Ps of organizational
performance
Classical view of CSR
Corporate social
responsibility
Environmental capital
or natural capital
ISO 14001
Shared value
Social business
Social entrepreneurs
Social responsibility
Socioeconomic view
of CSR
Stakeholders
Sustainability
Sustainable business
Sustainable
development
Triple bottom line
Virtuous circle
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Ethics and Social Responsibility ■ Chapter 3 81
1. A business owner makes a decision to reduce a
plant’s workforce by 10% in order to cut costs and
be able to save jobs for the other 90% of employees.
Th is decision could be justifi ed as ethical using the _________ approach to moral reasoning.
(a) utilitarian (b) individualism
(c) justice (d) moral rights
2. If a manager fails to enforce a late-to-work policy for
all workers—that is, by allowing some favored
employees to arrive late without penalties—this
would be considered a violation of _________.
(a) human rights (b) personal values
(c) distributive justice (d) cultural relativism
3. According to research on ethics in the workplace, _________ is/are often a major and frequent source
of pressures that create ethical dilemmas for people
in their jobs.
(a) declining morals in society
(b) long work hours
(c) low pay
(d) requests or demands from bosses
4. Someone who exposes the ethical misdeeds of
others in an organization is usually called a/an _________.
(a) whistleblower (b) ethics advocate
(c) ombudsman (d) stakeholder
5. Two employees are talking about ethics in their
workplaces. Jay says that ethics training and codes
of ethical conduct are worthless; Maura says they
are the only ways to ensure ethical behavior by all
employees. Who is right and why?
(a) Jay—no one really cares about ethics at work.
(b) Maura—only the organization can infl uence
ethical behavior.
(c) Neither Jay nor Maura—training and codes can
encourage but never guarantee ethical behavior.
(d) Neither Jay nor Maura—only the threat of legal
punishment will make people act ethically.
6. Which ethical position has been criticized as a
source of “ethical imperialism”?
(a) individualism (b) absolutism
(c) utilitarianism (d) relativism
7. If a manager takes a lot of time explaining to a subordi-
nate why he did not get a promotion and sincerely
listens to his concerns, this is an example of an attempt
to act ethically according to _________ justice.
(a) utilitarian
(b) commutative
(c) interactional
(d) universal
8. At what Kohlberg calls the _________ level of moral
development, an individual can be expected to act
consistent with peers, meet obligations, and follow
rules of social conduct.
(a) postconventional
(b) conventional
(c) preconventional
(d) nonconventional
9. In respect to the link between bad management and
ethical behavior, research shows that _________.
(a) managers who set unrealistic goals can cause
unethical behavior
(b) most whistleblowers just want more pay
(c) only top managers really serve as ethics role
models
(d) a good code of ethics makes up for any manage-
ment defi ciencies
10. A person’s desires for a comfortable life and family
security represent _________ values, while his or
her desires to be honest and hard working represent _________ values.
(a) terminal; instrumental
(b) instrumental; terminal
(c) universal; individual
(d) individual; universal
C H
A PTER 3
TP
Multiple-Choice Questions
TestPrep 3
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EXPLORING MANAGEMENT82
11. A proponent of the classical view of corporate social
responsibility would most likely agree with which of
these statements?
(a) Social responsibility improves the public image
of business.
(b) Th e primary responsibility of business is to
maximize profi ts.
(c) By acting responsibly, businesses avoid govern-
ment regulation.
(d) Businesses should do good while they are doing
business.
12. Th e triple bottom line of organizational perfor-
mance would include measures of fi nancial, social,
and _________ performance.
(a) philanthropic (b) environmental
(c) legal (d) economic
13. An amoral manager _________.
(a) always acts in consideration of ethical issues
(b) chooses to behave unethically
(c) makes ethics a personal goal
(d) acts unethically but does so unintentionally
14. In a social responsibility audit of a business fi rm,
positive behaviors meeting which of the following
criteria would measure the highest level of commit-
ment to socially responsible practices?
(a) legal—obeying the law
(b) economic—earning a profi t
(c) discretionary—contributing to community
(d) ethical—doing what is right
15. What organizational stakeholder would get
priority attention if a corporate board is having a
serious discussion regarding how the fi rm could
fulfi ll its obligations in respect to sustainable
development?
(a) owners or investors
(b) customers
(c) suppliers
(d) future generations
Short-Response Questions
16. How does distributive justice diff er from procedural justice?
17. What are the three Spotlight Questions that people can use for double- checking the ethics of a decision?
18. If someone commits an unethical act, how can he or she rationalize it to make it seem right?
19. What is the virtuous circle of corporate social responsibility?
Integration and Application Questions
20. A small outdoor clothing company in the U.S. has just received an attractive proposal from a business in Tanzania
to manufacture the work gloves that it sells. Accepting the off er from the Tanzanian fi rm would allow for substan-
tial cost savings compared to the current supplier. However, the American fi rm’s manager has recently read reports
that some businesses in Tanzania are forcing people to work in unsafe conditions in order to keep their costs
down. Th e manager is now seeking your help in clarifying the ethical aspects of this opportunity.
Questions: How would you describe to this manager his or her alternatives in terms of cultural relativism and moral absolutism? What would you identify as the major issues and concerns in terms of the cultural
relativism position versus the absolutist position? Finally, what action would you recommend in this situa-
tion, and why?
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Ethics and Social Responsibility ■ Chapter 3 83
C H
A PTER 3
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 3: Terminal Values
■ CLASS EXERCISE 3: Confronting Ethical Dilemmas
■ TEAM PROJECT 3 : Organizational Commitment to Sustainability
Case Snapshot Patagonia has managed to stay both green and profi table at a time when the economy is
down, consumers are tight for cash, and “doing the prof-
itable thing” is not necessarily doing the right thing.
How has Patagonia achieved its success without com-
promising their ideals?
With recent annual revenues of $314.5 million, Pa-
tagonia succeeds by staying true to Chouinard’s vision.
“Th ey’ve become the Rolls-
Royce of their product
category,” says Marshal
Cohen, chief industry analyst with market research fi rm
NPD Group. “When people were stepping back, and the
industry became copycat, Chouinard didn’t sell out, lower
prices, and dilute the brand. Sometimes, the less you do,
the more provocative and true of a leader you are.”
Don’t Miss This Selection from Cases for Critical Thinking
■ CHAPTER 3 CASE Patagonia: Leading a Green Revolution
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 3
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For 69 days shift leader Luis Urzua kept the men trapped in the
Chilean mine organized and hopeful. On the 70th day, he was
the last man safely out.
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Explore Yourself More on self-confi dence
Role Models Indra Nooyi brings style and
strategic vision to Pepsi
Ethics Check Left to die on Mt. Everest
Facts to Consider Greenhouse gas emissions as
executive priorities
Manager’s Library Th e Shallows
by Nicholas Carr
4 Managers as
Decision Makers
Th ere Is No Substitute for a Good Decision
1. Recognize how
managers use
information to solve
problems.
2. Identify fi ve steps in
the decision-making
process.
3. Understand current
issues in managerial
decision making.
YOUR CHAPTER 4
TAKEAWAYS
E l Y lf Ethi Ch k Manager’s
W H A T ’ S I N S I D E
85
MM LL Th
b
M
Management Live
Self-Confi dence and Red Eye
I n Red Eye, things get hectic at the Lux Atlantic Hotel when
manager Lisa Reisert (Rachel McAdams) is away attending her
grandmother’s funeral. Her assistant Cynthia ( Jayma Mays) is
unable to handle a series of problems that arise. She calls Reisert, who
is en route to the airport for a return fl ight to Miami. Reisert calmly talks Cynthia
through the handling of a deleted reservation for frequent guests, identifi es
another issue as a nonproblem, and gives details for handling a high-security
guest who is arriving 12 hours early.
Clearly, Reisert is confi dent in her abilities and can deal with multiple issues
even under pressure. Th is confi dence comes into play later in the movie when
Reisert develops a strategy to defeat a terrorist who wants to use her to threaten
the high-security guest.
How is it that some managers always seem to make the right moves while others
cave in at the slightest sign of trouble? Th e diff erence may be self-confi dence; they must believe in their decisions and the information foundations for them. Eff ective
managers are good decision makers. Th is involves gathering and processing infor-
mation, deciding, implementing, and then getting those involved to take action.
A good understanding of the many topics in this chapter can improve your
decision-making skills. A better understanding of your personal style in gather-
ing and processing information can also help build your self-confi dence as a
decision maker.
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EXPLORING MANAGEMENT86
On august 5, 2010, the san josé copper and gold mine collapsed in chile;
32 miners, along with their shift leader Carlos Urzua, were trapped inside. 1 “Th e
most diffi cult moment was when the air cleared and we saw the rock,” said Urzua,
“I had thought maybe it was going to be a day or two days, but not when I saw the
rock . . .” In fact, the miners were trapped 2300 hundred feet below the surface for
69 days. Getting them out alive was a problem that caught the attention of the
entire world. After the rescue shaft was completed, Urzua was the last man out.
“Th e job was hard,” he said, “they were days of great pain and sorrow.” But the
decisions Urzua made as shift leader—organizing the miners into work shifts,
keeping them busy, studying mine diagrams, making escape plans, raising
morale—all contributed to the successful rescue. After embracing Urzua when
he arrived at the surface, Chile’s President Sebastian Pinera said, “He was a shift
boss who made us proud.”
Most managers will never have to face such an extreme crisis, but decision
making and problem solving are parts of every manager’s job. Not all decisions
are going to be easy ones; some will have to be made under tough conditions;
and, not all decisions will turn out right. But as with the case of Urzua, the goal is
to do the best you can under the circumstances.
||| Managers deal with problems posing threats and off ering opportunities.
All of those case studies, experiential exercises, class discussions, and even essay
exam questions are intended to engage students in the complexities of manage-
rial decision making, the potential problems and pitfalls, and even the pressures
of crisis situations. From the classroom forward, however, it’s all up to you. Only
you can determine whether you step ahead and make the best out of very dif-
fi cult problems or collapse under pressure.
Problem solving is the process of identifying a discrepancy between an ac- tual and a desired state of aff airs, and then taking action to resolve it. Th e
context for managerial problem solving is depicted in Figure 4.1. It shows
Takeaway 4.1 How Do Managers Use Information
to Solve Problems?
ANSWERS TO COME
■ Managers deal with problems posing threats and off ering opportunities.
■ Managers can be problem avoiders, problem solvers, or problem seekers.
■ Managers make programmed and nonprogrammed decisions when solving
problems.
■ Managers can use systematic and intuitive thinking.
■ Managers use diff erent cognitive styles to process information for
decision making.
■ Managers make decisions under conditions of certainty, risk, and
uncertainty.
Problem solving involves identifying and taking action to resolve problems.
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Managers as Decision Makers ■ Chapter 4 87
why managers fit the definition of knowledge workers, persons whose value to organizations rests with their intellectual, not physical, capabilities.
2 All
managers continually solve problems as they gather, give, receive, and pro-
cess information from many sources. In fact, one of your most critical skills
might be described as information competency—the ability to locate, re- trieve, evaluate, organize, and analyze information to make decisions that
solve problems. This means not just getting information off the Internet; it
means getting credible and valuable information, and then using it well.
Information competency is the ability to gather and use information to solve problems.
A performance threat is a situation where something is wrong or likely to be wrong.
A performance opportunity is a situation that off ers the possibility of a better future if the right steps are taken.
FIGURE 4.1 In What Ways Do Managers Serve as Information Nerve Centers in Organizations? Managers sit at the center of complex networks of information fl ows; they serve as
information-processing hubs or nerve centers. Each of the management functions—planning,
organizing, leading, and controlling—requires the gathering, use, and transferring of
information in these networks. Managers must have the information competencies needed to
perform well in these roles.
Decisional Roles
Information used for entrepreneurship, resource
allocation, disturbance handling, negotiation
Interpersonal
Roles
Information used for ceremonies, motivation, and
networking
Information
Roles
Information sought, received, transferred
among insiders and outsiders
PLANNING,
ORGANIZING,
LEADING,
CONTROLLING
PLANNING,
ORGANIZING,
LEADING,
CONTROLLING
Information
Competency
Interpersonal
Skills
Computer
Literacy
Th e most obvious problem-solving situation for managers, or anyone for that
matter, is a performance threat. Th is occurs as an actual or potential perfor- mance defi ciency. Something is wrong, or is likely to be wrong in the near fu-
ture. Hurricane Katrina is an example worth remembering. Th ere were lots of
warnings about this storm, but many underestimated or were either ambivalent
or overconfi dent in preparing for it. Too many people weren’t ready when Katrina
slammed New Orleans, and a high price was paid for their errors.
Let’s not forget, however, that problem solving often involves, or should in-
volve, chances to deal with a performance opportunity. Th is is a situation that off ers the possibility of a better future if the right steps are taken now. Suppose
that a regional manager notices that sales at one retail store are unusually high.
Does she just say “Great,” and go on about her business? Th at’s an opportunity
missed. A really sharp manager says: “Wait a minute, there may be something
happening here that I could learn from and possibly transfer to other stores. I had
better fi nd out what’s going on.” Th at’s an opportunity gained.
Knowledge workers add value to organizations through their intellectual capabilities.
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EXPLORING MANAGEMENT88
||| Managers can be problem avoiders, problem solvers, or problem seekers.
What do you do when you receive a lower grade than expected on an exam or
assignment? Do you get the grade, perhaps complain a bit to yourself or friends,
and then forget it? Or do you get the grade, recognize that a problem exists, and
try to learn from it so that you can do better in the future? Managers are just like
you and me. Th ey approach problem solving in diff erent ways and realize diff er-
ent consequences.
Some managers are problem avoiders. Th ey ignore information that would
otherwise signal the presence of a performance threat or opportunity. Th ey are
not active in gathering information, and prefer not to make decisions or deal
with problems.
Other managers are problem solvers. Th ey make decisions and try to solve
problems, but only when required. Th ey are reactive, gathering information and
responding to problems when they occur, but not before. Th ese managers may
deal reasonably well with performance threats, but they are likely to miss many
performance opportunities.
Still other managers, the really better ones, are problem seekers. Th ey are al-
ways looking for problems to solve or opportunities to explore. True problem
seekers are proactive as information gatherers, and they are forward thinking.
Th ey anticipate threats and opportunities, and they are eager to take action to
gain the advantage in dealing with them.
||| Managers make programmed and nonprogrammed decisions when solving problems.
So far in this discussion, we have used the word “decision” rather casually.
From this point forward, though, let’s agree that a decision is a choice among possible alternative courses of action. Let’s also agree that decisions can be
made in diff erent ways, with some ways working better than others in various
circumstances.
Some management problems are routine and repetitive. Th ey can be addressed
through programmed decisions that apply preplanned solutions based on the lessons of past experience. Such decisions work best for structured problems
that are familiar, straightforward, and clear with respect to information needs. In
human resource management, for example, decisions always have to be made on
things such as vacations and holiday work schedules. Forward-looking managers
can use past experience and plan ahead to make these decisions in programmed,
not spontaneous, ways.
Other management problems, many in fact, arise as new or unusual situ-
ations full of ambiguities and information defi ciencies. Th ese unstructured
problems require nonprogrammed decisions that craft novel solutions to meet the unique demands of a situation. In the recent fi nancial crisis, for exam-
ple, all eyes were on President Obama’s choice of Treasury Secretary Timothy
Geithner. His task was to solve the problems with billions in bad loans made
by the nation’s banks and restore stability to the fi nancial markets. But it was
A decision is a choice among possible alternative courses of action.
A programmed decision applies a solution from past experience to a routine problem.
A nonprogrammed decision applies a specifi c solution that has been crafted to address a unique problem.
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Managers as Decision Makers ■ Chapter 4 89
uncharted territory ; no prepackaged solutions were readily available. Geithner
and his team did what they believed was best. But in diffi cult and dynamic cir-
cumstances, only time would tell if the nonprogrammed decisions they made
were the right ones.
||| Managers can use systematic and intuitive thinking.
Managers diff er in their use of “systematic” and “intuitive” thinking. In systematic thinking a person approaches problems in a rational, step-by-step, and analytical fashion. You might recognize this when someone you are working with tries to
break a complex problem into smaller components that can be addressed one by
one. We might expect systematic managers to make a plan before taking action,
and to search for information and proceed with problem solving in a fact-based
and step-by-step fashion.
Someone using intuitive thinking is more fl exible and spontaneous than the systematic thinker, and they may be quite creative.
3 You might observe this pat-
tern in someone who always seems to come up with an imaginative response to
a problem, often based on a quick and broad evaluation of the situation. Intuitive
managers tend to deal with many aspects of a problem at once, jump quickly
from one issue to another, and act on either hunches based on experience or on
spontaneous ideas. Amazon.com’s Jeff Bezos says that when it’s not possible for
the fi rm’s top managers to make systematic fact-based decisions, “you have to
rely on experienced executives who’ve honed their instincts” and are able to make
good judgments. 4 In other words, there’s a place for both systematic and intuitive
decision making in management.
||| Managers use diff erent cognitive styles to process information for decision making.
When US Airways Flight 1549 took off from LaGuardia airport on January 15,
2009, all was normal. It was normal, that is, until the plane hit a fl ock of birds and
both engines failed; Flight 1549 was going to crash. Pilot Chesley Sullenberger
quickly realized he couldn’t get to an airport and decided to land in the Hudson
River—a highly risky move. But he had both a clear head and a clear sense of
what he had been trained to do. Th e landing was successful and no lives were
lost. Called a “hero” for his eff orts, Sullenberger described his thinking this way. 5
Systematic thinking approaches problems in a rational and analytical fashion.
I needed to touch down with the wings exactly level. I needed to touch
down with the nose slightly up. I needed to touch down at . . . a descent
rate that was survivable. And I needed to touch down just above our
minimum fl ying speed but not below it. And I needed to make all these
things happen simultaneously.
Intuitive thinking approaches problems in a fl exible and spontaneous fashion.
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EXPLORING MANAGEMENT90
Th e Flight 1549 example points us toward a discussion of cognitive styles, or the way individuals deal with information while making decisions. If you take
the self-assessment “Intuitive Ability” at the end of the book, you can examine
your cognitive style in problem solving. Th is involves a contrast of tendencies
toward information gathering (sensation vs. intuition) and information evalu-
ation (feeling vs. thinking). Pilot Sullenberger would most likely score high in
both sensation and thinking, and that is probably an ideal type for his job. But as
shown in the fi gure, this is only one of four master cognitive styles. 6
• Sensation thinkers—STs tend to emphasize the impersonal rather
than the personal and take a realistic approach to problem solv-
ing. Th ey like hard “facts,” clear goals, certainty, and situations
of high control.
• Intuitive thinkers—ITs are comfortable with abstraction and
unstructured situations. Th ey tend to be idealistic, prone to-
ward intellectual and theoretical positions; they are logical and
impersonal but also avoid details.
• Intuitive feelers—IFs prefer broad and global issues. Th ey are
insightful and tend to avoid details, being comfortable with in-
tangibles; they value fl exibility and human relationships.
• Sensation feelers—SFs tend to emphasize both analysis and
human relations. Th ey tend to be realistic and prefer facts; they
are open communicators and sensitive to feelings and values.
As the descriptions suggest, people with diff erent cognitive styles may ap-
proach problems and make decisions in ways quite diff erent from one another.
It is important to understand our cognitive styles and tendencies, as well as
those of others. In the social context of the workplace, lots of decisions are
made by people working together in small groups and teams. Th e more diverse
the cognitive styles, the more diffi culty we might expect as they try to make
decisions.
||| Managers make decisions under conditions of certainty, risk, and uncertainty.
It’s not just personal styles that diff er in problem solving; the environment
counts, too. Figure 4.2 shows three diff erent conditions or problem environ- ments in which managers make decisions—certainty, risk, and uncertainty.
As you might expect, the levels of risk and uncertainty in problem environ-
ments tend to increase the higher one moves in management ranks. You might
think about this each time you hear about Coca-Cola or Pepsi launching a
new fl avor or product or advertising campaign. Are the top executives making
these decisions certain that the results will be successful? Or are they taking
risks in market situations that are uncertain as to whether the new fl avor or
product or ad will be positively received by customers?
It would be nice if we could all make decisions and solve problems in the relative
predictability of a certain environment. Th is is an ideal decision situation where factual information exists for the possible alternative courses of action and their
consequences. All a decision maker needs to do is study the alternatives and choose
the best solution. It isn’t easy to fi nd examples of decision situations with such
A certain environment off ers complete information on possible action alternatives and their consequences.
Sensation Thinkers “STs”—like facts,
goals
Intuitive Thinkers “ITs”—idealistic,
theoretical
Sensation Feelers “SFs”—like facts,
feelings
Intuitive Feelers “IFs”—thoughtful,
flexible
Sensing
F e e lin
g T
h in
ki n g
In fo
rm a ti
o n
E v a lu
a ti
o n
Intuition
Information Processing
Cognitive style is the way an individual deals with information while making decisions.
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Managers as Decision Makers ■ Chapter 4 91
certain conditions. One possibility is a decision to take out a “fi xed-rate” loan—say
for college studies or a new car. At least you can make the decision knowing future
interest costs and repayment timetables. But this situation changes signifi cantly,
doesn’t it, if the lender is off ering you a “variable-rate” loan? In this case the interest
rate you have to pay will vary in the future according to what happens with market
interest rates. How willing are you to take a loan while not knowing if interest rates
will go down (to your gain) or up (to your loss) in the future?
Whereas absolute certainty is the best scenario for decision makers, the
reality is that in our personal lives and in management we more often face risk environments where information and facts are incomplete. An example is the off er of a variable rate loan as just discussed. In risk conditions, alternative
courses of action and their consequences can be analyzed only as probabilities
(e.g., 4 chances out of 10). One way of dealing with risk is by gathering as much
information as possible, perhaps in diff erent ways. In the case of a new prod-
uct, such as Coke Zero or even a college textbook like this, it is unlikely that
marketing executives would make go-ahead decisions without lots of data
gathering and analysis. Often this involves getting reports from multiple focus
groups that test the new product in its sample stages.
When facts are few and information is so poor that managers have a hard
time even assigning probabilities to things, an uncertain environment exists. Th is is the most diffi cult decision condition.
7 It’s also more common than you
might think. And the border line between risk and uncertainty isn’t always clear.
When the Japanese built a nuclear power plant at Fukushima—on the sea coast
and in an earthquake zone, were decision makers just taking a calculated risk or
were they acting in the face of absolute uncertainty? Decisions made in uncer-
tain conditions depend greatly on intuition, judgment, informed guessing, and
hunches—all of which leave considerable room for error. Th is is one situation
where group decisions are often useful. When things are uncertain, the more
information, perspectives, and creativity that can be brought to bear on the situ-
ation, the better. Th is increases chances for a good decision, or at least a better
one than the individual alone might make.
A risk environment lacks complete information but off ers probabilities of the likely outcomes for possible action alternatives.
An uncertain environment lacks so much information that it is diffi cult to assign probabilities to the likely outcomes of alternatives.
Certain environment
Alternative courses of action and their outcomes are known to decision maker.
Problem
Alternative 1
Alternative 2
Alternative 3
Outcome A
Outcome B
Outcome C
Risk environment
Decision maker views alternatives and their outcomes in terms of probabilities.
Problem
Alternative 1
Alternative 2
Alternative 3
Outcome A
Outcome B
Outcome C
0.7
0.2
0.5
Uncertain environment
Decision maker doesn't know all alternatives and outcomes, even as probabilities.
Problem
Alternative 1
Alternative 2
Alternative ?
Outcome A
Outcome ?
0.4
Risk of failureLow High
Type of decisionProgrammed Nonprogrammed
FIGURE 4.2 What Are the Diff erences Between Certain, Risk, and Uncertain Decision-Making Environments? Managers rarely face a problem where they can know all the facts, identify all alternatives and their consequences, and chart a clear
course of action. Such certainty is more often than not replaced by problem environments involving risk and uncertainty. Risk is where
alternatives are known but their consequences can be described in terms of probabilities. Uncertainty is where all alternatives are not
known and their consequences are highly speculative.
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EXPLORING MANAGEMENT92
STUDY GUIDE
Takeaway 4.1 How Do Managers Use Information to
Solve Problems?
Rapid Review • A problem can occur as a threat or an opportunity; it involves an existing or poten-
tial discrepancy between an actual and a desired state of aff airs.
• Managers can deal with structured and routine problems using programmed deci- sions; novel and unique problems require special solutions developed by nonpro-
grammed decisions.
• Managers deal with problems in diff erent ways, with some being problem avoid- ers, others being reactive problem solvers, and still others being proactive problem
seekers.
• Managers using systematic thinking approach problems in a rational step-by-step fashion; managers using intuitive thinking approach them in a more fl exible and
spontaneous way.
• Managers display diff erent cognitive styles when dealing with information for de- cision making—sensation thinkers, intuitive thinkers, intuitive feelers, and sensa-
tion feelers.
• Th e problems that managers face occur in environments of certainty, risk, and uncertainty.
Questions for Discussion 1. Can a manager be justifi ed for acting as a problem avoider in certain situations?
2. Would an organization be better off with mostly systematic or mostly intuitive
thinkers?
3. Is it possible to develop programmed decisions for use in conditions of risk and
uncertainty?
Be Sure You Can • explain the importance of information competency for successful problem solving • diff erentiate programmed and nonprogrammed decisions • describe diff erent ways managers approach and deal with problems • discuss the diff erences between systematic and intuitive thinking • identify diff erences between the four cognitive styles used in decision making • explain the challenges of decision making under conditions of certainty, risk, and
uncertainty environments
What Would You Do? Even though some problems in organizations seem to “pop up,” many can be antici-
pated. Examples are an employee who calls in sick at the last minute, a customer
who is unhappy with a product or service and wants a refund, and even a boss who
asks you to do something that isn’t job-relevant. How can such situations be best
handled from a decision-making standpoint?
Terms to Defi ne
Certain environment
Cognitive styles
Decision
Information
competency
Intuitive thinking
Knowledge workers
Nonprogrammed
decision
Performance
opportunity
Performance threat
Problem solving
Programmed decision
Risk environment
Systematic thinking
Uncertain
environment
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Managers as Decision Makers ■ Chapter 4 93
Takeaway 4.2 What Are Five Steps in the
Decision-Making Process?
ANSWERS TO COME
■ Step 1 is to identify and defi ne the problem.
■ Step 2 is to generate and evaluate alternative courses of action.
■ Step 3 is to decide on a preferred course of action.
■ Step 4 is to implement the decision.
■ Step 5 is to evaluate results.
■ Ethical reasoning is important at all steps in decision making.
The decision-making process involves a straightforward series of steps shown in Figure 4.3—Identify and defi ne the problem, generate and evaluate alternative solutions, decide on a preferred course of action, implement the deci-
sion, and then evaluate results. An ethics double-check should be done at each
step along the way. 8
Th e decision-making process begins with identifi cation of a problem and ends with evaluation of implemented solutions.
FIGURE 4.3 What Are Five Steps in the Decision-Making Process? Decision making can be viewed as a series of steps—(1) fi nd and defi ne the problem, (2) generate and evaluate
solutions, (3) choose a preferred alternative, (4) implement the decision, and (5) evaluate the results. It is important to
conduct ethical analysis at all steps in the decision-making process—from initial problem identifi cation all the way to
the evaluation of results. When the ethics of a decision are questioned, it’s time to stop and rethink the entire process.
Th is helps the decision maker to be confi dent that all underlying moral problems have been identifi ed and dealt with in
the best possible ways.
Step 1
Identify and define the problem
Step 2
Generate and evaluate
alternative solutions
Step 3
Decide on preferred
course of action
Step 4
Implement the decision
Step 5
Evaluate results
Conduct ethical analysis
Let’s look at this process with a timely example. When General Motors an-
nounced it was closing nine plants in North America and cutting 30,000 jobs, it
was a blow to workers, their families, and communities. 9 Th e following case isn’t
quite as sensational, but it’s equally real. It helps show how the decision-making
steps apply in real situations.
Th e Ajax case On December 31, the Ajax Company decided to close down its Murphysboro plant. Market conditions and a recessionary economy were forcing
layoff s, and the company hadn’t been able to fi nd a buyer for the plant. Of the 172
employees, some had been with the company as long as 18 years, others as little
as 6 months. Ajax needed to terminate all of them. Under company policy, they
would be given severance pay equal to one week’s pay per year of service.
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EXPLORING MANAGEMENT94
Th is opening to the Ajax case refl ects how competition, changing times, and
the forces of globalization can take their toll on organizations, the people that
work for them, and the communities in which they operate. How would you feel—
as one of the aff ected employees, as the mayor of this small town, or as an Ajax
executive having to make tough decisions in this situation?
||| Step 1 is to identify and defi ne the problem. Th e fi rst step in decision making is to identify and defi ne the problem. Th is is
a stage of information gathering, information processing, and deliberation. It is
also where goals are clarifi ed to specify exactly what a decision should accom-
plish. Th e more specifi c the goals, the easier it is to evaluate results after imple-
menting the decision.
Th ree mistakes are common in this critical fi rst step in decision making. First,
we may defi ne the problem too broadly or too narrowly. To take a classic exam-
ple, instead of stating the problem as “Build a better mousetrap,” we defi ne it as
“Get rid of the mice.” Ideally, problems are defi ned in ways that give them the best
possible range of problem-solving options.
Second, we may focus on symptoms instead of causes. Symptoms only indi-
cate that problems may exist; they aren’t the problems themselves. Of course,
managers need to be good at spotting problem symptoms (e.g., a drop in per-
formance). But instead of just treating symptoms (such as simply encouraging
higher performance), they need to seek out and address
their root causes (e.g., discovering the worker’s need for
training in the use of a complex new computer system).
Th ird, we may choose the wrong problem to deal with.
Th is can easily happen when we are rushed and time is
short, or when there are many things happening at once.
Instead of just doing something, it’s important to do the
right things. Th is means setting priorities and dealing
with the most important problems fi rst.
Back to the Ajax case Closing the plant will result in a loss of jobs for a substan- tial number of people from the small community of Murphysboro. Th e unem-
ployment created will negatively impact these individuals, their families, and the
community as a whole. Th e loss of the Ajax tax base will further hurt the com-
munity. Ajax management, therefore, defi nes the problem as how to minimize
the adverse impact of the plant closing on the employees, their families, and the
community.
||| Step 2 is to generate and evaluate alternative courses of action.
After the problem is defi ned, the next step in decision making is to gather the
needed facts and information. Managers must be clear here on exactly what they
know and what they need to know. Extensive information gathering should iden-
tify alternative courses of action as well as their anticipated consequences. Key
stakeholders in the problem should be identifi ed and the eff ects of each possible
course of action on them should be considered. In the case of GM’s plant closings
Common Mistakes When
Identifying Problems
1. Defi ning problem too broadly or too narrowly
2. Dealing with symptoms, not real causes
3. Focusing on wrong problem to begin with
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Managers as Decision Makers ■ Chapter 4 95
and layoff s, for example, a union negotiator said: “While GM’s continuing decline
in market share isn’t the fault of workers or our communities, it is these groups
that will suff er.”
Most managers use some form of cost-benefi t analysis to evaluate alterna- tives. Th is compares what an alternative will cost with its expected benefi ts. At
a minimum, benefi ts should exceed costs. In addition, an alternative should be
timely, acceptable to as many stakeholders as possible, and ethically sound. And
most often, the better the pool of alternatives and the better the analysis, the
more likely it is that a good decision will result.
Back to the Ajax case Ajax will defi nitely close the plant; keeping it open is no longer an option. Th ese alternatives are considered—close the plant on schedule
and be done with it; delay the plant closing and try again to sell it to another
fi rm; off er to sell the plant to the employees and/or local interests; close the plant
and off er employees transfers to other Ajax plant locations; close the plant, off er
transfers, and help the employees fi nd new jobs in and around Murphysboro.
||| Step 3 is to decide on a preferred course of action.
Management theory recognizes two quite diff erent ways that alternatives get
explored and decisions get made: the classical and behavioral models shown in
Figure 4.4. Th e classical decision model views the manager as acting rationally and in a fully informed manner. Th e problem is clearly defi ned, all possible ac-
tion alternatives are known, and their consequences are clear. As a result, he
or she makes an optimizing decision that gives the absolute best solution to the problem.
Th e classical decision model describes decision making with complete information.
Cost-benefi t analysis involves comparing the costs and benefi ts of each potential course of action.
An optimizing decision chooses the alternative providing the absolute best solution to a problem.
Although the classical model sounds ideal, most of the time it’s too good to be
true. Because there are limits to our information-processing capabilities, some-
thing called cognitive limitations, it is hard to be fully informed and make per-
fectly rational decisions in all situations. Recognizing this, the premise of the
behavioral decision model is that people act only in terms of their perceptions, which are frequently imperfect. Armed with only partial knowledge about the
available action alternatives and their consequences, decision makers are likely
to choose the first alternative that appears satisfactory to them. Herbert
Th e behavioral decision model describes decision making with limited information and bounded rationality.
FIGURE 4.4 How Does the Classical Model of Managerial Deci- sion Making Diff er from the Behavioral Model? Th e classical model views deci-
sion makers as having com-
plete information and making
optimum decisions that are the
absolute best choices to resolve
problems. Th e behavioral model
views decision makers as having
limited information-processing
capabilities. Th ey act with incom-
plete information and make
satisfi cing decisions, choosing
the fi rst satisfactory alternative
that comes to their attention.
• Structured problem • Clearly defined • Certain environment • Complete information • All alternatives and consequences known
Choose absolute best among alternatives
Choose first “satisfactory” alternative
CLASSICAL MODEL
• Unstructured problem • Not clearly defined • Uncertain environment • Incomplete information • Not all alternatives and consequences known
BEHAVIORAL MODEL
OPTIMIZING DECISION SATISFICING DECISION
Rationality
Acts in perfect world
Bounded rationality
Acts with cognitive limitations
Manager as decision maker
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EXPLORING MANAGEMENT96
Simon, who won a Nobel Prize for his work, calls this the tendency to make
satisfi cing decisions.10 What do you think? Does this seem accurate in describ- ing how we make a lot of decisions?
Back to the Ajax case Ajax executives decide to close the plant, off er employees transfers to company plants in another state, and off er to help displaced employ-
ees fi nd new jobs in and around Murphysboro.
||| Step 4 is to implement the decision. Once a preferred course of action is chosen, managers must take action to fully
implement it. Until they do, nothing new can or will happen to solve the problem.
Th is not only requires the determination and creativity to arrive at a decision, it
also requires the ability and personal willingness to act. Most likely it also requires
the support of many other people. And more often than you might realize, it is lack
of support that sabotages the implementation of many perfectly good decisions.
Managers fall prey to the lack-of-participation error when they don’t include in the decision-making process those persons whose support is necessary for
implementation. When managers use participation wisely, by contrast, they get
A satisfi cing decision chooses the fi rst satisfactory alternative that presents itself.
Lack-of-participation error is failure to include the right people in the decision-making process.
YOUR BRAIN ON THE INTER-
NET—MORE ENLIGHTENED
OR LIGHTENED UP?
When the World Wide Web launched in 1991, human culture was forever altered. One profound impact has been that upon the
human brain. It has evolved along with the tools that we use to communicate. While the Internet has enlightened us in various ways, it may also be lightening our thinking by replacing deep thought and refl ection with shallow-minded pursuits.
In the book The Shallows (2010, W. W. Norton & Company), author Nicholas Carr discusses how human minds have changed along with communication technologies ranging from the spoken word to the written tablet, and the printing press to the Internet. Research shows that brains are “rewired” when using the Web as the “hypermedia” of links and audio-visual stimuli overwhelm its cognitive capacity. Studies show that brains cope with infor- mation overload by changing their neural networks of operation. “Linear” thought—deep thinking and slow refl ection using long- term memory—is replaced by “non-linear” thought—temporary thinking and rapid scanning using short-term memory.
Carr says research shows book readers outperform “hy- pertext” readers in comprehension, memory, and learning.
Internet brains are distracted by abundant stimuli and grow their short-term memory circuits by converting and replacing long-term memory circuits. Permanent memory requires time and calm for ideas to pass into the unconscious mind, so he describes the Internet as a “technology of forgetfulness” and a “Web of distraction.” Carr warns that critical mental skills are lost, and advises caution in Internet use. He thinks users should be purpose-driven, focus on fewer tasks simultaneously, and spend time away from the Web to read, ponder, and discuss ideas verbally.
He concedes that new skills are developed by Net use, like “power browsing” through titles, content pages, and abstracts to quickly obtain ideas. And “hunting and gathering” more effi ciently for additional and varied facts. Carr speculates Web use may someday advance brains to multitask effectively, but those tasks may be less complex as humans’ brains evolve to accommodate the shallow thinking demands of the Internet.
REFLECT AND REACT
Do you think the Internet makes you more, or less, smart? How can Internet distractions be managed? Do you think linear thinking may be developed within, or beyond, the Net? And by the way, do you agree that the Internet is a Web of distraction?
■ THE SHALLOWS BY NICHOLAS CARR
Manager’s Library
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Managers as Decision Makers ■ Chapter 4 97
the right people involved from the beginning. Th is not only brings their inputs
and insights to bear on the problem, it helps build commitments to take actions
supporting the decision and make sure it all works as intended.
Back to the Ajax case Ajax management ran an ad in the local and regional news- papers for several days. It announced to potential employers an “Ajax skill bank”
composed of “qualifi ed, dedicated, and well-motivated employees with a variety
of skills and experiences.” Th e ad urged interested employers to contact Ajax for
further information.
||| Step 5 is to evaluate results. A decision isn’t much good if it doesn’t achieve the desired outcomes or causes
undesired side eff ects. Th is is why the decision-making process is not complete
until results are evaluated. Doing so is a form of control, gathering data so that
performance results can be measured against initial goals. If things aren’t go-
ing well it means reassessing and perhaps redoing earlier steps in the decision-
making process. If things are better than expected, it means trying to learn why,
so these lessons can be used in the future.
Back to the Ajax case How eff ective was Ajax’s decision? Well, we don’t know for sure. After Ajax ran the skill-bank advertisement for 15 days, the plant’s industrial
relations manager said: “I’ve been very pleased with the results.” However, we re-
ally need a lot more information for a true evaluation. How many employees got
new jobs locally? How many transferred to other Ajax plants? How did the lo-
cal economy perform in the following months? Probably you can add evaluation
questions of your own to this list.
The best advice she ever got, says Indra Nooyi, Pepsico’s Chairman and CEO, was to always assume positive intent. The lesson came from her father: “Whatever anybody says or does, assume positive intent. You will be amazed at how your whole approach to a person or problem becomes very different. . . . You are trying to understand and listen because at your basic core you are saying, ‘Maybe they are saying something to me that I am not hearing.’ ”
Her father’s advice has carried Nooyi to the top ranks of global business, only the 12th woman to head a Fortune 500 fi rm. Business Week described her as a leader with “prescient business sense.” Former CEO Roger Enrico says, “Indra can drive as deep and hard as anyone I’ve ever met, but she can do it with a sense of heart and fun.” ABC news described her as a
blend of “Indian culture mixed in with the traditional American working mom.”
Nooyi is also a leader when it comes to corporate social re- sponsibility. She has said that her fi rm’s “real profi t” should be as- sessed as Revenue less Cost of Goods Sold less Costs to Society.
WHAT’S THE LESSON HERE?
Indra Nooyi makes lots of decisions every day, many of them strategic and consequential for her fi rm. But as the last point about “real profi t” indicates, she tries to make these decisions with a strong and confi dent sense of ethical direction. What things might provide her with the ability to always do so in this industry? And how about you? Do you have a solid ethics an- chor point that helps you make consistently good decisions?
■ INDRA NOOYI BRINGS STYLE AND A STRATEGIC VISION TO PEPSI
Role Models
“WHATEVER ANYBODY SAYS OR DOES, ASSUME POSITIVE INTENT.
YOU WILL BE AMAZED AT HOW YOUR WHOLE APPROACH TO
A PERSON OR PROBLEM BECOMES VERY DIFFERENT.” {
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EXPLORING MANAGEMENT98
||| Ethical reasoning is important at all steps in decision making.
If you look back to Figure 4.3, you’ll see that each step in the decision-making process is linked with ethical reasoning.
11 Attention to ethical analysis helps iden-
tify any underlying moral problems. You can think of this as an ongoing “ethics
double-check.” It is accomplished by asking and answering two sets of questions.
Th e fi rst set of ethics questions is based on four criteria described in the work
of ethicist Gerald Cavanagh and his associates. 12
1. Utility—Does the decision satisfy all constituents or stakeholders?
2. Rights—Does the decision respect the rights and duties of everyone?
3. Justice—Is the decision consistent with the canons of justice?
4. Caring—Is the decision consistent with my responsibilities to care?
Th e second set of ethics questions exposes a decision to public disclosure and
the prospect of shame. 13
Th ese so-called spotlight questions, discussed also in the last chapter, are especially powerful when the decision maker comes from a
morally scrupulous family or social structure.
1. “How would I feel if my family found out about this decision?”
2. “How would I feel if this decision was published in the local newspaper or
posted on the Internet?”
3. “What would the person I know who has the strongest character and best
ethical judgment say about my decision?”
Spotlight questions highlight the risks of public disclosure of one’s actions.
Some 40 climbers are winding their ways to the top of Mt. Everest. About 1,000 feet below the summit sits a British mountain climber in trouble, collapsed in a shallow snow cave. Most of those on the way up just look while continuing their climbs. Sherpas from one passing team pause to give him oxy- gen before moving on. Within hours, David Sharp, 34, is dead of oxygen defi ciency on the mountain.
A climber who passed by says: “At 28,000 feet it’s hard to stay alive yourself . . . he was in very poor condition . . . , it was a very hard decision . . . he wasn’t a member of our team.”
Someone who made the summit in the past says: “If you’re going to go to Everest . . . I think you have to accept responsi- bility that you may end up doing something that’s not ethically nice . . . you have to realize that you’re in a different world.”
After hearing about this case, the late Sir Edmund Hillary, who reached the top in 1953, said: “Human life is far more im- portant than just getting to the top of a mountain.”
YOU DECIDE
Who’s right and who’s wrong here? And, by the way, in our personal affairs, daily lives, and careers, we are all, in our own ways, climbing Mt. Everest. What are the ethics of our climbs? How often do we notice others in trouble, struggling along the way? And, like the mountain climbers heading to the summit of Everest, how often do we pass them by to con- tinue our own journeys? Can you identify examples—from business, school, career, sports, and so on—that pose similar ethical dilemmas?
■ LEFT TO DIE ON MT. EVEREST
Ethics Check “HUMAN LIFE IS FAR MORE IMPORTANT THAN JUST
GETTING TO THE TOP OF A MOUNTAIN.” {
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Managers as Decision Makers ■ Chapter 4 99
Takeaway 4.2 What Are Five Steps in the
Decision-Making Process?
Rapid Review • Th e steps in the decision-making process are: (1) identify and defi ne the problem;
(2) generate and evaluate alternatives; (3) decide on the preferred course of ac-
tion; (4) implement the decision; (5) evaluate the results; conduct ethics double-
check in all steps.
• A cost-benefi t analysis compares the expected costs of a decision alternative with its expected results.
• In the classical model, an optimizing decision chooses the absolute best solution from a known set of alternatives.
• In the behavioral model, cognitive limitations lead to satisfi cing decisions that choose the fi rst satisfactory alternative to come to attention.
• Th e ethics of a decision can be checked on the criteria of utility, rights, justice, and caring, as well as by asking the spotlight questions.
Questions for Discussion 1. Do the steps in the decision-making process have to be followed in order?
2. Do you see any problems or pitfalls for managers using the behavioral decision
model?
3. Is use of the spotlight questions suffi cient to ensure an ethical decision?
Be Sure You Can • list the steps in the decision-making process • apply these steps to a sample decision-making situation • explain cost-benefi t analysis • compare and contrast the classical and behavioral decision models • illustrate optimizing and satisfi cing in your personal decision-making experiences • list and explain the criteria for evaluating the ethics of a decision • list three questions for double-checking the ethics of a decision
What Would You Do? Well, it has fi nally happened. You’ve done the ethics analysis and a decision you are
about to make fails all three of the recommended spotlight questions. You are under
a lot of pressure because the problem situation involves social loafi ng and poor per-
formance by one of your team members. You have come up with a reason to remove
her from the team. But, you feel very uneasy knowing that your intention fails the
spotlight test. As team leader, what do you do now?
STUDY GUIDE
Terms to Defi ne
Behavioral decision
model
Classical decision
model
Cost-benefi t analysis
Decision-making
process
Lack-of-participation
error
Optimizing decision
Satisfi cing decision
Spotlight questions
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EXPLORING MANAGEMENT100
Once you accept the fact that each of us is likely to make imperfect
decisions at least some of the time, it makes sense to probe even further into the
how’s and why’s of decision making in organizations. In addition to the issues of
ethical reasoning and analysis just discussed, other concerns are possible causes
of decision bias and error, advantages and disadvantages of group decision mak-
ing, and the challenges of decision making under crisis conditions.
||| Personal factors help drive creativity in decision making.
Lonnie Johnson is a former U.S. Air Force captain and a NASA engineer.
You probably don’t know him, but you may be familiar with something he
invented—the Super Soaker water gun. Johnson didn’t set out to invent the water
gun; he was working in his basement on an idea for refrigeration systems that
would use water rather than Freon. Something connected in his mind and the
Super Soaker was born. Johnson says: “Th e Super Soaker changed my life.” He
now heads his own research and development company and, among other things,
always has fun toys in development. 14
We can think of creativity as the generation of a novel idea or unique approach to solving performance problems or exploiting performance opportunities.
15 Just
imagine what we can accomplish with all the creative potential that exists in an
organization’s workforce. But how do you turn that potential into actual creativity
in decision making—the Lonnie Johnson model, so to speak?
Creativity is one of our greatest personal assets, even though it may be too
often unrecognized by us and by others. We exercise creativity every day in lots of
ways—solving problems at home, building something for the kids, or even
fi nding ways to pack too many things into too small a suitcase. But are we
creative when it would really help in solving workplace problems?
One source of insight into personal creativity drivers is the three-component
model of task expertise, task motivation, and creativity skills shown in the small
fi gure on the next page. 16
From a management standpoint, the model is helpful
because it points us in the direction of actions that can be taken to build creativ-
ity drivers into the work setting and encourage creativity in decision making.
Creative decisions are more likely to occur when the person or team
has a lot of task expertise. As in the case of Lonnie Johnson, creativity is an
Creativity is the generation of a novel idea or unique approach that solves a problem or crafts an opportunity.
Takeaway 4.3 What Are Some Current Issues
in Managerial Decision Making?
ANSWERS TO COME
■ Personal factors help drive creativity in decision making.
■ Group decision making has both advantages and disadvantages.
■ Judgmental heuristics and other biases and traps may cause decision-making
errors.
■ Managers must be prepared for crisis decision making.
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Managers as Decision Makers ■ Chapter 4 101
outgrowth of skill and typically extends in new directions something
one is good at or knows about. Creativity is also more likely when the
people making decisions are highly task motivated. It tends to occur
in part because people work exceptionally hard to resolve a problem.
In the course of old-fashioned hard work—Lonnie Johnson spending
hours in his home basement, for example—something new and diff er-
ent is accomplished.
Creative decisions are more likely when the people involved have
strong creativity skill sets. In popular conversations you might refer to
this as the contrast between “right-brain” thinking—imagination, intu-
ition, spontaneity, and emotion—and “left-brain” thinking—logic, or-
der, method, and analysis. But just what are we talking about here? Is
creativity something that is built into some of us and not built into others? Or
is creativity something that one can work to develop along with other personal
skills and competencies?
Researchers argue the prior points. But, they tend to agree both that the fol-
lowing characteristics often describe creative people and that most of us can
develop these abilities into creativity skill sets. Why not use the list as a personal
test—a self-check of potential strengths and weaknesses in creativity skills? 17
• Ability to work with high energy
• Ability to hold one’s ground in the face of criticism
• Ability to be resourceful even in diffi cult situations
• Ability to think “outside of the box”—divergent thinking
• Ability to use “lateral thinking”—looking at diverse ways to solve problems
• Ability to transfer learning from one setting to others
• Ability to “step back,” be objective, and question assumptions
Managers are decision makers. And if they are to make con- sistently good decisions, they must be skilled at gathering and processing information. Managers are also implementers. Once decisions are made, managers are expected to rally peo- ple and resources to put them into action. This is how problems get solved and opportunities get explored in organizations.
In order for all this to happen, managers must have the self-confi dence to turn decisions into action accomplish- ments; they must believe in their decisions and the informa- tion foundations for them. A good understanding of the many
topics in this chapter can improve your decision-making skills. A better understanding of your personal style in gathering and processing information can also go a long way toward building your self-confi dence as a decision maker.
■ SELF-CONFIDENCE
Explore Yourself MANAGERS ARE DECISION MAKERS . . . THEY ARE
ALSO DECISION IMPLEMENTERS. {
Get to know yourself better by taking the self-assessment
on Cognitive Style and completing the other activities in
the Exploring Management Skill-Building Portfolio.
Personal Creativity Drivers
CREATIVITY
Task expertise
Task motivation
Creativity skills
CREATIVITY
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EXPLORING MANAGEMENT102
||| Group decision making has both advantages and disadvantages.
Sometimes the most important decisions we make involve choosing whether to
make them alone or with the help of others. And it really shouldn’t be an either/
or question. Eff ective managers and team leaders typically switch back and forth
between individual and group decision making, trying to use the best methods
for the problems at hand. To do this well, however, you need to understand the
implications of Table 4.1—Potential Advantages and Disadvantages of Group Decision Making.
18
Table 4.1 Potential Advantages and Disadvantages of Group Decision Making
Why group decisions are often good More information—More information, expertise, and viewpoints are available to help
solve problems.
More alternatives—More alternatives are generated and considered during decision
making.
Increased understanding—Th ere is increased understanding and a greater acceptance of
the decision by group members.
Greater commitment—Th ere is an increased commitment of group members to work
hard and support the decision.
Why group decisions can be bad Conformity with social pressures—Some members feel intimidated by others and give in
to social pressures to conform.
Domination by a few members—A minority dominates; some members get railroaded by
a small coalition of others.
Time delays—More time is required to make decisions when many people try to work
together.
In respect to advantages, group decisions can be good because they bring
greater amounts of information, knowledge, and expertise to bear on a prob-
lem. Th ey often expand the number and even the creativity of action alternatives
examined. And as noted earlier in our discussion of lack-of-participation error,
participation helps group members gain a better understanding of any decisions
reached. Th is increases the likelihood that they will both accept decisions made
and work hard to help implement them.
In respect to disadvantages, we all know that it is sometimes diffi cult and
time consuming for people to make group decisions. Th e more people involved,
the longer it can take to reach a group decision, and the more likely that prob-
lems will arise. Th ere may be social pressure to conform that leads to prema-
ture consensus and agreement in group situations. Some individuals may feel
intimidated or compelled to go along with the apparent wishes of others who
have authority, or who act aggressive and uncompromising. Minority domina-
tion might cause some members to feel forced or railroaded into a decision
advocated by one vocal individual or a small coalition. And, lots of decisions
get made quickly or at the last minute just because a group is running out of
meeting time.
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Managers as Decision Makers ■ Chapter 4 103
||| Judgmental heuristics and other biases and traps may cause decision-making errors.
Why do well-intentioned people sometimes make bad decisions? Th e reason of-
ten traces to simplifying strategies we use when making decisions with limited
information, time, and even energy. Th ese strategies, known as heuristics, can
cause decision-making errors. 19
Th e availability heuristic occurs when people use information “readily available” from memory as a basis for assessing a current event or situation. You may decide,
for example, not to buy running shoes from a company if your last pair didn’t last
long. Th e potential bias is that the readily available information may be wrong or
irrelevant. Even though your present running shoes are worn out, you may have pur-
chased the wrong model for your needs or used them in the wrong conditions.
Th e representativeness heuristic occurs when people assess the likelihood of something happening based on its similarity to a stereotyped set of past occur-
rences. An example is deciding to hire someone for a job vacancy simply because
he or she graduated from the same school attended by your last and most suc-
cessful new hire. Using the representative stereotype may mask the truly impor-
tant factors relevant to the decision—the real abilities and career expectations of
the new job candidate; the school attended may be beside the point.
Th e anchoring and adjustment heuristic involves making decisions based on adjustments to a previously existing value or starting point. For example, a man-
ager may set a new salary level for a current employee by simply raising the prior
year’s salary by a percentage increment. Th e problem is that this increment is an-
chored in the existing salary level, one that may be much lower than the employ-
ee’s true market value. Rather than being pleased with the raise, the employee may
be unhappy and start looking elsewhere for another, higher-paying job.
Th e availability heuristic uses readily available information to assess a current situation.
Th e representativeness heuristic assesses the likelihood of an occurrence using a stereotyped set of similar events.
Th e anchoring and adjustment heuristic adjusts a previously existing value or starting point to make a decision.
Walmart wants to cut its carbon footprint by 20% by 2012, and cut greenhouse gas emissions in its supply chains by 20 mil- lion metric tons by 2015. By its own measurements, it actions are falling short of goals, but good progress is being made. Business executives are taking notice as consumers become more informed about the carbon footprints of their favorite products. • Car: Toyota Prius—97,000 pounds (from production through
use and ultimate disposal) • Fleece jacket: Patagonia Talus—66 pounds • Six-pack of beer: Fat Tire Amber Ale—7 pounds • Half-gallon of milk: Aurora Organic Dairy—7.2 pounds
• Laundry detergent: Tesco nonbiological liquid (1.5 liter)— 31 pounds
• Hiking boots: Timberland Winter Park slip-ons—121 pounds
YOUR THOUGHTS?
When you look at these product numbers, is the glass “half full” or “half empty” when it comes to protection of our natu- ral environment? How much do you worry about the carbon footprints of the products you consume? How high on the list of executive priorities should issues such as sustainability and carbon neutrality be? Should Walmart be praised for publicly setting carbon goals, or criticized for missing them?
■ GREENHOUSE GAS EMISSIONS AS EXECUTIVE PRIORITIES
Facts to Consider WALMART WANTS TO CUT GREENHOUSE GAS EMISSIONS
IN ITS SUPPLY CHAINS BY 20 MILLION METRIC TONS. {
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EXPLORING MANAGEMENT104
In addition to heuristic biases, framing error is another potential decision trap. Framing occurs when managers evaluate and resolve a problem in the con-
text in which they perceive it—either positive or negative. You might consider
this as the “glass is half empty versus the glass is half full” dilemma. Suppose
marketing data show that a new product has a 40% market share. What does
this really mean? A negative frame says there’s a problem because the product
is missing 60% of the market. “What are we doing wrong?” is the likely follow-up
question. But if the marketing team used a positive frame and considered the
40% share as a success story, the conversation might well be: “How can we do
even better?” By the way, we are constantly exposed to framing in the world of
politics; the word used to describe it is “spin.”
Another of our tendencies is to try to fi nd ways to justify a decision after
making it. In the case of unethical acts, for example, we try to rationalize with
statements like: “No one will ever fi nd out” or “Th e boss will protect me.” Such
thinking causes a decision-making trap known as confi rmation error. Th is means that we notice, accept, and even seek out only information that confi rms
or is consistent with a decision we have just made. Other and perhaps critical
information is downplayed or denied. Th is is a form of selective perception. Th e
error is that we neglect other points of view or disconfi rming information that
might lead us to a diff erent decision.
Yet another decision-making trap is escalating commitment. Th is is a tendency to increase eff ort and perhaps apply more resources to pursue a course of action
that signals indicate is not working. 20
It is an inability or unwillingness to call it
quits even when the facts suggest this is the best decision under the circumstances.
Ego and the desire to avoid being associated with a mistake can play a big role in
escalation.
How about it? Are you disciplined enough to minimize the risk of escalating
commitments to previously chosen, but erroneous, courses of action? Fortunately,
researchers have provided some good ideas on how to avoid the escalation trap.
Th ey include:
• Setting advance limits on your involvement in and commitment to a particular
course of action; stick with these limits.
• Making your own decisions; don’t follow the lead of others, since they are also
prone to escalation.
• Carefully determining just why you are continuing a course of action; if there
are insuffi cient reasons to continue, don’t.
• Reminding yourself of the costs of a course of action; consider saving these
costs as a reason to discontinue.
||| Managers must be prepared for crisis decision making.
Th ink back to the example of shift leader Carlos Urzua and the Chilean mine
disaster in the photo that opened this chapter. One of the most challenging of
all decision situations is the crisis. Th is is an unexpected problem that can lead to disaster if not resolved quickly and appropriately. Th e ability to handle crises
could well be the ultimate test of any manager’s decision-making capabilities,
and Urzua certainly fulfi lled his responsibilities with fl ying colors. Not everyone
Framing error is solving a problem in the context perceived.
Confi rmation error is when we attend only to information that confi rms a decision already made.
Escalating commitment is the continuation of a course of action even though it is not working.
A crisis is an unexpected problem that can lead to disaster if not resolved quickly and appropriately.
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Managers as Decision Makers ■ Chapter 4 105
does as well. In fact, as another recent example helps show, we sometimes react
to crises by doing exactly the wrong things.
It caught most people by surprise when Toyota, the king of automobile
quality, recalled over 5 million vehicles for quality defects—a real crisis
for the automaker. But it wasn’t just the size of the recall that caught our
attention; the way Toyota’s management handled the crisis was scruti-
nized as well. 21
One observer called the situation a “public relations night-
mare for Toyota” and said that “crisis management does not get any more
woeful than this.” Th is poor crisis management was described as a fault of
Toyota’s insular corporate culture, one that discouraged early disclosure of
quality problems and contributed to poor public relations when the crisis
fi nally hit the news.
Even though Toyota’s CEO Akio Toyoda eventually apologized in public and
pledged a return to high standards of quality, by the time he did so customers and
government regulators considered it too late and inadequate. Both he and the fi rm
were criticized for “initially denying, minimizing and mitigating the problems.” It
even turns out that data on quality problems had been available within the system
for a long time. But it wasn’t acted upon. Th e top U.S. executive for the company
said: “We did not hide it. But it was not properly shared.” 22
Managers err in crisis situations when they isolate themselves and try to solve the
problem alone or in a small, closed group. 23
Th is denies them access to crucial infor-
mation at the very time that they need it the most. It not only sets them up for poor
decisions, it may create even more problems. Th is is why many organizations are de-
veloping formal crisis management programs. Th ey train managers in crisis decision
making (see Tips to Remember), assign people ahead of time to crisis management
teams, and develop crisis management plans to deal with various contingencies.
Fire and police departments, the Red Cross, and community groups plan
ahead and train to best handle civil and natural disasters; airline crews train for
fl ight emergencies. So too can managers and work teams plan ahead and train to
best deal with organizational crises. 24
Th is only makes sense, doesn’t it?
1. Figure out what is going on—Dig in to thoroughly under- stand what’s happening and the conditions under which the crisis must be resolved.
2. Remember that speed matters—Attack the crisis as quickly as possible, trying to catch it when it is small and before it gets overwhelmingly large.
3. Remember that slow counts, too—Know when to back off and wait for a better opportunity to make progress with the crisis.
4. Respect the danger of the unfamiliar—Understand the danger of entering all-new territory where you and others have never been before.
5. Value the skeptic—Don’t look for and get too comfortable with early agreement; appreciate skeptics and let them help you see things differently in sorting out what to do.
6. Be ready to “fi ght fi re with fi re”—When things are going wrong and no one seems to care, you may have to fuel the crisis to get their attention.
■ SIX RULES FOR CRISIS MANAGEMENT
Tips to Remember THE ABILITY TO HANDLE CRISES COULD BE THE ULTIMATE
TEST OF YOUR DECISION-MAKING CAPABILITIES. {
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EXPLORING MANAGEMENT106
Takeaway 4.3 What Are Some Current Issues
in Managerial Decision Making?
Rapid Review • Creativity in decision making can be enhanced by the personal creativity drivers
of individual creativity skills, task expertise, and motivation.
• Group decisions off er the potential advantages of more information, greater understanding, and expanded commitments; a major disadvantage is that they
are often time consuming.
• Judgmental heuristics such as availability, anchoring and adjustment, and repre- sentativeness can bias decisions by oversimplifying the situation.
• Framing errors infl uence decisions by placing them in either a negative or a posi- tive situational context; confi rmation error focuses attention only on information
that supports a decision.
• Escalating commitment occurs when one sticks with a course of action even though evidence indicates that it is not working.
• A crisis problem occurs unexpectedly and can lead to disaster if managers fail to handle it quickly and properly.
Questions for Discussion 1. How can you avoid being hurt by the anchoring and adjustment heuristic in your
annual pay raises?
2. What are some real-world examples of how escalating commitment is aff ecting
decision making in business, government, or people’s personal aff airs?
3. Is it really possible to turn a crisis into an opportunity, and, if so, how?
Be Sure You Can • identify personal factors that can be developed or used to drive greater creativity in
decision making
• list potential advantages and disadvantages of group decision making • explain the availability, representativeness, and anchoring and adjustment heuristics • illustrate framing error and continuation error in decision making • explain and give an example of escalating commitment • describe what managers can do to prepare for crisis decisions
What Would You Do? You have fi nally caught the attention of senior management. Top executives asked
you to chair a task force to develop a creative new product that can breathe new life
into an existing product line. First, you need to select the members of the task force.
What criteria will you use to choose members who are most likely to bring high
levels of creativity to this team?
STUDY GUIDE
Terms to Defi ne
Anchoring and
adjustment
heuristic
Availability heuristic
Confi rmation error
Crisis
Escalating
commitment
Framing error
Representativeness
heuristic
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Managers as Decision Makers ■ Chapter 4 107
1. A manager who is reactive and works hard to ad-
dress problems after they occur is described as a _____________.
(a) problem seeker
(b) problem solver
(c) rational thinker
(d) strategic opportunist
2. A problem is a discrepancy between a/an _____________ situation and a desired situation.
(a) unexpected
(b) risk
(c) actual
(d) uncertain
3. If a manager approaches problems in a rational
and analytical way, trying to solve them in step-by-
step fashion. He or she is well described as a/an _____________.
(a) systematic thinker
(b) intuitive thinker
(c) problem seeker
(d) behavioral decision maker
4. Th e fi rst step in the decision-making process is to _____________.
(a) generate a list of alternatives
(b) assess the costs and benefi ts of each alternative
(c) identify and defi ne the problem
(d) perform the ethics double-check
5. When the members of a special task force are asked
to develop a proposal for increasing the internation-
al sales of a new product, this problem most likely
requires _____________ decisions.
(a) routine (b) programmed
(c) crisis (d) nonprogrammed
6. Costs, benefi ts, timeliness, and _____________ are
among the recommended criteria for evaluating
alternative courses of action in the decision-making
process.
(a) ethical soundness
(b) past history
(c) availability
(d) simplicity
7. Th e _____________ decision model views
managers as making optimizing decisions, whereas
the _____________ decision model views them as
making satisfi cing decisions.
(a) behavioral; judgmental heuristics
(b) classical; behavioral
(c) judgmental heuristics; ethical
(d) crisis; routine
8. When a manager makes a decision about
someone’s annual pay raise only after looking
at the person’s current salary, the risk is that
the decision will be biased because of _____________.
(a) a framing error
(b) escalating commitment
(c) anchoring and adjustment
(d) strategic opportunism
9. One of the reasons why certainty is the most
favorable environment for problem solving is
that it can be addressed through _____________
decisions.
(a) satisfi cing
(b) optimizing
(c) programmed
(d) intuitive
C H
A PTER 4
TP
Multiple-Choice Questions
TestPrep 4
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EXPLORING MANAGEMENT108
10. A common mistake by managers facing crisis situa-
tions is _____________.
(a) trying to get too much information before
responding
(b) relying too much on group decision making
(c) isolating themselves to make the decision alone
(d) forgetting to use their crisis management plan
11. In which decision environment does a manager
deal with probabilities regarding possible courses of
action and their consequences?
(a) risk
(b) certainty
(c) uncertainty
(d) optimal
12. A manager who decides against hiring a new
employee that just graduated from Downstate
University because the last person hired from there
turned out to be a low performer is falling prey to _____________ error.
(a) availability (b) adjustment
(c) anchoring (d) representativeness
13. Which decision-making error is most associated
with the old adage: “If you don’t succeed, try and try
again”?
(a) satisfi cing
(b) escalating commitment
(c) confi rmation
(d) too late to fail
14. Personal creativity drivers include creativity skills,
task expertise, and _____________.
(a) strategic opportunism
(b) management support
(c) organizational culture
(d) task motivation
15. Th e last step in the decision-making process is to _____________.
(a) choose a preferred alternative
(b) evaluate results
(c) fi nd and defi ne the problem
(d) generate alternatives
Short-Response Questions
16. How does an optimizing decision diff er from a satisfi cing decision?
17. What is the diff erence between a risk environment and an uncertain environment in decision making?
18. How can you tell from people’s behavior if they tend to be systematic or intuitive in problem solving?
19. What is escalating commitment and how can it be avoided?
Integration and Application Question
20. With the goals of both expanding your resumé and gaining valuable experience, you have joined a new men-
toring program between your university and a local high school. One of the fi rst activities is for you and your
teammates to off er “learning modules” to a class of sophomores. You have volunteered to give a presentation
and engage them in some learning activities on the topic: “Individual versus group decision making: Is one
better than the other?”
Question: What will you say and do, and why?
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Managers as Decision Makers ■ Chapter 4 109
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 4: Intuitive Ability
■ CLASS EXERCISE 4: Lost at Sea
■ TEAM PROJECT 4: Crisis Management Realities
C H
A PTER 4
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot Amazon.com has soared ahead of other online merchants. What the fi rm can’t carry in its 29
world-wide warehouses, affi liated retailers distribute
for it. Not content to rest on past laurels, CEO Jeff Bezos
has introduced a number of Amazon products, includ-
ing a set-top box and several versions of the Kindle.
In just over a decade, Amazon.com has grown from a
one-man operation into a global giant of commerce. By
forging alliances to ensure that he has what customers
want and making astute
purchases, Jeff Bezos has
made Amazon the go-to
brand for online shopping. But with its signifi cant in-
vestments in new media and services, does the com-
pany risk spreading itself too thin? Will customers con-
tinue to fl ock to Amazon, the go-to company for their
every need?
Don’t Miss This Selection from Cases for Critical Thinking
■ CHAPTER 4 CASE Amazon.com—One E-Store to Rule Th em All
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 4
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“Considering the future of our children and young people . . . we have no
choice but to go ahead with the village-wide evacuation.” Mayor Noro
Kanno of Kawamata-cho town, after a 9.0 earthquake and monster
tsunami wrecked nuclear power facilities in Fukushima, Japan.
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5 Plans and
Planning
Techniques
Get Th ere Faster with Objectives
1. Understand how and
why managers use
the planning process.
2. Identify the types
of plans used by
managers.
3. Describe useful
planning tools and
techniques.
YOUR CHAPTER 5
TAKEAWAYS
Management Live
Time Management and 27 Dresses
I n 27 Dresses, Jane Nichols (Katherine Heigl) works as a
personal assistant for George (Edward Burns), the owner of
Urban Everest. Jane has a penchant for detail and also lives a
second life as “professional” bridesmaid and unoffi cial wedding planner.
Th e movie opens with Jane standing in for a bride as fi nal alterations are
made on the dress, then scurrying off to attend two weddings occurring almost
simultaneously. We learn that Jane is a fastidious planner who keeps a “fi le of
facts” and a tight schedule.
Time management is an essential planning skill in the fast-paced and complicated world of business and for new graduates entering the workforce.
Time management involves more than making a good to-do list. Jane is an
excellent example. Unlike some who are good at writing things down but then
never get the really important work done, Jane has a fl air for wrapping things up
with style.
What about you? You probably juggle multiple responsibilities, such as
school, a job, relationships, and extracurricular activities. Are you able to do it
like Jane, consistently getting the right things done in the right ways? As you
read the chapter, look for insights and tools to help improve your planning
skills.
Explore Yourself More on time management
Role Models Don Th ompson’s leadership
keeps McDonald’s on
focus
Ethics Check E-waste graveyards as easy
way out
Facts to Consider Policies on offi ce romances
vary widely
Manager’s Library Analytics at
Work by Th omas
Davenport et al.
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
M L A
W
D
M
111
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EXPLORING MANAGEMENT112
It can be easy to get so engrossed in the present that we forget about
the future. Yet a mad rush to the future can sometimes go off track without
solid reference points in the past. Th e trick is to blend past experiences and
lessons with future aspirations and goals, and to be willing to adjust as new
circumstances arise. Th e management function of planning helps us do just that. It is a process of setting goals and objectives, and determining how to
best accomplish them. Said a bit diff erently, planning involves looking ahead,
identifying exactly what you want to accomplish, and deciding how best to go
about it.
||| Planning is one of the four functions of management.
Among the four management functions shown in
Figure 5.1, planning comes fi rst. When done well, it sets the stage for the others: organizing—allocating and
arranging resources to accomplish tasks; leading—
guiding the eff orts of human resources to ensure high
levels of task accomplishment; and controlling— monitor-
ing task accomplishments and taking necessary correc-
tive action.
In today’s demanding organizational and career envi-
ronments, eff ective planning is essential to staying one
step ahead of the competition. An Eaton Corporation an-
nual report, for example, once stated: “Planning at Eaton
means taking the hard decisions before events force them
upon you, and anticipating the future needs of the mar-
ket before the demand asserts itself.” 1
You really should take these words to heart. But in-
stead of a company, think about your personal situation.
What hard decisions do you need to make? Where are
the job markets going? Where do you want to be in your
career and personal life in the next 5 or 10 years?
Planning is the process of setting performance objectives and determining how to accomplish them.
Takeaway 5.1 How and Why Do Managers Use the
Planning Process?
ANSWERS TO COME
■ Planning is one of the four functions of management.
■ Planning is the process of setting objectives and identifying how to achieve them.
■ Planning improves focus and action orientation.
■ Planning improves coordination and control.
■ Planning improves time management.
Leading
to inspire effort
Controlling
to ensure results
Organizing
to create structures
Planning
to set the direction • Decide where you want to go. • Decide how to best go about it.
MANAGEMENT
PROCESS
MANAGEMENT
PROCESS
FIGURE 5.1 Why Does Planning Play a Central Role in the Management Process? Planning is the fi rst of the four management functions. It
is the process of setting objectives—deciding where you
want to go—and then identifying how to accomplish
them—determining how to get there. When planning is
done well, it provides a strong foundation for success
with the other management functions.
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Plans and Planning Techniques ■ Chapter 5 113
||| Planning is the process of setting objectives and identifying how to achieve them.
From experience alone, you are probably familiar with planning and all that it
involves. But it also helps to understand Table 5.1—Steps in the Planning Process and its action implications.
Table 5.1 Steps in the Planning Process
Step 1. Defi ne your objectives Know where you want to go; be specifi c enough to know you have arrived when you get there and how far off you are along the way.
Step 2. Determine where you stand vis-à-vis objectives Know where you pres- ently stand in reaching the objectives; identify strengths that work in your favor and
weaknesses that can hold you back.
Step 3. Develop premises regarding future conditions Generate alternative sce- narios for what may happen; identify for each scenario things that may help or hinder
progress toward your objectives.
Step 4. Make a plan Choose the action alternative most likely to accomplish your objectives; describe what must be done to implement this course of action.
Step 5. Implement the plan and evaluate results Take action; measure progress toward objectives as implementation proceeds; take corrective actions and revise the
plan as needed.
Good Planning Makes Us . . .
• Action oriented—keeping a results-driven sense
of direction
• Priority oriented—making sure the most
important things get fi rst attention
• Advantage oriented—ensuring that all resources
are used to best advantage
• Change oriented—anticipating problems and
opportunities so they can be best dealt with
Step 1 in planning is to defi ne your objectives and to identify the specifi c re- sults or desired goals you hope to achieve. Th is step is important enough to stop
and refl ect a moment. Whether you call them goals or objectives, they are tar-
gets. Th ey point us toward the future and provide a frame of reference for evaluat-
ing progress. With them, as the module subtitle suggests, you should get where
you want to go and get there faster.
Step 2 in planning is to compare where you are at present with the objectives.
Th is establishes a baseline for performance; the present becomes a standard
against which future progress can be gauged. Step 3 is to formulate premises
about future conditions. It is where one looks ahead, trying to fi gure out what
may happen. Step 4 is to make an actual plan. Th is is a list of actions that must be taken in order to accomplish the objectives. Step 5 is to implement the plan and
evaluate results. Th is is where action takes place and measurement happens.
Results are compared with objectives and, if needed,
plans are modifi ed to improve things in the future.
Have you thought about how well you plan and how
you might do it better? Managers should be asking the
same question. Th ey rarely get to plan while working
alone in quiet rooms free from distractions. Because of
the fast pace and complications of the typical workday,
managerial planning is ongoing. It takes place even as
one deals with a constant fl ow of problems in a some-
times hectic and demanding work setting. 2 Yet it’s all
worth it: Planning off ers many benefi ts to people and
organizations. 3
Objectives are specifi c results that one wishes to achieve.
A plan is a statement of intended means for accomplishing objectives.
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EXPLORING MANAGEMENT114
||| Planning improves focus and action orientation.
Planning can help sharpen focus and increase fl exibility, both of which im-
prove performance. An organization with focus knows what it does best and
what it needs to do. Individuals with focus know where they want to go in a
career or situation, and they keep the focus even when diffi culties arise. An
organization with fl exibility is willing and able to change and adapt to shifting
circumstances. An individual with fl exibility adjusts career plans to fi t new
and developing opportunities.
Planning helps us avoid the complacency trap of being lulled into inaction by successes or failures of the moment. Instead of being caught in the present,
planning keeps us looking toward the future. Management consultant Stephen
R. Covey describes this as an action orientation with a clear set of priorities. 4
He says the most successful executives “zero in on what they do that adds value
to an organization.” Th ey know what is important, and they work fi rst on the
things that really count. Th ey don’t waste time by working on too many things
at once.
Would a friend or relative describe you as focused on priorities, or as always
jumping from one thing to another? Could you achieve more by getting your
priorities straight and working hard on things that really count?
Th e complacency trap is being lulled into inaction by current successes or failures.
FACE THE FACTS, THOSE
GUT FEELINGS COULD BE
MISLEADING YOU
In the book Analytics at Work (2010, Harvard Business Press), authors Thomas Davenport,
Jeanne Harris, and Robert Morison argue that organizations can improve their strategies by making better use of available infor- mation to guide decisions. A key point is that organizations have access to vast amounts of data but often fail to leverage it for competitive gain. Analytical approaches to decision making can yield smarter choices with improved results. Data sources in- clude, among others, transactional records within ERP systems and databases, clickstream data from Web activity, scanner data, and information from customer loyalty programs.
The authors suggest that all aspects of organizations are ripe for analytic improvement. Customer relationships can be enhanced by segmenting types, understanding preferences,
predicting desires, and identifying loyal or departing patrons. Supply chains can be streamlined by optimizing inventory lev- els, delivery routes, and production schedules. Human re- sources can be improved by hiring those likely to stay and predicting those prone to depart.
Analytics are great tools and we need to get better at using them. The authors say organizations are more intelli- gent when managers use facts, and not feelings, to guide decisions.
REFLECT AND REACT
Identify a business and describe the analytics it might use to plan improvements in a process such as customer relationship man- agement. For example, how might it determine which products are most popular, most profi table, or trending toward less popu- lar? How might it optimize inventory levels or hire better work- ers? And by the way, do you agree that better analytics can help in personal planning as well?
■ ANALYTICS AT WORK BY THOMAS DAVENPORT,
JEANNE HARRIS, AND ROBERT MORISON
Manager’s Library
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Plans and Planning Techniques ■ Chapter 5 115
||| Planning improves coordination and control.
Organizations consist of many people and subsystems doing many diff erent
things at the same time. But even as they pursue the various tasks, their accom-
plishments must add together meaningfully if the organization is to succeed.
Good planning facilitates coordination by linking people and subsystems
together in a hierarchy of objectives. Th is is a means–ends chain in which lower- level objectives (the means) lead to the accomplishment of higher-level objec-
tives (the ends). An example is the total quality management program shown in
Figure 5.2.
In a hierarchy of objectives, lower-level objectives help to accomplish higher-level ones.
FIGURE 5.2 How Might a Hierarchy of Objectives Guide a Quality Management Program in a Manufacturing Firm? A hierarchy of objectives
identifi es a means–ends chain
through which lower-level
objectives become the pathways
for accomplishing higher-level
ones. In the case of total quality
management, the top-level
objective (delivering error-free
products that meet customer
needs 100% of the time) moves
step-by-step down the hierarchy
until the point where a shift
supervisor supports TQM with
the objective of making sure
that machine operators are
trained well enough to do
error-free work.
Good planning also sets the stage for controlling in the management process.
It’s hard to exercise control if you haven’t set objectives. Without control, plans
may fail because of a lack of follow-through. With both, it’s a lot easier to see
when things aren’t going well and make the necessary adjustments. Two years
after launching a costly information technology upgrade, for example, the CEO of
McDonald’s realized that the system couldn’t deliver on its promises. He stopped
the project, took a loss of $170 million, and refocused the fi rm’s resources on
projects with more direct impact on customers. 5
||| Planning improves time management. When Daniel Vasella was CEO of Novartis AG and its 98,000 employees spread
across 140 countries, he was calendar bound—“locked in by meetings, travel and
other constraints.” To stay on track he would list priorities of things to do. As CEO
of ING US Wealth Management, Kathleen Murphy was also calendar bound, with
conferences and travel booked a year ahead. She scheduled meetings at half-hour
intervals, worked 12-hour days, and spent 60% of her time traveling. She also
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EXPLORING MANAGEMENT116
made good use of her time on planes, where, she says, “no
one can reach me by phone and I can get reading and
thinking done.” 6
Th ese are common executive stories—tight schedules,
little time alone, lots of meetings and phone calls, and not
much room for spontaneity. And the keys to success in
these classic management scenarios rest, in part at least,
on another benefi t of good planning—time management.
It is an important management skill and competency,
and a lot of time management comes down to discipline
and priorities. Lewis Platt, former chairman of Hewlett-
Packard, once said: “Basically, the whole day is a series of
choices.” 7 Th ese choices have to be made in ways that al-
locate your time to the most important priorities.
Surely you have experienced diffi culties in balancing time-consuming
commitments and requests. Indeed, it is all too easy to lose track of time and
fall prey to what consultants identify as “time wasters.” Of course, you have to
be careful in defi ning “waste.” It isn’t a waste of time to occasionally relax,
take a breather from work, and find humor and pleasure in social interactions.
Such breaks help us gather and replenish energies to do well in our work. But
it is a waste to let other people or nonessential activities dominate your time. 8
While to-do lists can help, they aren’t much good unless the lists contain
the high-priority things. We need to distinguish between things that we must
do (top priority), should do (high priority), might do (low priority), and really
don’t need to do (no priority).
One of the most consistently top rated “must-have” skills for new graduates entering fast-paced and complicated ca- reers in business and management is time management. Many, perhaps most, of us keep to-do lists. But it’s the rare person who is consistently successful in living up to one.
Time management is a form of planning, and planning can easily suffer the same fate as the to-do lists—put to- gether with the best of intentions, but with little or nothing to show in terms of results at the end of the day. There are a lot of good ideas in this chapter on how to plan, both in
management and in our personal lives. Now is a good time to get in touch with your time management skills and to start improving your capabilities to excel with planning as a basic management function.
■ TIME MANAGEMENT
Explore Yourself TO-DO LISTS ARE OFTEN PUT TOGETHER WITH BEST INTENTIONS
BUT FAIL TO DELIVER RESULTS AT THE END OF THE DAY. {
Get to know yourself better by taking the Time Management Profi le self-assessment and completing the other activities in the Exploring Management Skill-Building Portfolio.
You Can Manage Your Time Better
• Set priorities for what really needs to get done. • Work on the most important things fi rst. • Leave details for later, or delegate them to others. • Say “No!” to requests that divert attention from
your priorities.
• Take charge of your schedule; don’t let others control what you do and when.
• Stick with your choices; not everything deserves immediate attention.
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Plans and Planning Techniques ■ Chapter 5 117
Takeaway 5.1 How and Why Do Managers Use
the Planning Process?
Rapid Review • Planning is the process of setting performance objectives and determining how to
accomplish them.
• A plan is a set of intended actions for accomplishing important objectives. • Th e steps in the planning process are: (1) defi ne your objectives; (2) determine
where you stand vis-à-vis objectives; (3) develop premises regarding future condi-
tions; (4) make a plan to best accomplish objectives; (5) implement the plan, and
evaluate results.
• Th e benefi ts of planning include better focus and action orientation, better coor- dination and control, and better time management.
• Planning improves time management by setting priorities and avoiding time wasters.
Questions for Discussion 1. Should all employees plan, or just managers?
2. Which step in the planning process do you think is the hardest to accomplish?
3. How could better planning help in your personal career development?
Be Sure You Can • explain the importance of planning as the fi rst of four management functions • list the steps in the formal planning process • explain the important link between planning and controlling as management
functions
• illustrate the benefi ts of planning for a business or an organization familiar to you • illustrate the benefi ts of planning for your personal career development • list at least three things you can do now to improve your time management
What Would You Do? Take a step forward in time management. Make a list of all the things you plan
to do tomorrow. Note down which ones are (A) most important—top priority,
(B) important—not top priority, and (C) least important—low priority. Double-
check your Bs; should any really be As or Cs? Check your As; should any really
be Bs or Cs? Now, proceed with your day tomorrow and see how things turn out.
Does an exercise like this help you take charge of your time and get the really
important things done first?
STUDY GUIDE
Terms to Defi ne
Complacency trap
Hierarchy of objectives
Objectives
Plan
Planning
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EXPLORING MANAGEMENT118
Managers face different planning challenges in the flow and pace of
activities in organizations. In some cases, the planning environment is stable and
predictable. In others, it is more dynamic and uncertain. To meet these diff erent
needs, managers rely on a variety of plans.
||| Managers use short-range and long-range plans.
We live and work in a fast-paced world where planning horizons are becoming
compressed. We now talk about planning in Internet time, where businesses are
continually changing and updating plans. Even most top managers would likely
agree that long-range planning is becoming shorter and shorter. A reasonable
rule of thumb in this context is that short-range plans cover a year or less, whereas long-range plans look ahead three or more years into the future.9
Quite frankly, the advent of Internet time and shorter planning horizons might
be an advantage for many of us. Management researcher Elliot Jaques found that
very few people have the capacity to think long term. 10
As shown in the fi gure, he
believes that most of us work comfortably with only three-month time
spans; some can think about a year into the future; only about one person in
several million can handle a 20-year time frame.
Do Jaques’s conclusions match your experience? And if we accept his
fi ndings, what are their implications for managers and career develop-
ment? Although a team leader’s planning challenges may rest mainly in the
weekly or monthly range, a chief executive needs to have a vision extending
at least some years into the future. Career progress to higher management
levels still requires the conceptual skills to work well with longer-range
time frames. 11
||| Managers use strategic and operational plans.
When planning for the organization as a whole or a major component, the focus is
on strategic plans. Th ese longer-term plans set broad and comprehensive directions for an organization. Well crafted strategic plans create a framework for
allocating resources for best long-term performance impact. Th ey take a vision that clarifi es the purpose of the organization and what it hopes to be in the future,
and set out the ways to turn that vision into reality.
Short-range plans usually cover a year or less.
Long-range plans usually cover three years or more.
A strategic plan identifi es long-term directions for the organization.
A vision clarifi es the purpose of the organization and expresses what it hopes to be in the future.
Takeaway 5.2 What Types of Plans Do Managers Use?
ANSWERS TO COME
■ Managers use short-range and long-range plans.
■ Managers use strategic and operational plans.
■ Organizational policies and procedures are plans.
■ Budgets are plans that commit resources to activities.
3-month time frame
1-year time frame
20-year time frame
Very few
of us
Most of us
A few of us
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Plans and Planning Techniques ■ Chapter 5 119
When a sports team enters a game, it typically does so with a “strategy.” Most
often this strategy is set by the head coach in conjunction with assistants. Th e
goal is clear—win the game. But as the game unfolds, a variety of situations arise
that require adjustments and responses to solve problems or exploit opportuni-
ties. Th ey call for “tactics” that deal with the situation at hand while advancing
the overall strategy for winning against the competition. Th ese tactics are often
decided upon by assistant coaches, perhaps in consultation with the head coach.
Th e same logic holds true for organizations. Operational plans, also called tactical plans, are developed to implement strategic plans. Th ey are shorter term and step-by-step means for putting the strategies into action. In the sports
context, you might think of tactical plans as involving the use of “special teams”
plans or as “special plays” designed to meet a particular threat or opportunity. In
business, tactical plans often take the form of functional plans that indicate how diff erent parts of the enterprise will contribute to the overall strategy. Such func-
tional plans might include the following:
• Financial plans deal with money required to support various operations.
• Facilities plans deal with facilities development and work layouts.
• Marketing plans deal with the requirements of selling and distributing goods or
services.
• Human resource plans deal with the recruitment, selection, and placement of
people into various jobs.
• Production plans deal with the methods and technology needed by people in
their work.
||| Organizational policies and procedures are plans.
In addition to strategic and operational plans, organizations also need plans that
provide members with day-to-day guidance on such things as attendance, hiring
practices, ethical behavior, privacy, trade secrets, and more. Th is is often pro-
vided in the form of organizational policies and procedures.
A policy communicates broad guidelines for making decisions and taking action in specifi c circumstances. Common human resource policies address
An operational plan or tactical plan sets out ways to implement a strategic plan.
A functional plan identifi es how diff erent parts of an enterprise will contribute to accomplishing strategic plans.
A policy is a standing plan that communicates broad guidelines for decisions and action.
Gaming Entrepreneurs Also Play the Strategy Game
Zynga is the brainchild of Marc Pincus, self-described as having one part the
DNA of an entrepreneur and a second part the DNA of a competitive gamer.
His company’s mission is to connect the world through games like its wildly
popular FarmVille, ranked number one as a Facebook application. But when
Zynga was ready to launch CitiVille, expected to be the next blockbuster in
the fi rm’s strategy, Pincus decided to delay. He was worried the game wasn’t
ready and, above all else, he wanted it perfect right from the start. When
fi nally launched, CitiVille was every bit the success he hoped for.
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EXPLORING MANAGEMENT120
such matters as employee hiring, termination, performance appraisals, pay
increases, promotions, discipline, and civility. Consider the issue of sexual
harassment. How should individual behavior be guided? A sample sexual
harassment policy states: “Sexual harassment is specifi cally prohibited by this
organization. Any employee found to have violated the policy against sexual
harassment will be subject to immediate and appropriate disciplinary action
including but not limited to possible suspension or termination.”
Procedures, or rules, describe exactly what actions to take in specifi c situa- tions. Th ey are often found in employee handbooks or manuals as SOPs (stan-
dard operating procedures). Whereas a policy sets broad guidelines, procedures
defi ne specifi c actions to be taken. A sexual harassment policy, for example,
should be backed up with procedures that spell out how to fi le a sexual harass-
ment complaint, as well as the steps through which any complaint will be han-
dled. 12
When Judith Nitsch started her engineering consulting business, for
example, she defi ned a sexual harassment policy, established clear procedures
for its enforcement, and designated both a male and a female employee for others
to talk with about sexual harassment concerns. 13
A procedure or rule precisely describes actions to take in specifi c situations.
Some call Don Thompson, President and COO of McDonald’s, the accidental executive. He’s not only one of the youngest top managers in the Fortune 500, he also may have followed the most unusual career path. After graduating from Purdue with a degree in electrical engineering, Johnson went to work for Northrop Grumman, a leading global security company. One day he received a call from a head-hunter. Thompson lis- tened, thinking the job being offered was at McDonnell Douglas Company, a fi rm in which engineering is central. After fi nding out it was at McDonald’s, he almost turned the opportunity down. But, after some encouragement he took the interview. His career and McDonald’s haven’t been the same since.
Thompson hit the ground running at McDonald’s and did well, but he became frustrated after failing to win the annual McDonald’s President’s Award. On the recommendation of the fi rm’s diversity offi cer, he spoke with Raymond Mines, at the time the fi rm’s highest-ranking African-American executive. When Thompson confi ded that he “wanted to have an impact on decisions,” Mines told him to move out of engineering and into the operations side of the business. Thompson did. His work not only excelled, it got him the attention he needed to
advance to ever-higher responsibilities that spanned restaurant operations, franchisee relations, and strategic management.
From his childhood on Chicago’s South Side to his position as the head of the world’s largest fast-food hamburger chain, Don Thompson rose quickly in his career. He works from a corner offi ce that has no door, and the building is confi gured with an open fl oor plan. All that fi ts well with Thompson’s style and personality. His former mentor Raymond Mines says: “He has the ability to listen, blend in, analyze, and communi- cate. People feel at ease with him. A lot of corporate execu- tives have little time for those below them. Don makes ev- eryone a part of the process.” As for Thompson, he says “I want to make sure others achieve their goals, just as I have.”
WHAT’S THE LESSON HERE?
Don Thompson has done very well in his career. How much of his success traces to strong motivation and clear goals? How about the choices he made regarding jobs to seek? Is his resil- iency when things didn’t always go according to plan a strength that many others might lack? Could it have been a career maker for him?
■ DON THOMPSON’S LEADERSHIP KEEPS McDONALD’S ON FOCUS
Role Models “HE HAS THE ABILITY TO LISTEN, BLEND IN, ANALYZE,
AND COMMUNICATE. PEOPLE FEEL AT EASE WITH HIM.” {
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Plans and Planning Techniques ■ Chapter 5 121
||| Budgets are plans that commit resources to activities.
A budget is a plan that commits resources to activities, programs, or projects. It is a powerful tool that allocates scarce resources among multiple and often com-
peting uses. Managers typically negotiate with their bosses to obtain budgets
that support the needs of their work units or teams. Th ey are also expected to
achieve performance objectives while keeping within their budgets.
Managers deal with and use various types of budgets. Financial budgets proj-
ect cash fl ows and expenditures. Operating budgets plot anticipated sales or
revenues against expenses. Nonmonetary budgets allocate resources such as
labor, equipment, and space. A fi xed budget allocates a fi xed amount of re-
sources for a specifi c purpose, such as $50,000 for equipment purchases in a
given year. A fl exible budget allows resources to vary in proportion with various
levels of activity, such as monies to hire temporary workers when workloads
exceed certain levels.
All budgets play important roles in organizations by linking planned activi-
ties with the resources needed to accomplish them. But budgets can also get
out of control. Sometimes, perhaps much too often, they creep higher and
higher without getting enough critical scrutiny. If in doubt, just tune in to the
latest debates over local and national government budgets. One of the most
common problems is that resource allocations get rolled over from one time
period to the next without any real performance review. A zero-based budget deals with this problem by approaching each budget period as if it were brand
new. No guarantee exists for renewing any past funding. Instead, all proposals
compete with a fresh start for available resources. Th is helps eliminate waste
by making sure scarce resources are not spent on unproductive, outdated, or
low priority activities.
A budget is a plan that commits resources to projects or activities.
A zero-based budget allocates resources as if each budget was brand new.
A former CEO of Boeing was asked to resign by the fi rm’s board after his relationship with a female executive became public. But, employer policies on offi ce relationships vary. • 24%—prohibit relationships among persons in the same
department. • 13%—prohibit relationships among persons who have the
same supervisor. • 80%—prohibit relationships between supervisors and
subordinates. • 5%—have no restrictions on offi ce romances.
• New trend—”love contracts,” where employees pledge that their romantic relationships in the offi ce won’t interfere with their work.
YOUR THOUGHTS?
Do you know anyone who has been involved in an offi ce rela- tionship? What are your thoughts? Is this an area that employ- ers should be regulating, or should offi ce romance be left to the best judgments of those involved?
■ POLICIES ON OFFICE ROMANCES VARY WIDELY
Facts to Consider 80% OF EMPLOYERS PROHIBIT RELATIONSHIPS BETWEEN
SUPERVISORS AND THEIR SUBORDINATES. {
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EXPLORING MANAGEMENT122
Takeaway 5.2 What Types of Plans Do
Managers Use?
Rapid Review • Short-range plans tend to cover a year or less, whereas long-range plans extend
out to three years or more.
• Strategic plans set critical long-range directions; operational plans are designed to support and help implement strategic plans.
• Policies, such as a sexual harassment policy, are plans that set guidelines for the behavior of organizational members.
• Procedures are plans that describe actions to take in specifi c situations, such as how to report a sexual harassment complaint.
• Budgets are plans that allocate resources to activities or projects. • A zero-based budget allocates resources as if each new budget period is brand
new ; no “rollover” resource allocations are allowed without new justifi cations.
Questions for Discussion 1. Is there any need for long-range plans in today’s fast-moving environment?
2. What types of policies do you believe are essential for any organization?
3. Are there any possible disadvantages to zero-based budgeting?
Be Sure You Can • diff erentiate short-range and long-range plans • diff erentiate strategic and operational plans • explain how strategic and operational plans complement one another • diff erentiate policies and procedures, and give examples of each • explain the benefi ts of a zero-based budget
What Would You Do? One of the persons under your supervision has a “possible” sexual harassment com-
plaint about the behavior of a co-worker. She says that she understands the sexual
harassment policy of the organization, but the procedures are not clear. You’re not
clear either and take the matter to your boss. She tells you to draft a set of proce-
dures that can be taken to top management for approval. What procedures will you
recommend so that sexual harassment complaints like this one can be dealt with in
a fair manner?
STUDY GUIDE
Terms to Defi ne Budget
Functional plan
Long-range plan
Operational (tactical)
plan
Policy
Procedures
Short-range plan
Strategic plan
Vision
Zero-based budget
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Plans and Planning Techniques ■ Chapter 5 123
The benefits of planning are best realized when plans are built from
strong foundations. Useful planning tools and techniques include forecasting,
contingency planning, scenarios, benchmarking, participatory planning, and use
of goal setting.
||| Forecasting tries to predict the future. Who would have predicted on New Year’s Eve 2008 that General Motors and
Chrysler would soon declare bankruptcy ; that Italy’s Fiat would buy Chrysler ;
that GM’s Pontiac and Saturn brands would be discontinued? Who would
have predicted even a few years ago that Chinese fi rms would now own Volvo
and Hummer or that China would now be the largest car market in the world?
Would you believe that by the year 2025 (at the latest) China is expected to
have more cars on the roads than the United States has today?
What are top executives at the world’s automakers thinking about as they
make plans for the future? Are they on top of the right trends? At least one cor-
porate CEO, GE’s Jeff ery Immelt, is frank about his failure to plan well for the
recent economic and fi nancial crisis before it actually hit. “I should have done
more to anticipate the radical changes that occurred” he says. Immelt is now
restructuring GE around a model he believes is more consistent with new eco-
nomic realities. 14
Forecasting is the process of predicting what will happen in the future.15 Peri- odicals such as Business Week, Fortune, and Th e Economist regularly report fore-
casts of industry conditions, interest rates, unemployment trends, and national
economies, among other issues. 16
Some rely on qualitative forecasting which uses
expert opinions to predict the future. Others involve quantitative forecasting
which uses mathematical models and statistical analysis of historical data and
surveys.
Most plans involve forecasts of some sort. But, any forecast should be used
with caution. Forecasts are planning aids, not planning substitutes. It is said
that a music agent once told Elvis Presley: “You ought to go back to driving a
truck because you ain’t going nowhere.” Th at’s the problem with forecasts. Th ey
always rely on human judgment, and that judgment can be wrong.
Forecasting attempts to predict the future.
Takeaway 5.3 What Are Some Useful Planning Tools
and Techniques?
ANSWERS TO COME
■ Forecasting tries to predict the future
■ Contingency planning creates backup plans for when things go wrong
■ Scenario planning crafts plans for alternative future conditions
■ Benchmarking identifi es best practices used by others
■ Participatory planning improves implementation capacities
■ Goal setting helps align plans and activities throughout an organization
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EXPLORING MANAGEMENT124
||| Contingency planning creates backup plans for when things go wrong.
Of course things often go wrong. It is highly unlikely that any plan will ever be
perfect. But picture this scene. A golfer is striding down the golf course with an
iron in each hand. Th e one in her right hand is “the plan”; the one in her left is
the “backup plan.” Which club she uses will depend on how the ball lies on the
fairway. One of any professional golfer’s greatest strengths is being able to adjust
to the situation by putting the right club to work in the circumstances at hand.
Planning in our work and personal aff airs is often like that of the golfer. By
defi nition, planning involves thinking ahead. But the more uncertain the envi-
ronment, the more likely one’s original assumptions, forecasts, and intentions
may prove inadequate or wrong. And when they do, the best managers and orga-
nizations have alternative plans ready to go.
Contingency planning identifi es alternative courses of action that can be imp- lemented to meet the needs of changing circumstances. A really good contingency
plan will contain “trigger points” for activating preselected alternatives. Th is is
really an indispensable planning tool. But, it’s surprising how many organiza-
tions lack good contingency plans to deal with unexpected events.
Poor contingency planning was very much in the news when debates raged
over how BP managed the disastrous Deepwater Horizon oil spill in the Gulf of
Mexico. Everyone from the public at large to U.S. lawmakers to oil industry
experts criticized BP not only for failing to contain the spill quickly, but also for
failing to anticipate and have contingency plans in place to handle such a crisis.
A BP spokesperson initially said—“You have here an unprecedented event . . .
the unthinkable has become thinkable and the whole industry will be asking
questions of itself.”
An oil industry expert responded—“Th ere should be a technology that is pre-
existing and ready to deploy at the drop of a hat . . . it shouldn’t have to be de-
signed and fabricated now, from scratch.”
Former BP CEO Tony Hayward fi nally admitted—“Th ere are some capabilities
that we could have available to deploy instantly, rather than creating as we go.” 17
Th e lesson here is hard-earned but very clear. Contingency planning can’t pre-
vent crises from occurring. But when things do go wrong, there’s nothing better
to have in place than good contingency plans.
||| Scenario planning crafts plans for alternative future conditions.
A long-term version of contingency planning, called scenario planning, identi- fi es several alternative future scenarios. Managers then make plans to deal with
each, so they will be better prepared for whatever occurs. 18
In this sense, scenario
planning forces them to really think far ahead.
Th is approach was developed years ago at Royal Dutch/Shell when top managers
asked themselves a perplexing question: “What would Shell do after its oil supplies
ran out?” Although recognizing that scenario planning can never be inclusive of all
future possibilities, a Shell executive once said that it helps “condition the
organization to think” and better prepare for “future shocks.”
Contingency planning identifi es alternative courses of action to take when things go wrong.
Scenario planning identifi es alternative future scenarios and makes plans to deal with each.
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Plans and Planning Techniques ■ Chapter 5 125
Shell uses scenario planning to tackle such issues as climate change, sustain-
able development, fossil-fuel alternatives, human rights, and biodiversity. Most
typically it involves descriptions of “worst cases” and “best cases.” In respect to oil
supplies, for example, a worst case scenario might be—global confl ict and devas-
tating eff ects on the natural environment occur as nations jockey with one an-
other to secure increasingly scarce supplies of oil and other natural resources. A
best cases scenario might be—governments work together to fi nd pathways
that take care of everyone’s resource needs while supporting the sustainability of
global resources. It’s anyone’s guess which scenario will materialize or if some-
thing else altogether will happen. But these words of former Shell CEO Jeroen van
der Veer highlight the value of the scenario planning process: “Th is will require
hard work and time is short.” 19
||| Benchmarking identifi es best practices used by others.
All too often managers become too comfortable with the ways things are go-
ing. Th ey fall into the complacency trap discussed earlier, and let habits and
overconfi dence trick them into believing the past is a good indicator of the
future. Planning helps us deal with such tendencies by challenging the status
quo and reminding us not to always accept things as they are. One way to do
this is through benchmarking, a planning technique that makes use of exter- nal comparisons to better evaluate current performance.
20
Benchmarking uses external comparisons to gain insights for planning.
“Give me a plan,” says the boss. “We need to get rid of our electronic waste.”
This isn’t an uncommon problem. Just think about all those old stereo components, out-of-date cell phones, used com- puters and displays, and so on. Did you know that they often end up in e-waste graveyards in countries like Ghana, China, and Vietnam? The waste arrives by sea container or barge and ends up in huge dumps. Local laborers, perhaps including children, disassemble the waste products to salvage valuable metals. They often burn the plastic and mother boards to re- lease sought-after scraps.
It can be expensive to properly dispose of electronic waste. That’s the hidden problem behind the boss’s directive here. But what are the adverse environmental and health effects of taking the low-cost option of using offshore e-waste graveyards?
What harm to people and planet is done? It isn’t a stretch to say that the workers often inhale toxic fumes; nearby streams can get polluted with runoff waste; and even the streets and living areas of the workers get cluttered with electronic debris.
YOU DECIDE
As some countries become hosts for e-waste products, their governments may look the other way when it comes to the environmental and human costs. Whose responsibility is it to deal with the adverse consequences of e-waste disposal? Is it just a local matter? Do the originating country and consumer have obligations to reduce waste creation and assist with safe waste disposal? If the “plan” that is given to the boss in this case simply involves “ship it to Ghana,” is that acceptable business practice?
■ E-WASTE GRAVEYARDS AS EASY WAY OUT
Ethics Check OUR UNWANTED ELECTRICAL PRODUCTS OFTEN
END UP IN OFFSHORE E-WASTE GRAVEYARDS. {
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EXPLORING MANAGEMENT126
Managers use benchmarking to discover what other people and organizations
are doing well and plan how to incorporate these ideas into their own operations.
Th ey search for best practices inside and outside of the organization, and among competitors and noncompetitors alike. Th ese are things that others are doing
and that help them to achieve superior performance. As a planning tool, bench-
marking is basically a way of learning from the successes of others. Th ere’s little
doubt that sports stars benchmark one another; scientists and scholars do it;
executives and managers do it. Could you be doing it, too?
Many top fi rms make good use of best practices benchmarks. Xerox, for ex-
ample, has benchmarked L. L. Bean’s warehousing and distribution methods,
Ford’s plant layouts, and American Express’s billing and collections. In building
its “world car,’’ the Fiesta, Ford benchmarked BMW ’s 3 series. James D. Farley,
Ford’s global marketing head says: “Th e ubiquity of the 3 series engenders trust
in every part of the world, and its design always has a strong point of view . . . ” 21
And in the fast-moving apparel industry, the Spanish retailer Zara has exploded
on the world scene and become a benchmark for both worried competitors and
others outside the industry. 22
Zara is praised for excellence in aff ordable “fast-
fashion.” Th e fi rm’s design and manufacturing systems allow it to get new fash-
ions from design to stores in two weeks, while competitors may take months.
Zara produces only in small batches that sell out and create impressions of
scarcity. Shoppers at Zara know they have to buy now because an item will not
be replaced. At competitors, shoppers often have to wait for sales and inven-
tory clearance bargains.
||| Participatory planning improves implementation capacities.
When it comes to implementation, participa-
tion can be a very important word in planning.
Participatory planning, as shown in Figure 5.3, includes in all steps of the process those people whose ideas and inputs can benefi t the
plans and whose support is needed for imple-
mentation. It has all the advantages of group de-
cision making discussed in Chapter 4.
Participatory planning can increase the cre-
ativity and information available, it can increase
understanding and acceptance of plans, and it
can build stronger commitments to a plan’s suc-
cess. When 7-Eleven executives planned for
new upscale products and services, such as sell-
ing fancy meals-to-go, they learned this les-
son the hard way. Although their ideas sounded
good at the top, franchise owners and managers
disagreed. Th eir resistance taught the exec-
utives the value of taking time to involve lower
levels in planning new directions for the stores. 23
Best practices are methods that lead to superior performance.
Participatory planning includes the persons who will be aff ected by plans and/or who will be asked to implement them.
Identify action alternatives
and make plans
Define planning
objectives
Develop premises regarding
future conditions
Implement plans and
evaluate results
Determine where things stand
vis-à-vis objectives
Build Commitments
to Plans
Allow others to participate and
be involved at all steps in the
planning process
Build Commitments
to Plans
FIGURES 5.3 How Do Participation and Involvement Help Build Commitments to Plans? Any plan needs the eff orts and support of many people to make it work. It
is easier and more likely to get this commitment when the people
responsible for implementation have had the opportunity to participate in
developing the plans in the fi rst place. When managers use participatory
planning and allow others to become involved in the planning process, it
leads to better plans, a deeper understanding of the plans, and a
strengthened commitment to fully implementing the plans.
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Plans and Planning Techniques ■ Chapter 5 127
||| Goal setting helps align plans and activities throughout an organization.
In the dynamic and highly competitive technology industry, CEO T. J. Rodgers
of Cypress Semiconductor Corp. has earned a reputation for valuing both per-
formance goals and accountability. He supports a planning system where em-
ployees work with clear and quantifi ed work goals that they help set. He
believes the system helps people fi nd problems before they interfere with per-
formance. Says Rodgers: “Managers monitor the goals, look for problems, and
expect people who fall behind to ask for help before they lose control of or
damage a major project. 24
Although Rodgers makes us aware of the importance of goal setting in manage-
ment, he may make it look too easy. Actually, the way goals are set can make a
major diff erence in how well they work in pointing people in the right directions
and making sure plans are well implemented. To have the desired eff ects, goals and
objectives have to be good ones; they should push you to achieve substantial, not
trivial, things. Jack Welch, former CEO of GE, believed in stretch goals—perfor- mance targets that we have to work extra hard and really stretch to reach.
25 Would
you agree that stretch goals can add real strength to the planning process, for orga-
nizations and for individuals?
Th e following guidelines are starting points in moving from “no goals” and
even just everyday run-of-the-mill “average goals” to having really “great goals”—
ones that result in plans being successfully implemented. Great goals are:
1. Specifi c—clearly target key results and outcomes to be accomplished.
2. Timely—linked to specifi c timetables and “due dates.”
3. Measurable—described so results can be measured without ambiguity.
4. Challenging—include a stretch factor that moves toward real gains.
5. Attainable—although challenging, realistic and possible to achieve.
Even when individual goals are well set as part of a plan, managers must still
make sure that the goals and plan for one person or work unit help accomplish
the goals of the organization as a whole. It’s always important to align goals from
one level to the next so that the right things happen
at the right times throughout an organization.
Goals set anywhere in the organization should id-
eally help advance its overall mission or purpose.
Strategic goals set by top management should cas-
cade down the organization to become goals and
objectives for lower levels. Ideally, goals link to-
gether across levels in a consistent “means–end”
fashion as suggested earlier in Figure 5.2. When
a hierarchy of goals and objectives is well defi ned
through good planning, this helps improve coordi-
nation among the multiple tasks, components, and
levels of work in organizations.
Stretch goals are performance targets that we have to work extra hard and stretch to reach.
GREAT
GOALS
GREAT
GOALS
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EXPLORING MANAGEMENT128
Takeaway 5.3 What Are Some Useful Planning Tools
and Techniques?
Rapid Review • Forecasting, which attempts to predict what might happen in the future, is a plan-
ning aid but not a planning substitute.
• Contingency planning identifi es alternative courses of action to implement if and when circumstances change and an existing plan fails.
• Scenario planning analyzes the implications of alternative versions of the future. • Benchmarking utilizes external comparisons to identify best practices that could
become planning targets.
• Participation and involvement open the planning process to valuable inputs from people whose eff orts are essential to the eff ective implementation of plans.
Questions for Discussion 1. If forecasting is going to be imperfect, why bother with it?
2. Shouldn’t all planning provide for contingency plans?
3. Are stretch goals a good fi t for today’s generation of college students when they
enter the workplace?
Be Sure You Can • diff erentiate among forecasting, contingency planning, scenario planning, and
benchmarking
• explain the importance of contingency planning • describe the benefi ts of participatory planning as a special case of group decision
making
What Would You Do? A consulting fi rm has been hired to help write a strategic plan for your organization.
Th e plan would be helpful, but you are worried about getting “buy-in” from all mem-
bers, not just those at the top. What conditions can you set for the consultants so
that they not only provide a solid strategic plan, but also create strong commitments
to implementing it from members of your organization?
STUDY GUIDE
Terms to Defi ne
Benchmarking
Best practices
Contingency planning
Forecasting
Participatory planning
Scenario planning
Stretch goals
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Plans and Planning Techniques ■ Chapter 5 129
1. Planning is best described as the process of
and .
(a) developing premises about the future; evaluating
them
(b) measuring results; taking corrective action
(c) measuring past performance; targeting future
performance
(d) setting objectives; deciding how to accomplish
them
2. Th e benefi ts of planning should include
.
(a) improved focus
(b) less need for controlling
(c) more accurate forecasts
(d) increased business profi ts
3. Th e fi rst step in the planning process is to
.
(a) decide how to get where you want to go
(b) defi ne your objectives
(c) identify possible future conditions or scenarios
(d) act quickly to take advantage of opportunities
4. In order to help implement her fi rm’s strategic plans,
the CEO of a business fi rm would most likely want
marketing, manufacturing, and fi nance executives
to develop .
(a) means–ends chains
(b) operational plans
(c) fl exible budgets
(d) project management
5. planning identifi es alternative
courses of action that can be taken if problems
occur with the original plan.
(a) Benchmark
(b) Participatory
(c) Staff
(d) Contingency
6. A “no smoking” rule and a sexual harassment policy
are examples of that are types of
in organizations.
(a) long-range plans; policies
(b) single-use plans; means–ends chains
(c) policies; standing-use plans
(d) operational plans; short-range plans
7. When a manager is asked to justify a new
budget proposal on the basis of projected
activities rather than as an incremental
adjustment to the prior year’s budget, this is an
example of .
(a) zero-based budgeting
(b) strategic planning
(c) operational planning
(d) contingency planning
8. One of the expected benefi ts of participatory
planning is .
(a) faster planning
(b) less need for forecasting
(c) greater attention to contingencies
(d) more commitment to implementation
9. When managers use benchmarking in the planning
process, they usually try to .
(a) set up fl exible budgets
(b) identify best practices used by others
(c) fi nd the most accurate forecasts that are
available
(d) use expert staff planners to set objectives
10. In a hierarchy of objectives, plans at lower levels are
supposed to act as for accomplishing
higher-level plans.
(a) means
(b) ends
(c) scenarios
(d) benchmarks
C H
A PTER 5
TP
Multiple-Choice Questions
TestPrep 5
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EXPLORING MANAGEMENT130
11. In addition to providing better focus, good planning
off ers the benefi ts of .
(a) guaranteed performance success
(b) eliminating the need to change
(c) improved action orientation
(d) less emphasis on coordination and control
12. From a time management perspective, which
manager is likely to be in best control of his or her
time? One who .
(a) tries to never say “no” to requests from others
(b) works on the most important things fi rst
(c) immediately responds to instant messages
(d) always has “an open offi ce door”
13. A marketing plan in a business fi rm would most
likely deal with .
(a) production methods and technologies
(b) money and capital investments
(c) facilities and workforce recruiting
(d) sales and product distribution
14. The best goals or objectives for planning
purposes would have which of the following
characteristics?
(a) Easy enough so that no one fails to reach them
(b) Realistic and possible to achieve, while still
challenging
(c) Open ended, with no clear end point identifi ed
(d) No set timetable or due dates
15. Th e planning process isn’t complete until
.
(a) future conditions have been identifi ed
(b) stretch goals have been set
(c) plans are implemented and results evaluated
(d) budgets commit resources to plans
Short-Response Questions
16. List the fi ve steps in the planning process, and give examples of each.
17. How does planning facilitate controlling?
18. What is the diff erence between contingency planning and scenario planning?
19. Why is participation good for the planning process?
Integration and Application Question
20. My friends Curt and Rich own a local bookstore. Th ey are very interested in making plans for improving the
store and better dealing with competition from the other bookstores that serve college students in our town.
I once heard Curt saying to Rich: “We should be benchmarking what some of the successful coff ee shops,
restaurants, and novelty stores are doing.” Rich replied: “I don’t see why ; we should only be interested in book-
stores. Why don’t we study the local competition and even look at what the best bookstores are doing in the
big cities?”
Questions: Who is right, Curt or Rich? If you were hired as a planning consultant to them, what would you sug- gest as the best way to utilize benchmarking as a planning technique to improve their bookstore? And, how
would you use the planning process to help Curt and Rich come to a point of agreement on the best way forward
for their bookstore?
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Plans and Planning Techniques ■ Chapter 5 131
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 5: Time Management Profi le
■ CLASS EXERCISE 5: Th e Future Workplace
■ TEAM PROJECT 5: Personal Career Planning
C H
A PTER 5
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot How has Nordstrom managed to stay profi table heads and tails above the competition?
It brought time-honored retail practices—keeping
customers happy and managing inventory tightly—
into a new era. Nordstrom hopes to inspire customer
loyalty with its recent $150� million investment in an
ultramodern inventory management system.
Th e upgrade, spearheaded by the fourth generation
of Nordstrom family members in corporate leadership,
accomplished two key
goals: correlate purchasing
with demand to keep
inventory as lean as possible, and present both
customers and sales associates with a comprehensive
view of Nordstrom’s entire inventory, including every
store and warehouse.
■ CHAPTER 5 CASE Nordstrom: Planning a Better Inventory
Don’t Miss This Selection from Cases for Critical Thinking
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 5
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Toyota president Akio Toyoda meets the press to apologize for
his fi rm’s quality problems. He says, “I am deeply sorry for any
accidents Toyota drivers have experienced.”
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Explore Yourself More on resiliency
Role Models Patricia Karter shows how
values help control growth
Ethics Check Privacy and censorship worries
Facts to Consider Beware of corporate thieves
Manager’s Library Th e Facebook Eff ect by David
Kirkpatrick
6 Controls and
Control Systems
What Gets Measured Happens
1. Understand how and
why managers use
the control process.
2. Identify types of
controls used by
managers.
3. Describe useful
control tools and
techniques.
YOUR CHAPTER
TAKEAWAYS
Explore Yourself Ethihics Check Manager’s
W H A T ’ S I N S I D E
133
M L Th
E
M
Management Live
Resiliency and Forrest Gump
G rowing up in the Deep South, Forrest Gump (Tom Hanks)
is no stranger to adversity. Despite bullying about his
learning disability and close relationship with his mother,
Gump develops as a runner and parlays this into an opportunity to play football at
the University of Alabama.
During the Vietnam War, Gump is wounded while saving soldiers, including
his dying friend Bubba. He receives the Medal of Honor from President Kennedy.
Instead of retiring after the war on a military pension, Gump capitalizes on
another opportunity. He learns how to play ping pong during his recovery and
gets to take part in a sports exchange to improve diplomatic relations with
China. Following his world tour, he returns to the United States to make good
on a promise to start the Bubba Gump Shrimp Company—named for his
war-time friend.
Gump’s positive outlook, often stated using the phrase “life is like a box of
chocolates,” and actions demonstrate resiliency, the ability to call upon inner strength and keep moving forward even when things are tough.
How well do you respond to adversity? Watch Forrest Gump. It’s a feel-good
story with plenty of emotion. Ask yourself whether you would be able to bounce
back as often as Gump does. As you review the chapter, think about ways you
can develop internal control mechanisms and make yourself more resilient.
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EXPLORING MANAGEMENT134
“Keeping in touch” . . . “staying informed” . . . “being in control.” these are
important responsibilities for every manager. Yet “control” is a word like “power.”
If you aren’t careful when and how the word is used, it leaves a negative con-
notation. But control plays a positive and necessary role in the management
process. To have things “under control” is good; for things to be “out of control”
is generally bad.
So, you might ask: What happened at Toyota? 1 Something certainly went wrong
with quality control when the global giant had to recall more than 6 million
vehicles to fi x throttle problems and shut down production of models with defects
until corrections could be made. It was a major blow to a fi rm previously praised
for its quality vehicles. Reputation, sales, and profi ts were lost immediately. In
“An Open Letter to Toyota Customers,” Toyota North America’s president and COO
Jim Lentz said: “I am truly sorry for the concern our recalls have caused, and want
you to know we’re doing everything we can—as fast as we can—to make things right.
. . . We’ll continue to do everything we can to meet—and exceed—your expecta-
tions and justify your continued trust in Toyota.” 2
How did this company known for its product quality lose control? Was it a
management lapse, a technology breakdown, or simply the aftermath of growing
too fast in too many locations around the world?
||| Controlling is one of the four functions of management.
Managers understand controlling as a process of measuring performance and taking action to ensure desired results. Its purpose is straightforward—to make
sure that plans are achieved and that actual performance meets or surpasses ob-
jectives. Like any aspect of decision making, the foundation of control is informa-
tion. Henry Schacht, former CEO of Cummins Engine Company, once discussed
control in terms of what he called “friendly facts.” “Facts that reinforce what you
are doing . . . are nice,” he said, “because they help in terms of psychic reward.
Facts that raise alarms are equally friendly, because they give you clues about
how to respond, how to change, where to spend the resources.” 3
Just how does control fi t in with the other management functions? Plan-
ning sets the directions. Organizing arranges people and resources for work.
Controlling is the process of measuring performance and taking action to ensure desired results.
Takeaway 6.1 How and Why Do Managers Use
the Control Process?
ANSWERS TO COME
■ Controlling is one of the four functions of management.
■ Control begins with objectives and standards.
■ Control measures actual performance.
■ Control compares results with objectives and standards.
■ Control takes corrective action as needed.
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Controls and Control Systems ■ Chapter 6 135
Leading inspires people toward their best eff orts. And as
shown in Figure 6.1, controlling sees to it that the right things happen, in the right way, and at the right time. If
things go wrong, control helps get things back on track.
Eff ective control off ers the great opportunity of learning
from experience. Consider, for example, the program of after- action review pioneered by the U.S. Army and now utilized in many corporate settings. Th is is a structured review of les-
sons learned and results accomplished through a completed
project, task force assignment, or special operation. Partici-
pants answer questions like: “What was the intent?” “What
actually happened?” “What did we learn?” 4 Th e after-action
review encourages everyone involved to take responsibility
for his or her performance eff orts and accomplishments.
Even though improving performance through learning
is one of the great opportunities off ered by the control pro-
cess, the potential benefi ts are realized only when learn-
ing is translated into corrective actions. After setting up
Diversity Network Groups (DNGs) worldwide, for example,
IBM executives learned that male attitudes were major bar-
riers to the success of female managers. Th ey addressed
this fi nding by making male senior executives report annually on the progress
of women managers in their divisions. Th is action is credited with substantially
increasing the percentage of women in IBM’s senior management ranks. 5
After-action review is a structured review of lessons learned and results accomplished through a completed project, task force assignment, or special operation.
MANAGEMENT
PROCESS
MANAGEMENT
PROCESS
Planning
to set the direction
Leading
to inspire effort
Controlling
to ensure results • Measure performance • Take corrective action
Organizing
to create structures
FIGURE 6.1 Why Is Controlling So Important in the Management Process? Controlling is one of the four management functions. It is the
process of measuring performance—fi nding out how well you
are doing, and taking action to ensure desired results—making
sure results meet expectations. When controlling is done well,
it sets a strong foundation for performance. As the old adage
says: What gets measured happens.
Step 4:
Take necessary
action
THE CONTROL
PROCESS
THE CONTROL
PROCESS
Step 2:
Measure actual
performance
Step 3:
Compare actual performance with
objectives and standards
Step 1:
Establish performance objectives and
standards
FIGURE 6.2 What Are the Four Steps in the Control Process? Th e control process is straightforward: (1) set performance objectives
and standards, (2) measure actual performance, (3) compare actual
performance with objectives and standards, (4) take corrective action
as needed. Although essential to management, these steps apply
equally well to personal careers. Without career objectives, how do
you know where you really want to go? How can you allocate time
and other resources to take best advantage of opportunities? Without
measurement, how can you assess how well you are doing and make
adjustments to do better in the future?
||| Control begins with objectives and standards.
Th e control process consists of the four steps shown
in Figure 6.2. Th e process begins with setting perfor- mance objectives and standards for measuring them.
It can’t start any other way. Th is is the planning part:
setting the performance objectives against which re-
sults can eventually be compared. Measurement stan-
dards are important, too. It isn’t always easy to set
them, but they are essential.
We often hear about earnings per share, sales growth,
and market shares as standards for measuring busi-
ness performance. Others include quantity and quality
of production, costs incurred, service or delivery time,
and error rates. But how about other types of orga-
nizations, such as a symphony orchestra? When the
Cleveland Orchestra wrestled with performance stan-
dards, the members weren’t willing to rely on vague
generalities like “we played well,” “the audience seemed
happy,” “not too many mistakes were made.” Rather,
they decided to track standing ovations, invitations to
perform in other countries, and how often other
orchestras copied their performance styles. 6
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EXPLORING MANAGEMENT136
Th ings like earnings per share for a business and standing ovations for a sym-
phony are examples of output standards. Th ey measure actual outcomes or work results. When Allstate Corporation launched a new diversity initiative, it created
a “diversity index” to quantify performance on diversity issues. Th e standards in-
cluded how well employees met the goals of bias-free customer service and how
well managers met the fi rm’s diversity expectations. 7 When GE became concerned
about managing ethics in its 320,000-member global workforce, it created mea-
surement standards to track compliance. Each business unit was required to re-
port quarterly on how many of its members attended ethics training sessions and
what percentage signed the fi rm’s “Spirit and Letter” ethics guide. 8
Th e control process also uses input standards to measure work eff orts. Th ese are helpful in situations where outputs are diffi cult or expensive to measure.
Examples of input standards for a college professor might be having an orderly
course syllabus, showing up at all class sessions, and returning exams and assign-
ments in a timely fashion. Of course, as this example might suggest, measuring
inputs doesn’t mean that outputs, such as high-quality teaching and learning,
are necessarily achieved. Other examples of input standards in the workplace
include conformance with rules and procedures, effi ciency in the use of resources,
and work attendance or punctuality.
||| Control measures actual performance. Th e second step in the control process is to measure actual performance using
agreed-upon standards. Accurate and timely measurement is essential in order
to spot diff erences between what is really taking place and what was originally
An output standard measures performance results in terms of quantity, quality, cost, or time.
An input standard measures work eff orts that go into a performance task.
There’s a lot of crime in the corporate world, and a bad econo- my tends to bring out the worst in some of us. Consider these survey results. • 20% say worker theft is a “moderate to very big problem.” • 18% report an increase in money crimes such as stolen cash
or fraudulent transactions. • 24% report an increase in thefts of offi ce supplies and com-
pany products. • 17% have tightened security to prevent employee theft. • In global business, 48% of fi rms report fear of fraud, keeping
them from investing in places like China and Africa.
• 27% of companies report data fraud problems. • 50% of fi rms plan to spend more defending intellectual
property.
YOUR THOUGHTS?
Do these data tell the real story: Is employee theft mainly a “bad economy” problem? Is it a smaller or larger problem than indicated here? Have you witnessed such theft and, if so, what did you do about it? And have you been a participant in such bad employee behavior?
■ BEWARE OF CORPORATE THIEVES
Facts to Consider MAJORITY OF FIRMS PLANNING TO SPEND MORE
TO DEFEND INTELLECTUAL PROPERTY. {
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Controls and Control Systems ■ Chapter 6 137
planned. Unless we are willing to measure, very little control is possible. And as
the module subtitle indicates, willingness to measure has its rewards. What gets
measured tends to happen.
Th e “what gets measured happens” lesson can go a long way in nurturing a
career. Linda Sanford, senior vice president for IBM, grew up on a family farm,
where she developed an appreciation for measuring results. “At the end of the
day, you saw what you did, knew how many rows of strawberries you picked.” Th is
experience carried over into her work at IBM. She earned a reputation for walk-
ing around the factory just to see “at the end of the day how many machines were
going out of the back dock.” 9
||| Control compares results with objectives and standards.
Th e third step in the control process is to compare actual results with objectives
and standards. You might remember its implications by this control equation:
Need for Action � Desired Performance � Actual Performance
A sweet treat is what one gets when digging into one of Danc- ing Deer Baking’s Cherry Almond Ginger Chew cookies. The company, founded by Patricia Karter, sells about $8 million worth of them and other confectionary concoctions every year. Each product is made with all-natural ingredients, packaged in recycled materials, and produced in inner-city Boston.
Dancing Deer began with a $20,000 investment and two ovens in a former pizza shop. It may not have been the origi- nal plan, but growth came quickly as the bakery prospered. Customer demand led to expansion; an acquisition led to fur- ther expansion; being recognized on national TV as having the “best cake in the nation” fueled growth further.
It isn’t easy to stay on course and in control while changing structures, adding people, and building brands for competi- tive advantage. But for Karter the anchor point has always been clear: Let core values be the guide. Dancing Deer’s employees get stock options and free lunches; 35% of profi ts from the fi rm’s Sweet Home cakes are donated to help the homeless fi nd ac- commodations and jobs. When offered a chance to make a large cookie sale to Williams-Sonoma, Karter declined because
the contract would have required use of preservatives. Williams- Sonoma was so impressed that it contracted to sell her bakery mixes. Instead of lost opportunity, the fi rm gained more sales.
“There’s more to life than selling cookies,” says Dancing Deer’s Web site, “but it’s not a bad way to make a living.” And Karter hopes controlled growth will make Dancing Deer “big enough to make an impact, to be a social economic force.” The fi rm sums up its story to date this way: “It has been an interesting journey. Our successes are due to luck, a tremen- dous amount of dedication and hard work, and a commitment to having fun while being true to our principles. We have had failures as well—and survived them with a sense of humor.”
WHAT’S THE LESSON HERE?
Whether it’s moving ahead in our career or growing a work unit or organization, our aspirations can sometimes get the bet- ter of us. Patricia Karter seems to be nicely in control—of her- self and of her fi rm. How important are personal values when it comes to staying on course and staying ethical in times of challenge, change, and performance pressures?
■ PATRICIA KARTER SHOWS HOW VALUES HELP CONTROL GROWTH
Role Models “WE HAVE HAD FAILURES AS WELL—AND SURVIVED
THEM WITH A SENSE OF HUMOR.” {
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EXPLORING MANAGEMENT138
Th e control equation is a valuable tool. Identifying the need for action can
point you in two possible directions. It can point toward the need to deal with a
performance threat or defi ciency (when actual is less than desired), or to explore
a performance opportunity (when actual is more than desired).
Of course, the question of what constitutes desired performance plays an im-
portant role in the control equation and its implications. Th is is ideally clarifi ed
when original objectives and standards are set, such as in the earlier example of
ethics at GE. But other approaches are available.
Some organizations use engineering comparisons to identify desired perfor-
mance. An example is UPS. Th e fi rm carefully measures the routes and routines
of its drivers to establish the times expected for each delivery. When a delivery
manifest is scanned as completed, the driver’s time is registered in an elec-
tronic performance log that is closely monitored by supervisors. Some make
use of historical comparisons. Th ese use past experience as a basis for evalu-
ating current performance. And, relative comparisons are also common. Th ey
benchmark performance against that being achieved by other people, work
units, or organizations.
||| Control takes corrective action as needed. Th e fi nal step in the control process occurs when action is taken to address gaps
between desired and actual performance. You might hear the term management by exception used in this regard. It is the practice of giving attention to high- priority situations that show the greatest need for action.
Management by exception basically adds discipline to our use of the control
equation by focusing attention not just on needs for action but also on the highest-
priority needs for action. In this way it can save valuable time, energy, and other
resources that might be spent correcting things of lesser importance while those
of greater importance get missed or delayed.
Management by exception focuses attention on diff erences between actual and desired performance.
The control process is one of the ways through which manag- ers help organizations best use their resources and systems to achieve productivity. In many ways our daily lives are similar quests for productivity, and the control process counts there, too. But how well we do depends a lot on our capacity for resil- iency—the ability to call upon inner strength and keep moving forward even when things are tough. We need the courage and confi dence to admit when things are going wrong, to change
ways that aren’t working well, and to hold on and keep things moving forward even in the face of adversity.
■ RESILIENCY
Explore Yourself WE NEED THE COURAGE TO ADMIT
WHEN THINGS ARE GOING WRONG. {
Get to know yourself better by taking the self-assessment on
Internal/External Control and completing the other activi-
ties in the Exploring Management Skill-Building Portfolio.
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Controls and Control Systems ■ Chapter 6 139
Takeaway 6.1 How and Why Do Managers Use
the Control Process?
Rapid Review • Controlling is the process of measuring performance and taking corrective action
as needed.
• Th e control process begins when performance objectives and standards are set; both input standards for work eff orts and output standards for work results can
be used.
• Th e second step in control is to measure actual performance in the control process.
• Th e third step compares results with objectives and standards to determine the need for corrective action.
• Th e fi nal step in the control process involves taking action to resolve problems and improve things in the future.
• Th e control equation states: Need for action � Desired performance � Actual performance.
• Management by exception focuses attention on the greatest need for action.
Questions for Discussion 1. What performance standards should guide a hospital emergency room or fi re
department?
2. Can one control performance equally well with input standards and output
standards?
3. What are the possible downsides to management by exception?
Be Sure You Can • explain the role of controlling in the management process
• list the steps in the control process
• explain how planning and controlling should work together in management
• diff erentiate output standards and input standards
• state the control equation
• explain management by exception
What Would You Do? A work colleague comes to you and confi des that she feels “adrift in her career”
and “just can’t get enthused about what she’s doing anymore.” How can you re-
spond helpfully by pointing out that this might be a problem of self-management
and personal control? What can you suggest for using the steps in the manage-
ment control process to better understand and correct her situation?
STUDY GUIDE
Terms to Defi ne
After-action review
Controlling
Input standards
Management by
exception
Output standards
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EXPLORING MANAGEMENT140
||| Managers use feedforward, concurrent, and feedback controls.
You should recall discussions in earlier modules of how organizations operate
as open systems that interact with their environments in an input-throughput-
output cycle. Figure 6.3 now shows how three types of managerial controls— feedforward, concurrent, and feedback—apply to each phase.
10
Takeaway 6.2 What Types of Controls Are Used by
Managers?
ANSWERS TO COME
■ Managers use feedforward, concurrent, and feedback controls.
■ Managers use both internal and external controls.
■ Managing by objects is a way to integrate planning and controlling.
Feedforward Controls
Ensure the right directions are set and the right resource
inputs are available
Concurrent Controls
Ensure the right things are being done as part of work-flow operations
Feedback Controls
Ensure that final results are up to desired standards
WORK INPUTS WORK OUTPUTSWORK THROUGHPUTS
Solve problems before they occur
Solve problems while they are occurring
Solve problems after they occur
FIGURE 6.3 What Are the Diff erences Between Feedforward, Concurrent, and Feedback Controls? Organizations are input-throughput-output systems, and each point in the cycle off ers its own
opportunities for control over performance. Feedforward controls try to solve problems before
they occur, by making sure the production systems have high-quality inputs. Concurrent controls
try to solve problems as they occur, by monitoring and correcting problems during the work
process. Feedback controls try to correct problems after they have occurred and inform the
system so that similar mistakes can be avoided in the future.
Feedforward controls, also called preliminary controls, take place before work begins. Th eir goal is to prevent problems before they occur. Th is is a forward-
thinking and proactive approach to control, one that we should all try to follow
whenever we can. At McDonald’s, for example, preliminary control of food in-
gredients plays an important role in the fi rm’s quality program. Suppliers of
its hamburger buns produce them to exact specifi cations, covering everything
from texture to uniformity of color. Even in overseas markets, the fi rm works
hard to develop local suppliers of dependable quality. 11
Feedforward control ensures clear directions and needed resources before the work begins.
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Controls and Control Systems ■ Chapter 6 141
Concurrent controls focus on what happens during the work process; they take place while people are doing their jobs. Th e goal is to solve problems as they
occur. Sometimes called steering controls, they make sure that things are always
going according to plan. Th e ever-present shift leaders at McDonald’s restau-
rants are a good example of how this happens through direct supervision. Th ey
constantly observe what is taking place, even while helping out with the work.
Th ey are trained to correct things on the spot. Th e question continually asked is:
“What can we do to improve things right now?”
Feedback controls, or post-action controls, take place after a job or project is completed. Th ink about your experiences as a student. Most course evalua-
tion systems ask “Was this a good learning experience?” only when the class
is almost over. Th ink also about your experiences as a restaurant customer.
Very often we’re asked “was everything alright?” when it’s time to pay the bill.
And think of the electronic devices you buy. Probably the last question a cell
phone maker asks before your device is shipped from the factory fl oor is “Does
it work?” Although the prior questions are good ones most often asked in good
faith, feedback controls focus on the quality of fi nished products. Although this
type of control may prevent you from receiving a defective cell phone, it may
not help you much while taking a poorly organized college course or after eating
a bad meal.
Concurrent control focuses on what happens during the work process.
Feedback control takes place after completing an action.
Digging into Chick-fi l-A
Performance Leaves No Room for Complacency
You can get a tasty sandwich at Chick-fi l-A, but don’t plan on stopping in on a
Sunday. All of the chain’s stores are closed. It is a tradition started by founder
Truett Cathy, who believes employees deserve a day of rest.
Someone who places “people before profi ts,” Truett has built a successful, and
fast-growing, franchise known for consistent quality and great customer service.
Th e president of the national Restaurant Association Educational Foundation
says this about Chick-fi l-A: “I don’t think there’s any chain that creates such a
wonderful culture around the way they treat their people and the respect they
have for their employees.”
Current President Dan T. Cathy believes the Sunday day of rest is a state-
ment about that culture. He says: “If we take care of our team members and
operators behind the counter, then they are going to do a better job on
Monday. In fact, I say our food tastes better on Monday because we are closed
on Sunday.”
Truett believes in “continuous improvement” to upgrade menus and stores
even after years of increasing sales. Woody Faulk, vice president of brand
development, says: “It would be very easy for us to pause after a successful
year, but in doing that, we would be in jeopardy of falling into a trap of com-
placency.” He adds: “Change in the quick-service industry is much like that
of the fashion industry. Customer needs are constantly fl uctuating, and we
have to be intentional about staying ahead of and remaining relevant to those
changes.”
Truett Cathy’s success with
Chick-fi l-A probably traces
in part to his management
philosophy: A well-treated
staff delivers consistent
results. In other words,
people will do the right
things more often than not
if you respect and support
them. Th is puts the focus
on self-control and trusts
workers to exercise it. Why
don’t more employers get
this message?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT142
||| Managers use both internal and external controls.
We all exercise self-control in our daily lives; we do so in respect to managing our
money, our relationships, our work-life balance, and more. 12
Managers can take
advantage of this human capacity by unlocking and setting up conditions that
support internal control, or self-control, in the workplace. According to Doug- las McGregor’s Th eory Y perspective, discussed in Chapter 2, people are ready
and willing to exercise self-control in their work. 13
Th is potential is increased
when capable people have a clear sense of organizational mission, know their
goals, and have the resources necessary to do their jobs well.
In addition to encouraging and allowing internal control, managers also set
up and use various forms of external control to structure situation so that things happen as planned.
14 Th e alternatives include bureaucratic or administrative
control, clan control, and market control.
Th e logic of bureaucratic control is that authority, policies, procedures, job descriptions, budgets, and day-to-day supervision help make sure that people
behave in ways consistent with organizational interests. As discussed in the
Internal control, or self-control, occurs as people exercise self-discipline in fulfi lling job expectations.
External control occurs through direct supervision or administrative systems.
Bureaucratic control infl uences behavior through authority, policies, procedures, job descriptions, budgets, and day- to-day supervision.
ONLINE PRIVACY—ARE YOU AN OPEN BOOK, OR DO
YOU FEAR LOSING FACE?
As online networking grows, so does the tension between desires for social interaction and control of personal privacy. People offer different versions of themselves to others on- line, just as they do offl ine. But the Web lacks constraints of time and space, and digital data is proliferating and remains permanent. Online privacy can be controlled, but is it practi- cal or even necessary?
In the book The Facebook Effect (2010, Simon & Schuster), author David Kirkpatrick says Facebook.com exists on the idea of “radical transparency”—the concept that everyone knows everything about anyone. Privacy controls are available, but the belief is that users want less control as a more open society evolves.
Kirkpatrick says Facebook is shifting society’s attitude to- ward privacy. A vast majority of users register their true iden- tities. They are given “granular” controls—they can choose
exact users who may view precise postings—and may specify collections of data to be shared with various ‘groups’ such as family, friends, or coworkers. However, Facebook’s default set- tings are for ‘everyone’ to view all personal data.
Facebook’s approach has challenged users’ comfort lev- els, but ultimately they are embracing standard of openness. Kirkpatrick thinks Facebook will never remove users’ ability to control privacy, only their desire to do so. Managing privacy may prove too strenuous in an open society that tolerates people for who they truly are.
REFLECT AND REACT
What personal information do you want to keep private on Facebook, if any? Are you in control of your online persona? List the basic groups that users might create and identify dif- ferent information shared with these groups. And by the way, do you agree that society will become more open with time and adopt Facebook’s notion of “radical transparency”?
■ THE FACEBOOK EFFECT BY DAVID KIRKPATRICK
Manager’s Library {FACEBOOK PREDICTS LESS INTEREST IN PRIVACY CONTROLS
AS A MORE OPEN GLOBAL SOCIETY EVOLVES.
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Controls and Control Systems ■ Chapter 6 143
previous chapter on planning, for example, organizations typically have policies
and procedures regarding sexual harassment. Th ey are designed to make sure
people behave toward one another respectfully and without sexual pressures or
improprieties.
Whereas bureaucratic control emphasizes hierarchy and authority, clan con- trol infl uences behavior through social norms and peer expectations. Th is is the power of collective identity; persons who share values and identify strongly with
each other tend to behave in ways that are consistent with one another’s expecta-
tions. Just look around the typical college classroom and campus. You’ll see clan
control refl ected in dress, language, and behavior as students tend to act con-
sistent with the expectations of those peers and groups they identify with. Th e
same holds true in organizations where close-knit employees display common
behavior patterns.
Market control is essentially the infl uence of market competition on the behavior of organizations and their members. Business fi rms adjust products,
pricing, promotions, and other practices in response to customer feedback and
competitor moves. An example is the growing emphasis on “green” products and
practices. When a fi rm such as Wal-Mart starts to get good publicity from its ex-
pressed commitment to eventually power all of its stores with renewable energy,
the eff ect is felt by its competitors. 15
Th ey have to adjust practices to avoid giv-
ing up this public relations advantage to Wal-Mart. In this sense, the time-worn
phrase “keeping up with the competition” is really another way of expressing the
dynamics of market controls in action.
||| Managing by objectives is a way to integrate planning and controlling.
A useful technique for integrating planning and controlling is managing by objectives. Often called MBO, it is a structured process of regular communication in which a supervisor or team leader and a subordinate or team member jointly set
performance objectives and review accomplished results. 16
As Figure 6.4 shows, the process creates an agreement between the two parties regarding performance
Clan control infl uences behavior through social norms and peer expectations.
Market control is essentially the infl uence of market competition on the behavior of organizations and their members.
Managing by objectives is a process of joint objective setting between a superior and a subordinate.
Team leader
Team member
and Setting objectives Setting standards Choosing actions
Reviewing results Discussing implications Renewing MBO cycle
Jointly controlJointly plan
Performing tasks (member)
Individually act
Providing support (leader)
FIGURE 6.4 How Does Managing by Objectives Help to Integrate Planning and Controlling? Managing by objectives is a structured process of communication between a supervisor and a subordinate,
or team leader and team members. Planning is accomplished when both parties communicate to identify
the subordinate’s performance objectives. Th is is a form of participatory planning, and the goal is agreement.
Informed by the objectives, the supervisor provides support for the subordinate as work progresses.
Controlling is accomplished when the two parties meet at scheduled times to jointly discuss progress and
results, and make new plans setting future performance objectives.
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EXPLORING MANAGEMENT144
objectives for a given time period, plans for accomplishing them, standards for
measuring them, and procedures for reviewing them.
In the previous chapter on planning, we talked about “great goals.” You can
think of them in the present context as objectives that have real meaning in
terms of signifi cant performance consequences. When a team leader and
team member are working together in a managing by objectives approach,
for example, it is helpful to consider two types of objectives that can have an
element of “greatness” to them. Improvement objectives document intentions for improving performance in a specifi c way. An example is “to reduce quality
rejects by 10%.” Personal development objectives focus on expanding job knowledge or skills. An example is “to learn the latest version of a computer
spreadsheet package.”
Whether we are talking about improvement or personal objectives, it’s
always important to remember that the best objectives are specifi c, time de-
fi ned, challenging, and measurable. And, to make objectives measurable they
must be specifi ed as clearly as possible. Ideally, this involves agreement on a
measurable end product, for example, “to reduce housekeeping supply costs by
5% by the end of the fi scal year.” But this can be hard to do in some cases. In-
stead, performance objectives can be stated as verifi able work activities. For ex-
ample, a team leader can commit to holding weekly team meetings as a means
for achieving better communications.
You might already be wondering if managing by objectives can become too
complicated a process. 17
Th e answer is “yes.” Critics note that problems can arise
when objectives are linked too closely with pay, focused too much on easy
accomplishments, involve excessive paperwork, and end up being dictated by
supervisors. But, the advantages of making objectives a clear part of the ongoing
conversation between managers and those reporting to them are also clear. 18
It
keeps workers focused on the most important tasks and priorities, and keeps
supervisors focused on the best ways to help them meet agreed-upon objectives.
Because the process requires direct communication, furthermore, it helps build
good interpersonal relationships. And by increasing employees’ participation in
decisions that aff ect their work, it encourages self-management. 19
Improvement objectives document intentions to improve performance in a specifi c way.
Personal development objectives document intentions to accomplish personal growth, such as expanded job knowledge or skills.
• Clarify the target—be specifi c; clearly describe the key result to be accomplished.
• Make it measurable—state how the key result will be mea- sured and documented.
• Defi ne the timetable—identify a date by which the key result will be accomplished.
• Avoid the impossible—be realistic; don’t promise what can- not be accomplished.
• Add challenge—be optimistic; build in “stretch” to make the accomplishment signifi cant.
• Don’t overcomplicate—stick to the essentials; write to fi t a Post-It note reminder.
■ HOW TO WRITE A GOOD PERFORMANCE OBJECTIVE
Tips to Remember
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Controls and Control Systems ■ Chapter 6 145
Takeaway 6.2 What Types of Controls Are Used
by Managers?
Rapid Review • Feedforward controls try to make sure things are set up right before work begins;
concurrent controls make sure that things are being done correctly; feedback con-
trols assess results after an action is completed.
• Internal control is self-control that occurs as people take personal responsibility for their work.
• External control is accomplished by use of bureaucratic, clan, and market control systems.
• Management by objectives is a process through which team leaders work with team members to “jointly” set performance objectives and “jointly” review perfor-
mance results.
Questions for Discussion 1. How does bureaucratic control diff er from clan control?
2. What is Douglas McGregor’s main point regarding internal control?
3. Can MBO work when there are problems in the relationship between a team
leader and a team member?
Be Sure You Can • illustrate the use of feedforward, concurrent, and feedback controls
• explain the nature of internal control or self-control
• diff erentiate among bureaucratic, clan, and market controls
• list the steps in the MBO process as it might operate between a team leader and a team member
What Would You Do? You have a highly talented work team whose past performance has been out-
standing. Recently, though, team members are starting to act like the workday
is mainly a social occasion. Getting the work done seems less important than
having a good time, and performance is on the decline. How can you use external
controls in a positive way to restore performance to high levels in this team?
STUDY GUIDE
Terms to Defi ne
Bureaucratic control
Clan control
Concurrent control
External control
Feedback control
Feedforward control
Improvement
objectives
Internal control
(self-control)
Managing by objectives
Market control
Personal development
objectives
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EXPLORING MANAGEMENT146
Most organizations use a variety of comprehensive and system-wide
controls. You should be familiar with quality control, purchasing and inventory
controls, and breakeven analysis, as well as the use of key fi nancial controls and
balanced scorecards.
||| Quality control is a foundation of modern management.
If managing for high performance is a theme of the day, quality control is one of its
most important watchwords. As pointed out in Chapter 2, the term total quality management (TQM) is quite common in modern management. It is used to describe operations that make quality an everyday performance objective and
strive to always do things right the fi rst time. 20
A foundation of TQM is the quest
for continuous improvement, meaning that one is always looking for new ways to improve on current performance.
21 Th e notion is that you can never be satis-
fi ed, that something always can and should be improved upon. 22
Th e basic cornerstone of quality control in any organization is measure-
ment. If you want quality, you have to tally defects, analyze and trace them to
the sources, make corrections, and keep records of what happens afterwards. 23
A quality tool often used in manufacturing, for example, is the control chart shown below.
Total quality management (TQM) commits to quality objectives, continuous improvement, and doing things right the fi rst time.
Continuous improvement involves always searching for new ways to improve work quality and performance.
Takeaway 6.3 What Are Some Useful Control Tools
and Techniques?
ANSWERS TO COME
■ Quality control is a foundation of modern management.
■ Gantt charts and CPM/PERT are used in project management and control.
■ Inventory controls help save costs.
■ Breakeven analysis shows where revenues will equal costs.
■ Financial ratios measure key areas of fi nancial performance.
■ Balanced scorecards help top managers exercise strategic control.
P a r ts
d ia
m e te
r (i
n .)
Out of control
Out of control
Control charts are graphical ways of displaying trends so that exceptions to quality standards can be identifi ed.
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Controls and Control Systems ■ Chapter 6 147
Control charts are graphical ways of displaying trends so that exceptions to
quality standards can be identifi ed for special attention. In the prior fi gure, for
example, an upper control limit and a lower control limit specify the allowable
tolerances for measurements of a machine part. As long as the manufacturing
process produces parts that fall within these limits, things are “in control.” How-
ever, as soon as parts start to fall outside the limits, it is clear that something is
going wrong that is aff ecting quality. Th e process can then be investigated, even
shut down, to identify the source of the errors and correct them.
Th e use of statistics adds power to sampling as a basis for decision making
and quality management. Many manufacturers now use a Six Sigma program, meaning that statistically the fi rm’s quality performance will tolerate no more
than 3.4 defects per million units of goods produced or services completed.
Th is translates to a perfection rate of 99.9997%. As tough as it sounds, Six
Sigma is a common quality standard for many, if not most, major competitors
in our demanding global marketplace.
||| Gantt charts and CPM/PERT are used in project management and control.
It might be something personal such as planning an anniversary party for one’s
parents, preparing for a renovation to your home, or watching the completion of a
new student activities building on a campus. What these examples and others like
them share in common is that they are relatively complicated tasks. Multiple com-
ponents must be completed in a certain sequence, within budget, and by a specifi ed
date. In management we call them projects. Project management is responsibility for the overall planning, supervision,
and control of projects. Basically, a project manager’s job is to ensure that a
project is well planned and then completed according to plan—on time, within
budget, and consistent with objectives. In practice, this is often assisted by two
control techniques known as Gantt charts and CPM/PERT.
A Gantt chart graphically displays the scheduling of tasks that go into com- pleting a project. As developed in the early twentieth century by Henry Gantt, an
industrial engineer, this tool has become a mainstay of proj-
ect management. Use of the visual overview of what needs to
be done on a project allows for progress checks to be made
at diff erent time intervals. It helps with event or activity se-
quencing to make sure that things get accomplished in time
for later work to build upon them. One of the biggest prob-
lems with projects, for example, is when delays in early activi-
ties create problems for later ones.
A more advanced use of the Gantt chart is a technique
known as CPM/PERT—a combination of the critical path method and the program evaluation and review technique. Project planning
based on CPM/PERT uses a network chart like the one shown at the top of the
next page. Such charts break a project into a series of small sub-activities that
each have clear beginning and end points. Th ese points become “nodes” in the
charts, and the arrows between nodes show in what order things must be done.
Th e full diagram shows all the interrelationships that must be coordinated for
the entire project to be successfully completed.
Six Sigma is a quality standard of 3.4 defects or less per million products or service deliveries.
Projects are one-time activities with many component tasks that must be completed in proper order and according to budget.
Project management makes sure that activities required to complete a project are planned well and accomplished on time.
A Gantt chart graphically displays the scheduling of tasks required to complete a project.
CPM/PERT is a combination of the critical path method and the program evaluation and review technique.
Architect
Foundation
Framing
Finishing
3 6
Time in months
9 12 18 24
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EXPLORING MANAGEMENT148
Use of CPM/PERT techniques helps project managers track activities to make
sure they happen in the right sequence and on time. If you look at the network in
the fi gure, you should notice that the time required for each activity can be easily
computed and tracked. Th e pathway from start to conclusion that involves the
longest completion times is called the critical path. It represents the quickest time in which the entire project can be finished, assuming everything goes
according to schedule and plans. In the example, the critical path is 38 days.
||| Inventory controls help save costs. Cost control ranks right up there with quality control as an important perfor-
mance concern. And a very good place to start is with inventory. Th e goal of
inventory control is to make sure that any inventory is only big enough to meet one’s immediate performance needs.
Th e economic order quantity form of inventory control, shown in the fi gure, automatically orders a fi xed number of items every time an inventory level falls
to a predetermined point. Th e order sizes are mathematically calculated to mini-
mize costs of inventory. A good example is your local supermarket. It routinely
makes hundreds of daily orders on an economic order quantity basis.
Th e critical path is the pathway from project start to conclusion that involves activities with the longest completion times.
Inventory control ensures that inventory is only big enough to meet immediate needs.
Th e economic order quantity method places new orders when inventory levels fall to predetermined points.
q
Another and very popular approach to inventory control is just-in-time sched- uling ( JIT). First made popular by the Japanese, these systems reduce costs and improve workfl ow by scheduling materials to arrive at a workstation or facility
Just-in-time scheduling ( JIT) routes materials to workstations just in time for use.
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Controls and Control Systems ■ Chapter 6 149
just in time for use. Because JIT nearly eliminates the carrying costs of inventories,
it is an important business productivity tool. But, the recent tsunami and nuclear
disaster in Japan also showed some of the risks of JIT. Many global companies,
among them Boeing and Dell, faced product delays when just-in-time shipments
were disrupted as Japanese fi rms in their supply chains were closed or their opera-
tions scaled back due to the disaster. 24
||| Breakeven analysis shows where revenues will equal costs.
When business executives are deliberating new products or projects, a frequent
control question is: “What is the breakeven point?” Figure 6.5 shows that break- even occurs at the point where revenues just equal costs. You can also think of it
as the point where losses end and profi t begins. A breakeven point is computed
using this formula.
Breakeven Point � Fixed Costs � (Price � Variable Costs)
Managers rely on breakeven analysis to perform what-if calculations under diff erent projected cost and revenue conditions.
Suppose, for example, the proposed target price for
a new product is $8 per unit, fi xed costs are $10,000,
and variable costs are $4 per unit. What sales vol-
ume is required to break even? (Answer: Breakeven
at 2500 units.) What happens if you are good at cost
control and can keep variable costs to $3 per unit?
(Answer: Breakeven at 2000 units.) Now, suppose
you can only produce 1000 units in the beginning
and at the original costs. At what price must you sell
them to break even? (Answer: $14.) Business execu-
tives perform these types of cost control analyses
every day.
||| Financial ratios measure key areas of fi nancial performance.
Th e pressure is always on for organizations to use
their fi nancial resources well to achieve high per-
formance. And, the analysis of an organization’s
fi nancial performance is an important aspect of
managerial control.
At a minimum, business managers should be able to understand these
financial performance measures: (1) liquidity—ability to generate cash to
pay bills; (2) leverage—ability to earn more in returns than the cost of debt;
(3) asset management—ability to use resources efficiently and operate at min-
imum cost; and (4) profitability—ability to earn revenues greater than costs.
All of these measures can be assessed using financial ratios such as those
listed next.
Th e breakeven point occurs where revenues just equal costs.
Breakeven analysis performs what-if calculations under diff erent revenue and cost conditions.
FIGURE 6.5 How Do Managers Use Breakeven Analysis to Make Informed What-If Decisions? A common question asked by managers when considering a new
product or service investment is: “What is the breakeven point?” A
breakeven point is computed using this formula: Breakeven
Point � Fixed Costs � (Price � Variable Costs). As shown in this fi gure, breakeven occurs at the point where revenues just equal
costs. You can also think of it as the point where losses end and profi t
begins. Th is approach helps managers perform what-if calculations
under diff erent projected cost and revenue conditions.
D o
ll a r
C o
s ts
a n
d R
e v e n
u e s
Fixed Costs
Variable Costs
Unit Sales
Breakeven Point
Revenues � Costs
Lo ss
Pr of
it
Total Sales Revenue
Total Costs � Fixed � Variable
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EXPLORING MANAGEMENT150
Liquidity—measures ability to meet short-term obligations. • Current Ratio � Current Assets � Current Liabilities
• Quick Ratio � (Current Assets � Inventory) � Current Liabilities
Higher is better: You want more assets and fewer liabilities.
Leverage—measures use of debt. • Debt Ratio � Total Debts � Total Assets
Lower is better: You want fewer debts and more assets.
Asset Management—measures asset and inventory effi ciency. • Asset Turnover � Sales � Total Assets
• Inventory Turnover � Sales � Average Inventory
Higher is better: You want more sales and fewer assets or lower inventory.
Profi tability—measures profi t generation. • Net Margin � Net Income � Sales
• Return on Assets (ROA) � Net Income � Total Assets
• Return on Equity (ROE) � Net Income � Owner’s Equity
Higher is better: You want as much net income or profi t as possible for
sales, assets, and equity.
Th ese and other fi nancial ratios can be used for historical comparisons within
the fi rm and for external benchmarking relative to industry performance. Th ey can
also be used to set company-level fi nancial targets or goals to be shared with em-
ployees and tracked to indicate success or failure. At Civco Medical Instruments,
for example, fi nancial results are distributed monthly to all employees. Th ey always
know exactly how well the fi rm is doing. Th is helps them focus on what they can do
diff erently and better, to help improve the fi rm’s bottom line. 25
||| Balanced scorecards help top managers exercise strategic control.
If “what gets measured happens,” then managers should take advantage of “score-
cards” to record and track performance results. When an instructor takes class at-
tendance and assigns grades based on it, students tend to come to class. When an
employer tracks the number of customers each employee serves per day, employees
tend to serve more customers. Do the same principles hold for organizations?
Strategic management consultants Robert S. Kaplan and David P. Norton
think so. Th ey advocate using what is called the balanced scorecard in respect to management control.
26 It gives top managers, as they say, “a fast but compre-
hensive view of the business.” Th e basic principle is that to do well and to win, you
have to keep score. And like sports teams, organizations perform better when all
members know the score.
Developing a balanced scorecard for any organization begins with a clarifi cation
of the organization’s mission and vision—what it wants to be and how it wants to
be perceived by its key stakeholders. Next, the following questions are asked and
answered to develop balanced scorecard goals and performance measures.
• Financial Performance—“How well do our actions directly contribute to im- proved fi nancial performance?” To improve fi nancially, how should we ap-
pear to our shareholders? Sample goals: survive, succeed, and prosper. Sample
A balanced scorecard measures performance on fi nancial, customer service, internal process, and innovation and learning goals.
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Controls and Control Systems ■ Chapter 6 151
measures: cash fl ow, sales growth and operating income, increased market
share, and return on equity.
• Customer Satisfaction—“How well do we serve our customers and clients?” To achieve our vision, how should we appear to our customers? Sample goals:
new products, responsive supply. Sample measures: percentage sales from
new products, percentage on-time deliveries.
• Internal Process Improvement—“How well do our activities and processes di- rectly increase value provided to our customers and clients?” To satisfy our
customers and shareholders, at what internal business processes should we
excel? Sample goals: manufacturing productivity, design excellence, new
product introduction. Sample measures: cycle times, engineering effi ciency,
new product time.
• Innovation and Learning—“How well are we learning, changing, and improv- ing things over time?” To achieve our vision, how will we sustain our ability
to change and improve? Sample goals: technology leadership, time to market.
Sample measures: time to develop new technologies, new product introduc-
tion time versus competition.
When balanced scorecard measures are taken, recorded, shared, and critically
reviewed, Kaplan and Norton expect organizations to perform better in those
areas. Th eir point is one we’ve made before: What gets measured happens.
Th ink about the possibilities here. How can the balanced scorecard approach be
used by the following organizations: an elementary school, a hospital, a community
library, a mayor’s offi ce, a fast-food restaurant? How do the performance dimen-
sions and indicators vary among these diff erent types of organizations? And if bal-
anced scorecards make sense, why is it that more organizations don’t use them?
London—Amnesty International claims that Yahoo!, Micro- soft, and Google violated human rights in China by comply- ing with government requests for censorship. Amnesty says that “corporate values and policies” are compromised in the quest for profi ts. A spokesperson for Yahoo’s China business, Alibaba.com, says: “By creating opportunities for entrepreneurs and connecting China’s exporters to buyers around the world, Alibaba.com and Yahoo! China are having an overwhelmingly positive impact on the lives of average people in China.”
Beijing—Skype is told by the Chinese government that its software must fi lter words that the Chinese leadership consid- ers offensive from text messages. If the company doesn’t, it can’t do business in the country. After refusing at fi rst, company
executives fi nally agree: phrases such as “Falun Gong” and “Dalai Lama” no longer appear in text messages delivered through Skype’s Chinese joint venture partner, Tom Online.
YOU DECIDE
Skype cofounder Niklas Zennstrom says: “I may like or not like the laws and regulations to operate businesses in the UK or Germany or the U.S., but if I do business there I choose to comply.” What do you think? Do company executives have any choice but to comply with the requests of governments? Are there times when profi ts should be sacrifi ced for principles? When should business executives stand up and challenge laws and regulations used to deny customers the privacy they expect?
■ PRIVACY AND CENSORSHIP WORRIES
Ethics Check WHO WINS (AND LOSES) WHEN GLOBAL INTERNET FIRMS
AND LOCAL GOVERNMENTS BATTLE FOR CONTROL? {
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EXPLORING MANAGEMENT152
Takeaway 6.3 What Are Some Useful Control Tools
and Techniques?
Rapid Review • Total quality management tries to meet customers’ needs and do things right on
time, the fi rst time, and all the time.
• Organizations use control charts and statistical techniques such as the Six Sigma system to measure the quality of work samples for quality control purposes.
• Economic order quantities and just-in-time deliveries are common approaches to inventory cost control.
• Th e breakeven equation is: Breakeven Point � Fixed Costs � (Price � Variable Costs).
• Breakeven analysis identifi es the points where revenues will equal costs under diff erent pricing and cost conditions.
• Financial control of business performance is facilitated by use of fi nancial ratios, such as those dealing with liquidity, leverage, assets, and profi tability.
• Th e balanced scorecard measures overall organizational performance in respect to four areas: fi nancial, customers, internal processes, innovation.
Questions for Discussion 1. Can a fi rm such as Wal-Mart ever go too far in controlling its inventory costs?
2. Is the concept of total quality management out of date?
3. Does the “balanced scorecard” as described in this chapter measure the right
things?
Be Sure You Can
• explain the role of continuous improvement in TQM
• explain how Gantt charts and CPM/PERT helps organizations with project management
• explain two common approaches to inventory cost control
• state the equation to calculate a breakeven point and its use in explaining breakeven analysis
• state the common fi nancial ratios used in organizational control
• identify the balanced scorecard components and control questions
What Would You Do? You’ve had three years of solid work experience after earning your undergraduate
degree. A lot of your friends are talking about going to graduate school, and the
likely target for you would be an MBA degree. Given all the potential costs and ben-
efi ts of getting an MBA, how can breakeven analysis help you make the decision to
(1) go or not go, (2) go full time or part time, and (3) even where to go?
STUDY GUIDE
Terms to Defi ne
Balanced scorecard
Breakeven analysis
Breakeven point
Continuous
improvement
Control chart
Critical path
CPM/PERT
Economic order
quantity
Gantt chart
Inventory control
Just-in-time
scheduling ( JIT)
Project
Project management
Six Sigma
Total quality
management (TQM)
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Controls and Control Systems ■ Chapter 6 153
1. After objectives and standards are set, what step
comes next in the control process?
(a) Measure results.
(b) Take corrective action.
(c) Compare results with objectives.
(d) Modify standards to fi t circumstances.
2. When a soccer coach tells her players at the end of a
losing game, “You did good in staying with the game
plan,” she is using a/an ____________ as a measure
of performance.
(a) input standard
(b) output standard
(c) historical comparison
(d) relative comparison
3. When an automobile manufacturer is careful to
purchase only the highest-quality components for
use in production, this is an example of an attempt
to ensure high performance through ____________
control.
(a) concurrent
(b) statistical
(c) inventory
(d) feedforward
4. Management by exception means ____________.
(a) managing only when necessary
(b) focusing attention where the need for action is
greatest
(c) the same thing as concurrent control
(d) the same thing as just-in-time delivery
5. A total quality management program is most likely
to be associated with ____________.
(a) EOQ
(b) continuous improvement
(c) return on equity
(d) breakeven analysis
6. Th e ____________ chart graphically displays the
scheduling of tasks required to complete the project.
(a) exception
(b) Taylor
(c) Gantt
(d) after-action
7. When MBO is done right, who does the review of a
team member’s performance accomplishments?
(a) the team member
(b) the team leader
(c) both the team member and team leader
(d) the team leader, the team member, and a lawyer
8. A good performance objective is written in such a
way that it ____________.
(a) has a fl exible timetable
(b) is general and not too specifi c
(c) is impossible to accomplish
(d) can be easily measured
9. A manager is not living up to the concept of MBO if
he or she ____________.
(a) sets performance objectives for subordinates
(b) stays in touch and tries to support subordinates
in their work
(c) jointly reviews performance results with
subordinates
(d) keeps a written record of subordinates’
performance objectives
10. If an organization’s top management establishes a
target of increasing new hires of minority and
female candidates by 15% in the next six months,
this is an example of a/an ____________ standard
for control purposes.
(a) input
(b) output
(c) management by exception
(d) concurrent
C H
A PTER 6
TP
Multiple-Choice Questions
TestPrep 6
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EXPLORING MANAGEMENT154
11. When a supervisor working alongside of an employ-
ee corrects him or her when a mistake is made, this
is an example of ____________ control.
(a) feedforward
(b) external
(c) concurrent
(d) preliminary
12. In CPM/PERT, “CPM” stands for ____________.
(a) critical path method
(b) control planning management
(c) control plan map
(d) current planning matrix
13. In a CPM/PERT analysis, the focus is on ____________ and the event ____________ that
link them together with the fi nished project.
(a) costs; budgets
(b) activities; sequences
(c) timetables; budgets
(d) goals; costs
14. When one team member advises another team
member that “your behavior is crossing the line in
terms of our expectations for workplace civility,” she
is exercising a form of ________ control over the
other’s inappropriate behaviors
(a) clan
(b) market
(c) internal
(d) preliminary
15. Among the fi nancial ratios often used for control
purposes, Current Assets/Current Liabilities is
known as the ____________.
(a) debt ratio
(b) net margin
(c) current ratio
(d) inventory turnover ratio
Short-Response Questions
16. What type of control is being exercised in the U.S. Army’s after-action review?
17. How could clan control be used in a TQM program?
18. How can a just-in-time system reduce inventory costs?
19. What four questions could be used to set up a balanced scorecard for a small business?
Integration and Application Question
20. Put yourself in the position of a management consultant who specializes in MBO. Th e local Small Business
Enterprise Association has asked you to be the speaker for its luncheon next week. Th e president of the asso-
ciation says that the group would like to learn more about the topic: “How to Use Management by Objectives
for Better Planning and Control.”
Questions: Your speech will last 15 to 20 minutes. What is the outline for your speech? How will you explain the potential benefi ts of MBO to this group of small business owners?
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Controls and Control Systems ■ Chapter 6 155
C H
A PTER 6
SFL StepsforFurtherLearning
Many learning resources are available at the end of the book and online within WileyPLUS.
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 6: Internal/External Control
■ CLASS EXERCISE 6: Stakeholder Maps
■ TEAM PROJECT 6: After Meeting/Project Review
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot Electronic Arts is one of the largest and most profi table third-party video game makers. Exclusive
contracts with professional sports teams have enabled
it to dominate the sports gaming market. But as gam-
ing has shifted from consoles to laptops, phones, and
tablets, it is struggling to stay relevant. Can EA regain
the pole position in a crowded and contentious market?
Until recently, EA's devotion to sports games was
a winning asset—it dominated the market as the
world's largest video-
game publisher. But
over the course of a
few short years, the gaming market radically changed.
Now EA fi nds itself in third place behind two strong
competitors whose successes represent areas in which
EA needs to double down to stay in the game.
■ CHAPTER 6 CASE Electronic Arts: Inside Fantasy Sports
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 6
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Chinese factories run by Foxconn Technology Group supply
electronic components for global brands. To help prevent
suicides, Foxconn has installed nets on employee dormitories..
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Explore Yourself More on critical thinking
Role Models Roger W. Ferguson Jr. provides
strategic leadership at
TIAA-CREF
Ethics Check Life and death at an
outsourcing factory
Facts to Consider CEO pay is heading high
again
Manager’s Library Behind the Cloud by
Marc Benioff and
Carlye Adler
7 Strategy and
Strategic
Management
Insight and Hard Work Deliver Results
1. Identify the types of
strategies used by
organizations.
2. Understand how
managers formulate
and implement
strategies.
YOUR CHAPTER 7
TAKEAWAYS
E l Y lf Ethi Ch k Manager’s
W H A T ’ S I N S I D E
157
M L B
M
C
M
Management Live
Critical Thinking and Tron: Legacy
A cting on a mysterious pager message sent to a family
confi dant, Sam Flynn (Garrett Hedlund) fi nds himself in
a virtual world known as Th e Grid. Sam is captured and
designated as a game player, with his only instruction being to “survive.” Th at is
the plot for the sci-fi movie Tron: Legacy. Sam knows nothing about this virtual
world. He is left to anticipate what will happen and use his instincts to stay
alive. Th rough observation, he quickly learns how to use his disc and a light
cycle to defeat other players. Sam is eventually reunited with his father, Kevin
Flynn ( Jeff Bridges) and uses his intuition to save Quorra (Olivia Wilde).
Pretty heady stuff that you only see in the movies, right? Not so. Th e
complexity and uncertainty of the business world forces managers to respond
in similar ways. Strategic management requires a set of skills for monitoring
the competitive environment and developing organizational strategy. Foremost
among these skills is critical thinking, the ability to perceive situations, gather and interpret relevant information, and make decisions.
Case studies and other problem-based methods of learning can help develop
your critical thinking skills. Just remember, though, that case studies are neat
and tidy while the real world can be much more complex and unstructured. Th e
more practice you get now with critical thinking, the better prepared you will be
when you encounter uncertainties.
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EXPLORING MANAGEMENT158
Recent changes in the automobile industry have been fast, dramatic,
and, hopefully, strategically well done. It wasn’t always that way. Th ere was a time
when the automakers were quite literally in the driver’s seat. Henry Ford once
said of his Model T’s: “Th e customer can have any color he wants as long as it’s
black.” Not so in our era of high gasoline prices, tight credit, and lots full of un-
sold cars. We’ve seen a great shift in ways businesses make plans and appeal to
customers. When Stephen Haeckel was director of strategic studies at IBM’s Ad-
vanced Business Institute, he described the shift as “a diff erence between a bus,
which follows a set route, and a taxi, which goes where customers tell it to go.” 1
Th e bus-taxi analogy can also be applied to your career strategy. Will you be
acting like the bus following the set route, or the taxi following opportunities?
Don’t be afraid to move back and forth between the worlds of business strategy
and personal strategy as our discussions in this chapter develop. Th e applica-
tions go both ways.
Success in the business world requires leaders with the abilities to move their
organizations forward strategically. “If you want to make a diff erence as a leader,”
says Fast Company magazine, “you’ve got to make time for strategy.” 2
Th e same
holds true for your career.
||| Strategy is a comprehensive plan for achieving competitive advantage.
A strategy is a comprehensive action plan that identifi es long-term direction for an organization and guides resource utilization to accomplish its goals. Strat-
egy focuses leadership attention on the competitive environment. It represents a
“best guess” about what to do to be successful in the face of rivalry and changing
conditions.
A good strategy provides leaders with a plan for allocating and using resources
with consistent strategic intent. Th ink of this as having all organizational ener- gies directed toward a unifying and compelling target or goal.
3 Coca-Cola, for
example, describes its strategic intent as “To put a Coke within ‘arm’s reach’ of
every consumer in the world.”
A strategy is a comprehensive plan guiding resource allocation to achieve long-term organization goals.
Strategic intent focuses organizational energies on achieving a compelling goal.
Takeaway 7.1 What Types of Strategies Are Used
by Organizations?
ANSWERS TO COME
■ Strategy is a comprehensive plan for achieving competitive advantage.
■ Organizations use corporate, business, and functional strategies.
■ Growth strategies focus on expansion.
■ Restructuring and divestiture strategies focus on consolidation.
■ Global strategies focus on international business initiatives.
■ Cooperative strategies focus on alliances and partnerships.
■ E-business strategies focus on using the Internet for business success.
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Strategy and Strategic Management ■ Chapter 7 159
Ultimately, a good strategy helps an organization achieve competitive advan- tage. Th is means that it is able to outperform rivals. In fact, the best strategies provide sustainable competitive advantage. Th is means that they operate in successful ways that are hard for competitors to imitate.
4 When you think sus-
tainable competitive advantage, think about Apple and its iPad. It was fi rst to
market with an innovative product linking design, technology, and customer ap-
peal. And, all backed by a super effi cient supply chain. And it kept the ball rolling,
so to speak. One analyst observed: “Apple moved the goal posts before most of
their competitors even took the fi eld.” 5
||| Organizations use corporate, business, and functional strategies.
You can identify strategies at three levels in most organizations. At the top level,
corporate strategy provides direction and guides resource allocation for the organization as a whole. Th e strategic question at the corporate strategy level
is: In what industries and markets should we compete? In large, complex orga-
nizations, such as PepsiCo, IBM, and General Electric, decisions on corporate
strategy identify how the fi rm intends to compete across multiple industries,
businesses, and markets.
Business strategy focuses on the strategic intent for a single business unit or product line. Th e strategic question at the business strategy level is: How are we
going to compete for customers within this industry and in this market? Typical
A competitive advantage is an ability to outperform rivals.
A sustainable competitive advantage is achieved in ways that are diffi cult to imitate.
A corporate strategy sets long-term direction for the total enterprise.
A business strategy identifi es how a division or strategic business unit will compete in its product or service domain.
Leading a huge fi nancial institution with over $70 billion under its management is a big challenge. But Roger W. Ferguson Jr. is well prepared for the job. Black Enterprise magazine listed him as one of the “100 most powerful African Americans in corporate America.”
His experience and capabilities seem well up to the stra- tegic leadership task. With a PhD in economics, he has prior experience as vice chairman of the Board of Governors of the Federal Reserve System and chairman of Swiss Re America Holding Corp. And when U.S. President Barack Obama set up a new Economic Advisory Board and charged its members “to meet regularly so that I can hear different ideas and sharpen my own, and seek counsel that is candid and informed by the wider world,” Roger W. Ferguson Jr. was chosen as a member. Ferguson leads a fi rm that proudly proclaims “Diversify isn’t
just smart fi nancial advice. It’s a sound hiring policy as well.” The fi rm includes “promoting diversity” in its mission and states the belief that “all benefi t from a work environment that fosters respect, integrity and opportunity for people from a wide variety of backgrounds.”
WHAT’S THE LESSON HERE?
When TIAA-CREF appointed Ferguson, it made him one of only six other African American executives serving as CEOs of Fortune 500 companies. He brought a range of experience and personal capabilities to the position and is one of the most respected fi nancial executives in America. What does it take to achieve this level of professional success? Are we talking luck, career strategy, something else, or all of these things?
■ ROGER W. FERGUSON JR. PROVIDES STRATEGIC LEADERSHIP AT TIAA-CREF
Role Models BLACK ENTERPRISE CALLED HIM ONE OF THE “100 MOST
POWERFUL AFRICAN AMERICANS IN CORPORATE AMERICA.” {
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EXPLORING MANAGEMENT160
business strategy decisions include choices about product and service mix, facili-
ties locations, new technologies, and the like. For smaller, single-business enter-
prises, business strategy is the corporate strategy.
Functional strategy guides activities to implement higher-level business and corporate strategies. Th is level of strategy unfolds within a specifi c func-
tional area such as marketing, manufacturing, fi nance, and human resources.
Th e strategic question for functional strategies is: How can we best utilize re-
sources within the function to support implementation of the business strategy?
Answers to this question involve a wide variety of practices and initiatives to
improve things such as operating effi ciency, product quality, customer service,
or innovativeness.
||| Growth strategies focus on expansion. You often read and hear about organizations trying to get bigger. Th ey are pursu-
ing growth strategies to increase the size and scope of current operations. Many executives view growth as necessary for long-run profi tability. But you should
probably question this assumption and probe deeper right from the start. Is
growth always the best path? And if the strategic choice is to grow, how should it
be accomplished?
A strategy of growth through concentration seeks expansion within an exist- ing business area, one in which the fi rm has experience and presumably exper-
tise. You don’t see McDonald’s trying to grow by buying bookstores or gasoline
stations; it keeps opening more restaurants at home and abroad. You don’t see
Walmart trying to grow by buying a high-end department store chain or a cell-
phone company; it keeps opening more Walmart stores. Th ese are classic growth
by concentration strategies.
Growth can also take place through diversifi cation, where expansion occurs by entering new business areas. As you might expect, diversifi cation involves risk
because the fi rm may be moving outside existing areas of competency. One way
to moderate the risk is to pursue related diversifi cation, expanding into similar or
complementary new business areas. PepsiCo did this when it purchased Tropi-
cana. Although Tropicana’s fruit juices were new to Pepsi, the business is related
to its expertise in the beverages industry.
Some fi rms get involved in unrelated diversifi cation that pursues growth
in entirely new business areas. Did you know, for example, that Exxon once
owned Izod? Does that make sense? Can you see the risk here and why growth
through unrelated diversifi cation might cause problems? Research, in fact, is
quite clear that business performance may decline for fi rms that get into too
much unrelated diversifi cation. 6
Diversifi cation can also take the form of vertical integration. Th is is where a business acquires its suppliers (backward vertical integration) or its distributors
( forward vertical integration). Backward vertical integration has been a historical
pattern in the automobile industry as fi rms purchased parts suppliers, although
recent trends are to reverse this. It’s now evident at Apple Computer, where the
fi rm has bought chip manufacturers to give it more privacy and sophistication in
developing microprocessors for products like the iPad. In beverages, both Coca-
Cola and PepsiCo have pursued forward vertical integration by purchasing some
of their major bottlers.
A functional strategy guides activities within one specifi c area of operations.
A growth strategy involves expansion of the organization’s current operations.
Growth through concentration means expansion within an existing business area.
Growth through diversifi cation means expansion by entering related or new business areas.
Growth through vertical integration occurs by acquiring suppliers or distributors.
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Strategy and Strategic Management ■ Chapter 7 161
||| Restructuring and divestiture strategies focus on consolidation.
When organizations run into performance diffi culties, perhaps because of too
much growth and diversifi cation, these problems have to be solved. A retrench- ment strategy seeks to correct weaknesses by making radical changes to current ways of operating.
Th e most extreme form of retrenchment is liquidation, where a business closes down and sells its assets to pay creditors. A less extreme and more com-
mon form of retrenchment is restructuring. Th is involves making major changes to cut costs, gain short-term effi ciencies, and buy time to try new strategies to
improve future success.
When a fi rm is in desperate fi nancial condition and unable to pay its bills, a situ-
ation faced by Chrysler and General Motors during the fi nancial crisis, restructuring
by Chapter 11 bankruptcy is an option under U.S. law. Th is protects the fi rm from creditors while management reorganizes things in an attempt to restore solvency.
Th e goal is to emerge from bankruptcy as a stronger and profi table business, some-
thing achieved by both GM and Chrysler.
Downsizing is a restructuring approach that often makes the news. It cuts the size of operations and reduces the workforce.
7 When you learn of organiza-
tions downsizing by across-the-board cuts, however, you might be a bit skepti-
cal. Research shows that downsizing is most successful when cutbacks are done
selectively and focused on key performance objectives. 8
Finally, restructuring by divestiture involves selling parts of the organization to refocus on core competencies, cut costs, and improve operating effi ciency.
Th is type of retrenchment often occurs when organizations have become overdi-
versifi ed. An example is eBay’s purchase for $3.1 billion of the Internet telephone
A retrenchment strategy changes operations to correct weaknesses.
Liquidation occurs when a business closes and sells its assets to pay creditors.
Restructuring reduces the scale or mix of operations.
Chapter 11 bankruptcy protects an insolvent fi rm from creditors during a period of reorganization to restore profi tability.
Downsizing decreases the size of operations.
Divestiture involves selling off parts of the organization to refocus attention on core business areas.
Strategic management requires managers to deal with a complex array of forces and uncertainties. All must be ana- lyzed to craft a strategy that moves an organization forward with success.
Critical thinking is a “must have” for success in strategic management. It is what enables you to perceive problems, hone in on their more essential aspects, gather and interpret useful information, and make good decisions in complex conditions.
The same critical thinking that is part of a case study in your course is what helps managers create winning strate- gies. But with all the uncertainties that exist today, managers
rarely have the luxury of full information boxed up for analysis in a nice neat case format. Critical thinking in the real world must be multidimensional, and embrace both the systematic and intuitive aspects of decision making.
■ CRITICAL THINKING
Explore Yourself MANAGERS RARELY HAVE THE LUXURY OF FULL INFORMATION
BOXED UP FOR ANALYSIS IN A NICE NEAT CASE FORMAT. {
Get to know yourself better by taking the self-assessment
on Handling Facts and Inferences and completing
the other activities in the Exploring Management
Skill-Building Portfolio.
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EXPLORING MANAGEMENT162
service Skype. Th e expected synergies between Skype and eBay’s online auction
business never developed, and Skype was later sold to private investors. 9
||| Global strategies focus on international business initiatives.
International business off ers a variety of growth opportunities. Many large U.S.
fi rms—including McDonald’s, Intel, and Colgate-Palmolive, now get the majority
of their revenues internationally. But, along with the growth opportunities of in-
ternational business also come many challenges. And, fi rms strategically engage
them in diff erent ways. 10
Firms pursuing a globalization strategy tend to view the world as one large market. Th ey try to advertise and sell standard products for use everywhere. For
example, Gillette sells and advertises its latest razors around the world; you get
the same product in Italy or South Africa as in America.
Firms pursuing a multidomestic strategy customize products and advertising to
fi t local cultures and needs. Bristol Myers, Procter & Gamble, and Unilever all vary
their products to match consumer preferences in diff erent countries and cultures. 11
A third approach is the transnational strategy, where fi rms seek a balance be-
tween effi ciencies in global operations and responsiveness to local markets. A
transnational fi rm tries to operate without a strong national identity, hoping instead to blend with the global economy. Firms using a transnational strategy
try to fully utilize business resources and tap customer markets worldwide. Ford,
for example, draws on design, manufacturing, and distribution expertise all over
the world to build car platforms. Th ese are then modifi ed within regions to build
cars that meet local tastes.
A globalization strategy adopts standardized products and advertising for use worldwide.
A transnational fi rm tries to operate globally without having a strong national identity.
A major outsourcing fi rm in China, Foxconn makes products for Apple, Dell, and Hewlett-Packard, among others. Over 250,000 people work in a huge complex stretching over 1 square mile in Shenzen, China. It’s full of dormitories and includes restaurants and a hospital in addition to the factory spaces. And, the fi rm has experienced problems with employee suicides. Netting draped from the dormitories is designed to prevent suicidal employees from jumping to their death from the roofs.
One worker complains that the work is meaningless, no conversation is allowed on the production lines, and bathroom breaks are limited. Another says: “I do the same thing every day. I have no future.” A supervisor points out that the fi rm
provides counseling services since most workers are young and this is the fi rst time they have been away from their homes. “Without their families,” says the supervisor, “they’re left with- out direction. We try to provide them with direction and help.”
YOU DECIDE
What ethical responsibilities do fi rms have when they con- tract for outsourcing in foreign plants? Whose responsibility is it to make sure workers are well treated? And as consum- ers, should we support bad practices by buying products from fi rms whose outsourcing partners are known to treat workers poorly?
■ LIFE AND DEATH AT AN OUTSOURCING FACTORY
Ethics Check THE WORK IS MEANINGLESS, NO CONVERSATION IS ALLOWED ON
THE PRODUCTION LINES, AND BATHROOM BREAKS ARE LIMITED. {
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Strategy and Strategic Management ■ Chapter 7 163
||| Cooperative strategies focus on alliances and partnerships.
Th e trend today is toward more cooperation among organizations, often in stra- tegic alliances where two or more organizations join together in partnership to pursue an area of mutual interest. A common form involves outsourcing alliances,
contracting to purchase specialized services from another organization. Many
organizations today, for example, are outsourcing their IT function to fi rms such
as EDS, Infosys, and IBM. Th e belief is that these services are better provided by a
fi rm with special expertise in this area.
Cooperation in the supply chain also takes the form of supplier alliances, which
guarantee a smooth and timely fl ow of quality supplies among alliance partners.
Another approach is cooperation in distribution alliances, in which fi rms join to-
gether to accomplish product or services sales and distribution.
Some cooperation strategies even involve strategic alliances with competitors.
Known as co-opetition, it has been called a “revolution mindset” that business competitors can be cooperating partners.
12 United and Lufthansa are international
competitors, but they cooperate in the Star Alliance network that allows custom-
ers to book each other’s fl ights and share frequent fl yer programs. Likewise, luxury
car competitors Daimler and BMW are cooperating to co-develop new motors and
components for hybrid cars. 13
||| E-business strategies focus on using the Internet for business success.
Without a doubt, most business executives today have been asked: “What is your
e-business strategy?” Th is is the strategic use of the Internet to gain competitive advantage.
14 Table 7.1—Web-Based Business Models—lists some of the most com-
mon ways for doing this.
In a strategic alliance, organizations join together in partnership to pursue an area of mutual interest.
Co-opetition is the strategy of working with rivals on projects of mutual benefi t.
An e-business strategy strategically uses the Internet to gain competitive advantage.
Table 7.1 Web-Based Business Models
Advertising model: Providing free information or services and then generating revenues from paid advertising to viewers (e.g., Yahoo!, Google)
Brokerage model: Bringing buyers and sellers together for online business transac- tions and taking a percentage from the sales (e.g., eBay, Priceline)
Community model: Providing a meeting point sold by subscription or supported by advertising (e.g., eHarmony, Facebook)
Freemium model: Off ering a free service and encouraging users to buy extras (e.g., Skype, Zynga)
Infomediary model: Providing free service in exchange for collecting information on users and selling it to other businesses (e.g., Epinions, Yelp)
Merchant model: E-tailing, or selling products direct to customers through the Web (e.g., Amazon, Apple, iTunes Store)
Referral model: Providing free listings and getting referral fees from online merchants for directing potential customers to them (e.g., Shopzilla, PriceGrabber)
Subscription model: Selling access to high-value content through a subscription Web site (e.g., Wall Street Journal Interactive, Netfl ix)
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EXPLORING MANAGEMENT164
B2B business strategies are business-to-business. Th ey use the Web to verti- cally link organizations with members of their supply chains. For example, Dell
Computer sets up special website services that allow its major corporate cus-
tomers to manage their accounts online. Walmart links its suppliers to the fi rm’s
information systems so they can electronically manage inventories for their own
products. B2C business strategies are business-to-customer. Th ey use the Web to link businesses with customers. Whenever you buy a music download from
Apple’s iTunes Store, order a book from Amazon.com, or shop Patagonia.com for
the latest outdoor gear, you are the “C” in a B2C strategy.
A lot of buzz today is on an organization’s social media strategy. You can think of this as using social media such as Facebook or Twitter to better engage
with an organization’s customers, clients, and external audiences. How often do
you hear or read “fi nd us on Facebook”? Th at’s what Procter & Gamble says. If
you go to Facebook, you’ll fi nd a P&G page dedicated to Pampers. It’s used to
sell the product, host a forum for users to discuss the product, and encourage
people to perform “Miracle Missions” that qualify them to enter free Pampers
sweepstakes.
Crowdsourcing is a special type of social media strategy. It uses the Internet to engage customers and potential customers to make suggestions and express
opinions on products and their designs. An example is Th readless.com. Th e fi rm’s
website allows online visitors to submit designs for tee shirts. Th e designs are
voted on by other viewers—the “crowd,” and top rated ones get selected for pro-
duction and sale to customers. 15
A B2B business strategy uses IT and Web portals to link organizations vertically in supply chains.
B2C business strategy uses IT and Web portals to link businesses with customers.
A social media strategy uses social media to better engage with an organization’s customers, clients, and external audiences in general.
Crowdsourcing is strategic use of the Internet to engage customers and potential customers in providing opinions and suggestions on products and their designs.
WHICH NUMBERED KEY
OPENS THE DOOR TO
SUCCESS?
When Marc Benioff took time off from his executive software posi- tion to travel through India, he didn’t realize his journey would
transform not only him, but also the software industry and existing business paradigms. His chance meeting with a “hug- ging saint” yielded the fi rst of several keys he later used to achieve personal and professional success.
In his book Behind the Cloud (2009, Jossey-Bass), Benioff records 111 management strategies he used to create and build Salesforce.com, the fi rst SaaS (Software as a Service) business model. Before SaaS, software companies created huge and expensive programs to install on costly and prob- lematic corporate systems. He pioneered “cloud computing,” known as ASP (application service provisioning) in which soft- ware programs could be delivered by the Internet using re- mote hardware systems.
His book is written in the form of a playbook. The fi rst tip is “Allow Yourself Time to Recharge” and the second is “Have a Big Dream.” Others are “Defi ne Your Values and Culture Up Front,” “Create a Persona,” and “Differentiate.” “Differentiate“ was achieved using “No Software” logos with a red circle and backs- lash, and print ads showing a jet fi ghter shooting down a biplane.
Sales insights include “Sell to the End User,” not execu- tives, “Don’t Dis Your Product with a Discount” since they carry perceived risks, and “Sales Is a Numbers Game” so hire more salespeople to increase revenue. For corporate philanthropy he says “Make Your Foundation Part of Your Business Model,” so he founded a 501(c)(3) and adopted a 1-1-1 model, donat- ing 1% of Salesforce time, products, and equity.
REFLECT AND REACT
What was unique in the way Marc Benioff used the Internet to craft a unique business strategy? Does his “playbook” seem to offer insights valuable to others that might like to follow in his footsteps? How “sustainable” is the competitive advantage Salesforce.com now gets from cloud computing?
■ BEHIND THE CLOUD BY MARC BENIOFF AND CARLYE ADLER
Manager’s Library
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Strategy and Strategic Management ■ Chapter 7 165
STUDY GUIDE
Takeaway 7.1 What Types of Strategies Are Used
by Organizations?
Rapid Review • A strategy is a comprehensive plan that sets long-term direction for an organiza-
tion and guides resource allocations to achieve competitive advantage, operating
in ways that outperform the competition.
• Corporate strategy sets the direction for an entire organization; business strategy sets the direction for a large business unit or product division; functional strategy
sets the direction within business functions.
• Growth strategies seek to expand existing business areas through concentration or add new ones by related or unrelated diversifi cation.
• Retrenchment strategies try to streamline or consolidate organizations for better performance through restructuring and divestiture.
• Global strategies pursue international business opportunities. • Cooperative strategies make business use of alliances and partnerships. • E-business strategies use the Internet to pursue competitive advantage.
Questions for Discussion 1. With things changing so fast today, is it really possible for a business to achieve
“sustainable” competitive advantage?
2. Why is growth such a popular business strategy?
3. Is it good news or bad news for investors when a business announces that it is
restructuring?
Be Sure You Can • diff erentiate strategy, strategic intent, and competitive advantage • diff erentiate corporate, business, and functional levels of strategy • list and explain major types of growth and diversifi cation strategies • list and explain restructuring and divestiture strategies • explain alternative global strategies • diff erentiate B2B and B2C as e-business strategies
What Would You Do? A neighborhood business association has this set of members: coff ee shop, book-
store, drugstore, dress shop, hardware store, and bicycle shop. Th e owners of these
businesses are interested in how they might “cooperate” for better success. As a
business consultant to the association, what would you propose as possible strate-
gic alliances that would join sets of these businesses together for mutual gain?
Terms to Defi ne
B2B business strategy
B2C business strategy
Business strategy
Chapter 11 bankruptcy
Competitive advantage
Concentration
Co-opetition
Corporate strategy
Crowdsourcing
Diversifi cation
Divestiture
Downsizing
E-business strategy
Functional strategy
Globalization strategy
Growth strategy
Liquidation
Restructuring
Retrenchment strategy
Social media strategy
Strategic alliance
Strategic intent
Strategy
Sustainable competitive
advantage
Transnational fi rm
Vertical integration
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EXPLORING MANAGEMENT166
The late and great management guru Peter Drucker once said: “The
future will not just happen if one wishes hard enough. It requires decision—now.
It imposes risk—now. It requires action—now. It demands allocation of resources,
and above all, of human resources—now. It requires work—now.” 16
Drucker’s
views fi t squarely with the chapter subtitle: Insight and hard work deliver results.
Now’s the time to talk more about the hard work of strategic management.
||| Th e strategic management process formulates and implements strategies.
Figure 7.1 shows strategic management as the process of formulating and implementing strategies to accomplish long-term goals and sustain competi-
tive advantage. Strategy formulation is the process of crafting strategy. It re- views current mission, objectives, and strategies, assesses the organization
Strategic management is the process of formulating and implementing strategies.
Strategic formulation is the process of creating strategies.
Takeaway 7.2 How Do Managers Formulate and
Implement Strategies?
ANSWERS TO COME
■ Th e strategic management process formulates and implements strategies.
■ Strategy formulation begins with the organization’s mission and objectives.
■ SWOT analysis identifi es strengths, weaknesses, opportunities, and threats.
■ Porter’s fi ve forces model examines industry attractiveness.
■ Porter’s competitive strategies model examines business or product strategies.
■ Portfolio planning examines strategies across multiple businesses or products.
■ Strategic leadership ensures strategy implementation and control.
• Organizational resources and capabilities (strengths and weaknesses) • Industry and external environment (opportunities and threats)
• Mission • Objectives • Strategies
Strategy Formulation–
Creating strategies Strategy Implementation–
Putting strategies into action
• Corporate strategy • Business strategies • Functional strategies
• Strategic control • Renew strategic management process
Analyze organization
and external
environment
Review current
situation
Develop new
strategies
• Management systems and practices • Strategic leadership
Implement
strategies
Evaluate
results
FIGURE 7.1 What Are the Steps in the Strategic Management Process? Th e strategic management process involves responsibilities for both formulating and implementing organizational strategies.
Th e process begins with review of existing mission, objectives, and strategies to set a baseline for further action. Next,
organizational strengths and weaknesses as well as environmental opportunities and threats are analyzed. Strategies are
then crafted at corporate, business, and functional levels. Finally, the strategies are put into action. Th is requires strategic
leadership and control to ensure that all organizational resources and systems fully support strategy implementation.
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Strategy and Strategic Management ■ Chapter 7 167
and environment, and develops new strategies to deliver future competitive ad-
vantage. Strategy implementation is the process of putting strategies into action. It leads and activates the entire organization to put strategies to work.
Can you see that both activities are necessary, that success is only possible
when strategies are both well formulated and well implemented? Competitive
advantage in business or in a career doesn’t just happen. It is created when great
strategies are implemented to full advantage.
||| Strategy formulation begins with the organization’s mission and objectives.
Strategy formulation begins with review of the organizational mission and cur-
rent strategies objectives. 17
You should remember that the mission describes the purpose of an organization, its reason for existence in society.
18 Th e best organi-
zations have clear missions that communicate a sense of direction and motivate
members to work hard in their behalf. 19
Th ey also link these missions with well-
chosen operating objectives that serve as short-term guides to performance.20 A sampling of typical business operating objectives includes: profi tability, cost effi -
ciency, market share, product quality, innovation, and social responsibility.
When mission and objectives are clear, a planning baseline is established. Th e
next step in strategy formulation is to understand how well the organization is
currently positioned to achieve competitive advantage.
||| SWOT analysis identifi es strengths, weaknesses, opportunities, and threats.
A SWOT analysis involves a detailed examination of organizational strengths and weaknesses as well as environmental opportunities and threats. As Figure 7.2 shows, the results of this examination can be portrayed in a straightforward and
very useful planning matrix.
Strategy implementation is the process of putting strategies into action.
Th e mission is the organization’s reason for existence in society.
Operating objectives are specifi c results that organizations try to accomplish.
A SWOT analysis examines organizational strengths and weaknesses, as well as environmental opportunities and threats.
SWOT
ANALYSIS
Outdated facilities? Inadequate R & D? Obsolete technologies? Weak management? Past planning failures?
New competitors? Shortage of resources? Changing market tastes? New regulations? Substitute products?
Manufacturing efficiency? Skilled workforce? Good market share? Strong financing? Superior reputation?
Possible new markets? Strong economy? Weak market rivals? Emerging technologies? Growth of existing market?
Internal Assessment
of the Organization
What are our strengths? What are our weaknesses?
What are our opportunities? What are our threats?
External Assessment
of the Environment
FIGURE 7.2 What Does a SWOT Analysis Try to Discover? Th e SWOT analysis is a way
of identifying organizational
strengths and weaknesses
as well as environmental
opportunities and threats. It
forces strategists to discover
key facts and conditions with
potential consequences for
strategic performance. It also
organizes this information in a
structured manner that is useful
for making strategy decisions.
Managers using a SWOT
analysis should be looking
for organizational strengths
that can be leveraged as core
competencies to make future
gains, as well as environmental
opportunities that can be
exploited.
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EXPLORING MANAGEMENT168
When looking at the organization’s strengths, one goal is to identify core com- petencies. Th ese are special strengths that the organization has or does excep- tionally well in comparison with its competitors. When an organization’s core
competencies are unique and costly for others to imitate, they become potential
sources of competitive advantage. 21
Organizational weaknesses are the fl ip side
of the picture. Th ey must also be investigated and understood to develop a realis-
tic perspective on the organization’s capabilities.
Th e same discipline holds when examining conditions in the environment.
It’s not only the opportunities that count—such as new markets, a strong econ-
omy, weak competitors, and emerging technologies. Th e threats must also be
considered—perhaps the emergence of new competitors, resource scarcities,
changing customer tastes, and new government regulations.
By the way, don’t forget the career planning implications of this discussion.
If you were to analyze your strategic readiness for career entry or advancement
right now, what would your personal SWOT look like?
||| Porter’s fi ve forces model examines industry attractiveness.
Harvard scholar and consultant Michael Porter says, “A company without a
strategy is willing to try anything.” 22
With a good strategy in place, by contrast,
Porter believes an organization can best focus its resources on mission and
objectives. He goes on to suggest that the fi rst step in crafting a good strategy
is to understand the nature of competition within the industry based on these
“fi ve forces.”
Force 1: Competitors—intensity of rivalry among fi rms in the industry
Force 2: New entrants—threats of new competitors entering the market
Force 3: Suppliers—bargaining power of suppliers
Force 4: Customers—bargaining power of buyers
Force 5: Substitutes—threats of substitute products or services 23
A core competency is a special strength that gives an organization a competitive advantage.
When executives meet to discuss how well an organization is doing, these operating objectives are often under scrutiny: • Profi ts—operating with revenues greater than costs • Cost effi ciency—operating with low costs; fi nding ways to
lower costs • Market share—having a solid and sustainable pool of customers • Product quality—producing goods and services that satisfy
customers
• Talented workforce—attracting and retaining high-quality employees
• Innovation—using new ideas to improve operations and products
• Social responsibility—earning the respect of multiple stake- holders
• Sustainability—developing sustainable processes, products, and supply chains
■ HOW TO ASSESS KEY OPERATING OBJECTIVES
Tips to Remember { OPERATING OBJECTIVES LINK MISSION
AND ORGANIZATIONAL PERFORMANCE.
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Strategy and Strategic Management ■ Chapter 7 169
Porter’s fi ve forces model of industry attractiveness is shown in Figure 7.3. An unattractive industry will have intense competitive rivalries, substantial threats
in the form of possible new entrants and substitute products, and powerful sup-
pliers and buyers who dominate any bargaining with the fi rm. As you might ex-
pect, this is a very challenging environment for strategy formulation.
A very attractive industry will have little existing competition, few threats from
new entrants or substitutes, and low bargaining power among suppliers and buy-
ers. Th ese are much more favorable conditions for strategy formulation.
||| Porter’s competitive strategies model examines business or product strategies.
Once industry forces are understood, attention shifts to how a business or its prod-
ucts can be strategically positioned relative to competitors. Porter believes that com-
petitive strategies can be built around diff erentiation, cost leadership, and focus.
A diff erentiation strategy seeks competitive advantage through uniqueness. Th is means developing goods and services that are clearly diff erent from the
competition. Th e strategic objective is to attract customers who stay loyal to the
fi rm’s products and lose interest in those of its competitors.
Success with a diff erentiation strategy depends on customer perceptions of
product quality and uniqueness. Th is requires organizational strengths in mar-
keting, research and development, and creativity. An example is Polo Ralph Lau-
ren, retailer of upscale classic fashions and accessories. In Ralph Lauren’s words,
“Polo redefi ned how American style and quality is perceived. Polo has always
been about selling quality products by creating worlds and inviting our custom-
ers to be part of our dream.” 24
If you’ve seen any Polo ads in magazines or on
television, you’ll know that the company aggressively markets this perception.
A cost leadership strategy seeks competitive advantage by operating with lower costs than competitors. Th is allows organizations to make profi ts while
selling products or services at low prices their competitors can’t profi tably
match. Th e objective is to continuously improve operating effi ciencies in pur-
chasing, production, distribution, and other organizational systems.
Success with the cost leadership strategy requires tight cost and managerial
controls, as well as products or services that are easy to create and distribute.
Th is is what might be called the “Walmart” strategy—do everything you can to
A diff erentiation strategy off ers products that are unique and diff erent from those of the competition.
A cost leadership strategy seeks to operate with lower costs than competitors.
Rivalry among competing firms
Threat of potential new competitors
Threat of substitute products or services
Bargaining power of suppliers
New Entrants
Suppliers Customers
Bargaining power of buyers
Substitute Products
INDUSTRY COMPETITION
FIGURE 7.3 What Is Porter’s Five Forces Model of Industry Attractiveness? Strategic management is very
challenging in an unattractive
industry that has intense
competitive rivalries, substantial
threats in the form of possible
new entrants and substitute
products, and powerful suppliers
and buyers who dominate
any bargaining with the fi rm.
Strategy management is less
of a problem in an attractive
industry that has little existing
competition, few threats from
new entrants or substitutes, and
low bargaining power among
suppliers and buyers.
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EXPLORING MANAGEMENT170
keep costs so low that you can off er customers the lowest prices and still make a
reasonable profi t. 25
Porter describes two forms of the focus strategy, both of which try to serve
the needs of a narrow market segment better than anyone else. Th e focused dif- ferentiation strategy off ers a unique product to customers in a special market segment. For example, NetJets off ers air travel by fractional ownership of private
jets to wealthy customers. Th e focused cost leadership strategy tries to be the low-cost provider for a special market segment. Low-fare airlines, for example,
off er heavily discounted fares and “no frills” service for customers who want to
travel point-to-point for the lowest prices.
Can you apply these four competitive strategies to an actual situation, say, alter-
native sodas in the soft-drink industry? Porter would begin by asking and answering
two questions for each soda: What is the market scope—broad or narrow? What is
the potential source of competitive advantage—low price or product uniqueness?
Figure 7.4 shows how answers to these questions might strategically position some soft drinks with which you might be familiar.
Th e makers of Coke and Pepsi follow a diff erentiation strategy. Th ey spend bil-
lions on advertising to convince consumers that their products are of high quality
and uniquely desirable. Bubba Cola, a Save-A-Lot Brand,
Go2 Cola, a Safeway Brand, sell as cheaper alternatives.
In order to make a profi t at the lower selling price, these
stores must follow a cost leadership strategy.
What about a can of A & W Root Beer or a can of Moun-
tain Dew? In Porter’s model they represent a strategy of
focused diff erentiation—products with unique tastes for
customers wanting quality brands. Th is is quite diff erent
from the strategy behind Giant store’s Quist or Stop &
Shop’s Sun Pop. Th ese are classic cases of focused cost
leadership—a product with a unique taste for customers
who want a low price.
A focused diff erentiation strategy off ers a unique product to a special market segment.
A focused cost leadership strategy seeks the lowest costs of operations within a special market segment.
Porter’s Competitive Strategies
• Diff erentiation—make products that are unique
and diff erent.
• Cost leadership—produce at lower cost and sell at
lower price.
• Focused diff erentiation—use diff erentiation and
target needs of a special market.
• Focused cost leadership—use cost leadership and
target needs of a special market.
Broad
COST LEADERSHIP
STRATEGY
Bubba Cola, Go2 Cola
DIFFERENTIATION
STRATEGY
FOCUSED LOW COST
STRATEGY
FOCUSED DIFFERENTIATION
STRATEGY
Narrow
Low Price
Source of Competitive Advantage
Unique Product
M a rk
e t
S c o
p e Coke, Pepsi
Diet Quist, Sun Pop A & W Root
Beer, Mountain Dew
FIGURE 7.4 What Are the Strategic Options in Porter’s Competitive Strategies Model? Porter’s competitive strategies model asks two basic questions to identify alternative business
and product strategies. First, what is the market scope—broad or narrow? Second, what
is the expected source of competitive advantage—lower price or product uniqueness? Th e
four possible combinations of answers result in diff erentiation, cost leadership, focused
diff erentiation, and focused cost leadership strategies. Th e fi gure uses examples from the soft-
drink industry to show how these strategies can be used for diff erent products.
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Strategy and Strategic Management ■ Chapter 7 171
||| Portfolio planning examines strategies across multiple businesses or products.
As you might expect, strategic management gets quite complicated for compa-
nies that operate multiple businesses selling many diff erent products and ser-
vices. A good example is the global conglomerate General Electric. Th e fi rm owns
a portfolio of diverse businesses ranging from jet engines, to capital services, to
medical systems, to power systems, and even more. CEO Jeff rey Immelt faces a
diffi cult strategic question all the time: How should GE’s resources be allocated
across this mix, or portfolio, of businesses? 26
Th ese portfolio-planning questions
are better made systematically than haphazardly. 27
Th e Boston Consulting Group recommends a portfolio planning approach
summarized in Figure 7.5 and known as the BCG Matrix. Th is strategic frame- work asks managers to analyze business and product strategies based on market
growth rate and market share. 28
Stars in the BCG Matrix have high market shares in high-growth markets. Th ey
produce large profi ts through substantial penetration of expanding markets.
Th e preferred strategy for stars is growth. Th e BCG Matrix recommends making
further resource investments in them. Stars are not only high performers in the
present, they off er future potential to do the same or even more so.
Cash cows have high market shares in low-growth markets. Th ey produce large
profi ts and a strong cash fl ow, but with little upside potential. Because the mar-
kets off er little growth opportunity, the preferred strategy for cash cows is stabil-
ity or modest growth. Like real dairy cows, the BCG Matrix advises fi rms to “milk”
these businesses to generate cash for investing in other more promising areas.
Question marks have low market shares in high-growth markets. Although
they may not generate much profi t at the moment, the upside potential is there
because of the growing markets. Question marks make for diffi cult strategic de-
cision making. Th e BCG Matrix recommends targeting only the most promising
question marks for growth, while retrenching those that are less promising.
Dogs have low market shares in low-growth markets. Th ey produce little if any
profi t, and they have low potential for future improvement. Th e preferred strat-
egy for dogs is straightforward: retrenchment by divestiture.
Th e BCG Matrix analyzes business opportunities according to market growth rate and market share.
QUESTION MARKS
poor position; growing industry
DOGS
poor position; low-growth industry
STARS
dominant position; growing industry
CASH COWS
dominant position; low-growth industry
Market Share
Low High
Low
High
M a
rk e
t G
ro w
th R
a te
Growth or retrenchment
strategy
Retrenchment strategy
Growth strategy
Stability or modest growth
strategy
FIGURE 7.5 Why Is the BCG Matrix Useful in Strategic Planning? Th e BCG Matrix is useful in
situations where managers must
make strategic decisions that
allocate scarce organizational
resources among multiple and
competing uses. Th is is a typical
situation for organizations that
have a range of businesses or
products. Th e BCG Matrix sorts
businesses or products into four
strategic types (dogs, stars,
question marks, and cash cows),
based on market shares held and
market growth rates. Specifi c
master strategies are recomm-
ended for each strategic type.
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EXPLORING MANAGEMENT172
||| Strategic leadership ensures strategy implementation and control.
Th e rest of Exploring Management 3/e is really all about strategy implementation.
In order to successfully put strategies into action, the entire organization and
all of its resources and systems must be mobilized in support of them. Th is, in
eff ect, involves the complete management process—from planning and control-
ling through organizing and leading. No matter how well or elegantly planned,
a strategy requires supporting structures, a good allocation of tasks and work-
fl ow designs, and the right people to staff all aspects of operations. Th e strategy
needs to be enthusiastically supported by leaders who are capable of motivating
everyone, building individual performance commitments, and utilizing teams
and teamwork to their best advantage.
In our dynamic and often-uncertain environment, in fact, the premium is on
strategic leadership—the capability to inspire people to successfully engage in a process of continuous change, performance enhancement, as well as implemen-
tation and control of organizational strategies. 29
In order to excel at strategic man-
agement, a leader must have the ability not only to make strategic choices but also
to learn from any mistakes made. Th is includes the willingness to exercise control
and make modifi cations to meet the needs of changing conditions.
A discussion of the corporate history on Patagonia Inc. ’s website includes this
statement: “During the past thirty years, we’ve made many mistakes but we’ve
never lost our way for very long.” 30
Not only is the fi rm being honest in its public
information, it is also communicating an important point about the strategic man-
agement process: Mistakes will be made. No matter how thorough or well intended
the analysis, the chance exists that one’s strategic choices might be wrong.
Strategic leadership inspires people to implement organizational strategies.
Climbing High with Patagonia, Inc.
Passion and Values Make for Strategic Success
Headquartered in Ventura, California, Patagonia sells top quality and high
priced outdoor clothing and gear. Th at may seem like nothing special perhaps,
but the company is noteworthy. It is known for a commitment to sustainability
and respect for the natural environment.
Talk about unique. Patagonia’s earnings are consistently above the indus-
try average. Its workforce is loyal and inspired. And you are as likely to fi nd its
founder, Yvon Chouinard, climbing a mountain in Yosemite or the Himalayas as
working in the offi ce.
Most analysts would call Patagonia a strategic success story anchored to its
clear mission: “Build the best product, cause no unnecessary harm, use busi-
ness to inspire and implement solutions to the environmental crisis.” Th ere’s
no doubt Chouinard leads Patagonia with a personal commitment to sustain-
ability and expects the fi rm to live up to its responsibilities as a steward of the
natural environment. He says: “Most people want to do good things but don’t.
At Patagonia it’s an essential part of your life.”
Yvon Chouinard believes
in talent and self-control.
“I have an M.B.A. theory
of management,” he says,
“Management by Absence.
I take off for weeks at a
time and never call in. We
hire the best people we
can and then leave them
to do their jobs.” Can in-
spiring leadership be this
easy?
F I N D I N S P I R A T I O N
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Strategy and Strategic Management ■ Chapter 7 173
One of the big lessons learned in studying how business fi rms fared in the re-
cent economic crisis is that a strategic leader has to maintain strategic control. Th is means that the CEO and other top managers should always be in touch
with the strategy, know whether it is generating performance success or failure,
and recognize when the strategy needs to be tweaked or changed.
Michael Porter, whose fi ve forces and competitive strategy models for strate-
gic management were discussed earlier, places a great emphasis on the role of
CEO as chief strategist. He describes the task in the following ways. 31
• A strategic leader has to be the guardian of trade-off s. It is the leader’s job to
make sure that the organization’s resources are allocated in ways consistent
with the strategy. Th is requires the discipline to sort through many competing
ideas and alternatives to stay on course and not get sidetracked.
• A strategic leader needs to create a sense of urgency. Th e leader must not allow
the organization and its members to grow slow and complacent. Even when
doing well, the leader keeps the focus on getting better and being alert to con-
ditions that require adjustments to the strategy.
• A strategic leader must make sure that everyone understands the strategy. Unless
strategies are understood, the daily tasks and contributions of people lose con-
text and purpose. Everyone might work very hard, but unless eff orts are aligned
with strategy, the impact is dispersed and fails to advance common goals.
• A strategic leader must be a teacher. It is the leader’s job to teach the strategy
and make it a “cause,” says Porter. In order for strategy to work, it must become
an ever-present commitment throughout the organization. Th is means that a
strategic leader must be a great communicator. Everyone must understand the
strategy and how it makes the organization diff erent from others.
Strategic control makes sure strategies are well implemented and that poor strategies are scrapped or changed.
• Top paid CEOs for 2010 include: Philippe P. Daumon of Viacom—$84.3 million; Lawrence J. Ellison of Oracle— $68.6 million; Leslie Moonves of CBS—$53.9 million, and Michael White of DirecTV—$32.6 million.
• CEOs at S&P 500 fi rms earned average pay of $9 million. If the combined pay of the top 299 CEOs was used to hire workers earning the median wage, 102,325 of them could be employed.
• CEO and top executive compensation often includes a com- bination of salary, bonuses, long-term incentives, and stock grants.
• The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 gives non-binding “say-on-pay” rights to share- holders of publicly traded companies, allowing them to voice opinions and concerns regarding executive compensation.
YOUR THOUGHTS?
Where do you stand on the issues of CEO pay? Is it too high across the board compared to what’s happening to everyday workers? Or, is such high pay justifi ed by the strategic leader- ship responsibilities these executives bear? How would you feel earning $55,000 per year at a fi rm whose CEO makes millions?
■ CEO PAY IS HEADING HIGH AGAIN
Facts to Consider THE COMBINED PAY OF 299 CEOs COULD
BE USED TO EMPLOY 102,325 WORKERS. {
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EXPLORING MANAGEMENT174
Takeaway 7.2 How Do Managers Formulate and
Implement Strategies?
Rapid Review • Strategic management is the process of formulating and implementing strategies
to achieve a sustainable competitive environment.
• A SWOT analysis sets a foundation for strategy formulation by systematically as- sessing organizational strengths and weaknesses as well as environmental oppor-
tunities and threats.
• Porter’s fi ve forces model analyzes industry attractiveness in terms of competi- tors, threat of new entrants, substitute products, and the bargaining powers of
suppliers and buyers.
• Porter’s competitive strategies describes business and product strategies based on diff erentiation (distinguishing one’s products from the competition), cost lead-
ership (minimizing costs relative to the competition), and focus (concentrating
on a special market segment).
• Th e BCG Matrix is a portfolio-planning approach that describes strategies for businesses classifi ed as stars, cash cows, question marks, or dogs.
• Strategic leadership is the responsibility for activating people, organizational re- sources, and management systems to continually pursue and fully accomplish
strategy implementation.
Questions for Discussion 1. Can an organization have a good strategy but a poor sense of mission?
2. Would a monopoly receive a perfect score for industry attractiveness in Porter’s
fi ve forces model?
3. Does the BCG Matrix oversimplify a complex strategic management problem?
Be Sure You Can • describe the strategic management process • explain Porter’s fi ve forces model • explain Porter’s competitive strategies model • describe the purpose and use of the BCG Matrix • explain the responsibilities of strategic leadership
What Would You Do? For some years now, you’ve owned a small specialty bookshop in a college town. You
sell some textbooks but mainly cater to a broader customer base. Th e store always
has the latest fi ction, nonfi ction, and children’s books in stock. Recently, you’ve ex-
perienced a steep decline in overall sales, even for those books that would normally
be considered best sellers. You suspect this is because of the growing popularity of
e-books and e-readers such as the Amazon Kindle and Barnes & Noble Nook. Some
of your friends say it’s time to close up because your market is dying. Is it hopeless
or is there a business strategy that might save you?
STUDY GUIDE
Terms to Defi ne
BCG Matrix
Core competencies
Cost leadership strategy
Diff erentiation strategy
Focused cost
leadership strategy
Focused diff erentiation
strategy
Mission
Operating objectives
Strategic control
Strategic leadership
Strategic management
Strategy formulation
Strategy
implementation
SWOT analysis
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Strategy and Strategic Management ■ Chapter 7 175
1. Which is the best question to ask when starting the
strategic management process?
(a) “What is our mission?”
(b) “How well are we currently doing?”
(c) “How can we get where we want to be?”
(d) “Why aren’t we doing better?”
2. Th e ability of a fi rm to consistently outperform its
rivals is called .
(a) vertical integration
(b) competitive advantage
(c) strategic intent
(d) core competency
3. General Electric is a complex conglomerate
that owns many firms operating in very differ-
ent industries. The strategies pursued for each
of these units within GE would best be called
-level strategies.
(a) corporate
(b) business
(c) functional
(d) transnational
4. An organization that is downsizing by cutting staff
to reduce costs can be described as pursuing a
strategy.
(a) liquidation
(b) divestiture
(c) retrenchment
(d) stability
5. When you buy music downloads online, the fi rm
selling them to you is engaging in which type of
e-business strategy?
(a) B2C
(b) B2B
(c) infomediary
(d) crowdsourcing
6. A in the BCG Matrix would have a
high market share in a low-growth market.
(a) dog
(b) cash cow
(c) question mark
(d) star
7. In Porter’s fi ve forces model, which of the following
conditions is most favorable from the standpoint of
industry attractiveness?
(a) many competitive rivals
(b) many substitute products
(c) low bargaining power of suppliers
(d) few barriers to entry
8. If Google’s top management were to announce
that the fi rm was going to buy Federal Express, this
would indicate a growth strategy of .
(a) diversifi cation
(b) concentration
(c) horizontal integration
(d) vertical integration
9. Th e alliances that link together fi rms in supply chain
management relationships are examples of how
businesses try to use strategies.
(a) B2C
(b) growth
(c) cooperation
(d) concentration
10. Among the global strategies that international
businesses might pursue, the strat-
egy most directly tries to tailor products to fi t local
needs and cultures in diff erent countries.
(a) concentration
(b) globalization
(c) transnational
(d) multidomestic
C H
A PTER 7
TP
Multiple-Choice Questions
TestPrep 7
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EXPLORING MANAGEMENT176
11. When Coke and Pepsi spend millions on ads try-
ing to convince customers that their products are
unique, they are pursuing a strategy.
(a) transnational
(b) concentration
(c) diversifi cation
(d) diff erentiation
12. Porter’s model of competitive strategies suggests a
fi rm that wants to compete with its rivals in a broad
market by selling a very-low-priced product would
need to successfully implement a
strategy.
(a) retrenchment
(b) diff erentiation
(c) cost leadership
(d) diversifi cation
13. are special strengths that an organi-
zation has or does exceptionally well and that help
it outperform competitors.
(a) Core competencies
(b) Strategies
(c) Alliances
(d) Operating objectives
14. Th e two questions asked by Porter to identify the
correct competitive strategy for a business or
product line are: 1—What is the market scope?
2—What is the ?
(a) market share
(b) source of competitive advantage
(c) core competency
(d) industry attractiveness
15. Which is an example of a cooperative strategy?
(a) retrenchment
(b) strategic alliance
(c) bankruptcy
(d) vertical integration
Short-Response Questions
16. What is the diff erence between corporate strategy and functional strategy?
17. Why is a cost leadership strategy so important when one wants to sell products at lower prices than competitors?
18. What strategy should be pursued for a “question mark” in the BCG Matrix, and why?
19. What is strategic leadership?
Integration and Application Question
20. Kim Harris owns and operates a small retail store, selling the outdoor clothing of an American manufacturer
to a predominantly college-student market. Lately, a large department store outside of town has started selling
similar but lower-priced clothing manufactured in China, Th ailand, and Bangladesh. Kim is starting to lose busi-
ness to this store. She has asked your instructor to have a student team analyze the situation and propose some
strategic alternatives to best deal with this threat. You are on the team.
Questions: Why would a SWOT analysis be helpful in addressing Kim’s strategic management problem? How could Porter’s competitive strategies model be helpful as well?
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Strategy and Strategic Management ■ Chapter 7 177
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 7: Handling Facts and Inferences
■ CLASS EXERCISE 7: Strategic Scenarios
■ TEAM PROJECT 7: Contrasting Strategies
C H
A PTER 7
SFL StepsforFurtherLearning
Many learning resources are available at the end of the book and online within WileyPLUS.
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot Once a niche company operating in the northeast, Dunkin’ Donuts is opening hundreds of
stores and entering new markets. At the same time, the
java giant is expanding both its food and coff ee menus
to ride the wave of fresh trends, appealing to a new gen-
eration of customers. But is the rest of the world ready
for Dunkin’ Donuts? And can the company keep up
with its own rapid growth?
Th e company is bank-
ing on mutually benefi cial
partnerships to help it
achieve widespread marketplace prominence. If Dunkin’
Donuts can fi nd the sweet spot by being within most
consumers’ reach while falling just short of a Big Broth-
er-like omnipresence, the company’s strategy of expan-
sion may well reward it very handsomely.
■ CHAPTER 7 CASE Dunkin’ Donuts: Betting Dollars on Donuts
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 7
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When Carol Bartz took over as Yahoo’s CEO, she said the fi rm’s
organization chart was “odd” and “looked like a Dilbert cartoon.”
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Explore Yourself More on empowerment
Role Models Alan Mulally makes mark
by restructuring Ford
Ethics Check Flattened into exhaustion
Facts to Consider Bosses may be overestimating
their managing skills
Manager’s Library Th e Truth About Middle Managers
by Paul Osterman
8 Organization
Structure
and Design
It’s All About Working Together
1. Understand
organizing as
a managerial
responsibility.
2. Identify
common types
of organizational
structures.
3. Recognize
current trends in
organizational design.
YOUR CHAPTER 8
TAKEAWAYS
Explore Yourself Ethihics Check Manager’s
W H A T ’ S I N S I D E
179
Management Live
Empowerment and Patch Adams
T he movie Patch Adams is based on the true-life story
of Hunter “Patch” Adams. In the movie, Adams (Robin
Williams) becomes increasingly disillusioned with medical
bureaucracy. After a heart-wrenching incident at the hospital where he
volunteers, Adams is inspired to create a new kind of hospital—one free from
the usual constraints. Th e idea involves unconventional methods of treatment.
Doctors and patients work side-by-side; patients take responsibility for their
own care. Adams believed medical treatment would be more eff ective when
patients had control.
Th is is how empowerment works in any setting. It frees people to make decisions about how they work. It recognizes their full potential. While structures
and processes are necessary, they only carry an organization so far. People are the
real diff erence.
Th ink back to a time when you had a problem with a product or service. How
was the situation resolved? Was the person with whom you dealt able to use
discretion and make a decision on how to best resolve your problem?
As you read about organizational structures and designs, try to imagine the
advantages and disadvantages of each. One thing is certain—organizations
are only as good as the people who work within them. Too many managers
fail to properly empower their employees and end up wondering why their
organizations underperform.
M L Th
M
b
M
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EXPLORING MANAGEMENT180
Like most things, it is much easier to talk about
high-performing organizations than to actually create
them. In true contingency fashion, there is no one best way
to do things; no one organizational form meets the needs of
all circumstances. And what works well at one moment in
time can quickly become outdated, even dysfunctional, in
another. Th is is why you often read and hear about organi-
zations making changes and reorganizing in an attempt to
improve their performance.
Nothing is constant in most organizations, at least not
for long. Th is is a major reason why management scholar
Henry Mintzberg points out that people often have prob-
lems. 1 Whenever job assignments and reporting relation-
ships change, whenever the organization grows or shrinks,
whenever old ways of doing things are reconfi gured, people
naturally struggle to understand the new ways of working.
And perhaps even more importantly, they will worry about
the implications for their jobs and careers.
||| Organizing is one of the management functions.
Most of us like to be organized—at home, at work, when
playing games. We tend to get uncomfortable and anxious when things are dis-
organized. It shouldn’t surprise you, therefore, that people in organizations need
answers to such questions as: “Where do I fi t in?” “How does my work relate to
that of others?” “Who runs things?” 2 People need these answers when they fi rst
join an organization, when they take new jobs, and whenever things are substan-
tially changed.
Th is is where and why organizing comes into play as one of the four functions of management shown in Figure 8.1. It is the process of arranging people and resources to work together to accomplish goals. Planning sets the goals; through
organizing, managers begin to carry them out. 3
Organizing arranges people and resources to work toward a goal.
Takeaway 8.1 What Is Organizing as a
Managerial Responsibility?
ANSWERS TO COME
■ Organizing is one of the management functions.
■ Organization charts describe the formal structures of organizations.
■ Organizations also operate with informal structures.
■ Informal structures have good points and bad points.
FIGURE 8.1 What Is the Importance of Organizing in the Management Process? Organizing is one of the four management functions. It is
the process of arranging people and resources to create
structures so that they work well together in accomplishing
goals. Key organizing decisions made by managers include
those that divide up the work to be done, staff jobs with
talented people, position resources for best utilization, and
coordinate activities.
MANAGEMENT
PROCESS
MANAGEMENT
PROCESS
Controlling
to ensure results
Planning
to set the direction
Leading
to inspire effort
Organizing
to create structures
• Divide up the work • Arrange resources • Coordinate activities
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Organization Structure and Design ■ Chapter 8 181
||| Organization charts describe the formal structures of organizations.
When managers organize things, they arrange people and jobs into meaningful
working relationships. Th ey clarify who is to do what, who is in charge of whom,
and how diff erent people and work units are supposed to cooperate. Th is creates
what we call the organization structure, a formal arrangement that links the various parts of an organization to one another.
You probably know the concept of structure best in terms of an organiza- tion chart. Th is is a diagram, like the one in the nearby fi gure, of positions and reporting relationships within an organization.
4 A typical organization chart
identifi es major job titles and shows the hierarchy of authority and commu-
nication that links them together. It describes the organization’s division of labor—people and groups performing diff erent jobs, ideally ones for which they are well skilled.
Check out Table 8.1—What You Can Learn from an Organization Chart. And indeed you can learn quite a bit from an organization chart, but only in re-
spect to the formal structure. Th is is the “offi cial” structure, or the way things are supposed to operate. It aligns positions, people, and responsibilities in the
best ways. But as things change over time, managers fi nd themselves tinker-
ing with the formal structure to get the alignment right. And sometimes, the
current structure doesn’t make sense. When Carol Bartz asked to see Yahoo’s
organization chart before taking over as CEO, for example, she said: “It was
like a Dilbert cartoon. It was very odd.” Her response was: “ You need manage-
ment here.” 5
Problems with the organization structure were evident during
recent performance failures in large companies such as General
Motors, AIG, and Citibank. Some blame the failures on structures
that allowed the same person to be both chairman of the board
and CEO. What happens to corporate governance in such cases
where the CEO essentially reports to himself or herself ? How does
this structure provide for critical oversight of top management? As
you might expect, many fi rms are now changing their organization
charts to separate the job of board chairman from that of CEO. Th e
goal is to strengthen governance by not allowing the same person
to fi ll both positions. 6
Organization structure is a system of tasks, reporting relationships, and communication linkages.
An organization chart describes the arrangement of work positions within an organization.
Th e division of labor means that people and groups perform diff erent jobs.
Formal structure is the offi cial structure of the organization.
Table 8.1 What You Can Learn from an Organization Chart
Division of work—Positions and titles show work responsibilities.
Supervisory relationships—Lines between positions show who reports to whom in the
chain of command.
Span of control—Th e number of persons reporting to a supervisor.
Communication channels—Lines between positions show routes for formal communica-
tion fl ows.
Major subunits—How jobs are grouped together in work units, departments, or divisions.
Staff positions—Staff specialists who support other positions and parts of the organization.
Levels of management—Th e number of management layers from top to bottom.
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EXPLORING MANAGEMENT182
||| Organizations also operate with informal structures.
Picture this scene: A worker his offi ce cubicle overhears a conversation taking
place in the next cubicle. Words such as “project being terminated” and “job cuts
will be necessary” are used. At lunch he shares this with friends; word quickly
spreads that their employer is going to announce layoff s. What’s happening in
this scenario falls outside of the formal structure of the organization; it takes
place in the “shadows.”
An important fact of organizational life is that behind every formal structure
also lies an informal structure. You might think of this as a shadow organiza- tion made up of unoffi cial relationships between organizational members. Like
any shadow, the shape of the informal structure will be blurry and change with
time. You may have to work hard to understand its full complexities.
If you could draw the informal structure for your organization—and this
would be an interesting exercise—you would fi nd relationships cutting across
levels and moving from side to side. Some would be work-related, refl ecting how
people have found the best ways to get their jobs done. Many others would be
personal, refl ecting who meets for coff ee, stops in for offi ce chats, meets together
in exercise groups, and spends time together as friends, not just co-workers. 7
A tool known as social network analysis is one way of identifying the informal structures and their embedded social relationships that are active in an organi-
zation. It asks people to identify others whom they turn to for help most often,
whom they communicate with regularly, and who energizes and de-energizes
them. 8 Th e results of a social network analysis are often described as a map with
lines running from person to person according to frequency of communication
and type of relationship maintained. Th e map shows who is linked with whom
and how a lot of work really gets done in organizations, in contrast to the formal
arrangements shown on the organization chart. Th is information can be used to
redesign the formal structure for better performance, and identify who the key
people are for possible leadership and mentoring roles. 9
Th e informal structure is the set of unoffi cial relationships among an organization’s members.
Social network analysis identifi es the informal structures and their embedded social relationships that are active in an organization.
Lots to Learn at Build-A-Bear
Organizing Is Like Creating a Work of Art
Maxine Clark started Build-A-Bear Workshop Inc. with a simple concept: Pick
out a bear or bunny or turtle that you like, add stuffi ng, and then personalize
your own pet with clothing, shoes, and accessories. Each pet is unique— soccer
player, teacher, doctor . . . you name it—and tailored to the user’s tastes and
interests.
Each Build-A-Bear store is arranged in a streamlined production process.
Guest Bear Builders move along the Bear Pathway from the Choose Me work-
station on to Stuff Me and fi nally to Name Me as their personal creation takes
shape. Sounds a lot like organizations, doesn’t it? Until you get to the “making it
personal” part. Th at’s where organizations often struggle—how to bring togeth-
er hundreds, thousands, even hundreds of thousands of people in arrangements
that make sense and allow personal talents to shine through.
More expansion contin-
ues to be in the cards
for Build-A-Bear. Clark’s
current challenge is to
manage the growth by
continually adapting and
redesigning her company
to best meet its new global
opportunities. When you
think about it, isn’t this a
lot like her young custom-
ers who love to build their
own bears?
F I N D I N S P I R A T I O N
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Organization Structure and Design ■ Chapter 8 183
||| Informal structures have good points and bad points.
Lots happens in the emergent and spontaneous relationships
of informal structures, as depicted in the small fi gure. One of
the fi rst things you probably learned in college was that know-
ing secretaries and departmental assistants is a very good
way to get into classes that are “closed” or fi nd out about new
courses that will be off ered. Th ink about all the diff erent ways
you use informal structures to get things done. Most people in
most organizations do the same.
Let’s start with the good points of informal structures and
social networks. As just pointed out, they can be very helpful
in getting work accomplished. Indeed, they may be essential
in many ways to organizational success.
The relationships available in the informal structure are
often important in helping people learn their jobs and solve
problems while doing them. This occurs as people assist
one another not because the structure requires it, but because they know and
like one another. Informal relationships also provide a lot of social and emo-
tional support. They give people access to friendships, conversations, and ad-
vice that can help make the normal workday pleasant and a bad workday less
troublesome.
Informal structures can be especially helpful during times of change, when
out-of-date formal structures just don’t deal well with new or unusual situ-
ations. Because it takes time to change or modify formal structures, the in-
formal structure helps fill the void. For these reasons and possibly more, it
can be argued that informal structures are essential for any organization to
succeed. They fill gaps missing in the formal structure and help compensate
for its inadequacies.
Now let’s consider the potential bad points of informal structures. Because
they exist outside the formal system, things that happen in informal struc-
tures may work against the best interests of the organization as a whole. Th ese
shadow structures can be susceptible to rumor, carry inaccurate information,
breed resistance to change, and even distract members from their work. And if
you happen to end up as an “outsider” rather than an “insider in the informal
networks,” you may feel less a part of things. Some American managers in Jap-
anese fi rms, for example, have complained about being excluded from what
they call the “shadow cabinet”—an informal group of Japanese executives who
hold the real power and sometimes act to the exclusion of others. 10
Th e Society for Human Resource Management reported that after the econ-
omy suff ered a round of massive layoff s, human resource (HR) professionals
observed in their fi rms a 23% increase in workplace eavesdropping and a 54%
increase in “gossip and rumors about downsizings and layoff s.” Cafeterias are
hotspots for gossip, and one HR director says she even notices people trying
to hang out in hallways and sit as close as possible to executives in cafeterias
in attempts to overhear conversations. A manager says he does his own eaves-
dropping to try to learn what he can from employee conversations; he calls
this “alert listening.” 11
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EXPLORING MANAGEMENT184
Takeaway 8.1 What Is Organizing as a Managerial
Responsibility?
Rapid Review
• Organizing is the process of arranging people and resources to work toward a common goal.
• Structure is the system of tasks, reporting relationships, and communication that links people and positions within an organization.
• Organization charts describe the formal structure and how an organization should ideally work.
• Th e informal structure of an organization consists of the unoffi cial relationships that develop among its members.
• Informal structures create helpful relationships for social support and task assis- tance, but they can be susceptible to rumors.
Questions for Discussion 1. Why is organizing such an important management function?
2. If organization charts are imperfect, why bother with them?
3. Could an organization consistently perform well without the help of its informal
structure?
Be Sure You Can
• explain what you can learn from an organization chart
• diff erentiate formal and informal structures
• discuss potential good and bad points about informal structures
What Would You Do? As the new manager of a branch bank location, you will be supervising 22 employ-
ees, most of whom have worked together for a number of years. How will you iden-
tify the informal structure of the branch? And, how will you try to use this structure
to your advantage while establishing yourself as an eff ective manager in the new
situation?
STUDY GUIDE
Terms to Defi ne
Division of labor
Formal structure
Informal structure
Organization chart
Organization structure
Organizing
Social network analysis
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Organization Structure and Design ■ Chapter 8 185
A traditional principle of organizing is that high performance depends
on having a good division of labor whose parts are well coordinated. Th e process
of arranging people by tasks and work groups is called departmentalization.12 Th e most basic forms are the functional, divisional, matrix, team, and network
structures. As you read about each, don’t forget that organizations rarely use only
one type of structure. Most often they will use a mixture, with diff erent parts and
levels having diff erent structures because of their unique needs.
||| Functional structures group together people using similar skills.
Take a look at Figure 8.2 on the next page. What organizing logic do you see? Th ese are functional structures where people having similar skills and perform- ing similar tasks are grouped together into formal work units. Th e assumption
is that if the functions are well chosen and each acts properly, the organization
should operate successfully. In business, for example,
typical functions include marketing, fi nance, account-
ing, production, management information systems, and
human resources. But functional structures are not lim-
ited to businesses. Th e fi gure also shows how other or-
ganizations such as banks and hospitals may use them.
Functional structures work well for small organiza-
tions that produce only one or a few products or services.
Th ey also tend to work best for organizations, or parts of
organizations, that have relatively stable environments
where the problems are predictable and demands for
change are limited. And they off er benefi ts to individu-
als. Within a given function—say, marketing—people
share technical expertise, interests, and responsibilities. Th ey can also advance
in responsibilities and pursue career paths within the function.
Although functional structures have a clear logic, there are some potential
downsides as well. When an organization is divided into functions it can be
hard to pinpoint responsibilities for things such as cost containment, prod-
uct or service quality, and innovation. And with everyone focused on meeting
Departmentalization is the process of grouping together people and jobs into work units.
A functional structure groups together people with similar skills who perform similar tasks.
Takeaway 8.2 What Are the Most Common Types
of Organization Structures?
ANSWERS TO COME
■ Functional structures group together people using similar skills.
■ Divisional structures group together people by products, customers, or
locations.
■ Matrix structures combine the functional and divisional structures.
■ Team structures use many permanent and temporary teams.
■ Network structures extensively use strategic alliances and outsourcing.
Potential Advantages of Functional Structures
• Economies of scale make effi cient use of human resources.
• Functional experts are good at solving technical problems.
• Training within functions promotes skill development.
• Career paths are available within each function.
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EXPLORING MANAGEMENT186
functional goals, the sense of working for the good of the organization as a
whole may get lost. People may also fi nd that they get trapped in functional
career niches that are hard to break out of in order to gain career-broadening
experiences in other areas.
Another concern is something that you might hear called the functional chimneys or functional silos problem. Shown in the small fi gure, this problem occurs as a lack of communication, coordination, and problem solving across
functions. Instead of cooperating with one another, members of functional units
sometimes end up either competing or selfi shly focusing on functional goals
rather than broader organizational objectives. CEO Carol
Bartz described a functional silo problem she discovered at
Yahoo this way: “Th e home page people didn’t want to drive
traffi c to the fi nance page because they wanted to keep
them on the home page.” 13
Such problems of poor coopera-
tion and even just plain lack of helpfulness across functions
can be very persistent. It often takes alert and strong man-
agers such as Bartz to get things resolved.
Mars Inc. is the world’s largest candy company and, like
most fi rms of its size, it also suff ers from the functional
chimneys problem. When Paul Michaels took over as CEO,
he says “the top team was siloed and replete with unspoken agendas. Members
did not see the benefi t of working together as a team; they were only concerned
about success in their own region.” Michaels’s solution was to break the habits
of functional thinking by realigning people and mindsets around teams and
teamwork. 14
Th e functional chimneys or functional silos problem is a lack of communication and coordination across functions.
FIGURE 8.2 What Does a Typical Functional Organization Structure Look Like? Functional structures are
common in organizations of
all types and sizes. In a typical
business you might have vice
presidents or senior managers
heading the traditional
functions of accounting,
human resources, fi nance,
manufacturing, marketing,
and sales. In a bank, they
may head such functions as
loans, investments, and trusts.
In a hospital, managers or
administrators are usually in
charge of functions such as
nursing, clinics, and patient
services.
President
Vice President
Marketing Vice President
Finance Vice President
Production Vice President
Human Resources
B U
S IN
E S
S
Branch Manager
Manager
Loans Manager
Investments Manager
Operations Manager
Trusts
B A
N K
Administrator
Director
Medical Staff Director
Nursing Director
Clinics
Director
Patient Services
H O
S P
IT A
L
• Too little communication across functions • Too many problems referred upward for solution
Functional chimneys or silos
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Organization Structure and Design ■ Chapter 8 187
||| Divisional structures group together people by products, customers, or locations.
A second organizational alternative is the divisional structure shown in Figure 8.3. It groups together people who work on the same product, serve similar customers,
and/or are located in the same area or geographical region. 15
Th e basic idea is to overcome the disadvantages of a functional structure,
such as the functional chimneys problem. Toyota, for example, shifted to a divi-
sional structure in its North American operations during the recent economic
crisis. Engineering, manufacturing, and sales were brought together under a
common boss, instead of each function reporting to its own top executive. One
analyst said the problem was that “every silo reported back to someone diff er-
ent” and “they need someone in charge of the whole choir.” 16
A divisional structure groups together people working on the same product, in the same area, or with similar customers.
Type Focus Example
Product
Geographical
Customer
Good or service produced
Location of activity
Customer or client serviced
President
Asian division European division
General Manager
Grocery products Drugs and toiletries
Agency Administrator
Problem youth Senior citizens
Process Activities part
of same process
Catalog Sales Manager
Product purchasing Order fulfillment
FIGURE 8.3 What Are Some Ways Organizations Use Divisional Structures? In products structures, divisions are based on the product or service provided, such as
consumer products and industrial products. In geographic structures, divisions are based
on geography or territories, such as an Asia–Pacifi c division and a North American division.
In customer structures, divisions are based on customers or clients served, such as graduate
students and undergraduate students in a university.
Product structures group together jobs and activities devoted to a single product or service. Th ey identify a common point of managerial responsibility
for costs, profi ts, problems, and successes in a defi ned market area. An expected
benefi t is that the product division will be able to respond quickly and eff ectively
to changing market demands and customer tastes. When Fiat took over Chrysler
after it emerged from bankruptcy, CEO Sergio Marchionne said he wanted a new
structure to “speed decision making and improve communication fl ow.” He re-
organized into product divisions for the fi rm’s three brands—Chrysler, Jeep, and
Dodge. Each was given its own chief executive and assigned responsibility for
its own profi ts and losses. 17
Th e “new” General Motors took the same approach
A product structure groups together people and jobs working on a single product or service.
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EXPLORING MANAGEMENT188
and reorganized around four product divisions—Buick,
Cadillac, Chevrolet, and GMC. 18
Geographical structures, or area structures, group together jobs and activities in the same location or geo-
graphical region. Companies use geographical divisions
when they need to focus attention on the unique product
tastes or operating requirements of particular regions. As
UPS operations expanded worldwide, for example, the
company announced a change from a product to a geo-
graphical organizational structure. Th e company created
two geographical divisions—the Americas and Europe/
Asia—with each area responsible for its own logistics,
sales, and other business functions.
Customer structures group together jobs and activi- ties that serve the same customers or clients. Th e major appeal of customer di-
visions is the ability to best serve the special needs of the diff erent customer
groups. Th is is a common structure for complex businesses in the consumer
products industries. 3M Corporation, for example, structures itself to focus on
such diverse markets as consumer and offi ce, specialty materials, industrial,
health care, electronics and communications, transportation, graphics, and
safety. Customer structures are also useful in service companies and social
agencies. Banks, for example, use them to give separate attention to consumer
and commercial customers for loans; government agencies use them to focus on
diff erent client populations.
Divisional structures are supposed to avoid some of the major problems of
functional structures, including functional chimneys. But, as with any structural
alternative, they also have potential disadvantages. Th ey can be costly when
economies of scale get lost through the duplication of resources and eff orts
across divisions. Th ey can also create unhealthy rivalries where divisions end up
competing with one another for scarce resources, prestige, or special top man-
agement attention.
||| Matrix structures combine the functional and divisional structures.
Th e matrix structure, often called the matrix organization, combines the func- tional and divisional structures to try to gain the advantages of each. Th is is
accomplished by setting up permanent teams that operate across functions to
support specifi c products, projects, or programs. 19
Workers in a typical matrix
structure, like Figure 8.4, belong to at least two formal groups at the same time— a functional group and a product, program, or project team. Th ey also report to
two bosses—one within the function and the other within the team.
Th e use of permanent cross-functional teams in matrix structures creates several potential advantages. Th ese are teams whose members come together
from diff erent functional departments to work on a common task. Everyone,
regardless of his or her departmental affi liation, is required to work closely with
others and focus on team goals—no functional chimneys thinking is allowed.
Expertise and information is shared to solve problems at the team level and
make sure that things get accomplished in the best ways possible.
A geographical structure brings together people and jobs performed in the same location.
A customer structure groups together people and jobs that serve the same customers or clients.
A matrix structure combines functional and divisional approaches to emphasize project or program teams.
A cross-functional team brings together members from diff erent functional departments.
Potential Advantages of Divisional Structures
• Expertise is focused on special products, custom- ers, or regions.
• Better coordination exists across functions within divisions.
• Th ere is better accountability for product or service delivery.
• It is easier to grow or shrink in size as conditions change.
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Organization Structure and Design ■ Chapter 8 189
Still, matrix structures aren’t perfect; they can’t over-
come all the disadvantages of their functional and divi-
sional parents. Th e two-boss system of the matrix can
lead to power struggles if functional supervisors and
team leaders make confusing or confl icting demands on
team members. Matrix structures can be costly because
they require a whole new set of managers to lead the
cross-functional teams. 20
And as you might guess, team
meetings in the matrix can be time consuming.
Th e matrix structure has gained a strong foothold in
the workplace. Applications are found in such diverse
settings as manufacturing (e.g., aerospace, electronics,
pharmaceuticals), service industries (e.g., banking, brokerage, retailing), profes-
sional fi elds (e.g., accounting, advertising, law), and the nonprofi t sector (e.g.,
government agencies, hospitals, universities).
||| Team structures use many permanent and temporary teams.
Some organizations are adopting team structures that extensively use perma- nent and temporary teams to solve problems, complete special projects, and
accomplish day-to-day tasks. 21
As Figure 8.5 on the next page shows, these teams are often formed across functions and staff ed with members whose
talents match team tasks. 22
Th e goals are to reduce the functional chimneys
problem, tap the full benefi ts of group decision making, and gain as much
creativity in problem solving as possible. At Polaroid Corporation a research
team developed a new medical imaging system in three years, when most had
predicted it would take six. As one Polaroid executive noted, “Our researchers
are not any smarter, but by working together they get the value of each other’s
intelligence almost instantaneously.” 23
A team structure uses permanent and temporary cross- functional teams to improve lateral relations.
Potential Advantages of Matrix Structures
• Performance accountability rests with program, product, or project managers.
• Better communication exists across functions. • Teams solve problems at their levels. • Top managers spend more time on strategy.
FIGURE 8.4 How Does a Matrix Structure Combine Functional and Divisional Structures? A matrix structure is designed
to combine the best of the
functional and divisional
forms. In a typical matrix, the
normal functions create a
traditional vertical structure,
with heads of marketing and
manufacturing, and so on. Th en
a new horizontal structure is
added to create cross-functional
integration. Th is is done using
teams that are staff ed by
members from the functions.
Project A Manager
Manager of Projects
Manufacturing Manager
Engineering Manager
Sales Manager
Project B Manager
Project C Manager
Members assigned to both functional departments and cross-functional teams
General
Manager
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EXPLORING MANAGEMENT190
Th ings don’t always work this well in team structures,
however, since the complexities of teams and teamwork
can create other problems. As with the matrix, team
members sometimes have to deal with confl icting loy-
alties between their team and functional assignments.
Teamwork always takes time. And as in any team situa-
tion, the quality of results often depends on how well the
team is managed and how well team members gel as a
group. Th is is why you’ll most likely fi nd that organiza-
tions with team structures invest heavily in team build-
ing and team training.
||| Network structures extensively use strategic alliances and outsourcing.
Another development in organizational structures uses strategic alliances and out-
sourcing to dramatically reduce the need for full-time staff . Shown in Figure 8.6, a network structure links a central core of full-time employees with “networks” of relationships to outside contractors and partners that supply essential services.
Because the central core is relatively small and the surrounding networks can be
expanded or shrunk as needed, the potential advantages are lower costs, more
speed, and greater fl exibility in dealing with changing environments. 24
Th e example in Figure 8.6 shows a network structure for a company that sells
lawn and deck furniture over the Internet and by mail order. Th e fi rm employs
only a few full-time “core” employees. Other business requirements are met
through a network of alliances and outsourcing relationships. A consultant cre-
ates product designs, while suppliers produce them at low-cost sites around the
world. A supply chain management fi rm gets products shipped to and distributed
A network structure uses IT to link with networks of outside suppliers and service contractors.
Plant
Manager
New product
development team
Valuing diversity
task force
Team assignments
Sales Manager
Manufacturing Manager
Engineering Manager
Human Resource Manager
FIGURE 8.5 How Do Team Structures Capture the Benefi ts of Cross-Functional Teams? Team structures make extensive use of teams to improve organizations through better communication and problem solving across
functions. Some teams are temporary, such as a project team that convenes to create a new product and then disbands when fi nished.
Other teams are more permanent. Th ey bring together members from diff erent functions to work together on standing issues and
common problems, such as quality control, diversity management, labor-management relations, or health care benefi ts.
Potential Advantages of Team Structures
• Team assignments improve communication, cooperation, and decision making.
• Team members get to know each other as persons, not just job titles.
• Team memberships boost morale and increase enthusiasm and task involvement.
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Organization Structure and Design ■ Chapter 8 191
from an outsourced warehouse. A quarterly catalog is mailed as part of a strate-
gic alliance with two other fi rms that sell diff erent home furnishings. Accounting
services are outsourced. Even the company Web site that supports customer and
network relationships is maintained by an outside contractor.
Th is may sound a bit radical, but it isn’t. It is an increasingly common arrange-
ment that raises lots of entrepreneurial opportunities. Could the growing popu-
larity of network organization concepts make it easier for you to start your own
business someday?
If network structures are highly streamlined, effi -
cient, and adaptable, don’t you wonder why even more
organizations aren’t adopting them? Part of the answer
may lie in inertia, simply being caught up in old ways
and fi nding it very hard to change. Another reason is
the management complication of having to deal with a
vast and sometimes shifting network of contracts and
alliances.
When one part of the network breaks down or fails to
deliver, the entire system may suff er the consequences.
Th e recent Japanese tsunami and nuclear disaster is a good case in point. Many
global fi rms suff ered when their Japanese contractors and partners had to shut
down or scale back operations. Too much reliance on outsourcing might also
have hidden costs. Not too long ago, for example, Delta Air announced that it
was shutting down its call-center operations in India because so many custom-
ers complained about communication diffi culties with service providers. 25
As information technology continues to evolve, a variation of the network
structure is appearing. Called the virtual organization, it uses information technologies to operate a constantly shifting network of alliances.
26 Th e goal
is to use virtual networks to eliminate boundaries that traditionally separate
a fi rm from its suppliers and customers, and its internal departments and divi-
sions from one another. Th e intense use of IT allows virtual relationships to be
A virtual organization uses information technologies to operate as a shifting network of alliances.
Mail-order lawn and deck furniture
Business
Core
Other home furnishing firms to share
mail-order catalog
Off-shore manufacturing and
packaging firm
Port-of-entry warehouse and
distribution company
Furniture design studio
National accounting and financial
management firm
Mail-order lawn
and deck
furniture
Business
Core Mail-order lawn
and deck
furniture
Business
Core
INFORMATION
TECHNOLOGY
Strategic alliance Outsourcing contracts
FIGURE 8.6 How Do Network Structures Take Advantage of Strategic Alliances and Outsourcing? Organizations using network
structures replace some full-time
positions and functions with
services provided by alliance
partners and outsourcing
contractors. In these structures,
“core” employees perform
essential operations at the center
of a “network” that links them
with a shifting mix of outside
partners and contractors. Th e
example in this fi gure shows
that a small group of people
can run a mail-order business
in this manner. A lot of network
activities are made easy and
cost effi cient by using the latest
information technologies.
Potential Advantages of Network Structures
• Lower costs due to fewer full-time employees. • Better access to expertise through specialized
alliance partners and contractors.
• Easy to grow or shrink with market conditions.
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EXPLORING MANAGEMENT192
called into action on demand. When the work is done, they are disbanded or left
idle until next needed.
Th e popular tech start-up Groupon has virtual characteristics. Picture the
vast number of coupon sponsors that are actived on any given day, and how
diff erent the mix is the following day. Picture the arrays of coupon clippers as
well. Standing at the center of this virtual network are the Groupon employees
who make the daily deals with retailers and communicate them to potential
customers.
If you really think about it, each of us is probably already a part of virtual
organizations. Do you see similarities, for example, with the Facebook, Four-
square, Tumblr, Twitter, or LinkedIn communities? Isn’t the virtual organiza-
tion concept similar to how we manage our online relationships—signing on,
signing off , getting things done as needed with diff erent people and groups, and
all taking place instantaneously, temporarily, and without the need for face-to-
face contacts?
HEROES, VILLAINS, AND THE
REINVENTION OF MIDDLE
MANAGEMENT
Modern organizations still rely largely on hierarchical effi ciencies. A few top executives determine
hourly work for many below, while managers in-between align those decisions and actions. Expectations of middle managers shift as organizations adapt to swings in the economy and they are revealed as heroes, or cast as villains.
Now middle managers have undergone a makeover as or- ganizations restructure. They’ve reinvented their roles to match new organizational demands.
In the book The Truth About Middle Managers (2008, Harvard Business School Publishing Corporation), Paul Osterman de- scribes the changing landscape for managers nestled between levels of top management and hourly workers. Restructuring trends—fewer levels of management between top manage- ment and hourly workers, and fewer employees overall— require middle managers to assume broader duties and work longer hours. They have less autonomy since top managers are closer in the hierarchy, and less control as information technol- ogy allows monitoring and feedback, anytime, anywhere.
Osterman fi nds middle managers have increased job inse- curity due to restructuring. Job tenure, or length of time spent
with one employer, is decreasing and they are more likely to job hop. Stress has increased due to new realities, and they are less loyal to employers. They see top management as greedy, self-serving, and distant, and are frustrated by executive hires outside the organization. Many lose ambition since fl at hierar- chies mean fewer paths to the top.
Despite the challenges, Osterman believes middle man- agers are highly committed to their work. They enjoy their jobs as craft and thrive on skill execution. Restructuring has pushed high level duties upon many, and they welcome new strategic roles. They make key decisions involving resource allocations and negotiations with varied interests. They spend more time in informal interaction and unplanned activities, and experience more variety and complexity in assignments.
REFLECT AND REACT
Organizations now have fewer management levels and em- ployees, so how would you describe middle management jobs and skills? Middle managers view work not only as a means to an end—money or promotion, but an end in itself—craftwork and fulfi llment. Why is this? And by the way, what is the future likely to hold for middle managers as more organizations take on team, network, and virtual characteristics?
■ THE TRUTH ABOUT MIDDLE MANAGERS BY PAUL OSTERMAN
Manager’s Library
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Organization Structure and Design ■ Chapter 8 193
Takeway 8.2 What Are the Most Common Types
of Organization Structures?
Rapid Review
• Functional structures group together people using similar skills to perform similar activities.
• Divisional structures group together people who work on a similar product, work in the same geographical region, or serve the same customers.
• A matrix structure uses permanent cross-functional teams to try to gain the ad- vantages of both the functional and divisional approaches.
• Team structures make extensive use of permanent and temporary teams, often cross-functional ones, to improve communication, cooperation, and problem
solving.
• Network structures maintain a staff of core full-time employees and use contracted services and strategic alliances to accomplish many business needs.
Questions for Discussion
1. Why use functional structures if they are prone to functional chimneys prob-
lems?
2. Could a matrix structure improve performance for an organization familiar to
you?
3. How can the disadvantages of group decision making hurt team structures?
Be Sure You Can
• compare the functional, divisional, and matrix structures
• draw charts to show how each structure might be used in a business
• list advantages and disadvantages of each structure
• explain the functional chimneys problem
• describe how cross-functional and project teams operate in team structures
• illustrate how an organization familiar to you might operate as a network structure
• list advantages and disadvantages of the network approach to organizing
What Would You Do? Th e typical business school in a university is organized on a functional basis, with
departments such as accounting, fi nance, information systems, management,
and marketing all reporting to a dean. How would you redesign things to increase
communication and collaboration across departments, as well as improve cur-
riculum integration across all areas of study?
STUDY GUIDE
Terms to Defi ne
Cross-functional teams
Customer structure
Departmentalization
Divisional structure
Functional chimneys,
or functional silos,
problem
Functional structure
Geographic structure
Matrix structure
Network structure
Product structure
Team structure
Virtual organization
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EXPLORING MANAGEMENT194
Takeaway 8.3 What Are the Trends in Organizational
Design?
ANSWERS TO COME
■ Organizations are becoming fl atter, with fewer levels of management
■ Organizations are increasing decentralization
■ Organizations are increasing delegation and empowerment
■ Organizations are becoming more horizontal and adaptive
■ Organizations are using more alternative work schedules
Just as organizations vary in size and type, so, too, do the variety of
problems and opportunities they face. 27
Th is is why they use diff erent ways of or-
ganizing—from the functional, divisional, and matrix structures to the team and
network approaches reviewed in the previous modules. Now it’s time to probe
further. Th ere is still more to the story of how managers try to align their organi-
zations with the unique situations they face.
Th is process of alignment is called organizational design. It deals with the choices managers make to confi gure their organizations to best meet the prob-
lems and opportunities posed by their environments. 28
And because every orga-
nization faces unique challenges, there is no “one fi ts all” best design. Organiza-
tional design is a problem-solving activity where managers strive to get the best
confi guration to meet situational demands.
||| Organizations are becoming fl atter, with fewer levels of management.
When organizations grow in size, they tend to get taller by adding more and more
levels of management. Th is raises costs. It also increases the distance between
top management and lower levels, making it harder for the levels to communi-
cate with one another. Even with the benefi ts of new technologies, this increases
the risks of slow and poorly informed decisions.
Taller organizations are generally viewed as less effi cient, less fl exible, and less
customer-sensitive. 29
You shouldn’t be surprised that the trend is for organiza-
tions to get fl atter. One of the fi rst announcements by Robert McDonald when
taking over as Procter & Gamble’s CEO was that he would “create a simpler, fl at-
ter and more agile organization . . . because simplifi cation reduces cost, improves
productivity and enhances employee satisfaction.” His plan cut management
levels from nine to seven. 30
When organizations get fl atter, one of the things often aff ected is span of control—the number of persons directly reporting to a manager. When span of control is narrow, as shown in the small fi gure, a manager supervises only a
few people. Taller organizations have many levels of management and narrow
spans of control. A manager with a wide span of control supervises many peo-
ple. Flatter organizations with fewer levels of management have wider spans of
control.
Organizational design is the process of confi guring organizations to meet environmental challenges.
Span of control is the number of persons directly reporting to a manager.
Tall Structure
(more levels; narrower spans of control)
Flat Structure
(fewer levels; wider spans of control)
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Organization Structure and Design ■ Chapter 8 195
||| Organizations are increasing decentralization.
While we are talking about levels of management, the next question becomes:
Should top management make the decisions and the lower levels just carry them
out? Th e answer is “No,” at least not for all decisions. When top management
keeps the power to make most decisions, the setup is called centralization. When top management allows lower levels to make decisions on matters where
they are best prepared or informed, the setup is called decentralization. If you had to choose right now, wouldn’t you go for decentralization? Well, you
wouldn’t be wrong given the trends. 31
But you wouldn’t be exactly right either. Do
you really want lower levels making major decisions and changing things when-
ever they see fi t?
Th e reality is that there is no need for a trade-off ; an organization can have
both. One of the unique opportunities of today’s high-tech world is that top
management can decentralize and still maintain centralized control. Computer
technology and information systems allow top managers to easily stay informed
about day-to-day performance results throughout an organization. Th is makes it
easier for them to operate in more decentralized ways. 32
With centralization, top management keeps the power to make most decisions.
With decentralization, top management allows lower levels to help make many decisions.
Dear Stress Doctor:
My boss has come up with this great idea of cutting some supervisor positions, assigning more workers to those of us who remain, and calling us “coaches” instead of supervisors. She says this is all part of a new management approach to op- erate with a fl atter structure and more empowerment.
For me this means a lot more work coordinating the ac- tivities of 17 operators instead of the 6 that I previously super- vised. I can’t get everything cleaned up on my desk most days, and I end up taking a lot of paperwork home.
As my organization “restructures” and cuts back staff, it puts a greater burden on those of us that remain. We get ex- hausted, and our families get short-changed and even angry. I even feel guilty now taking time to watch my daughter play soccer on Saturday mornings. Sure, there’s some decent pay involved, but that doesn’t make up for the heavy price I’m pay- ing in terms of lost family times.
But you know what? My boss doesn’t get it. I never hear her ask: “Henry, are you working too much; don’t you think it’s time
to get back on a reasonable schedule?” No! What I often hear instead is “Look at Andy; he handles our new management model really well, and he’s a real go-getter. I don’t think he’s been out of here one night this week before 8 p.m.” What am I to do, just keep it up until everything falls apart one day? Is a fl atter structure with fewer managers always best? Am I miss- ing something in regard to this “new management”?
Sincerely, Overworked in Cincinnati
YOU DECIDE
Is it ethical to restructure, cut management levels, and expect the remaining managers to do more work? Or is it simply the case that managers used to the “old” ways of doing things need extra training and care while learning “new” manage- ment approaches? And what about this person’s boss—is she on track with her management skills? Aren’t managers sup- posed to help people understand their jobs, set priorities, and fulfi ll them, while still maintaining a reasonable work-life balance?
■ FLATTENED INTO EXHAUSTION
Ethics Check MY BOSS DOESN’T GET IT. I NEVER HEAR HER ASK:
“HENRY, ARE YOU WORKING TOO MUCH?” {
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EXPLORING MANAGEMENT196
||| Organizations are increasing delegation and empowerment.
Decentralization brings with it another trend that is good for organizations
and their members: increased delegation and empowerment. Delegation is the process of entrusting work to others by giving them the right to make
decisions and take action.
You can think of delegation as the foundation for decentralization. Its
three steps are:
(1) Assign responsibility—explain tasks and expectations to others.
(2) Grant authority—allow others to act as needed to complete tasks.
(3) Create accountability—require others to report back on the completed
tasks.
Delegation is the process of entrusting work to others.
Why is it that a CEO brought in from outside the industry fared the best as the Big Three automakers went into crisis mode during the economic downturn? That’s a question that Ford Motor Company’s chairman, William Clay Ford Jr., is happy to answer. And the person he’s talking about is Alan Mulally, a former Boeing executive Ford hired to retool the fi rm and put it back on a competitive track.
Many wondered if an “airplane guy” could run an auto company. It isn’t easy to come in from outside an industry and successfully lead a huge fi rm. But Mulally’s management experience and insights are proving well up to the task. One consultant remarked: “The speed with which Mulally has trans- formed Ford into a more nimble and healthy operation has been one of the more impressive jobs I’ve seen.” He went on to say that without Mulally’s impact, Ford might well have gone out of business.
In addition to many changes to modernize plants and streamline operations, Mulally has tackled the bu- reaucratic problems common to many extremely large organizations—particularly those dealing with functional chimneys and a lack of open communication. William Ford says that the firm had a culture that “loved to meet” and in which managers got together to discuss the message they wanted to communicate to the top executives. But Mulally
changed all that. He began with a focus on transparency and data-based decision making. He pushed for greater cooperation between Ford’s divisions. And he pursued a more centralized approach to global operations, one that focused on building vehicles to sell in many markets. When some of the senior executives balked and tried to go di- rectly to Ford with their complaints, he refused: “I didn’t permit it,” he says, thus reinforcing Mulally’s authority to run the firm his way.
As for Mulally’s success, only time will tell how the fi rm does in extremely diffi cult circumstances. For now, however, Ford is performing well and Mulally has gained lots of respect for his executive prowess. One of his senior managers says: “I’m going into my fourth year on the job. I’ve never had such con- sistency of purpose before.”
WHAT’S THE LESSON HERE?
It takes a lot of confi dence to come in from outside an in- dustry and lead an organization with vision and a clear strat- egy. Mulally seems to be doing a good job of blending a strong central authority with decentralized action. He’s got support from the board and has built his own top manage- ment team. How will you act when taking over a new posi- tion someday?
■ ALAN MULALLY MAKES MARK BY RESTRUCTURING FORD
Role Models
“THE SPEED WITH WHICH MULALLY HAS TRANSFORMED FORD
INTO A MORE NIMBLE AND HEALTHY OPERATION HAS BEEN
ONE OF THE MORE IMPRESSIVE JOBS I’VE SEEN.” {
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Organization Structure and Design ■ Chapter 8 197
Every manager really needs to know how and when to delegate. Even if you are
already good at it, there are probably ways to get even better. On those days when
you complain “I just can’t get everything done,” the real problem may be that you
are trying to do everything yourself. Delegation involves deciding what work to
do yourself and what you should allow others to accomplish. It sounds easy, but
there is skill in doing delegation right. 33
A classical management principle states that authority should equal respon-
sibility when a supervisor delegates work to a subordinate. In other words, man-
agers shouldn’t delegate without giving the subordinate suffi cient authority to
perform. Can you think of a time when you were asked to get something done but
didn’t have the authority to do it? Th is was probably frustrating, and it may have
even caused you to lose respect for the manager.
Some managers mistakenly go even one step further; they fail to delegate at all.
Whether because they are unwilling or unable to trust others or are too infl exible
in how they want things done, the failure to delegate is more common than you
might think. And it creates problems. A failure to delegate not only makes it hard
for people to do their jobs, it overloads the manager with work that really should
be done by others.
Let’s remember that the trend is toward more, not less, delegation. And let’s
not forget that when delegation is done well it leads to empowerment. Th is is the process of giving people the freedom to contribute ideas, make decisions, show
initiative, and do their jobs in the best possible ways. Empowerment unlocks the
full power of talent, experience, and intellect that people bring to their jobs. It is
the engine that powers decentralization. And when it becomes part of the orga-
nizational culture, it helps everyone act faster and be more fl exible when dealing
with today’s dynamic environments.
Empowerment gives people freedom to do their jobs as they think best.
Structures help bring order to organizational complexity. They put people together in ways that, on paper at least, make good sense in terms of getting tasks accomplished. But al- though there are many structural alternatives, as described in this chapter, they all struggle for success at times.
Things can change so fast that you might think of today’s organization structures as solutions to yesterday’s problems. This puts a great burden on people to fi ll in the gaps and deal spontaneously with things that the formal structures don’t or can’t cover at any point in time.
Empowerment is a way of unlocking talent and motiva- tion so that people can act in ways that make a performance
difference. It gives them freedom to make decisions about how they work. But, many managers fail when it comes to em- powerment. And when they do, their organizations often un- derperform.
Are you willing, and able, to embrace empowerment as you work with others?
■ EMPOWERMENT
Explore Yourself YOU MIGHT THINK OF TODAY ’S ORGANIZATION STRUCTURES
AS SOLUTIONS TO YESTERDAY ’S PROBLEMS. {
Get to know yourself better by taking the self-assessment
on Empowering Others and completing the other activities in the Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT198
||| Organizations are becoming more horizontal and adaptive.
You should remember the concept of bureaucracy from earlier discussion in this book. Its distinguishing features are clear-cut division of labor, strict hierar-
chy of authority, formal rules and procedures, and promotion based on compe-
tency. According to Max Weber, bureaucracies should be orderly, fair, and highly
effi cient. 34
Yet chances are that your image of a bureaucracy is an organization
bogged down with “red tape,” which acts cumbersome and impersonal and is
sometimes overcome to the point of inadequacy by rules and procedures.
Where, you might ask, are the decentralization, delegation, and empower-
ment that we have just been talking about? Well, researchers have looked into
the question and arrived at some interesting answers. When Tom Burns and
George Stalker investigated 20 manufacturing fi rms in England, they found that
two quite diff erent organizational forms could be successful. 35
Th e key was the
“fi t” between the form and challenges in the external environment.
A more bureaucratic form of organization, which Burns and Stalker called the
mechanistic design, thrived in stable environments. It was good at doing routine things in predictable situations. But in rapidly changing and uncertain situations,
a much less bureaucratic form, called the organic design, performed best. It was adaptable and better suited to handle change and less predictable situations.
Figure 8.7 portrays these two approaches as opposite extremes on a contin- uum of organizational design alternatives. You can see that organizations with
mechanistic designs typically operate as “tight” structures of the traditional ver-
tical and bureaucratic form. 36
Th ey are good for production effi ciency. A ready
example is your local fast-food restaurant. But what about a company like the
software giant Microsoft?
A bureaucracy emphasizes formal authority, rules, order, fairness, and effi ciency.
Mechanistic designs are bureaucratic, using a centralized and vertical structure.
Organic designs are adaptive, using a decentralized and horizontal structure.
FIGURE 8.7 What Are the Major Diff erences Between Mechanistic and Organic Organizations Designs? Some indicators of a more organic design are decentralization, few rules and procedures,
wider spans of control, sharing of tasks, use of teams and task forces, and informal or personal
approaches to coordination. Th is organic design is most associated with success in dynamic and
changing environments. Th e more mechanistic design has mainly bureaucratic features and is
more likely to have diffi culty in change environments but to be successful in more stable ones.
Goal
MECHANISTIC DESIGNS
Bureaucratic
organizations
ORGANIC DESIGNS
Adaptive
organizations
Predictability Adaptability
Authority DecentralizedCentralized
Rules and procedures Few
Spans of controlNarrow Wide
TasksSpecialized Shared
Teams and task forcesFew Many
Coordination Formal and impersonal
Informal and personal
Many
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Organization Structure and Design ■ Chapter 8 199
Business Week has claimed that Microsoft suff ers from “bureaucratic red
tape” and endless meetings that bog employees down and limit their abilities
to be creative and on top of market demands. 37
Th e Wall Street Journal has sug-
gested it should be broken into smaller pieces to free the fi rm from the “bu-
reaucracy that’s stifl ing entrepreneurial spirits.” 38
Th e idea is that the new and
smaller components would be faster and more innovative in our changing world
of technology. In other words, over time and with increasing size Microsoft may
have become too mechanistic for its own good.
The organic organizational design is more horizontal and less vertical than
its mechanistic counterpart. It emphasizes empowerment and teamwork,
and gets a lot of work done through informal structures and interpersonal
networks. 39
The result is an organization that is adaptive and flexible, and
whose employees are allowed to be more spontaneous in dealing with chang-
ing markets and environments. 40
This design is good for creativity and in-
novation. Doesn’t it sound like just the type of organization most likely to
succeed in the technology industry today? 41
||| Organizations are using more alternative work schedules.
Th ere’s yet another organizing trend that’s quite likely to become very important
to you someday, if it isn’t already—the use of alternative work schedules. Th e fact
is that just because it was normal to work 40 hours each week in the past doesn’t
make this the only or best way to schedule work time. 42
Here are some possibilities.
A compressed workweek allows a worker to complete a full-time job in less than the standard fi ve days of 8-hour shifts.
43 Its most common form is the “4–40,”
that is, accomplishing 40 hours of work in four 10-hour days. It’s well used at USAA,
a diversifi ed fi nancial services company that ranks among the 100 best companies
to work for in America. A large part of the fi rm’s San Antonio workforce is on
A compressed workweek allows a worker to complete a full-time job in less than fi ve days.
A survey by Development Dimensions International, Inc., fi nds that managers may be overestimating their managing skills. “It doesn’t matter what industry you’re in. People have blind spots about where they are weak,” says DDI vice president Scott Erker. These results are from a sample of 1,100 fi rst-year managers: • 72% never question their ability to lead others. • 58% claim planning and organizing skills as strengths. • 53% say they are strong in decision making. • 50% say they are strong in communication.
• 32% claim profi ciency in delegating. • Skills rated as needing most development were delegating,
gaining commitment, and coaching.
YOUR THOUGHTS?
Would you, like managers in this survey, probably overestimate your strengths in management skills? What might explain such tendencies toward overconfi dence? And among the skills needing work, why would delegating be the one about which even very confi dent managers still feel some inadequacy?
■ BOSSES MAY BE OVERESTIMATING THEIR MANAGING SKILLS
Facts to Consider “IT DOESN’T MATTER WHAT INDUSTRY YOU’RE IN. PEOPLE
HAVE BLIND SPOTS ABOUT WHERE THEY ARE WEAK.” {
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EXPLORING MANAGEMENT200
a four-day schedule, with some working Monday through Th ursday and others
working Tuesday through Friday. 44
Although compressed workweeks can cause
scheduling problems, possible customer complaints, and even union objections,
the benefi ts are there as well. USAA reports improved morale, lower overtime
costs, less absenteeism, and decreased use of sick leave.
Th e term fl exible working hours, also called fl extime, describes any work schedule that gives employees some choice in daily work hours. A typical fl extime
schedule off ers choices of starting and ending times, while still putting in a full
workday. Some may start earlier and leave earlier, while others do the opposite.
Th e fl exibility provides opportunities to attend to personal aff airs such as parent-
ing, elder care, medical appointments, and home emergencies. All top 100 compa-
nies in Working Mother magazine’s list of best employers for working moms off er
fl exible scheduling. Th ey fi nd it reduces stress and unwanted job turnover. 45
More and more people now do some form of telecommuting.46 Th ey spend at least a portion of scheduled work hours outside the offi ce linked with co-workers, custom-
ers, and bosses by a variety of information technologies. And it’s popular. 47
When
asked what they like, telecommuters report increased productivity, fewer distrac-
tions, the freedom to be their own boss, and the benefi t of having more time for them-
selves. On the negative side, some telecommuters report working too much, having
less time to themselves, diffi culty separating work and personal life, and having less
time for family. 48
“You have to have self-discipline and pride in what you do,” says one,
“but you also have to have a boss that trusts you enough to get out of the way.” 49
A recent development in telecommuting is the co-working center, essentially
a place where telecommuters go to share an offi ce environment outside of the
home and join the company of others. One marketing agency telecommuter says:
“we have two kids, so the ability to work from home—it just got worse and worse.
I found myself saying. ‘If daddy could just have two hours. . . .’” Now he has started
his own co-working center to cater to his needs and those of others. One of those
using his center says: “What you’re paying for is not the desk, it’s access to net-
working creativity and community.”
Yet another alternative is job sharing, where two or more persons split one full-time job. Th is often involves each person working one-half day, but it can
also be done via weekly or monthly sharing arrangements. Both the employees
and the organizations benefi t when talented people who cannot work full days or
weeks are kept in or brought back into the workforce.
Flexible working hours give employees some choice in daily work hours.
Telecommuting involves using IT to work at home or outside the offi ce.
Job sharing splits one job between two people.
Flexibility in work scheduling helps employers beat the “mommy drain.” It’s well known that attracting and retaining talented workers has to be one of the top priorities for any organization. But what happens with new Moms? How do you get them onboard when you want to hire them? How do you keep them onboard when you already have them? The “Mommy drain,” loss of mothers from the workforce, is real (there’s a “Daddy drain” too). Flexibility is the rule for dealing with it. Things like extended pay and time off for maternity and parental leaves along with jobs that allow fl exible hours, work-at-home time, and job sharing are essential. In-house career networks that support working parents are helpful too.
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Organization Structure and Design ■ Chapter 8 201
Takeaway 8.3 What Are the Current Trends
in Organizational Design?
Rapid Review
• Organizations are becoming fl atter—having fewer management levels, combining decentralization with centralization, and using more delegation and empowerment.
• Mechanistic organizational designs are vertical and bureaucratic; they perform best in stable environments with mostly routine and predictable tasks.
• Organic organizational designs are horizontal and adaptive; they perform best in change environments requiring adaptation and fl exibility.
• Organizations are using alternative work schedules such as the compressed work- week, fl exible working hours, and job sharing.
Questions for Discussion 1. Is “empowerment” just a buzzword, or is it something that can really make a dif-
ference in organizations today?
2. Knowing your personality, will you fi t in better with an organization that has a
mechanistic or an organic design?
3. How can alternative work schedules work to the benefi t of both organizations
and their members?
Be Sure You Can
• illustrate the link between tall or fl at organizations and spans of control
• explain how decentralization and centralization can work together
• list the three steps in delegation
• diff erentiate mechanistic and organic organizational designs
• diff erentiate compressed workweek, fl exible working hours, and job sharing
• list advantages and disadvantages of telecommuting
What Would You Do? As the owner of a small computer repair and services business, you would like to
allow employees more fl exibility in their work schedules. But you also need consis-
tency of coverage to handle drop-in customers as well as at-home service calls. Also,
there are many times when customers need what they consider to be “emergency”
help outside of normal 8 a.m. to 5 p.m. offi ce times. A meeting with the employees
is scheduled for next week. How can you work with them to develop a staffi ng plan?
What will you present as “fl exible work schedule” options that meet their needs as
well as yours?
STUDY GUIDE
Terms to Defi ne
Bureaucracy
Centralization
Compressed workweek
Decentralization
Delegation
Empowerment
Flexible working hours
Job sharing
Mechanistic design
Organic design
Organizational design
Span of control
Telecommuting
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EXPLORING MANAGEMENT202
1. Th e main purpose of organizing as a management function is to ____________.
(a) make sure that results match plans
(b) arrange people and resources to accomplish work
(c) create enthusiasm for the needed work
(d) link strategies with operational plans
2. An organization chart is most useful for ____________.
(a) mapping informal structures
(b) eliminating functional chimneys
(c) showing designated supervisory relationships
(d) describing the shadow organization
3. Rumors and resistance to change are potential dis-
advantages often associated with ____________.
(a) virtual organizations
(b) informal structures
(c) functional chimneys
(d) cross-functional teams
4. When an organization chart shows that vice presi-
dents of marketing, fi nance, manufacturing, and
purchasing all report to the president, top manage-
ment is using a ____________ structure.
(a) functional (b) matrix
(c) network (d) product
5. Th e “two-boss” system of reporting relationships is
both a potential source of problems and one of the
key aspects of ____________ structures.
(a) functional (b) matrix
(c) network (d) product
6. A manufacturing business with a functional struc-
ture has recently acquired two other businesses
with very diff erent product lines. Th e president of
the combined company might consider using a ____________ structure to allow a better focus on
the unique needs of each product area.
(a) virtual (b) team
(c) divisional (d) network
7. An organization using a ____________ structure
should expect that more problems will be solved at
lower levels and that top managers will have more
time free to engage in strategic thinking.
(a) virtual (b) matrix
(c) functional (d) product
8. Th e functional chimneys problem occurs when
people in diff erent functions ____________.
(a) fail to communicate with one another
(b) try to help each other work with customers
(c) spend too much time coordinating decisions
(d) focus on products rather than functions
9. An organization that employs just a few “core” or
essential full-time employees and outsources a
lot of the remaining work shows signs of using a ____________ structure.
(a) functional (b) divisional
(c) network (d) team
10. A “tall” organization will likely have ____________
spans of control than a “fl at” organization with the
same number of members.
(a) wider (b) narrower
(c) more ambiguous (d) less centralized
11. If a student in one of your course groups
volunteers to gather information for a case
analysis and the other members tell him to go
ahead and choose the information sources he
believes are most important, the group is giving
this student ____________ to fulfill the
agreed-upon task.
(a) responsibility (b) accountability
(c) authority (d) values
12. Th e bureaucratic organization described by Max
Weber is similar to the ____________ organization
described by Burns and Stalker.
(a) adaptive (b) mechanistic
(c) organic (d) horizontal
13. Which organization would likely be a good fi t for a
dynamic and changing external environment?
(a) vertical (b) centralized
(c) organic (d) mechanistic
C H
A
PTER 8
TP
Multiple-Choice Questions
TestPrep 8
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Organization Structure and Design ■ Chapter 8 203
14. Workers following a compressed workweek schedule
most often work 40 hours in ____________ days.
(a) 3 ½ (b) 4
(c) 5 (d) a fl exible schedule of
15. Which alternative work schedule is identifi ed by
Working Mother magazine as being used by all
companies on its list of “100 Best Employers for
Working Moms”?
(a) telecommuting (b) job sharing
(c) fl exible hours (d) part-time
Short-Response Questions
16. Why should an organization chart be trusted “only so far”?
17. In what ways can informal structures be good for organizations?
18. How does a matrix structure combine functional and divisional forms?
19. Why is an organic design likely to be quicker and more fl exible in adapting to changes than a mechanistic design?
Integration and Application Question
20. Imagine you are a consultant to your university or college president. Th e assignment is: Make this organization more
effi cient without sacrifi cing its educational goals. Although the president doesn’t realize it, you are a specialist in net-
work structures. You are going to suggest building a network organization, and your ideas are going to be radical and
provocative. Questions: What would be the core of the network—is it the faculty members, who teach the various courses, or is it the administration, which provides the infrastructure that students and faculty use in the learning
experience? What might be outsourced—grounds and facilities maintenance, food services, security, recreation pro-
grams, even registration? What types of alliances might prove benefi cial—student recruiting, faculty, even facilities?
Snapshot Nike is indisputably a giant in the athlet- ics industry. But the Portland, Oregon, company has
grown large precisely because it knows how to stay
small. By focusing on its core competencies—and out-
sourcing all others—Nike has managed to become a
sharply focused industry leader.
Banking on the star power of its Swoosh, Nike has
successfully branded apparel, sporting goods, sunglasses,
and even an MP3 player
made by Philips. Like
many large companies
who have found themselves at odds with the possible
limitations of their brands, Nike realized that it would
have to master the one-two punch: identifying new
needs and supplying creative and desirable products to
fi ll those needs.
Don’t Miss This Selection from Cases for Critical Thinking
■ CHAPTER 8 CASE Nike—Spreading Out to Stay Together
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 8: Empowering Others ■ CLASS EXERCISE 8: Organizational Metaphors
C H
A
PTER 8
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
■ TEAM PROJECT 8: Network “U”
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Salinee Tavaranan leads a team that installs solar panels in
remote refugee camps on the Th ai-Myanmar border. “Th e more
people learn to harness natural energy,” she says, “the better
their lives become.”
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Explore Yourself More on tolerance for
ambiguity
Role Models Tom Szaky puts eco-capitalism
to work at Terra Cycle
Ethics Check Facebook follies
Facts to Consider Organization cultures face up
to work-life trends
Manager’s Library Change by Design
by Tim Brown
9 Organizational
Cultures,
Innovation,
and Change
Adaptability and Values Set the Tone
1. Understand the nature
of organizational
culture.
2. Recognize how
organizations
support and achieve
innovation.
3. Describe how
managers lead
the process of
organizational change.
YOUR CHAPTER 9
TAKEAWAYS
E l Y lf Ethi Ch k Manager’s
W H A T ’ S I N S I D E
205
M L C
b
M
Management Live
Tolerance for Ambiguity and The Terminal
I n Th e Terminal, Viktor Navorski (Tom Hanks) travels from his
native Krakozhia to New York City to get an autograph for his
father from jazz musician Benny Golson. While he is in transit, Krakozhian
soldiers overthrow their government and the United States no longer
recognizes passports from Krakozhia. Navorski is refused entry, but he can’t go
home because Krakozhian airspace is closed.
Confi ned to the international transit lounge, Navorski at fi rst doesn’t know
where to sleep, how to fi nd food, or how to maintain personal hygiene. But he
fi gures out how to do all of this. In addition, he earns money, fi rst by rounding up
unreturned baggage carts and then by getting an airport construction job.
Th e movie is loosely based on the true story of Mehran Nasseri, a
dispossessed Iranian who spent 18 years living in Charles de Gaulle Airport. It
seems unimaginable that anyone could live for more than a few days in these
conditions. When they do, it refl ects incredible tolerance for ambiguity, an ability to deal with uncertainty even when events are beyond personal control.
What about you? We live and work in changing, often uncertain, times. Do you
fi nd that you are able to deal eff ectively with circumstances that are unpredictable?
How do you respond when something unexpected comes your way?
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EXPLORING MANAGEMENT206
You probably hear the word “culture” a lot these days. In today’s global
economy, how can we fail to appreciate the cultural diff erences between people
or nations? However, there’s another type of culture that can be just as important:
the cultures of organizations. Just as nations, ethnic groups, and families have
cultures, organizations do too. Th ese cultures help distinguish them from one
another and give members a sense of collective identity.
||| Organizational culture is the personality of the organization.
Th ink of the stores that you shop in, the restaurants that you patronize, the
place where you work. What is the “atmosphere” like? Do you notice how major
retailers like Anthropologie, Hollister, and Abercrombie & Fitch have websites
and store climates that seem to fi t their brands and customer identities? 1 Such
aspects of the internal environments of organizations are important in man-
agement. Th e term used to describe them is organizational culture, the system of shared beliefs and values that develops within an organization and guides
the behavior of its members. 2
Whenever someone speaks of “the way we do things here,” he or she is talking
about the organization’s culture. You can think of this as the personality of the
organization, the atmosphere within which people work. Sometimes called the
corporate culture, it can have a strong impact on an organization’s performance
and the quality of work experiences of its members.
One firm now considered a benchmark for its special culture is Zappos.
com, a popular e-tailer of shoes, clothing, and accessories. CEO Tony Hsieh
has built a fun, creative, and customer-centered culture. Amazon CEO Jeff
Bezos liked Zappos so much he bought the company, and the Girl Scouts
sent executives to study Zappos and bring back ideas for improving its own
culture. Hsieh says that “the original idea was to add a little fun” and things
moved to the point where everyone shared in the idea that “we can do it bet-
ter.” Now the notion of an unhappy Zappos customer is almost unthinkable:
“They may only call once in their life,” says Hsieh, “but that is our chance to
wow them.” 3
Organizational culture is a system of shared beliefs and values guiding behavior.
Takeaway 9.1 What Is the Nature of Organizational
Culture?
ANSWERS TO COME
■ Organizational culture is the personality of the organization.
■ Organizational culture shapes behavior and infl uences performance.
■ Th e observable culture is what you see and hear as an employee or customer.
■ Th e core culture is found in the underlying values of the organization.
■ Value-based management supports a strong organizational culture.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 207
||| Organizational culture shapes behavior and infl uences performance.
Zappos’s Tony Hsieh says: “If we get the culture right, most of the other stuff ,
like brand and the customer service, will just happen.” 4 And he’s mostly right. Al-
though culture isn’t the only determinant of what happens in organizations, it
does infl uence what they accomplish. Organizational culture helps to shape atti-
tudes, reinforce beliefs, direct behavior, and establish performance expectations
and the motivation to fulfi ll them. It helps set the organization’s performance
tone. 5 Meg Whitman, former eBay CEO, describes organization culture as “the set
of values and principles by which you run a company” and create its “character.” She
says it becomes the “moral center” that helps every member understand what is
right and what is wrong in terms of personal behavior. 6
Groupon is an organization in the news these days, and it’s been described as
having a “noncorporate culture.” 7 Th e fi rm has blossomed with a culture that al-
lows for lots of fun and individualism while still focusing attention on high perfor-
mance and bottom-line business accomplishments. One employee says: “I tell my
friends that the atmosphere is like being in the library in college where everyone
is working, but we’re all working on a project for the same class, and it’s everyone’s
favorite class.” 8 Wouldn’t you like to work this way?
Organizations like Zappos, Netfl ix, and Groupon have strong cultures that are clear, well defi ned, performance driven, and widely shared by members. Th ese cul-
tures fi t the nature of the business and the talents of the employees, while keeping
a clear performance vision front and center for all to rally around. Th ey discourage
dysfunctional behaviors and encourage positive ones, helping commit members
to do things for and with one another that are good for the organization. 9
Strong and positive cultures don’t happen by chance. Th ey are created through
socialization.10 Th is is the process of helping new members learn the culture and values of the organization, as well as the behaviors and attitudes that are shared
among its members. 11
Strong cultures are clear, well defi ned, and widely shared among members.
Socialization is the process through which new members learn the culture of an organization.
Netfl ix Runs a Fast Stream
New Thinking Thrives in the Right Culture
If you ask friends and neighbors to identify the most exciting Internet down-
load they’ve received lately, it may well turn out to be a delivery from Netfl ix.
CEO Reed Hastings—a Fortune magazine businessperson of the year—says
that it’s a commitment to customer service that keeps the company strong
and growing.
Wired magazine describes Hastings as “a quiet disrupter, sabotaging business
models silently and irretrievably” . . . “a quiet, hands-off leader . . . [who] sets the
tone and objectives and lets his employees fi gure out how to execute them.” Th e
Netfl ix corporate culture fi ts its founder—unique and oriented toward high per-
formance. Employees get to choose how much of their salary is paid in cash and
how much in stock options; they get as much time off as they want for vacation;
and day-to-day work rules are kept to a minimum so as to maximize individual
freedom on the job.
Th ink about Netfl ix, its
culture and CEO Hastings’
view of management the
next time you watch a
movie. Too many execu-
tives and organizations
forget that culture counts,
or they neglect to learn
and change over time.
What does the Netfl ix
story tell us about leading
organizations in today’s
day and age?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT208
Career socialization often begins in an anticipatory sense with one’s education,
such as the importance of professional appearance and interpersonal skills. It then
continues with an employer’s orientation and training programs, which, when well
done, can be strongly infl uential on new members. Each new Disney employee, for
example, attends a program called “traditions.” It educates them on the company
mission, history, language, lore, traditions, and expectations. Th is commitment to
socialization and a strong culture began with the founder, Walt Disney. He once
said: “You can dream, create, design and build the most wonderful place in the
world, but it requires people to make the dream a reality.” 12
||| Th e observable culture is what you see and hear as an employee or customer.
One way that you can try to understand organizational culture is through the
two levels shown in Figure 9.1—the outermost or “observable” culture and the inner or “core” culture.
13 You might think of this in the sense of an ice-
berg. What lies below the surface and is harder to see is the core culture. What
stands out above the surface and is more visible to the discerning eye is the
observable culture.
FIGURE 9.1 What Are the Main Components of Organizational Culture? With a bit of eff ort, one can
easily identify the organizational
culture. Th e most visible part
is the observable culture. It is
shown in the stories, rituals,
heroes, and symbols that are
part of the everyday life of
the organization. Th e deeper,
below-the-surface part is the
core culture. It consists of the
values that infl uence the beliefs,
attitudes, and work practices
among organizational members.
OBSERVABLE CULTURE
CORE CULTURE
Core Values
• Beliefs about the
right ways to
behave
CORE CULTURE
Core Values
• Beliefs about the
right ways to
behave
Celebration of heroes and events displaying
core values
Rites and Rituals Heroes
People (past and present) who display
core values
Symbols
Language and other symbols conveying
core values
Stories
Tales about events conveying core
values
Th e observable culture is what you see in people’s behaviors and hear in their conversations. It is refl ected in how people dress at work, arrange their offi ces,
speak to and behave toward one another, and talk about and treat their customers.
You’ll notice it not only as an employee but also as a customer or client. Test this
out the next time you go into a store, restaurant, or service establishment. How
do people look, act, and behave? How do they treat one another? How do they
treat customers? What’s in their conversations? Are they enjoying themselves?
When you answer these questions, you are starting to describe the observable
culture of the organization.
Th e observable culture is also found in the stories, heroes, rituals, and symbols
that are part of daily organizational life. In the university, it includes the pageantry
Th e observable culture is what you see and hear when walking around an organization.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 209
of graduation and honors ceremonies; in sports teams, it’s the pre-game rally, side-
lines pep talk, and all the “thumping and bumping” that takes place after a good
play. In workplaces it can be spontaneous celebrations of a work accomplishment
or personal milestone such as a co-worker’s birthday or wedding. And in organiza-
tions like Apple, Hewlett-Packard, Zappos, Google, and Amazon, it’s in the stories
told about the founders and the fi rm’s history.
Th e presence or absence of such things, and the ways they are practiced,
can say a lot about an organization’s culture. Th ey represent, communicate,
and carry the culture over time, keeping it visible and clear in all members’
eyes. New members learn the organization’s culture through them, while all
members keep the culture alive by sharing and joining in them.
||| Th e core culture is found in the underlying values of the organization.
A second and deeper level of organizational culture is called the core culture. It consists of the core values, or underlying assumptions and beliefs, that shape and guide people’s behaviors. Values in some of the best companies, for example,
often emphasize performance excellence, innovation, social responsibility, integ-
rity, worker involvement, customer service, and teamwork. 14
Values statements are typically found on websites, in mission statements, and
in executive speeches. Here are some examples. Merck—“highest level of scien-
tifi c excellence.” Whole Foods—“Creating ongoing win-win partnerships with
our suppliers.” Fedex—“We are honest, ethical and do the right thing.” Zynga—
“Build games you & your friends love to play.” Under Armour—“Innovation, In-
spiration, Reliability and Integrity.” Mozilla—“use the Mozilla assets (intellectual
property such as copyrights and trademarks, infrastructure, funds, and reputa-
tion) to keep the Internet an open platform.” 15
Th e core culture is found in the underlying values of the organization.
Core values are beliefs and values shared by organization members.
If you have any doubts at all regarding the importance of work- life issues and their implications for organizational cultures and management practices, consider these facts: • 78% of American couples are dual-wage earners. • 63% believe they don’t have enough time for their spouses
or partners. • 74% believe they don’t have enough time for their children. • 35% are spending time caring for elderly relatives. • Both Baby Boomers (87%) and Gen Ys (89%) rate fl exible
work as important.
• Both Baby Boomers (63%) and Gen Ys (69%) want opportuni- ties to work remotely at least part of the time.
YOUR THOUGHTS?
What organizational culture issues are raised by these facts? What should employers do to best respond to the situation described here? And when it comes to you, are you prepared to succeed in a work setting that doesn’t respect these facts? Or, are you preparing right now to always fi nd and be attrac- tive to employers that do?
■ ORGANIZATION CULTURES FACE UP TO WORK-LIFE TRENDS
Facts to Consider BOTH BABY BOOMERS AND GEN YS RATE
FLEXIBLE WORK AS IMPORTANT. {
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EXPLORING MANAGEMENT210
When trying to read or understand an organization’s culture, don’t be fooled
by values statements alone. It’s easy to write a set of values, post them on the
Web, and talk about them. It’s a lot harder to live up to them. If an organiza-
tion’s stated values are to have any positive eff ects, everyone in the organization
from top to bottom must know the values and live up to them in day-to-day ac-
tions. Th at is characteristic of successful strong culture organizations. And in this
sense, managers have a special responsibility to “walk the values talk” and make
the expressed values real. After all, how might you react if you found out senior
executives in your organization talked up values such as honesty and ethical be-
havior, but were also known to spend company funds on lavish private parties
and vacations?
||| Value-based management supports a strong organizational culture.
When managers practice the core values, model them for others, and communicate
and reinforce them in all that they do, this is called value-based management. It is managing with a commitment to actively help develop, communicate, and repre-
sent shared values within an organization.
An incident at Tom’s of Maine provides an example of value-based man-
agement. 16
After a big investment in a new deodorant, founder Tom Chappell
was dismayed when he learned that customers were very dissatisfi ed with it.
But having founded the company on values that include fairness and hon-
esty in all matters, he decided to reimburse customers and pull the product
from the market. Even though it cost the company more than $400,000, Tom
did what he believed was the right thing. He was living up to the full spirit of
the company’s values and also setting a very positive example for others in
the fi rm to follow.
Tom Chappell’s actions in this incident show value-based management
in action. Th ey also show his strengths as a symbolic leader, someone who uses language and symbols well to communicate core values, and whose actions
model the desired organizational culture. 17
Symbolic managers and leaders both
act and talk the “language” of the organization. Th ey are always careful to behave
in ways that live up to the espoused core values. Th ey are ever-present role models
for others to emulate and follow.
Value-based management actively develops, communicates, and enacts shared values.
A symbolic leader uses language and symbols and actions to establish and maintain a desired organizational culture.
S—How tight or loose is the structure? C—Are decisions change oriented or driven by the status quo? O—What outcomes or results are most highly valued?
R—What is the climate for risk taking, innovation? E—How widespread is empowerment, worker involvement? S—What is the competitive style, internal and external?
■ SCORES—HOW TO READ AN ORGANIZATION’S CULTURE
Tips to Remember
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Organizational Cultures, Innovation, and Change ■ Chapter 9 211
One thing you’ll notice is that successful symbolic leaders continually high-
light and even dramatize core values and the observable culture. Th ey are careful
to use spoken and written words to describe people, events, and even the compe-
tition in ways that reinforce and communicate core values. Th ey tell key stories
over and over again, and they encourage others to tell them. Th ey may refer to the
“founding story” about the entrepreneur whose personal values set a key tone
for the enterprise. Th ey remind everyone about organizational heroes, past and
present, whose behaviors exemplify core values.
Language metaphors—the use of positive examples from another context—
are very powerful in symbolic leadership. For example, newly hired workers at
Disney are counseled to always think of themselves not as employees but as key
“members of the cast” that work “on stage.” After all, they are told Disney isn’t just
any business; it is an “entertainment” business.
Along these same lines, it is now popular to discuss something called work- place spirituality. Although the fi rst tendency might be to associate the term “spirituality” with religion, it is used in management to refl ect practices that try
to nourish people’s inner lives by bringing meaning to work and engaging each
other with a sense of shared community. 18
Th e core values in a culture of work-
place spirituality will have strong ethical foundations, recognize the value of in-
dividuals and respect their diversity, and focus on creating meaningful jobs that
off er real value to society. When someone works in a culture of workplace spiri-
tuality, in other words, the person should derive personal pleasure from knowing
that what is being accomplished is personally meaningful, created through com-
munity, and valued by others.
Workplace spirituality involves practices that create meaning and shared community among organizational members.
Facebook is fun, but don’t post before checking your organi- zational culture. If you put the wrong things on your Facebook page—the wrong photo, a snide comment, or complaints about your boss—you might have to change your status to “Just got fi red!”
Bed-surfi ng banker— After a Swiss bank employee called in sick with the excuse that she “needed to lie in the dark,” com- pany offi cials observed her surfi ng Facebook. She was fi red and the bank’s statement said it “had lost trust in the employee.”
Angry mascot—The Pittsburgh Pirates fi red their mascot after he posted criticisms of team management on his Facebook page. A Twitter campaign by supporters helped him get hired back.
Short-changed server—A server at a North Carolina pizza parlor used Facebook to call her customers “cheap” for not
giving good tips. After fi nding out about the posting, her bosses fi red her for breaking company policy.
YOU DECIDE
You may know of other similar cases where employees ended up being penalized for things they put on their Facebook pages. But where do you draw the line? Isn’t a person’s Face- book page separate from one’s work? Shouldn’t people be able to speak freely about their jobs, co-workers, and even bosses when outside the workplace? Or is there an ethical boundary that travels from work into one’s public communica- tions that needs to be respected? What are the ethics here— on the employee and the employer sides?
■ FACEBOOK FOLLIES
Ethics Check BE CAREFUL, OR YOUR FACEBOOK STATUS
MAY CHANGE TO “JUST GOT FIRED!” {
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EXPLORING MANAGEMENT212
STUDY GUIDE
Takeaway 9.1 What Is the Nature of Organizational
Culture?
Rapid Review • Organizational culture is a climate of shared values and beliefs that guides the
behavior of members; it creates the character and personality of the organization,
and sets its performance tone.
• Th e observable culture is found in the everyday rites, rituals, stories, heroes, and
symbols of the organization.
• Th e core culture consists of the core values and fundamental beliefs on which the
organization is based.
• Value-based management communicates, models, and reinforces core values
throughout the organization.
• Symbolic leadership uses words, symbols, and actions to communicate the orga-
nizational culture.
Questions for Discussion 1. Can an organization achieve success with a good organizational design but a
weak organizational culture?
2. When you are in your local bank or any other retail establishment as a customer, what do you see and hear around you that identifi es its observable culture?
3. What core values would you choose if you were creating a new organization and wanted to establish a strong performance-oriented culture?
Be Sure You Can • explain organizational culture as the personality of an organization • describe how strong cultures infl uence organizations • defi ne and explain the process of socialization • distinguish between the observable and the core cultures • explain value-based management • explain symbolic leadership
What Would You Do? You have two really nice job off ers and will soon have to choose between them. Th ey
are both in the same industry, but you wonder which employer would be the “best
fi t” for you. What aspects of the cultures of these organizations would you investi-
gate to help you make your choice? Why are these aspects of organizational culture
most relevant to you as a person?
Terms to Defi ne
Core culture
Core values
Observable culture
Organizational culture
Socialization
Strong cultures
Symbolic leader
Value-based
management
Workplace spirituality
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Organizational Cultures, Innovation, and Change ■ Chapter 9 213
The iPad, Super-Soaker water gun, Kindle e-reader, Post-It Notes, as
well as ATM machines, self-checkouts at the supermarkets, streaming movie
rentals, overnight package deliveries and more—name your favorites! What we
are discussing here are examples of innovation, the process of developing new ideas and putting them into practice.
19 Th e late management consultant Peter
Drucker called innovation “an eff ort to create purposeful, focused change in an
enterprise’s economic or social potential.” 20
Said a bit diff erently, it is the act of
turning new ideas into usable applications.
||| Organizations pursue process, product, and business model innovations.
Innovation in and by organizations is often discussed in three forms. Process innovations result in better ways of doing things. Product innovations result in the creation of new or improved goods and services. Business model in- novations result in new ways of making money for the fi rm.21 Consider these examples.
22
• Process innovation—Southwest Airlines keeps streamlining operations to fi t
its low-cost business strategy; IKEA sells furniture and fi xtures in assemble-
yourself kits; Amazon.com makes online shopping easy ; Nike allows online
customers to design their own sneakers.
• Product innovation—Groupon put coupons on the Web; Apple introduced the
iPod, iPhone, and iPad, and made the “app” a must-have for smartphones and
tablets; Amazon brought us the Kindle e-book reader ; Facebook and Twitter
made social media a part of everyday life.
• Business model innovation—Netflix turned movie rental into a subscrip-
tion business; eBay earns revenues from users of its online marketplace;
Google thrives on advertising revenues driven by ever-expanding Web tech-
nologies; Zynga made paying for “extras” profitable with free online games;
Salesforce.com sells cloud-based software not as a product but as a service.
Innovation is the process of taking a new idea and putting it into practice.
Process innovations result in better ways of doing things.
Product innovations result in new or improved goods or services.
Business model innovations result in ways for fi rms to make money.
Takeaway 9.2 How Do Organizations Support
and Achieve Innovation?
ANSWERS TO COME
■ Organizations pursue process, product, and business model innovations.
■ Green innovations pursue and support the goals of sustainability.
■ Social innovations seek solutions to important societal problems.
■ Commercializing innovation turns new ideas into salable products.
■ Innovative organizations share many common characteristics.
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EXPLORING MANAGEMENT214
||| Green innovations pursue and support the goals of sustainability.
Today we can add green innovation, or sustainable innovation, to the list of innovation types. Green innovations support sustainability by reducing the car- bon footprint of an organization or its products. Th ese innovations are emerging
quite frequently now as businesses strive to create new products and produc-
tion methods that have minimal impact on the natural environment.
Sustainable innovations are found in areas like energy use, water use, pack-
aging, waste management, and transportation practices, as well as in product
development. Th e possibilities abound. Replacing air travel with videoconferenc-
ing eliminated 13,500 fl ights by Vodafone employees and cut some 5,000 tons of
carbon emissions. Sierra Nevada Brewing Company fuels its generators with a
blend of purchased natural gas and biogas from a water treatment plant. Adding
in solar energy, the fi rm generates 80% of its own power, cutting electricity costs
while also reducing air pollution. Patagonia buys used garments, breaks them
down, and reweaves the fi bers for clothing sold in its Common Th reads line. Th e
fi rm says savings in energy costs and carbon emissions are over 70%. 23
Green innovation or sustainable innovation reduces the carbon footprint of an organization or its products.
||| Social innovations seek solutions to important societal problems.
Although the tendency is to view innovation in a purely economic or business con-
text, it’s important to remember that it applies equally well to the world’s social
problems—poverty, famine, literacy, diseases, and the general conditions for social
development. As Dipak C. Jain, the former dean of Northwestern’s Kellogg School of
Management, says: “Our primary goal should be producing leaders of real substance
who put their knowledge to work in ways that make the world a better place.” 25
Social innovation can be described as innovation driven by a social con- science. It stems from creativity in social entrepreneurship, fi rst discussed in Chapter 3 on ethics and social responsibility.
26 Th is is a unique form of entrepre-
neurship that pursues innovative ways to solve pressing social problems. Social
entrepreneurs really try to make the world a better place.
What do you do, for example, about the chronic hunger that is the leading cause
of death among African children? Sympathy wasn’t enough for Andrew Youn. He’s a
social entrepreneur whose eff orts have made a world of diff erence for many African
families. 27
After returning from a Northwestern University internship in Africa, Youn
Social innovation is business innovation driven by a social conscience.
Social entrepreneurship pursues innovative ways to solve pressing social problems.
The chapter opening photo showed Salinee Tavaranan, who is part of the
Border Green Energy Team that brings green and sustainable innovations
to rural and marginalized communities in Thailand.24 BGET aims to improve
lives by helping people access and learn to use renewable energy sources
and sustainable technologies. This includes initiatives to expand use of solar
electricity, solar cooking, bio-digesters to create cooking gas from animal
and agricultural waste, UV water purifi cation methods, and the hydro-ram
pump which automatically pumps water without the use of electricity.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 215
attacked the problem of chronic child hunger with an innovative program—the One
Acre Fund. It provides small loans to Kenya’s poor families, enabling them to work
their land with high-quality seed, fertilizer, equipment, and training. Th e goal is to
help farmers “grow their way out of poverty” by fi nding ways to increase crop yields
and avoid the devastating eff ects of Kenya’s three-month “hunger season.” Th e One
Acre Fund won the SC Johnson Award for Socially Responsible Entrepreneurship and
has expanded into Rwanda. Says Youn: “Th e mothers are absolutely inspiring. Th e
things they do out of necessity are heroic.”
||| Commercializing innovation turns new ideas into salable products.
Th e management of innovation requires encouragement and support for both
invention, the act of discovery, and application, the act of use. 28
In business it is
the process of commercializing innovation that turns new ideas—the inven- tions, into actual products, services, or processes—the applications, that generate
profi ts through more sales or lower costs. 29
3M Corporation, for example, owes its
success to the imagination of employees such as Art Fry. He’s the person whose
creativity turned an adhesive that “wasn’t sticky enough” into the blockbuster
product known worldwide today as Post-It Notes®.
It’s tempting to believe that commercializing an innovation such as the Post-It
Note is easy. You might even consider it a “no brainer.” But it isn’t necessarily so. Art
Fry and his colleagues had to actively “sell” the Post-It idea to 3M’s marketing group
and senior management before getting the fi nancial support they needed to turn
their invention into a salable product. Figure 9.2 shows how new product ideas such as Post-It might move through the typical steps of commercializing innovation.
Commercializing innovation is the process of turning new ideas into salable products.
COMMERCIALIZING
INNOVATION
COMMERCIALIZING
INNOVATION
Initial experimentation
Sharing the idea with others and testing it in
prototype form
Feasibility determination
Testing the practicality and financial viability of
the new product
Final application
Commercializing the product for sale to
customers or clients
Idea creation
Discovering a potential product or way to modify
an existing one
FIGURE 9.2 How Do Organizations Commercialize Innovation? In business it is the process of
commercializing innovation
that turns new ideas into
actual products, services, or
processes that can increase
profi ts through greater sales
or reduced costs. Th is requires
management encouragement
and support for idea creation
(invention and the act of
discovery), experimentation
and feasibility determination,
and fi nal application (actually
putting the tested idea into use).
One of the newer developments in commercializing innovation is called
reverse innovation. Sometimes called trickle-up innovation, the concept got its start in the world of global business.
30 Firms have shifted away from only viewing
innovation as something done “at home” and then transferred to “foreign or
emerging markets.” Instead, reverse innovation takes products and services
developed in emerging markets, often subject to pricing constraints, and fi nds
Reverse innovation recognizes the potential for valuable innovations to be launched from lower organizational levels and diverse locations, including emerging markets.
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EXPLORING MANAGEMENT216
ways to use them elsewhere. In fact, management scholar C. K. Prahalad goes so
far as to call emerging market settings “laboratories for radical innovation.” 31
And
GE is a major believer. Th e fi rm has found expanded markets for hand-held and
portable electrocardiogram and ultrasound machines that sell for a fraction of
the price of larger units. Th e smaller units were developed in India and China and
then moved through reverse innovation into the United States. Th eir mobility
and lower prices have made them popular with emergency units.
||| Innovative organizations share many common characteristics.
How do you view Microsoft? Do you see a fi rm whose strategy and culture drive
an innovation powerhouse? Or do you see what PC World once described as “a
stodgy old corporation churning out boring software”? Th ere are quite a few crit-
ics who believe Microsoft meets the latter description, not the former. 32
If you
were Microsoft’s current CEO, wouldn’t you be thinking a lot about how to recap-
ture some of the fi rm’s past innovation glory?
Truly innovative organizations such as 3M, Google, and Apple have built en-
during organizational capacities to innovate. And most of them share common
features like these. 33
HIGHLY INNOVATIVE ORGANIZATIONS
Strategy includes
innovation
Culture values
innovation
Structures support
innovation
Management supports
innovation
Staffing for creativity
and innovation
In highly innovative organizations the corporate strategy and culture support
innovation. Th e strategies of the organization include and highlight innovation;
the culture of the organization, as refl ected in visions and values, emphasizes an
innovation spirit. If you go to the Web site for the design fi rm IDEO, featured in
the Manager’s Library, you’ll fi nd this description: “Our values are part mad sci-
entist (curious, experimental), bear-tamer (gutsy, agile), reiki master (hands-on,
empathetic), and midnight tax accountant (optimistic, savvy). Th ese qualities are
refl ected in the smallest details to the biggest endeavors, composing the medium
in which great ideas are born and fl ourish.” 34
Th ere’s little doubt that core values
at IDEO encourage innovation and allow new ideas to continually fl ourish.
In highly innovative organizations, organization structures support innovation.
Bureaucracy is an enemy of innovation. Organizations that break its confi nes
take advantage of organic designs and team structures that empower people and
eliminate functional chimneys and silos. BusinessWeek describes them this way:
“Instead of assembly line, think swarming beehive. Teams of people from diff er-
ent disciplines gather to focus on a problem. Th ey brainstorm, tinker and toy
with diff erent approaches.” 35
Th e term skunkworks is often used to describe spe- cial units set free from the normal structure and given separate locations, special
resources, and their own managers, all with the purpose of achieving innovation.
Yahoo!, for example, has the “Brickhouse,” an idea incubator in a separate facility
where Yahoo staff ers, some in bean bag chairs and playing with Nerf balls, work on
ideas submitted from all over the company. 36
In other words, Brickhouse exists so
that good ideas don’t get lost in Yahoo’s bureaucracy.
Skunkworks are special creative units set free from the normal structure for the purpose of innovation.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 217
In highly innovative organizations, staffi ng supports innovation. Step one in
meeting this goal is to make creativity an important criterion when hiring and
moving people into positions of responsibility. Step two is allowing their creative
talents to fully operate by inspiring and empowering them by the practices just
discussed—strategy, culture, structure, and leadership.
In highly innovative organizations, top management supports innovation.
Google’s former CEO Eric Schmidt is a good example. Considered a master at fu-
eling innovation, he gave the fi rm’s engineers freedom to spend 20% of their time
on projects of their own choosing. 37
But the best top managers go further. Th ey
not only encourage new ideas, they tolerate criticism and diff erences of opinion.
Th ey know that success doesn’t always come in a straight line and admit that
mistakes are often part of the innovation process. Johnson & Johnson’s former
CEO James Burke once said: “I try to give people the feeling that it’s okay to fail,
that it’s important to fail.” 38
And when talking about the fi rm’s innovative elec-
tronic reader, the Kindle, Amazon’s CEO Jeff Bezos said: “Our willingness to be
misunderstood, our long-term orientation and our willingness to repeatedly fail
are the three parts of our culture that make doing this kind of thing possible.” 39
BE CREATIVE AND IMPROVE BY
NOT THINKING STRAIGHT
Some people like strong coffee and a quiet space to dream up new ideas, while other people pre- fer crowded social settings and
hands-on activities to get their creative juices fl owing. Either approach helps since creative thinking seems to be non-routine. But perhaps innovation is really that simple. Just avoid an ordinary mindset and try not to think straight!
In the book Change By Design (2009, HarperCollins), au- thor Tim Brown discusses methods that people and organiza- tions can use to change their regular approach and advance innovation. He says “design thinking” implies that people of all functions are innovators, not just artists, engineers, and marketers. Those near “externalities”—technology, consum- ers, and market forces outside the organization—are best placed and motivated to innovate.
Brown thinks human-centered ideas, not technology- centered ones, capture sustainable gains. New ideas should consider and alter human experiences—those of customers, employees, or business partners—and avoid use of existing resources to improve functionality for incremental but pre- dictable gains. Services are particularly ripe and he urges
construction of ideas with emotional benefi ts, saying a shift to an “experience economy” means consumers are actively seeking emotive experiences in products and services and avoiding basic feature improvements.
Brown provides anecdotes from a prolifi c career as a de- sign consultant. He advocates building prototypes early in the design phase—ones that are rough and cheap. The goal is not to have working models, but to generate tangible re- sults from abstract thought and realize their strengths and weaknesses. Prototyping “slows down the process to speed it up.” In a sense, not thinking straight yields innovation since the road to success is less cluttered. Perhaps creative thought requires less effort than most people think?
REFLECT AND REACT
Describe products or services that provide you with an emo- tional experience rather than a functional utility. How can these feelings be evoked in other products or services? De- scribe circumstances where members of your organization in- teract with externalities—customers, technologies, broader society, etc. How can their observations yield innovations? And by the way, do you agree slowing down to speed up enables creative thinking?
■ CHANGE BY DESIGN, BY TIM BROWN
Manager’s Library
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EXPLORING MANAGEMENT218
Takeaway 9.2 How Do Organizations Support
and Achieve Innovation?
Rapid Review • Innovation is a process that turns creative ideas into products or processes that
benefi t organizations and their customers.
• Organizations pursue process, product, and business model innovations. • Organizations pursue green innovations that support sustainability. • Organizations pursue social business innovations to tackle important societal
problems.
• Th e process of commercializing innovation turns new ideas into useful applica- tions.
• Highly innovative organizations tend to have supportive cultures, strategies, struc- tures, staffi ng, and top management.
Questions for Discussion 1. Are there any potential downsides to making organizational commitments to
green innovation?
2. What are the biggest trouble points in a large organization that might prevent a great idea from becoming a commercialized innovation?
3. What diff erence does a leader make in terms of how innovative an organization becomes?
Be Sure You Can • discuss diff erences among process, product, and business model innovations • explain green innovation and social business innovation • list fi ve steps in the process of commercializing innovation • list and explain four characteristics of innovative organizations
What Would You Do? Take a look around your present organization, be it a school or workplace. What
three ideas can you come up with right away that would be possible sustainable or
green innovations? How would your ideas, if implemented, benefi t both the organi-
zation and society at large? What are the potential obstacles to putting your “green”
ideas into practice? What could you really do as a “champion” to make your ideas
really work?
STUDY GUIDE
Terms to Defi ne
Business model
innovation
Commercializing
innovation
Green innovation
Innovation
Process innovations
Product innovations
Reverse innovation
Skunkworks
Social business
innovation
Social
entrepreneurship
Sustainable innovation
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Organizational Cultures, Innovation, and Change ■ Chapter 9 219
Takeaway 9.3 How Do Managers Lead the Processes
of Organizational Change?
ANSWERS TO COME
■ Organizations pursue both transformational and incremental changes
■ Th ree phases of planned change are unfreezing, changing, and refreezing
■ Managers use force-coercion, rational persuasion, and shared power change strategies
■ Change leaders identify and deal positively with resistance to change
What if the existing culture of the organization doesn’t support high
performance and innovation? Just “change it,” you might say. And the tendency
may be to think of change as almost a matter of routine, something readily ac-
cepted by everyone involved. But the realities of trying to change organizations
and the behaviors of people within them can be quite diff erent. Former British
Airways CEO Sir Rod Eddington once said, for example, that “altering an airline’s
culture is like trying to perform an engine change in fl ight.” 40
Look at what is
taking place in industry. You’ll always fi nd fi rms that are struggling, and it’s not
always because they don’t have the right ideas—it’s because they have diffi culty
adapting to new circumstances. In other words, they have diffi culty creating or-
ganizational change.
Like many other new CEOs, when Angel Martinez became head of Rockport
Company, he wanted to change traditional ways of doing things and increase the
company’s future competitiveness. But instead of embracing the changes, em-
ployees resisted. Martinez said they “gave lip service to my ideas and hoped I’d go
away.” 41
He was trying, but had trouble succeeding, to be a change leader. Th ese are managers who act as change agents, who take leadership responsibility for
changing the existing pattern of behavior of another person or social system. 42
In theory, every manager should act as a change leader.
But the reality described in the small fi gure is that people in
organizations show major tendencies toward the status quo—
accepting things as they are and not wanting to change. And
it’s the status quo that creates lots of diffi culties as organiza-
tions strive to innovate and managers try to lead the pro-
cesses of change.
||| Organizations pursue both transformational and incremental changes.
Many, if not most, people believe that only major, frame-breaking, radical change
can save the large legacy companies hammered by the global fi nancial crisis—big
automakers, big airlines, big banks, and more. Th ey are talking about the need for
transformational change that results in a major and comprehensive redirection of the organization—new vision, new strategy, new culture, new structure, and
even new people. 43
A change leader tries to change the behavior of another person or social system.
Transformational change results in a major and comprehensive redirection of the organization.
Change leaders
• Confident of ability • Willing to take risks • Seize opportunity • Expect surprise • Make things happen
Status quo managers
• Threatened by change • Bothered by uncertainty • Prefer predictability • Support the status quo • Wait for things to happen
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EXPLORING MANAGEMENT220
As you might expect, transformational change is intense, highly stressful, and
very complex to achieve. Reports are that as many as 70% or more of large-scale
change eff orts actually fail. 44
And, the main reason for failure is bad implemen-
tation. One of the most common mistakes is failure by top management to build
commitments within the workforce so that everyone accepts and works hard to
accomplish change goals. 45
See the nearby box for advice to would-be leaders of
large-scale changes. 46
Let’s not forget that there is another more modest, frame-bending side to
organizational change. Th is is incremental change. It tweaks and nudges peo- ple, systems, and practices to better align them with emerging problems and
opportunities. Th e intent isn’t to break and remake the
system, but to move it forward through continuous im-
provements. Leadership of incremental change focuses
on building on existing ways of doing things with the goal
of doing them better in the future. Common incremental
changes in organizations involve new products, new pro-
cesses, new technologies, and new work systems.
One shouldn’t get the idea, by the way, that incremental
change is somehow inferior to transformational change.
Th ink of it this way: incremental changes keep things
tuned up (like the engine on a car) in between transfor-
mations (when the old car is replaced with a new one).
Putting the two together probably off ers organizations the
best of both worlds.
When GE’s former CEO Jack Welch fi rst took the top
job, for example, he was concerned about the fi rm’s
performance. So he began a large-scale restructuring
of major workforce cuts and business realignment. Once the transformation
was underway, however, he created a pathway for incremental change driven
by employee involvement. He called the program Work-Out. 47
In GE’s Work-Out
sessions, employees confronted their managers in a “town meeting” format. Th e
manager sat or stood in front listening to suggestions for everything from remov-
ing performance obstacles to improving operations. Welch expected the manag-
ers to respond immediately to the suggestions and to try to implement as many
of them as possible.
||| Th ree phases of planned change are unfreezing, changing, and refreezing.
Managers seeking to lead change in organizations can benefi t from a simple but
helpful model developed by the psychologist Kurt Lewin. He describes how change
situations can be analyzed and addressed in three phases: unfreezing—preparing a
system for change; changing—making actual changes in the system; and refreezing—
stabilizing the system after change. 48
Unfreezing is the stage in which managers help others to develop, experience, and feel a real need for change. Th e goal here is to get people to view change as a
way of solving a problem or taking advantage of an opportunity. Some might call
this the “burning bridge” phase, arguing that in order to get people to jump off a
bridge, you might just have to set it on fi re. Managers can simulate the burning
Incremental change bends and adjusts existing ways to improve performance.
Unfreezing is the phase during which a situation is prepared for change.
Guidelines for Leading Large-Scale Transformational Change
• Establish a sense of urgency for change.
• Form a powerful coalition to lead the change.
• Create and communicate a change vision.
• Empower others to move change forward.
• Celebrate short-term wins and recognize those
who help.
• Build on success; align people and systems with
new ways.
• Stay with it; keep the message consistent; cham-
pion the vision.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 221
bridge by engaging people with facts and information that communicate the need
for change—environmental pressures, declining performance, and examples of
alternative approaches. And as you have probably experienced, confl ict can help
people to break old habits and recognize new ways of thinking about or doing
things.
Th e changing phase is where actual change takes place. Ideally these changes are planned in ways that give them the best opportunities for success, having
maximum appeal and posing minimum diffi culties for those being asked to make
them. Although this phase should follow unfreezing in Lewin’s model, he believes
it is often started too early. When change takes place before people and systems
are ready for it, the likelihood of resistance and change failure is much greater. In
this sense Lewin might liken the change process to building a house: You need to
put a good foundation in place before you begin the framing.
As shown in Figure 9.3, the fi nal stage in the planned change process is refreezing. Here, the focus is on stabilizing the change to make it as long lasting as needed. Linking change with rewards, positive reinforcement, and resource
support all help with refreezing. Of course, in today’s dynamic environments
there may not be a lot of time for refreezing before things are ready to change
again. You may well fi nd that refreezing in Lewin’s sense probably gives way quite
often to another phase of evaluating and reassessing. In other words, we begin
preparing for or undertaking more change even while trying to take full advan-
tage of the present one.
Changing is the phase where a planned change actually takes place.
Refreezing is the phase at which change is stabilized.
Change leader , s task: create a felt need for change
This is done by:
Establishing a good relationship with the people involved. Helping others realize that present behaviors are not effective. Minimizing expressed resistance to change.
Change leader , s task: implement change
This is done by:
Identifying new, more effective ways of behaving. Choosing changes in tasks, people, culture, technology, structures. Taking action to put these changes into place.
Change leader , s task: stabilize change
This is done by:
Creating acceptance and continuity for the new behaviors. Providing any necessary resource support. Using performance-contingent rewards and positive reinforcement.
P H
A S
E 1
U n
fr e e z in
g
P H
A S
E 2
C h
a n
g in
g
P H
A S
E 3
R e fr
e e z in
g
FIGURE 9.3 What Are the Change Leader’s Responsibilities in Lewin’s Th ree Phases of Planned Change? Kurt Lewin identifi ed three phases of the planned change process. Th e fi rst is unfreezing, the
phase where people open up and become receptive to the possibility of change. Th e second is
changing, where the actual change happens and the new ways of doing things are put into place.
Th ird is refreezing, the phase where changes are stabilized to become part of ongoing routines.
Lewin believed that change agents often neglect unfreezing and move too quickly into the
changing phase, thus setting the stage for change failures. Th ey may also neglect refreezing, with
the result that any achieved change has only temporary eff ects.
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EXPLORING MANAGEMENT222
||| Managers use force-coercion, rational persuasion, and shared power change strategies.
When it comes to a manager actually being able to move people and systems to-
ward change, the issue boils down to change strategy. Figure 9.4 summarizes three common change strategies—force-coercion, rational persuasion, and shared
power. Each should be understood and most likely used by all change leaders. 49
FIGURE 9.4 What Happens When a Change Leader Uses Diff erent Types of Change Strategies? Force-coercion strategies use authority, off ers of rewards, and threats of punishment to push change
forward. Th e likely results are, at best, temporary compliance. Rational persuasion strategies use
information, facts, and logic to present a persuasive case in support of change. Th e likely outcomes
are compliance with reasonable commitment. Shared power strategies engage others and allow
them to participate in the change process, from initial planning through implementation. Th e high
involvement tends to build more internalization and greater commitments to change.
Force–Coercion
Using position power to create change by decree and formal authority
Rational Persuasion
Creating change through rational persuasion and empirical argument
Shared Power
Developing support for change through personal values and commitments
Change Strategy Power Bases Managerial Behavior Likely Results
Faster, but low commitment and only temporary compliance
Slower, but high commitment and longer
term internalization
Legitimacy
Rewards
Punishments
Expertise
Reference
Direct forcing and unilateral action
Political maneuvering and indirect action
Informational efforts using credible knowledge, demonstrated facts, and logical argument
Participative efforts to share power and involve others in planning and implementing change
A force-coercion strategy uses the power bases of legitimacy, rewards, and punishments as the primary inducements to change.
50 It comes in at least two
types. In a direct forcing strategy, the change agent takes direct and unilateral
action to command that change take place. Th is involves the exercise of for-
mal authority or legitimate power, off ering special rewards and/or threaten-
ing punishment. In political maneuvering, the change agent works indirectly
to gain special advantage over other persons to force the change. Th is involves
bargaining, obtaining control of important resources, forming alliances, or
granting favors.
One thing to remember is that most people will probably respond to force-
coercion with temporary compliance. Th ey’ll act in a limited way and only out
of fear of punishment or hope for a reward. But the new behavior continues
only so long as the possibilities for rewards and punishments exist. Th is is why
force-coercion may be most useful as an unfreezing strategy. It can help to break
people from old habits and try new ones that eventually prove valuable enough
to be self-sustaining. An example is General Electric’s Work-Out program, dis-
cussed earlier. 51
Jack Welch started Work-Out to create a forum for active em-
ployee empowerment. But he made participation mandatory from the start; he
used his authority to force employees to participate. And he was confi dent in
A force-coercion strategy pursues change through formal authority and/or the use of rewards or punishments.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 223
doing so because he believed that, once started, the program would prove valu-
able enough to survive and prosper on its own. It did.
An alternative to force-coercion is the rational persuasion strategy, attempt- ing to bring about change through persuasion backed by special knowledge, infor-
mation, facts, and rational argument. Th e likely outcome of rational persuasion is
compliance with reasonable commitment. Th is is actually the strategy that you
learn and practice so much in school when writing reports and making formal
presentations on group projects. You’ll do a lot of rational persuasion in the real
world as well. But as you probably realize, success with the strategy depends on
having very good facts and information—the rational part, and then being able to
communicate them well—the persuasion part.
Th e rational persuasion strategy works best when the change agent has cred-
ibility as an expert. Th is credibility can come from possessing special information
or having a repution as an expert. It can also be gained from bringing in external
consultants or experts, showing case examples or benchmarks, and conducting
demonstration projects. Ford, for example, has sent managers to Disney World to
A rational persuasion strategy pursues change through empirical data and rational argument.
Decisions . . . hunches . . . achievements? It’s all about being tuned into the environment. That’s a message that seems well learned by Tom Szaky. He’s ridden the roller coaster of all roller coasters, taking ideas for “sustainability,” “green,” and “recy- cling” from dorm room banter to the shelves of Walmart. If you read Tom Szaky’s book Revolution in a Bottle, you enter the world of “upcycling”—the art, if you will, of turning waste that isn’t recyclable into reusable packaging.
Szaky is what many call an “eco-capitalist,” someone who brings environmentalism into the world of business and con- sumers. While a freshman at Princeton University, he ordered a million red worms with the goal of learning how to use them to recycle campus garbage. In conversations with classmate Jon Beyer, the original idea of eco-friendly waste management became one of creating and selling liquid fertilizer made from worm excrement. But they couldn’t afford the expensive plas- tic bottles for packaging. More conversations, this time with entrepreneur Robin Tator, led to a new fi rm called TerraCycle with a mission to “fi nd a meaningful use for waste materials.”
Szaky’s original liquid fertilizer became TerraCycle Plant Food. Now the fi rm upcycles a variety of waste products like
cookie wrappers, drink containers, and discarded juice packs into usable products ranging from tote bags to containers of various sorts to pencil cases. And, yes, lots of them are found on Walmart’s shelves. Szaky says: “Unlike most companies, which spend years in product development and testing, Terra- Cycle moves through these stages very quickly. First we iden- tify a waste stream, then we fi gure out what we can make from that material. This is our strength—creatively solving the “what the hell do we make from it” issue. If a retailer bites, we are in full production in a matter of weeks.”
WHAT’S THE LESSON HERE?
Tom Szaky made many decisions as he moved into the entre- preneurial world of eco-capitalism. It could have ended when the experiment with red worms and campus recycling proved more diffi cult than expected. But Szaky and his friends didn’t stop there; learning from the experience, they persevered and made changes—more than once. We all talk about the planet, sustainability, and social values. But how often do we turn decisions into positive actions? Is there a bit of Tom Szaky in you?
■ TOM SZAKY PUTS ECO-CAPITALISM TO WORK AT TERRACYCLE
Role Models IF A RETAILER BITES, WE ARE IN FULL
PRODUCTION IN A MATTER OF WEEKS. {
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EXPLORING MANAGEMENT224
learn about customer loyalty, hoping to stimulate them to lead customer service
initiatives of their own. A Ford vice president says, “Disney’s track record is one
of the best in the country as far as dealing with customers.” 52
In this sense the
power of rational persuasion is straightforward: If it works for Disney, why can’t
it work for Ford?
A shared power strategy engages people in a collaborative process of iden- tifying values, assumptions, and goals from which support for change will nat-
urally emerge. Although slow, the process is likely to yield high commitment.
Sometimes called a normative re-educative strategy, this approach relies on
empowerment and participation. Th e change leader engages others as a team
to develop the consensus needed to support change. Th is requires being com-
fortable and confi dent in allowing others to infl uence decisions that aff ect the
planned change and its implementation. And because it entails a high level of
involvement, this strategy is often quite time consuming. But shared power can
deliver major benefi ts in terms of longer-lasting and internalized change.
Th e great strength of the shared power strategy lies with unlocking the creativ-
ity and experience of people within the system. Still, many managers hesitate to
use it for fear of losing control or of having to compromise on important orga-
nizational goals. Harvard scholar Teresa M. Amabile points out, however, that
managers and change leaders can share power regarding choice of means and
processes, even if they can’t debate the goals. “People will be more creative,” she
says, “if you give them freedom to decide how to climb particular mountains. You
needn’t let them choose which mountains to climb.” 53
||| Change leaders identify and deal positively with resistance to change.
You may have heard the adage that “change can be your best friend.” At this point,
however, we should probably add: “but only if you deal with resistance in the
right ways.” When people resist change, they are most often defending something
important to them and that now appears threatened.
It is tempting to view resistance to change as something that must be over-
come or defeated. But this mindset can easily cause problems. Perhaps a bet-
ter way is to view resistance as feedback, as a source of information about how
people view the change and its impact on them. A change leader can learn a lot
by listening to resistance and then using it to develop ideas for improving the
change and change process. 54
Th e list in Table 9.1—Why People May Resist Change—probably contains some familiar items. Surely you’ve seen some or all of these types of change resistance
in your own experience. And honestly now, haven’t you also been a resister at
times? When you were, how did the change leader or manager respond? How do
you think they should have responded?
Researchers have found that once resistance appears in organizations, man-
agers try to deal with it in various ways, and some of their choices are better than
others. 55
Education and communication use discussions, presentations, and dem-
onstrations to educate people about a change before it happens. Participation
and involvement allows others to contribute ideas and help design and imple-
ment the change. Facilitation and support provide encouragement and training,
channels for communicating problems and complaints, and ways of helping to
A shared power strategy pursues change by participation in assessing change needs, values, and goals.
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Organizational Cultures, Innovation, and Change ■ Chapter 9 225
Table 9.1 Why People May Resist Change
Fear of the unknown—not understanding what is happening or what comes next
Disrupted habits—feeling upset to see the end of the old ways of doing things
Loss of confi dence—feeling incapable of performing well under the new ways of doing
things
Loss of control—feeling that things are being done “to” you rather than “by” or “with” you
Poor timing—feeling overwhelmed by the situation or feeling that things are moving
too fast
Work overload—not having the physical or psychic energy to commit to the change
Loss of face—feeling inadequate or humiliated because it appears that the old ways
weren’t good ways
Lack of purpose—not seeing a reason for the change and/or not understanding its
benefi ts
overcome performance pressures. Negotiation and agreement off er incentives to
those who are actively resisting or ready to resist, trying to make trade-off s in
exchange for cooperation.
Although very diff erent, each of the prior strategies for dealing with resistance
to change has a role to play in organizations. Two other approaches, also found
in management practice, are considerably more risky and prone to negative side
eff ects. Change leaders who use manipulation and cooptation try to covertly in-
fl uence resisters by providing information selectively and structuring events in
favor of the desired change. Th ose using explicit and implicit coercion try to force
resisters to accept change by threatening them with a variety of undesirable
consequences if they don’t go along as asked. Would you agree that most people
don’t like to be on the receiving end of these strategies?
The next time you are driving somewhere and following a familiar route only to fi nd a “detour” sign ahead, test your tolerance for ambiguity. Is the detour no big deal and you go forward without any further thought? Or is it a bit of a deal, perhaps causing anxiety or anger and demonstrating your tendencies to resist change in your normal routines?
Your tolerance for ambiguity is a good predictor of how you like to work and deal with change. Some organizations are structured and directive, while others are the opposite. Some of us embrace change, while others resist it. But remember, people today are being asked to be ever more creative and innovative in their work; organizations are, too.
Change, we often hear said, is now a given. And in so many ways it is. At work we are expected to support change initiatives launched from the top; we are also expected to be change leaders in our own teams and work units. This is a good time to check your readiness to meet the challenges of change in organizations and in personal affairs.
■ TOLERANCE FOR AMBIGUITY
Explore Yourself YOUR TOLERANCE FOR AMBIGUITY IS A GOOD
INDICATOR OF HOW YOU DEAL WITH CHANGE. {
Get to know yourself better by taking the self-assessment on
Tolerance for Ambiguity and completing the other activi- ties in the Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT226
Takeaway 9.3 How Do Managers Lead the Processes
of Organizational Change?
Rapid Review • Transformational change makes radical changes in organizational directions; in-
cremental change makes continuing adjustments to existing ways and practices.
• Change leaders are change agents who take responsibility for helping to change the behavior of people and organizational systems.
• Lewin’s three phases of planned change are unfreezing (preparing a system for change), changing (making a change), and refreezing (stabilizing the system with
a new change in place).
• Successful change agents understand the force-coercion, rational persuasion, and shared power change strategies, and the likely outcomes of each.
• People resist change for a variety of reasons, including fear of the unknown and force of habit; this resistance can be a source of feedback that can help improve
the change process.
• Change agents deal with resistance to change in a variety of ways, including edu- cation, participation, facilitation, negotiation, manipulation, and coercion.
Questions for Discussion 1. When is it better to pursue incremental rather than transformational change? 2. Can the refreezing phase of planned change ever be completed in today’s dy-
namic environment?
3. Should managers avoid the force-coercion change strategy altogether?
Be Sure You Can • diff erentiate transformational and incremental change • discuss a change leader’s responsibilities for each phase of Lewin’s change process • explain the force-coercion, rational persuasion, and shared power change strategies • list reasons why people resist change • identify strategies for dealing with resistance to change
What Would You Do? Times are tough at your organization, and, as the director of human resources, you
have a problem. Th e company’s senior executives have decided that 10% of the pay-
roll has to be cut immediately. Instead of laying off about 30 people, you would like
to have everyone cut back their work hours by 10%. Th is way the payroll would be
cut but everyone would get to keep their jobs. But you’ve heard that this idea isn’t
popular with all the workers. Some are already grumbling that it’s a “bad idea” and
the company is just looking for excuses “to cut wages.” How can you best handle this
situation as a change leader?
STUDY GUIDE
Terms to Defi ne
Change leader
Changing
Force-coercion strategy
Incremental change
Rational persuasion
strategy
Refreezing
Shared power strategy
Transformational
change
Unfreezing
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Organizational Cultures, Innovation, and Change ■ Chapter 9 227
1. Stories told about an organization’s past accom-
plishments and heroes such as company found-
ers are all part of what is called the __________
culture.
(a) observable
(b) underground
(c) functional
(d) core
2. Planned and spontaneous ceremonies and cel-
ebrations of work achievements illustrate how the
use of __________ helps build strong corporate
cultures.
(a) rewards
(b) structures
(c) rites and rituals
(d) core values
3. An organization with a strong culture is most likely
to have __________.
(a) a tight, bureaucratic structure
(b) a loose, fl exible design
(c) a small staff size
(d) clearly communicated mission
4. Honesty, social responsibility, and customer service
are examples of __________ that can become
foundations for an organization’s core culture.
(a) rites and rituals
(b) values
(c) subsystems
(d) ideas
5. Product innovations create new goods or services
for customers, while __________ innovations cre-
ate new ways of doing things in the organization.
(a) content
(b) process
(c) quality
(d) task
6. Th e Kindle e-reader by Amazon and the iPad
by Apple are examples of __________
innovations.
(a) business model
(b) social
(c) product
(d) process
7. Movie downloads by subscription (Netfl ix) and ad-
vertising revenues from Internet searches (Google)
are examples of __________ innovations.
(a) business model
(b) social
(c) product
(d) process
8. Green innovation is most associated with the concept
of __________.
(a) observable culture
(b) core culture
(c) sustainability
(d) skunkworks
9. Th e innovation process isn’t really successful in an
organization until a new idea is __________.
(a) tested as a prototype
(b) proven to be fi nancially feasible
(c) put into practice
(d) discovered or invented
10. Th e basic role of a skunkworks is to __________.
(a) add more bureaucratic structure to the innova-
tion process
(b) provide special free space in which people work
together to achieve innovation
(c) make sure that any innovation occurs according
to preset plans
(d) give people free time in their jobs to be person-
ally creative
C H
A PTER 9
TP
Multiple-Choice Questions
TestPrep 9
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EXPLORING MANAGEMENT228
11. __________ change results in a major change of di-
rection for an organization, while __________ makes
small adjustments to current ways of doing things.
(a) Frame breaking; radical
(b) Frame bending; incremental
(c) Transformational; frame breaking
(d) Transformational; incremental
12. A manager using a force-coercion strategy is most
likely relying on the power of __________ to bring
about planned change.
(a) expertise
(b) reference
(c) legitimacy
(d) information
13. Th e most participative of the planned change strate-
gies is __________.
(a) negotiation and agreement
(b) rational persuasion
(c) shared power
(d) education and communication
14. When a change leader tries to deal with resistance
by trying to covertly infl uence others, off ering only
selective information and/or structuring events in
favor of the desired change, this is an example of __________.
(a) rational persuasion
(b) manipulation and cooptation
(c) negotiation
(d) facilitation
15. Th e responses most likely to be associated with use
of a force-coercion change strategy are best
described as __________.
(a) internalized commitment
(b) temporary compliance
(c) passive cooptation
(d) active resistance
Short-Response Questions
16. What core values might be found in high-performance organizational cultures?
17. What is the diff erence between process, product, and business model innovation?
18. How do a manager’s responsibilities for change leadership vary among Lewin’s three phases of planned
change?
19. What are the possible diff erences in outcomes for managers using force-coercion and shared power change
strategies?
Integration and Application Question
20. One of the common experiences of new college graduates in their fi rst jobs is that they often “spot things that
need to be changed.” Th ey are full of new ideas, and they are ready and quick to challenge existing ways of do-
ing things. Th ey are enthusiastic and well intentioned. But more often than most probably expect, their new
bosses turn out to be skeptical, not too interested, or even irritated; co-workers who have been in place for
some time may feel and act the same.
Questions: What is the new employee to do? One option is to just forget it and take an “I’ll just do my job” ap- proach. Let’s reject that. So then, how can you be an eff ective change leader in your next new job? How can you
use change strategies and deal with resistance from your boss and co-workers in a manner that builds your repu-
tation as someone with good ideas for positive change?
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Organizational Cultures, Innovation, and Change ■ Chapter 9 229
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 9: Tolerance for Ambiguity
■ CLASS EXERCISE 9: Force-Field Analysis
■ TEAM PROJECT 9: Organizational Culture Walk
C H
A PTER 9
SFL StepsforFurtherLearning
Many learning resources are available at the end of the book and online within WileyPLUS.
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot Over a span of more than 30 years, Apple Computer has generated some of America’s greatest
business successes and has also experienced major
failures. Apple Inc. ignited the personal computer in-
dustry in the 1970s, bringing such behemoths as IBM
and Digital Equipment almost to their knees; stagnated
when a series of CEOs lost opportunities; and rebounded
tremendously since the return of its co-founder and
former CEO, Steve Jobs.
Th e fi rm represents a
fascinating microcosm
of American business as it continues to leverage its
strengths while reinventing itself. With the world revel-
ing in iPads, iPods, iPhones, and iMacs, what’s next for
a fi rm that continues to face a tough economy and stiff
competition?
■ CHAPTER 9 CASE Apple: People and Design Create the Future
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 9
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Work-life balance is highly valued, but surveys show as many as
“74% of workers believe they don’t have enough time for their
children.”
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10 Human Resource
Management
Nurturing Turns Potential into Performance
1. Understand the
purpose and legal
context of human
resource management.
2. Identify essential
human resource
management
practices.
3. Recognize current
issues in human
resource management.
YOUR CHAPTER 10
TAKEAWAYS
Management Live
Professionalism and Iron Man 2
T ony Stark (Robert Downey Jr.) is the rich, playboy owner of
Stark Industries, a military weapons company started by his
father. Tony was a child prodigy in technology and when his
father dies, the company becomes his. Th e problem is that Tony doesn’t know
how to run a business. So, he turns it over to his faithful assistant Pepper Potts
(Gwyneth Paltrow). Potts is the consummate professional, always willing to do
whatever it takes to keep her boss on schedule and to keep the company running
eff ectively. When Potts becomes CEO and Tony comes to the offi ce acting in
typical arrogant and self-centered fashion, she dismisses him.
Professionalism involves more than expertise. It means behaving with internalized commitments to special standards. Th ose standards may be
determined by personal values, academic degrees, professional affi liations, and,
most certainly, company culture and practices. Managers need to be thoroughly
professional in all areas of work responsibility, including how they interact with
and make decisions aff ecting human resources.
After reading the chapter, make an assessment of your professionalism.
Where do you stand? Take advantage of opportunities to test your
professional commitment. Th ey’re all around. Chances are your school has a
student branch of the Society for Human Resource Management or some
other professional organization. Consider getting involved to develop your
professional skills.
Explore Yourself More on professionalism
Role Models Jim Goodnight makes people a
top priority at SAS
Ethics Check Help Wanted: Saleswomen
Facts to Consider Human resource executives
worry about performance
measurement
Manager’s Library Th e Trophy Kids
Grow Up by
Ron Alsop
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
231
M L Th
G
R
M
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EXPLORING MANAGEMENT232
The key to managing people in ways that lead to profi t, productivity,
innovation, and real organizational learning ultimately lies in how you think
about your organization and its people . . . . When you look at your people,
do you see costs to be reduced? . . . Or, when you look at your people do
you see intelligent, motivated, trustworthy individuals—the most critical
and valuable strategic assets your organization can have?
These comments are from Jeffrey Pfeffer’s book, The Human Equation:
Building Profi ts by Putting People First. 1 What is your experience? Do you fi nd employ-
ers treating people as costs or as assets? And what diff erence does this seem to make?
Pfeff er and his colleague, John F. Veiga, believe it makes a performance diff erence, a
potentially big one. Th ey conclude: “Th ere is a substantial and rapidly expanding
body of evidence . . . that speaks to the strong connection between how fi rms manage
their people and the economic results achieved.” 2
Th e core argument being advanced here is that organizations will perform
better when they treat their members better. 3 And when it comes to how people
are treated at work, we enter the territory of human resource management.
||| Human resource management attracts, develops, and maintains a talented workforce.
A marketing manager at IDEO, the Palo Alto–based design fi rm, once said: “If you
hire the right people . . . if you’ve got the right fi t . . . then everything will take care
of itself.” 4 It really isn’t quite that simple, but getting the right people on board is
certainly a great starting point for success. Th e process of human resource management (HRM) is supposed to do just that—attract, develop, and maintain
Human resource management (HRM) is the process of attracting, developing, and maintaining a high-quality workforce.
Takeaway 10.1 What Are the Purpose and Legal
Context of Human Resource
Management?
ANSWERS TO COME
■ Human resource management attracts, develops, and maintains a talented
workforce.
■ Strategic human resource management aligns human capital with organiza-
tional strategies.
■ Government legislation protects against employment discrimination.
■ Laws can’t guarantee that employment discrimination will never happen.
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Human Resource Management ■ Chapter 10 233
a talented and energetic workforce. Its purpose is to ensure that an organization
is always staff ed with the best people so that all jobs get done in the best possible
ways. You might think of the goal of HRM this way—to build organizational per-
formance capacity through people.
Th e three major responsibilities of human resource management are typically
described as:
1. Attracting a quality workforce—employee recruitment and selection
2. Developing a quality workforce—employee orientation, training and develop-
ment, and performance management
3. Maintaining a quality workforce—career development, work-life balance, com-
pensation and benefi ts, retention and turnover, and labor-management relations
Attracting talented
employees
Human
Resource
Management
Developing talented
employees
Keeping talented
employees
||| Strategic human resource management aligns human capital with organizational strategies.
High-performing organizations thrive on strong foundations of human capital, the economic value of people’s abilities, knowledge, experience, ideas, energies,
and commitments. When Sheryl Sandberg left her senior management post with
Google to become Facebook’s chief operating offi cer, she made human capital her
top priority. She strengthened the fi rm’s human resource management systems
with updated approaches for employee performance reviews, innovative recruit-
ing methods, and new management training. 5 Th ese initiatives are consistent with
the concept of strategic human resource management— mobilizing human cap- ital through the HRM process to best implement organizational strategies.
6
One indicator that the HRM process is truly strategic to an organization is
when it is headed by a senior executive reporting directly to the chief executive
offi cer. When former Home Depot executive Denis Donovan became the fi rm’s
fi rst vice president for human resources, he said: “CEOs and boards of directors
are learning that human resources can be one of your biggest game-changers in
terms of competitive advantage.” 7 Th e strategic importance of HRM has also been
raised in respect to corporate ethics scandals. “It was a failure of people and that
isn’t lost on those in the executive suite,” says Susan Meisinger, past president of
the Society for Human Resource Development. 8
Th ere are many career opportunities in human resource management. HRM
departments are common in most organizations. And HRM specialists are in-
creasingly important in an environment complicated by legal issues, labor
shortages, economic turmoil, changing corporate strategies, changing social
values, and more. A growing number of fi rms provide specialized HRM services
such as recruiting, compensation, outplacement, and the like. Th e Society for
Human Resource Management, or SHRM, is a professional organization dedi-
cated to keeping its membership up to date in all aspects of HRM and its com-
plex legal environment.
Human capital is the economic value of people with job-relevant abilities, knowledge, ideas, energies, and commitments.
Strategic human resource management mobilizes human capital to implement organizational strategies.
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EXPLORING MANAGEMENT234
||| Government legislation protects against employment discrimination.
“Why didn’t I get invited for a job interview? Is it because my fi rst name is Omar?”
“Why didn’t I get that promotion? Is it because I’m so visibly pregnant?” If valuing
people is at the heart of human resource management, job discrimination should be its enemy. It occurs when an organization denies someone employ-
ment or a job assignment or an advancement opportunity for reasons that are
not performance relevant. 9
An important cornerstone of U.S. laws designed to protect workers from job
discrimination is Title VII of the Civil Rights Act of 1964, amended by the Equal
Employment Opportunity Act of 1972 and the Civil Rights Act (EEOA) of 1991. Th ese
acts provide for equal employment opportunity (EEO), giving everyone the right to employment without regard to sex, race, color, national origin, or reli-
gion. It is illegal under Title VII to use any of these as criteria when making deci-
sions about hiring, promoting, compensating, terminating, or otherwise changing
someone’s terms of employment.
Job discrimination occurs when someone is denied a job or job assignment for non-job-relevant reasons.
Equal employment opportunity (EEO) is the right to employment and advancement without regard to race, sex, religion, color, or national origin.
Th e intent of Title VII and equal employment opportunity is to ensure every-
one the right to gain and keep employment based only on their ability and job
performance. Th e Equal Employment Opportunity Commission (EEOC) enforces
the legislation through its federal power to fi le civil lawsuits against organiza-
tions that do not provide timely resolution of any discrimination charges lodged
against them. Th ese laws generally apply to all public and private organizations
that employ 15 or more people.
Title VII also requires organizations to show affi rmative action in their eff orts to ensure equal employment opportunity for members of protected groups, those
historically underrepresented in the workforce. Employers are expected to ana-
lyze existing workforce demographics, compare them with those in the relevant
labor markets, and set goals for correcting any underrepresentation that might
exist. Th ese goals are supported by affi rmative action plans that are designed to
Affi rmative action is an eff ort to give preference in employment to women and minority group members.
When the U. S. Supreme Court ruled 5–4 in favor of Walmart in Wal-mart v.
Dukes, it set off a fl urry of controversy.10 The case was a class-action lawsuit fi led
on behalf of some 1.5 million women who claimed Walmart violated Title VII
of the Civil Rights Act by favoring men in pay and promotions. The ruling did
not say that individual women had not been discriminated against; it said the
“class” action did not show a policy of company-wide discriminatory practices.
A corporate press release stated: “Walmart has had strong policies against
discrimination for many years . . . the plaintiffs’ claims were worlds away from
showing a companywide discriminatory pay and promotion policy.” Writing for
the minority, Justice Ruth Bader Ginsburg said: “Managers, like all humankind,
may be prey to biases of which they are unaware. The risk of discrimination
is heightened when those managers are predominantly of one sex, and are
steeped in a corporate culture that perpetuates gender stereotypes.”
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Human Resource Management ■ Chapter 10 235
ensure that an organization’s workforce represents women and minorities in pro-
portion to their labor market availability. 11
You are likely to hear debates over the pros and cons of affi rmative action.
Critics tend to focus on the use of group membership, female or minority status,
as a criterion in employment decisions. 12
Th e issues raised include claims of
reverse discrimination by members of majority populations. White males, for
example, may claim that preferential treatment given to minorities in a particular
situation interferes with their individual rights.
As a general rule, the legal protections of EEO do not restrict an employer’s
right to establish bona fi de occupational qualifi cations. Th ese are criteria for employment that an organization can clearly justify as relating to a person’s ca-
pacity to perform a job. However, EEO bars the use of employment qualifi cations
based on race and color under any circumstances; those based on sex, religion,
and age are very diffi cult to support. 13
Table 10.1 is a reminder that legal protection against employment discrimina- tion is quite extensive. But we must still be realistic. Laws help, but this doesn’t
mean you will never be aff ected by employment discrimination. 14
Bona fi de occupational qualifi cations are employment criteria justifi ed by capacity to perform a job.
Table 10.1 A Sample of U.S. Laws Against Employment Discrimination
• Pay—The Equal Pay Act of 1963 requires equal pay for women and men doing equal work. It describes equal work in terms of skills, responsibilities, and working
conditions.
• Age—Th e Age Discrimination in Employment Act of 1967 as amended in 1978 and 1986 protects workers against mandatory retirement ages. Age discrimination occurs
when a qualifi ed individual is adversely aff ected by a job action that replaces him or
her with a younger worker.
• Pregnancy—Th e Pregnancy Discrimination Act of 1978 protects female workers from discrimination because of pregnancy. A pregnant employee is protected against ter-
mination or adverse job action because of the pregnancy and is entitled to reasonable
time off work.
• Disabilities—Th e Americans with Disabilities Act of 1990 as amended in 2008 prevents discrimination against people with disabilities. Th e law requires employment deci-
sions be based on a person’s abilities and what he or she can do.
• Family matters—Th e Family and Medical Leave Act of 1993 protects workers who take unpaid leaves for family matters from losing their jobs or employment status. Workers
are allowed up to 12 weeks of leave for childbirth, adoption, personal illness, or illness
of a family member.
||| Laws can’t guarantee that employment discrimination will never happen.
Not too long ago, a woman wrote to the Wall Street Journal with this question: “I
was interviewing for a sales job and the manager asked me what child care ar-
rangements I had made . . . . Was his question legal?” Th e answer, according to
an employment attorney, is that the manager’s question is “a perfect example of
what not to ask a job applicant” and “could be considered direct evidence of gen-
der bias against women based on negative stereotypes.” 15
Other examples of dis-
criminatory practices can easily be found.
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EXPLORING MANAGEMENT236
One of the emerging areas of controversy in employment discrimination in-
volves issues of social media use and employee privacy—the rights of employ- ees to privacy on and off the job.
16 Technology allows most employers to
monitor telephone calls, e-mails, social media usage, and Internet searches to
track your activities while on the job. Th e best advice on workplace privacy is
to assume you have none and act accordingly. But beyond that, we don’t al-
ways have privacy outside of work either. While vacationing in Europe, a Flor-
ida teacher posted to her “private setting” Facebook pages photos that showed
her drinking alcoholic beverages. After it came to the attention of school ad-
ministrators, she was asked to resign. And she did. Since, however, she has
fi led a lawsuit stating her resignation was forced. 17
Th e resolutions of a grow-
ing number of such social media lawsuits may help clear up just what is and is
not against the law in the non-work zone of employee privacy.
Pay discrimination is against the law. So when Lilly Ledbetter was about to retire from Goodyear and realized that male co-
workers were being paid more, she sued. She initially lost the
case because the Supreme Court said she had delayed too long in
fi ling the claim. But she was smiling when the Lilly Ledbetter
Fair Pay Act became the very fi rst bill signed by President Barack
Obama. It expanded workers’ rights to sue employers on equal
pay issues. Obama said he signed it in honor not only of Lilly but
also of his own grandmother “who worked in a bank all her life,
and even after she hit that glass ceiling, kept getting up again.”
When he signed the Lilly Ledbetter Fair Pay Act, President
Obama said “making our economy work means making sure it
works for everybody.” 18
How about pregnancy discrimination? It’s also against the law, but preg- nancy bias complaints fi led with the U.S. Equal Employment Opportunity
Commission are still common. A spokesperson for the National Partnership of
Women & Families said that problems of pregnancy discrimination are
“escalating” and require “national attention.” 19
And recent research paints a
bleak picture as well. Actors played roles of visibly pregnant and nonpregnant
applicants for jobs as corporate attorneys and college professors. Results
showed that interviewers were more negative toward the “pregnant” females,
making comments such as “she’ll try to get out of doing work” and “she would
be too moody.” 20
Age discrimination, too, is against the law. But the EEOC is reporting an in- creased number of age bias complaints. Federal age discrimination laws protect
employees aged 40 and up, and the proportion of workers in this age group is
increasing with what some call the “graying” of the American workforce. When
an older worker is laid off or loses his or her job, the possibility of age discrimi-
nation exists. However, it’s hard to prove. “Th ere’s always the fi ne line between
what discrimination is and what is a legitimate business decision,” says one
attorney. About 20% of age discrimination suits result in some fi nancial settle-
ment in favor of the person fi ling the claim, but this doesn’t always include get-
ting the job back. And there is no doubt that older workers face tough job
searches. Data indicate that unemployment for workers over 50 lasts 27 more
weeks than for younger ones. 21
Employee privacy is the right to privacy on and off the job.
Pay discrimination occurs when men and women are paid diff erently for doing equal work.
Pregnancy discrimination penalizes a woman in a job or as a job applicant for being pregnant.
Age discrimination penalizes an employee in a job or as a job applicant for being over the age of 40.
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Human Resource Management ■ Chapter 10 237
Takeaway 10.1 What Are the Purpose and Legal Con-
text of Human Resource Management?
Rapid Review • Th e human resource management process involves attracting, developing, and
maintaining a quality workforce.
• Job discrimination occurs when someone is denied an employment opportunity for reasons that are not job relevant.
• Equal employment opportunity legislation guarantees people the right to employ- ment and advancement without discrimination.
• Current legal issues in the work environment deal with workplace privacy, pay, pregnancy, and age, among other matters.
Questions for Discussion 1. How might the forces of globalization aff ect human resource management in the
future?
2. Are current laws protecting American workers against discrimination in employ-
ment suffi cient, or do we need additional ones?
3. What employee-rights issues and concerns would you add to those discussed
here?
Be Sure You Can • explain the purpose of human resource management • diff erentiate job discrimination, equal employment opportunity, and affi rmative
action
• identify major U. S. laws protecting against employment discrimination • explain the issues of workplace privacy that today’s college graduates should be
prepared to face
What Would You Do? If you were on a student committee appointed to investigate gender equity in sports
on your campus, what areas would you look at? Based on your understanding of
campus aff airs, what changes would you suggest in athletic funding and
administration to improve gender equity?
STUDY GUIDE
Terms to Defi ne Affi rmative action
Age discrimination
Bona fi de occupational
qualifi cations
Comparable worth
Employee privacy
Equal employment
opportunity (EEO)
Human capital
Human resource
management (HRM)
Independent
contractors
Job discrimination
Pay discrimination
Pregnancy
discrimination
Strategic human
resource management
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EXPLORING MANAGEMENT238
A key goal of HRM is “fit.” Person-job fit is the extent to which an individual’s skills, interests, and personal characteristics are consistent with
the requirements of the job. Person-organization fit is the extent to which an individual’s values, interests, and behavior are consistent with the culture
of the organization.
It makes sense that the fi rst responsibility of human resource management is
to attract and retain the right people to an organization’s work-
force. To do this, one must fi rst know exactly what type of people
to look for. Th is requires a clear understanding of the jobs to be
done and the talents people need to do them well. And it requires
having the right systems in place so that jobs are always fi lled with
enthusiastic and high-performing workers.
Tony Hsieh, CEO of Zappos, takes the notion of fi t to the ex-
treme. If a new employee is unhappy with the fi rm after going
through initial training, Zappos pays them to quit. Yes, believe it or
not, the “bye-bye bounty” is $3,000. Some 2–3% of new hires take it
each year. 22
||| Recruitment attracts qualifi ed job applicants. Recruitment is what organizations do to attract a qualifi ed pool of applicants to an organization. Th e word “qualifi ed” is especially important here. Recruiting
should bring employment opportunities to the attention of people whose skills
and abilities meet job requirements. Recruiting is basically a process of advertis-
ing the job, collecting a pool of applicants, and selecting from that pool those
who are most promising in terms of potential employability.
More and more recruiters are turning to the Web and social media sites to dis-
seminate job openings and search for qualifi ed applicants. Monster.com and
LinkedIn.com are two examples of the online career sites frequently used by job
hunters and employers. U.S. Cellular, for example, reports that it saved $1 million
in just one year by using LinkedIn to fi nd job candidates rather than hiring
through head-hunter fi rms. 23
Person-job fi t is the match of individual skills, interests, and personal characteristics with the job.
Person-organization fi t is the match of individual values, interests, and behavior with the organizational culture.
Recruitment is a set of activities designed to attract a qualifi ed pool of job applicants.
Takeaway 10.2 What Are the Essential Human
Resource Management Practices?
ANSWERS TO COME
■ Recruitment attracts qualifi ed job applicants.
■ Selection makes decisions to hire qualifi ed job applicants.
■ Socialization and orientation integrate new hires into an organization.
■ Training continually develops employee skills and capabilities.
■ Performance management appraises and rewards accomplishments.
■ Retention and career development provide career paths.
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Human Resource Management ■ Chapter 10 239
When you use online sites to disseminate your résumé, be
sure to fi ll your online profi le with key words that both display
your skills and match employer interests. Many employers use
special software to scan online profi les for indicators of real job
skills and experiences that fi t their needs. Also, don’t forget that
technology can also work to your disadvantage unless you
maintain a truly professional Web presence. A CareerBuilder.
com survey reports that some 45% of executives in one sample
said they visited social network sites of job candidates, and
about one-third of them found information that caused them to
not hire the person. 24
It’s more common now that an early screening check after reviewing a résumé
takes place over the telephone. Th is can be a make-or-break moment and
shouldn’t be taken lightly. Check out the Tips to Remember for ideas on how to
succeed in telephone interviews. 25
Are you ready? Th e typical telephone inter-
view can last an hour or more and get into lots of specifi cs that traditionally have
been covered in face-to-face conversation. After being asked to describe her ma-
jor past accomplishments, one job candidate said, “I was taken aback by how
specifi c the interviewer was getting.” 26
And when it comes to the interview itself, be sure to look and press for a realistic job preview. It gives you both the good points and the bad points of the job and organization.
27 You might be easily misled by an interviewer that adopts a more
traditional “tell-and-sell” approach, perhaps trying to hide or gloss over the poten-
tial negatives. It’s far better to get a realistic and full picture of the situation before,
not after, you decide to accept off er. Instead of “selling” only positive features, a re-
alistic job preview tries to be open and balanced in describing the job and organiza-
tion. Both favorable and unfavorable aspects are covered.
Realistic job previews provide job candidates with all pertinent information about a job and organization.
• Prepare ahead—Learn everything you can about the organi- zation; with this employer in mind, list your relevant strengths and capabilities.
• Practice answers to common questions—What value can you add to our organization on day one? Why do you want this job? What are your career goals?
• Take the call in private—Be in a quiet room, with privacy, without interruptions; set aside enough time to talk as long as the interviewer wants.
• Dress professionally—Don’t be casual; dressing right in- creases confi dence and helps set your interview tone.
• Practice your interview voice—What you say and how you sound affects the fi rst impression you make; it often helps to stand up while talking; use correct telephone etiquette and don’t answer other calls.
• Have your questions ready—Don’t be caught hesitating; intersperse your best questions throughout the interview; don’t be “smart” or “pushy,” but show insight and interest.
• Check your social persona—Review your social media postings. Be prepared to answer questions about your online presence.
• Ask what happens next—Ask how to follow up and what ad- ditional information you can provide.
■ STEPS TO SUCCESS IN TELEPHONE INTERVIEWS
Tips to Remember { BE PREPARED TO ANSWER QUESTIONS
ABOUT YOUR ONLINE PRESENCE.
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EXPLORING MANAGEMENT240
How can you tell if you are getting a realistic job preview? Th e interviewer
might use phrases such as “Of course, there are some downsides . . . ” “Th ings
don’t always go the way we hope . . . ” “Something that you will want to be
prepared for is . . . ” “We have found that some new hires had diffi culty with . . . ”
If you don’t hear these phrases, ask the tough questions yourself. Th e answers
you get will help establish realistic job expectations and better prepare you for
the inevitable ups and downs of a new job. And the recruiter benefi ts too from
higher levels of early job satisfaction and less inclination of new hires to quit
prematurely.
||| Selection makes decisions to hire qualifi ed job applicants.
Once a good set of job candidates is identifi ed, the next step is to decide whom to
hire. Selection involves choosing to hire applicants who off er the greatest perfor- mance potential. Th is is really an exercise in prediction—trying to anticipate
whether the candidate will perform well once on the job. Th e typical sequence
involves in-depth interviewing, some form of testing, perhaps a real-time assess-
ment of how well the candidate works on actual or simulated job tasks, and back-
ground checks that may include Web searches and reviews of personal postings
on social media sites such as a Facebook profi le.
It’s quite common for job candidates to be asked to take employment tests.
Some test job-specifi c knowledge and skills; others focus more on intelligence,
aptitudes, personality, or general interests. Regardless of the intent, however, any
employment test should be both reliable and valid. Reliability means that the test provides a consistent measurement, returning the same results time after
time. Validity means that the test score is a good predictor of future job perfor- mance, with a high score associated with high job performance and vice versa.
One of the popular developments in employment testing is the use of assess- ment centers. Th ey allow recruiters to evaluate a person’s job potential by ob- serving his or her performance in experiential activities designed to simulate
daily work. A related approach is work sampling, which asks candidates to work on actual job tasks while observers grade their performance. Google uses a form
of this called “Code Jams.” Th ese are essentially contests that the fi rm runs to fi nd
the most brilliant software coders. Winners get fi nancial prizes and job off ers.
Code Jams are held worldwide and a company spokesperson says: “Wherever the
best talent is, Google wants them.” 28
Screening applicant information
Interview or site visit
Employment testing
Preemployment checks
Selection Process
Deficient qualifications or poor references
Overall potential is low or poor interpersonal skills
Poor test scores
Physically unfit for job or failed drug test or background check
Reasons for Rejection
1
2
3
4
Selection is choosing whom to hire from a pool of qualifi ed job applicants.
Reliability means that a selection device gives consistent results over repeated measures.
Validity means that scores on a selection device have demonstrated links with future job performance.
An assessment center examines how job candidates handle simulated work situations.
Work sampling evaluates applicants as they perform actual work tasks.
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Human Resource Management ■ Chapter 10 241
||| Socialization and orientation integrate new employees into the organization.
Once hired, a new member of any organization has to “learn the ropes” and be-
come familiar with “the way things are done.” Socialization is the process of infl u- encing the expectations, behavior, and attitudes of a new hire in a desirable way.
It begins with the human resource management practice of orientation—a set of activities designed to familiarize new employees with their jobs, co-workers,
and key values, policies, and other aspects of the organization as a whole.
For years, Disney has been considered a master at this. During orientation at its
Disney World Resort in Buena Vista, Florida, new employees learn the corporate
culture. Th ey also learn that the company places a premium on personality and
expects all employees—from entertainers to ticket sellers to groundskeepers—“to
make the customer happy.” A Disney HRM specialist says: “We can train for skills.
We want people who are enthusiastic, who have pride in their work, who can take
charge of a situation without supervision.” 29
||| Training continually develops employee skills and capabilities.
At this point, you should probably be keeping a list of things to look for in your
next employer. Here’s a big one: a willingness to invest in training so that you are
continuously learning and updating your job skills. Training is so important at
Procter & Gamble that managers are rated on how well they train and develop
those reporting to them. And, those that develop reputations as great trainers
usually get the promotions. 30
We all need training. But it’s especially critical today because new knowledge
and technologies quickly make so many of our existing skills obsolete. A great
employer won’t let this happen. Instead of trying to avoid training and save
costs, it willingly spends on training and views it as an investment in human
resources. 31
Th is is a classic case of valuing employees as assets. In fact, you
should probably ask questions about training opportunities in any job inter-
view. And if the interviewer struggles for answers or evades the questions,
you’re getting a pretty good indication that the organization isn’t likely to pass
the “great employer” test.
A convenient and powerful training approach that you should be inquiring
about is coaching. Th is is where an experienced person provides performance advice to someone else. Ideally, a new employee is assigned a coach who can
model desired work behaviors and otherwise help him or her to learn and make
progress. Sometimes, the best coach is the manager. At other times, it may be a
co-worker. Always, the key is for the coach to be willing and able to show a new-
comer by example how things should be done.
You should also be interested in mentoring. Th is is where a new or early- career employee is assigned as a protégé to someone senior in his or her area of expertise,
perhaps a high-level manager. Good mentoring programs can be a great boost to
a newcomer’s career. Mentors are supposed to take an interest in the junior per-
son, provide guidance and advice on skills and career progress, and otherwise in-
form him or her about how one gets ahead careerwise in the organization. At
Cisco Systems, for example, pre-retirement Baby Boomers serve as mentors for
Socialization systematically infl uences the expectations, behavior, and attitudes of new employees.
Orientation familiarizes new employees with jobs, co-workers, and organizational policies and services.
Coaching occurs as an experienced person off ers performance advice to a less experienced person.
Mentoring assigns early-career employees as protégés to more senior ones.
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EXPLORING MANAGEMENT242
Gen Ys just starting out with the fi rm. Executives believe this has helped in
recruiting a new generation of employees.
Some enlightened employers are using reverse mentoring where younger em- ployees mentor seniors. A good example is technology-savvy Gen Ys tutoring their
seniors on how to use social media in their jobs. Reverse mentoring programs are
not only informative for senior managers, they also provide younger employees
with an important sense of buy-in and contribution. One human resource man-
agement consultant says: “It’s exactly the kind of thing that’s needed today be-
cause Gen-Yrs really want to be involved.” 32
||| Performance management appraises and rewards accomplishments.
Once a person is hired and on the job, one of the important functions of HRM is
performance management. Th is involves using various techniques of perfor- mance appraisal to formally assess and give feedback on someone’s work ac- complishments.
33 Th e purposes of performance appraisal are twofold. First, it
measures and documents performance for the record. Second, it initiates a pro-
cess of development that can improve performance in the future. 34
In reverse mentoring, younger and newly hired employees mentor senior executives, often on latest developments with digital technologies.
Performance appraisal is the process of formally evaluating performance and providing feedback to a job holder.
The Millennial generation—born 1980 to 2001—enters today’s work- place trailing generations that pos- sess different attitudes about work life. The Baby Boomers—born 1946
to 1964—lead most organizations, and Generation Xers—born 1965 to 1979—are likely to supervise. Millennials have been nur- tured to be confi dent and reliant on technology, yet co-workers may be cautious of their need for advancement and advice. Baby Boomers toiled for years to attain leadership and expect patience from others, while Gen Xers were raised to be self- directed and not expect lots of guidance. Today’s workplace will change as each generation adjusts to the others’ capabilities.
In the book The Trophy Kids Grow Up (2008, Jossey-Bass), author Ron Alsop urges Millennials to make distinctions be- tween their childhood treatments and adult work life. He sug- gests that in formative years everyone in this generation received participation trophies—rewarded for effort not per- formance. They chatted in shorthand text and Internet fo- rums that were free from adults, and emphasized friends and interests as much as schoolwork. Their standard attire in- cluded jeans, fl ip-fl ops, and iPods. Though Millennials anointed themselves as the greatest generation and feel entitled to
success, Alsop cautions they may need to rationalize how fantasy and past experience meets reality as they emerge from adolescence into the adult workplace.
Alsop believes Millennials expect more direction and feed- back at work than Gen X or Baby Boomer bosses are used to providing. Young workers want checklists for direction and pre- fer teamwork. They possess a soft work ethic and casual ap- proach to work structure. They limit work time to pursue outside interests, dress casually, loathe meetings, and have trouble with the 9 to 5 timetable at an offi ce. But, there’s a reality to face. Alsop advises Millennials that employers expect personal sacri- fi ces to advance and that formal attire is necessary to respect others. Offi ce interaction is essential to success and creates outcomes impossible through electronic means.
REFLECT AND REACT.
Will you expect your supervisor to counsel you the same way that your parents advise you? Is time commitment to a job more or less important than spending time with friends or hobbies? Are you prone to replacing face-to-face interactions with elec- tronic ones? Have you posted material on the Web that might embarrass you if your employer viewed it? And by the way, do you agree that Millennials have a sense of entitlement?
■ THE TROPHY KIDS GROW UP, BY RON ALSOP
CEO—ARE WE THERE YET?
Manager’s Library
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Human Resource Management ■ Chapter 10 243
In order for an appraisal method to serve these two purposes with credibility,
it must satisfy the same reliability and validity criteria as do employment tests. 35
Any manager who hires, fi res, or promotes based on performance appraisals,
must be able to confi dently explain and discuss them with the persons involved
even when disagreement is voiced. Managers may even need to defend such ac-
tions in discrimination-based lawsuits. It is hard to have a good performance
review conversation or mount a legal case if the performance appraisal method
can be faulted because of reliability or validity problems.
One of the most basic performance appraisal methods is a graphic rating scale. It is a checklist or scorecard for rating an employee on criteria such as work quality, attendance, and punctuality. Although simple, quick, and commonly
used, graphic rating scales have questionable reliability and validity. At best they
should probably be used only along with additional appraisal tools.
A more advanced approach to performance appraisal uses a behaviorally an- chored rating scale (BARS). Th is describes actual behaviors that exemplify various levels of performance achievement in a job. Th e example in Figure 10.1 shows a BARS for a customer service representative. “Extremely poor” performance is
described with the behavioral anchor “treats a customer rudely and with disre-
spect.” Because the BARS relates performance assessments to specifi c descriptions
of work behavior, it is more reliable and valid than the graphic rating scale. Th e
behavioral anchors can also be used for training in job skills and objectives.
A graphic rating scale uses a checklist of traits or characteristics to evaluate performance.
A behaviorally anchored rating scale (BARS) uses specifi c descriptions of actual behaviors to rate various levels of performance.
If a customer has defective merchandise that is not the responsibility of the store, you can expect this representative to help the customer arrange for the needed repairs elsewhere.
You can expect this representative to help a customer by sharing complete information on the store's policies on returns.
After finishing with a request, you can expect this representative pleasantly to encourage a customer to “shop again” in the store.
You can expect this representative to delay a customer without explanation while working on other things.
You can expect this representative to treat a customer rudely and with disrespect.
Outstanding
performance
Unsatisfactory
performance
5
4
3
2
1
FIGURE 10.1 What Does a Behaviorally Anchored Rating Scale Look Like? A behaviorally anchored rating
scale (BARS) uses actual
descriptions of positive and
negative job behaviors to anchor
rating points. In this example of
how a customer service
representative handles a
merchandise return, various
alternative behaviors are clearly
identifi ed. Consistent and
documented rude or
disrespectful behavior toward
customers by a salesperson
would earn a rating of “extremely
poor.” Th is specifi city makes the
BARS more reliable and valid.
Th e critical-incident technique keeps an actual log of a person’s eff ective and ineff ective job behaviors. Using the case of the customer service representative
again, a critical-incident log might include this positive example: “Took extraordi-
nary care of a customer who had purchased a defective item from a company store
in another city.” Or it might include this negative example: “Acted rudely in dismiss-
ing the complaint of a customer who felt that we mistakenly advertised a sale item.”
Not all performance appraisals are completed only by one’s immediate boss. It
is increasingly popular to include self-appraisal, peer appraisals, and even up-
ward appraisals from subordinates. Th is is called 360� feedback, where superi- ors, subordinates, peers, and even internal and external customers are involved
in the appraisal of a job holder’s performance. 36
New technologies even allow
Th e critical-incident technique keeps a log of someone’s eff ective and ineff ective job behaviors.
360� feedback includes superiors, subordinates, peers, and even customers in the appraisal process.
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EXPLORING MANAGEMENT244
Chances are that your school has a student branch of the So- ciety for Human Resource Management. It’s a great example of how professionalism plays a role in management. When students work together on SHRM projects, they are not just learning HRM techniques and practices. They are learning to behave with internalized commitments to external standards.
All managers should show professionalism in their own areas of expertise and work responsibility. And, of course, they should be thoroughly professional in all aspects of hu- man resource management discussed in this chapter—from
recruiting and selecting new hires, to training and developing them, to appraising performance, to handling issues like com- pensation and work-life balance.
■ PROFESSIONALISM
Explore Yourself MANAGERS SHOULD ACT PROFESSIONAL WHEN
DOING PERFORMANCE APPRAISALS. {
Get to know yourself better by taking the self-assessment
on Performance Appraisal Assumptions and completing the other activities in the Exploring Management Skill- Building Portfolio.
360� feedback to be continuous rather than periodic. Accenture uses a computer
program called Performance Multiplier that allows users to post projects, goals,
and status updates for review by others. And a Toronto-based start-up company
off ers a program called Rypple. Users post questions in 140 characters or less; for
example: “What did you think of my presentation?” or “How could I have run that
meeting better?” Anonymous responses are compiled by the program and the
360�-type feedback is then sent to the person posting the query.37
Finally, some performance appraisals use multiperson comparisons to avoid the problem of everyone being rated “about the same.” Instead, they make manag-
ers rate and rank people relative to one another. Th ese multiperson comparisons
can be done by rank-ordering people from top to bottom in order of performance
achievement, with no ties allowed. Th ey can be done by paired comparisons that
fi rst evaluate each person against every other, and then create a summary ranking
based on the number of superior scores. Or they can be done by a forced distribu-
tion that places each person into a frequency distribution with fi xed performance
classifi cations—such as top 10%, next 40%, next 40%, and bottom 10%.
||| Retention and career development provide career paths.
After investing in recruitment, selection, orientation, training, and appraisal,
an employer would be foolish to neglect eff orts to retain the best employees for
as long as possible. Th ere are many issues involved in retention, with compen-
sation and benefi ts as discussed in the next section leading the list. If an
organization isn’t willing to pay at or above market levels with benefi ts to
match, it may end up losing good people who leave for better jobs elsewhere.
Another signifi cant retention issue is career development—the process of managing how a person grows and progresses in responsibility from one point in
a career to the next. After initial entry, our career paths in organizations can take
A multiperson comparison compares one person’s performance with that of others.
Career development is the process of managing how a person grows and progresses in a career.
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Human Resource Management ■ Chapter 10 245
off in many directions. Lots of choices will have to be made dealing with promo-
tions, transfers, overseas assignments, mentors, higher degrees, even alternative
employers and retirement.
Ideally, the employer and the individual work closely together in making ca-
reer development choices. At Procter & Gamble, global human resources offi cer
Moheet Nagrath says career tracks are built to match individual goals and
company needs. If someone wants to become a top manager someday, for ex-
ample, the company will plot moves through various brands as well as domestic
and international assignments. “If you train people to work in diff erent coun-
tries and businesses,” he says, “you develop a deep bench.” 38
With people changing jobs frequently today and many working as indepen-
dent contractors and freelancers, career development is becoming more and
more a personal responsibility. Th is means that we each have to be diligent in
career planning, the process of systematically matching career goals and indi- vidual capabilities with opportunities for their fulfi llment. It involves answering
such questions as “Who am I?” “What can I do?” “Where do I want to go?” and
“How do I get there?”
Some suggest that we should view a career as something to be rationally
planned and pursued in a logical step-by-step fashion. Others argue for fl exibility,
allowing our career to unfold in a somewhat random fashion as we respond to
unexpected opportunities. But think about it. A well- managed career will prob-
ably include elements of each. A carefully thought-out career plan points you in a
general direction; an eye for opportunity helps fi ll in the details as you proceed
along the way. Are you ready?
Career planning is the process of matching career goals and individual capabilities with opportunities for their fulfi llment.
Are you successful working in sales at mall fashion cloth- ing and retail shops? If so, a new and higher-paying option may be right for you. A local car dealership sell- ing luxury vehicles wants outgoing, helpful women for client sales positions. Applicants should be honest and money-motivated, with high initiative and excellent communication skills. Pay based on wages, commis- sions, and bonuses can reach $80,000 per year. Watch for our recruiters at your mall this weekend.
This ad isn’t real; you’re unlikely to see anything like it in your local paper. But it is refl ective of a trend in automobile sales—trying to hire more women and trying to recruit them in nontraditional settings. Marketing surveys show that women
infl uence some 80% of car purchases and that many men pre- fer dealing with a female salesperson.
At a St. Louis dealership, the female owner claims that women are better organized and better at building a client base than are men; she wants to hire more. A law professor at Wash- ington University in St. Louis says that it’s okay to try to hire more women if the dealers aren’t getting enough applicants.
YOU DECIDE
Suppose you’re a qualifi ed man, working in sales at a mall fashion store. You’re also honest, self-starting, a good com- municator, motivated by money, and in love with cars. Where does this ad leave you? Is it ethical for the car dealer to inter- view only women for this position?
■ HELP WANTED: SALESWOMEN
Ethics Check MANY MEN PREFER BUYING CARS FROM
A FEMALE SALESPERSON. {
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EXPLORING MANAGEMENT246
Takeaway 10.2 What Are the Essential Human
Resource Management Practices?
Rapid Review • Recruitment is the process of attracting qualifi ed job candidates to fi ll vacant po-
sitions; realistic job previews try to provide candidates with accurate information
on the job and organization.
• Assessment centers and work sampling that mimic real job situations are increas- ingly common selection techniques.
• Orientation is the process of formally introducing new employees to their jobs and socializing them to the culture and performance expectations.
• Training keeps workers’ skills up to date and job relevant; important training approaches include coaching and mentoring.
• Performance appraisal methods include graphic rating scales, behaviorally an- chored rating scales, the critical-incidents technique, 360� feedback, and multi- person comparisons.
• Employee retention programs try to keep skilled workers in jobs and on career paths satisfying to them and benefi cial to the employer.
Questions for Discussion 1. Is it realistic to expect that you can get a realistic job preview during the inter-
view process?
2. If a new employer doesn’t formally assign someone to be your coach or mentor,
what should you do?
3. What are some of the possible downsides to receiving 360� feedback?
Be Sure You Can • list steps in the recruitment process • explain realistic job previews • illustrate reliability and validity in employment testing • illustrate how an assessment center might work • explain the importance of socialization and orientation • describe coaching and mentoring as training approaches • discuss strengths and weaknesses of alternative performance appraisal methods
What Would You Do? As the new head of retail merchandising at a local department store, you are
disappointed to fi nd that the sales clerks are evaluated on a graphic rating scale
that uses a simple list of traits to gauge their performance. You want to propose an
alternative and better approach for performance appraisal. Exactly what will you
present as your proposal, and how will you present it to both the sales clerks and
the boss?
STUDY GUIDE
Terms to Defi ne
Assessment center
Behaviorally anchored
rating scale (BARS)
Career development
Career planning
Coaching
Critical-incident
technique
Graphic rating scale
Mentoring
Multiperson
comparison
Orientation
Performance appraisal
Person-job fi t
Person-organization fi t
Realistic job preview
Recruitment
Reliability
Reverse mentoring
Selection
Socialization
360� feedback
Validity
Work sampling
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Human Resource Management ■ Chapter 10 247
“Hiring good people is tough,” starts an article in the Harvard Business
Review. Th e sentence fi nishes with “keeping them can be even tougher.” 39
Th e
point is that it isn’t enough to hire and train workers to meet an organization’s
immediate needs. Th ey must also be successfully nurtured, supported, and re-
tained. When the Society for Human Resource Management surveyed employers,
it learned that popular tools for maintaining a quality workforce included fl exible
work schedules and personal time off , as well as competitive salaries and good
benefi ts—especially health insurance. 40
||| Today’s lifestyles increase demands for fl exibility and work-life balance.
Did you know that 78% of American couples are dual-wage earners, that 63% of
workers believe they don’t have enough time for spouses and partners, and that 74%
say they don’t have enough time for their children? 41
Today’s fast-paced and compli-
cated lifestyles have raised concerns for work-life balance, how people balance the demands of careers with their personal and family needs.
42 Not surprisingly,
the “family-friendliness” of an employer is now frequently used as a screening cri-
terion by job candidates. It is also used in “best employer” rankings by magazines
such as Business Week, Working Mother, and Fortune. 43
Work-life balance is enhanced when workers have fl exibility in scheduling
work hours, work locations, and even such things as vacations and personal time
off . Flexibility allows people to more easily manage their personal aff airs and
work responsibilities, and it has been shown that workers who have fl exibility, at
least with start and stop times, are less likely to leave their jobs. 44
Job designs that
include fl exible work hours and other alternative work schedules discussed in
Chapter 8 are an increasingly popular starting point. 45
At Abbott Labs in Colum-
bus, Ohio, for example, Wednesday is the only day employees have to be in the
offi ce; other days are open to fl exible scheduling. 46
More and more employers create fl exibility by directly helping workers handle
family matters through such things as on-site day care and elder care. Some have
moved into innovative programs that include work sabbaticals—Schwab off ers
four weeks after fi ve years employment; unlimited vacation days—a Dublin,
Work-life balance involves balancing career demands with personal and family needs.
Takeaway 10.3 What Are Current Issues in Human
Resource Management?
ANSWERS TO COME
■ Today’s lifestyles increase demands for fl exibility and work-life balance.
■ Organizations use more independent contractors and part-time workers.
■ Compensation plans infl uence employee recruitment and retention.
■ Fringe benefi ts are an important part of employee compensation packages.
■ Labor relations and collective bargaining are closely governed by law.
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EXPLORING MANAGEMENT248
Ohio, advertising agency lets workers take as many vacation days as they want;
purchased vacation time—Xerox allows workers to buy vacation days using pay-
roll deductions; and on-call doctors—Microsoft sends doctors to employees’
homes to keep them out of emergency rooms. 47
Th e accounting fi rm KPMG even
keeps a “wellness scorecard” on employees to see if they are missing vacations or
working too hard; if so, they are contacted by supervisors to discuss work pat-
terns and ways to slow down. 48
||| Organizations are using more independent contractors and part-time workers.
Don’t be surprised if you are asked some day to work only “as needed,” as a “free-
lancer,” or as an independent contractor. Th is would mean that you are expected to work for an agreed-upon period or for an agreed-upon task and without be-
coming part of the permanent workforce.
If there is one trend that has been reinforced by our tight economy, it’s the use
of more temporary and part-time workers. Gerry Grabowski of Pittsburgh knows
the downside and the upside fi rsthand; he turned a temporary job in real estate
into a full-time one. Says Grabowski: “A lot of people say it’s a raw deal, and I
guess it can be. But if I were an entrepreneur, I would never do a straight hire. I
would use a contractor or temp fi rst.” 49
If you wonder why, BusinessWeek de-
scribes them as: “easy to lay off , no severance; no company funded retirement
plan; pay own health insurance; get zero sick days and no vacation.” 50
Independent contractors are hired on temporary contracts and are not part of the organization’s permanent workforce.
After being voted as one of Fortune magazine’s “Best Compa- nies to Work for” 13 years in a row, this privately owned soft- ware fi rm in North Carolina has earned a top reputation as an employer. Here’s a glimpse of what it’s like to be one of Good- night’s 4000� employees.
The typical workweek is 35 hours; no one monitors what time you show up; two in-house day-care centers are available; you can get dry cleaning, car washes and haircuts on site; and work-life or wellness centers provide everything from workout rooms to special programs in weight management to counsel- ing on family issues.
Goodnight is the brains behind SAS’s unique culture. He believes in treating employees well, giving them freedom and support, and trusting them to act as responsible adults. “My chief assets walk out the door every day,” he says. “My job is to make sure they come back.”
And come back they do. The turnover rate at SAS is 2%, compared to 22% for the industry as a whole; over 100 résumés are received for each job opening. And when it comes to performance, employee Bev Brown says: “Some may think that because SAS is family friendly and has great benefi ts that we don’t work hard, but people do work hard here because they’re motivated to care for company that takes care of them.”
WHAT’S THE LESSON HERE?
Jim Goodnight says that “contented cows give more milk.” Is that the lesson we should all be listening to? Is it possible that organizations that really do put people fi rst and treat them as adults have a highly motivated workforce?
■ JIM GOODNIGHT MAKES PEOPLE A TOP PRIORITY AT SAS
Role Models “MY CHIEF ASSETS WALK OUT THE DOOR EVERY DAY.
MY JOB IS TO MAKE SURE THEY COME BACK.” {
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Human Resource Management ■ Chapter 10 249
Part-time and temporary workers represent some 26% of the U.S. workforce,
and the number keeps growing. We call them contingency workers because they supplement the full-time workforce by working as-needed and part-time, often
on a long-term basis. Tammy DePew is one; she works from home as a contract
employee of LiveOps, a contract call-center fi rm. Tammy gets paid by minutes of
customer contact time and is glad to have steady and fl exible work. “LiveOps was
a lifesaver for me.” She says: “Contracting and working from home may not be for
everyone, but is empowering and I like it.” 51
Because contingency workers can be easily hired, contracted with, and termi-
nated in response to changing needs, many employers like the fl exibility they of-
fer in controlling labor costs and dealing with cyclical demand. On the cost side,
an employer can save up to 30% by hiring a contingency versus full-time worker. 52
On the other hand, some worry that temporary workers lack the commitment of
permanent workers and may lower productivity. Perhaps the most controversial
issues of part-time workers is that they may be paid less than their full-time
counterparts, they may experience signifi cant stress and anxiety from their part-
time job status, and many do not receive important benefi ts such as health care,
life insurance, pension plans, and paid vacations.
||| Compensation plans infl uence employee recruitment and retention.
Pay! It may be that no other work issue receives as much attention. And, the trend
in compensation today is largely toward “pay-for-performance.” 53
If you are part of a merit pay system, your pay increases will be based on some assessment of how well you perform. Th e notion is that a good merit raise sends
a positive signal to high performers and a low one sends a negative signal to poor
performers, encouraging both to work hard in the future.
Contingency workers work as needed and part-time, often on a longer-term basis.
Merit pay awards pay increases in proportion to performance contributions.
A survey of human resource executives published in the Wall Street Journal says that they aren’t pleased with the way man- agers in their organizations do performance reviews. Some are so concerned that they suggest dropping them altogether. Some survey fi ndings were: • Only 30% of the HR executives believed that employees trust
their employer’s performance measurement system. • 40% rated their performance review systems as B, and only
3% rated them as A. • Many HR executives were concerned that managers aren’t
willing to face employees and give constructive feedback.
• HR executives also complained that employees don’t have a clear enough understanding of what rates as good and bad performance.
YOUR THOUGHTS?
Performance measurement is often a hot topic these days as things like “merit pay” and “performance accountability” are discussed in many job settings. Based on your experience, what should be done about it? Is it really possible to have a performance measurement system that is respected by all— employers and workers alike?
■ HUMAN RESOURCE EXECUTIVES WORRY ABOUT PERFORMANCE MEASUREMENT
Facts to Consider ONLY 3% OF HRM EXECUTIVES GIVE “A” GRADES TO THEIR
FIRMS’ PERFORMANCE MEASUREMENT SYSTEMS. {
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EXPLORING MANAGEMENT250
Although the pay-for-performance logic makes sense, merit systems are not
problem-free. In many ways they are only as good as the performance appraisal
methods used to measure performance. And this is a problem. A survey reported
by the Wall Street Journal found that only 23% of employees believed they under-
stood their companies’ systems. 54
Typical questions are: Who assesses perfor-
mance? Suppose the employee doesn’t agree with the assessment? Is the system
fair and equitable to everyone involved? Is there enough money available to make
the merit increases meaningful for those who receive them?
In order for a merit pay system to work, it must be based on a solid
foundation of agreed-upon and well-defi ned performance measures
that can handle the prior questions and more. For example, at the res-
taurant chain Applebee’s International Inc., managers know that part
of their merit pay will be determined by the percentage of their best
workers who are retained. In an industry known for high turnover,
Applebee’s makes retention of high performers a high-priority goal for
managers. 55
But this system can still break down if Applebee’s manag-
ers don’t perceive that it is administered in a fair, consistent, and cred-
ible fashion.
Th ere’s more to the Applebee’s story. If you are one of the employees
that managers want to retain, you might be on the receiving end of
“Applebucks”—small cash awards that are given to reward performance and raise
loyalty to the fi rm. 56
Th is is an example of bonus pay—one-time or lump-sum pay- ments to employees based on the accomplishment of specifi c performance tar-
gets or some other extraordinary contribution, such as an idea for a work
improvement. How would you like to someday receive a letter like this one, once
sent to two top executives by Amazon.com’s chairman Jeff Bezos? “In recognition
and appreciation of your contributions,” his letter read, “Amazon.com will pay you
a special bonus in the amount of $1,000,000.” 57
In contrast to straight bonuses, profi t sharing distributes to employees a proportion of net profi ts earned by the organization in a performance period.
Gain sharing extends the profi t-sharing concept by allowing groups of employ- ees to share in any savings or “gains” realized when their eff orts result in measur-
able cost reductions or productivity increases. 58
Yet another merit pay approach is to grant employees stock options linked to their performance.
59 Stock options give the owner the right to buy shares of stock
at a future date at a fi xed price. Stock owners gain fi nancially the more the stock
price rises above the original option price; they lose if the stock price moves
lower. Some companies “restrict” the stock options so that they come due only
after designated periods of employment. Th is practice is meant to tie high per-
formers to the employer and is often called the golden handcuff . You’ll fi nd that
many of the most admired U.S. companies are also ones that off er stock options
to a greater proportion of their workforces.
||| Fringe benefi ts are an important part of employee compensation packages.
Benefi ts! Th ey rank right up there with pay as a way of helping to attract and re-
tain workers. How many times does a graduating college student hear, “Be sure to
get a job with benefi ts!”? 60
Bonus pay plans provide one-time payments based on performance accomplishments.
Profi t sharing distributes to employees a proportion of net profi ts earned by the organization.
Gain sharing allows employees to share in cost savings or productivity gains realized by their eff orts.
Stock options give the right to purchase shares at a fi xed price in the future.
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Human Resource Management ■ Chapter 10 251
Any mention of fringe benefi ts directs attention toward nonmonetary forms of compensation such as health insurance and retirement plans. And they can be
a hot button in conversations about work today. Benefi ts can add as much as 20%
or more to a typical worker’s earnings, and, at times, the cost of benefi ts increases
faster than the cost of wages and salaries.
Fringe benefi t costs, especially medical insurance and retirement, are a major
worry for employers. Many are attempting to gain control over health care expenses
by shifting more of the insurance costs to the employee and by restricting options
in choosing health care providers. Many are also off ering wellness programs and
encouraging healthy lifestyles as a way of decreasing health insurance claims.
Th e growing signifi cance of work-life balance is refl ected in family-friendly ben- efi ts that help employees to better balance work and nonwork responsibilities. Th ese include child care, elder care, fl exible schedules, parental leave, and part-time
employment options, among others. Also popular are fl exible benefi ts programs that let the employee choose a personalized set of benefi ts within a certain dollar
amount, and employee assistance programs that help with troublesome personal problems. Such EAP programs may include assistance in dealing with stress, coun-
seling on alcohol and substance abuse, referrals for domestic violence and sexual
abuse, family and marital counseling, and advice on community resources.
You’ll probably hear a lot about fringe benefi ts in conversations with family
and friends. A quick check of online discussions, for example, uncovered this
question: “If I don’t get the raise I was hoping for, what are some of the possible
fringe benefi ts other than medical insurance that I might ask for to make up the
diff erence?” Here’s a list of the suggestions the questioner received: 401(k) or
403(b) options, life and disability insurance, lower premiums on health insur-
ance, vision insurance, free fi tness center membership, extra vacation time, more
fl exible hours, the option to work from home or the car, longer lunch periods, use
of a company car, and new offi ce furniture. If you’re looking for a new job or
getting ready to negotiate for a pay raise, what might be on your list of desired
fringe benefi ts?
||| Labor relations and collective bargaining are closely governed by law.
Labor unions are organizations to which workers belong and that deal with em- ployers on the workers’ behalf. Th ey act as a collective “voice” for their members,
one that wouldn’t be available to them as individuals. Historically, this voice of
the unions has played an important role in American society. And even though
unions are often associated with wage and benefi t concerns, workers also join
unions because of things like poor relationships with supervisors, favoritism or
lack of respect by supervisors, little or no infl uence with employers, and failure of
employers to provide a mechanism for grievance and dispute resolution. 61
Th e average percentage of workers in the United States who belong to unions
has been on the decline. Recent fi gures show that 11.0% of workers overall now
belong to unions versus 14.9% in 1996. But the percentage of public sector work-
ers who belong to unions—teachers, police, fi refi ghters, and local government
employees, is increasing. It nows stands at 36.2% of workers versus 6.9% in the
private sector. 62
What do you think? Does the decline in private sector union
membership mean that workers have pretty much decided they don’t need union
Fringe benefi ts are nonmonetary forms of compensation such as health insurance and retirement plans.
Family-friendly benefi ts help employees achieve better work-life balance.
Flexible benefi ts programs allow choice to personalize benefi ts within a set dollar allowance.
Employee assistance programs help employees cope with personal stresses and problems.
A labor union is an organization that deals with employers on the workers’ collective behalf.
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EXPLORING MANAGEMENT252
representation anymore? Or do other factors explain these trends? Why is union
membership increasing in the public sector?
Unions negotiate legal contracts aff ecting many aspects of the employment
relationship for their members. Th ese labor contracts typically specify the rights and obligations of employees and management with respect to wages,
work hours, work rules, seniority, hiring, grievances, and other conditions of
work. Th e front line in labor-management relationship is collective bargaining, the process that brings management and union representatives together in ne-
gotiating, administering, and interpreting labor contracts. During a collective
bargaining session, these parties exchange a variety of demands, proposals, and
counterproposals. Several rounds of bargaining may take place before a con-
tract is reached or a dispute resolved. Sometimes the process breaks down, and
one or both parties walk away. Th e impasse can be short or lengthy, in some
cases leading to labor actions that can last months and even years before agree-
ments are reached.
One of the areas where unions and employers can fi nd themselves on diff erent
sides of the bargaining issue relates to so-called two-tier wage systems. Th ese are systems that pay new hires less than workers already doing the same jobs
with more seniority. Agreeing to a two-tier system in collective bargaining isn’t
likely to be the preference of union negotiators. At a Goodyear factory in Alabama
where a two-tiered system is in place, one of the high-seniority workers says: “If I
was doing the same job, working just as hard and earning what they make, I’d be
resentful.” 63
But the management side off ers at least one strong argument in its
favor. Getting a two-tier agreement in the labor contract can help keep the fi rm
profi table and retain jobs in America that would otherwise be lost to foreign
outsourcing. Such agreements are now in place at all the big U.S. automakers. 64
When labor-management relations take on the adversarial character shown
in Figure 10.2, the confl ict can be prolonged and costly for both sides. Th at’s not good for anyone, and there is quite a bit of pressure these days for more coopera-
tive union-management relationships. Wouldn’t it be nice if unions and manage-
ment would work together in partnership, trying to address the concerns of both
parties in ways that best meet the great challenges and competitive pressures of
a global economy?
A labor contract is a formal agreement between a union and an employer about the terms of work for union members.
Collective bargaining is the process of negotiating, administering, and interpreting a labor contract.
Two-tier wage systems pay new hires less than workers already doing the same jobs with more seniority.
What unions can do to make things
difficult for management
Strike—refuse to come to work
Boycott—refuse to buy employer ‚ s
products or services and ask others to do the same
Picket—post and carry signs complaining about the employer
‚ s
treatment of workers
What managers can do to make
things difficult for unions
Lockout—refuse to let employees come to work
Strike-breakers—hire nonunion workers, called “scabs,” to do strikers
‚ jobs
Injunction—get a court order requiring that strikers come back to work
UNIONS AND
MANAGEMENT
AS ADVERSARIES
UNIONS AND
MANAGEMENT
AS ADVERSARIES
FIGURE 10.2 What Happens When Labor-Management Relations Become Adversarial? When union and management representatives meet in collective bargaining, it would be nice if things were always cooperative.
Unfortunately, they sometimes turn adversarial, and each side has weapons at its disposal to make things hard for the other. Unions can
resort to strikes, boycotts, and picketing. Management can use lockouts, strike-breakers, and court injunctions to force strikers back to
work. Although each side can fi nd justifi cations in defense of using such tactics, they can also come with high price tags in terms of lost
worker earnings and company profi ts.
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Human Resource Management ■ Chapter 10 253
Takeaway 10.3 What Are Current Issues in Human
Resource Management?
Rapid Review • Complex job demands and family responsibilities have made work-life balance
programs increasingly important in human resource management.
• Compensation and benefi ts packages must be attractive so that an organization stays competitive in labor markets.
• Labor unions are organizations to which workers belong and that deal with employers on the employees’ behalf.
• Collective bargaining is the process of negotiating, administering, and interpret- ing a labor contract.
• Labor relations and collective bargaining are closely governed by law and can be cooperative or adversarial in nature.
Questions for Discussion 1. Are we giving too much attention these days to issues of work-life balance?
2. Can a good argument be made that merit pay just doesn’t work?
3. Given economic trends, is it likely that unions will gain in future popularity?
Be Sure You Can • defi ne work-life balance and discuss its signifi cance for the human resource
management process
• explain why compensation and benefi ts are important in human resource management
• diff erentiate bonuses and profi t sharing as forms of performance-based pay • defi ne the terms “labor union,” “labor contract,” and “collective bargaining” • compare the adversarial and cooperative approaches to labor-management
relations
What Would You Do? As a student, you have become aware of a drive to organize the faculty of your insti-
tution and have them represented by a union. Th e student leaders on campus are
holding a forum to gather opinions on the pros and cons of a unionized faculty.
Because you represent a student organization in your college, you are asked to par-
ticipate in the forum. What will you say and why?
STUDY GUIDE
Terms to Defi ne
Bonus pay
Collective bargaining
Contingency workers
Employee assistance
program
Flexible benefi ts
Family-friendly
benefi ts
Fringe benefi ts
Gain sharing
Independent
contractors
Labor contract
Labor union
Merit pay
Profi t sharing
Stock options
Two-tier wage systems
Work-life balance
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EXPLORING MANAGEMENT254
1. Human resource management is the process of
____________, developing, and maintaining a
high-quality workforce.
(a) attracting (b) compensating
(c) appraising (d) selecting
2. A ____________ is a criterion that organizations
can legally justify for use in screening job candidates.
(a) job description
(b) bona fi de occupational qualifi cation
(c) realistic job preview
(d) BARS
3. ____________ programs are designed to ensure
equal employment opportunities for groups histori-
cally underrepresented in the workforce.
(a) Realistic recruiting (b) Mentoring
(c) Affi rmative action (d) Coaching
4. An employment test that yields diff erent results
over time when taken by the same person lacks ____________.
(a) validity (b) reliability
(c) realism (d) behavioral anchors
5. Th e assessment center approach to employee
selection relies heavily on ____________ to evalu-
ate a candidate’s job skills.
(a) intelligence tests
(b) simulations and experiential exercises
(c) 360º feedback
(d) formal one-on-one interviews
6. In the legal context of human resource manage-
ment, which of the following is most likely a safe
question for an interviewer to ask a job candidate
during a telephone interview?
(a) Are you pregnant or planning to soon start a
family?
(b) What skills do you have that would help you do
this job really well?
(c) Will you be able to work at least ten years before
hitting the retirement age?
(d) Do you get fi nancial support from a spouse or
companion who is also a wage earner?
7. Socialization of newcomers occurs during the ____________ step of the staffi ng process.
(a) orientation (b) recruiting
(c) selection (d) advertising
8. Which phrase is most consistent with a recruiter
off ering a job candidate a realistic job preview?
(a) “Th ere are just no downsides to this job.”
(b) “No organization is as good as this one.”
(c) Th ere just aren’t any negatives.”
(d) “Let me tell you what you might not like once
you start work.”
9. When a job candidate is asked to actually perform
on-the-job for a period of time while being observed
by a recruiter, this is a selection technique known as ____________.
(a) mentoring (b) work sampling
(c) job coaching (d) critical incident testing
10. Th e ____________ purpose of performance
appraisal is being addressed when a manager
describes training options that might help an
employee improve future performance.
(a) development (b) evaluation
(c) judgmental (d) legal
11. When a team leader must rate 10% of team mem-
bers as “superior,” 80% as “good,” and 10% as “unac-
ceptable,” this is an example of the ____________
approach to performance appraisal.
(a) graphic
(b) critical-incident
(c) behaviorally anchored rating scale
(d) forced distribution
12. What is one of the reasons why employers are hiring
more part-time or contingency workers?
(a) It’s hard to get people to work full-time anymore.
(b) Part-timers are known to work much harder
than full-timers.
(c) Full-time employees don’t have up-to-date job skills.
(d) It’s easy to hire part-timers when you need
them, and let them go when you don’t.
C H
A
PTER 1 0
TP
Multiple-Choice Questions
TestPrep 10
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Human Resource Management ■ Chapter 10 255
13. Whereas bonus plans pay employees for special
accomplishments, gain-sharing plans reward them
for ____________.
(a) helping to increase social responsibility
(b) regular attendance
(c) positive work attitudes
(d) suggestions that lead to cost reductions
14. An employee with family problems that are
starting to interfere with work would be pleased
to learn that his employer had a(n) ____________
plan.
(a) employee assistance (b) cafeteria benefi ts
(c) comparable worth (d) collective bargaining
15. When representatives of management and a labor
union meet and negotiate the terms of a new labor
contract, this process is known as ____________.
(a) boycotting (b) collective bargaining
(c) picketing (d) wage negotiating
Short-Response Questions 16. Why is orientation important in the HRM process?
17. How does mentoring work as an on-the-job training approach?
18. When is an employment test or a performance appraisal method reliable?
19. How do the graphic rating scale and the BARS diff er as performance appraisal methods?
Integration and Application Question 20. Sy Smith is not doing well in his job. Th e problems began to appear shortly after Sy’s job changed from a manual
to a computer-based operation. He has tried hard but is just not doing well in learning how to use the computer
to meet performance expectations. He is 45 years old and has been with the company for 18 years. Sy has been a
great worker in the past and is both popular and infl uential among his peers. Along with his performance
problems, you have also noticed that Sy is starting to sometimes “badmouth” the fi rm. Questions: As Sy’s man- ager, what options would you consider in terms of dealing with the issue of his retention in the job and in the
company? What could you do by way of career development for Sy, and why?
C H
A
PTER 1 0
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot How can the most successful video-deliv- ery company beat its already unbelievable one-day
turnaround time? By making a growing portion of
its immense catalog available for instant download.
Netfl ix leverages emerging technologies, superior
customer service, and an
ever- growing subscriber
base to transform the
traditional video-rental model into a 21st- century
on-demand concept.
Don’t Miss This Selection from Cases for Critical Thinking
■ CHAPTER 10 CASE Netfl ix—Making Movie Magic
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 10: Performance Appraisal Assumptions ■ CLASS EXERCISE 10: Upward Appraisal ■ TEAM PROJECT 10 : Th e Future of Labor Unions
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“I have a dream,” said Martin Luther King, Jr, and his voice
traveled across generations. Visionary leaders communicate
shared dreams and inspire others to pursue lofty goals.
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11 Leadership
A Leader Lives in Each of Us
1. Understand the
foundations for
eff ective leadership.
2. Identify insights
of the contingency
leadership theories.
3. Discuss current
issues and directions
in leadership
development.
YOUR CHAPTER 11
TAKEAWAYS
Management Live
Integrity and Love Happens
B urke Ryan (Aaron Eckhardt) is a successful self-help guru.
He travels around the country promoting his book and
hosting workshops to help people overcome tragedies and
move on in their lives. Th e only problem is that Ryan has not dealt eff ectively with
his own tragedy—the death of his wife in a car accident.
While hosting a week-long seminar in Seattle, his former home, he meets
eclectic fl orist Eloise Chandler ( Jennifer Anniston). He also comes face-to-face
with his father-in-law (Martin Sheen) for the fi rst time since the tragedy. Th ese
forces help Ryan realize he can no longer live the lie. On the last day of the
workshop, he makes a painful public admission that the accident was his fault
and he has never forgiven himself. Th e audience erupts in a standing ovation as
Ryan receives a tearful embrace of forgiveness from his father-in-law.
Th is movie helps remind us about the importance of integrity—being honest, credible, and consistent while living up to personal values. And it moves us to
think more about leadership. Real leaders have lots of integrity. It helps them as
they try to help others achieve their full potential. Real leaders are also humble,
willing to serve others more than be in the spotlight.
How often do you think about integrity when it comes to leadership? When
news media cover leaders, do their reports indicate integrity or its absence?
What does this say about the status of leadership integrity in our society?
Explore Yourself More on integrity
Role Models Lorraine Monroe’s leadership
turns vision into inspiration
Ethics Check When the boss asks too much
Facts to Consider Workers report shortcomings
of leaders and top managers
Manager’s Library Power by
Jeff rey Pfeff er
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
M L P
J
M
257
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EXPLORING MANAGEMENT258
Takeaway 11.1 What Are the Foundations for
Eff ective Leadership?
ANSWERS TO COME
■ Leadership is one of the four functions of management.
■ Leaders use position power to achieve infl uence.
■ Leaders use personal power to achieve infl uence.
■ Leaders bring vision to leadership situations.
■ Leaders display diff erent traits in the quest for leadership eff ectiveness.
■ Leaders display diff erent styles in the quest for leadership eff ectiveness.
A glance at the shelves in your local bookstore will quickly confirm
that leadership, the process of inspiring others to work hard to accomplish im- portant tasks, is one of the most popular management topics.
1 Consultant and
author Tom Peters says that the leader is “rarely—possibly never—the best
performer.” 2 Th ey don’t have to be; leaders thrive through and by the successes
of others. But not all managers live up to these expectations. Warren Bennis, a
respected scholar and consultant, claims that too many U.S. corporations are
“over-managed and under-led.” Th e late Grace Hopper, the fi rst female admiral in
the U.S. Navy, advised that “you manage things; you lead people.” 3 Th e bottom line
is that leaders become great by bringing out the best in people.
||| Leadership is one of the four functions of management.
Leadership is one of the four functions that make up the
management process shown in Figure 11.1. Planning sets the direction and objectives; organizing brings together the
resources to turn plans into action; leading builds the com-
mitment and enthusiasm that allow people to apply their
talents to help accomplish plans; and controlling makes sure
things turn out right.
Where do you stand on leadership skills and capabili-
ties? If, as the chapter subtitle states, “A leader lives in each
of us,” what leader resides in you?
Of course, managers sometimes face daunting chal-
lenges in their quest to succeed as leaders. Th e time
frames for getting things accomplished are becoming
shorter. Second chances are sometimes few and far be-
tween. Th e problems to be resolved through leadership
are often complex, ambiguous, and multidimensional.
And, leaders are expected to stay focused on long-term
goals even while dealing with problems and pressures
in the short term. 4 Anyone aspiring to career success in
Leadership is the process of inspiring others to work hard to accomplish important tasks.
FIGURE 11.1 Why Is Leading So Important in the Management Process? Leading is one of the four management functions. It is the
process of inspiring others to work hard to accomplish
important tasks. Managers who are eff ective leaders act in
ways that create high levels of enthusiasm among people
to use their talents fully to accomplish tasks and pursue
important plans and goals.
MANAGEMENT
PROCESS
MANAGEMENT
PROCESS
Controlling
to ensure results
Planning
to set the direction
Organizing
to create structures
Leading— to inspire effort
• Communicate the vision • Build enthusiasm • Motivate commitment, hard work
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Leadership ■ Chapter 11 259
leadership must rise to these challenges and more. Th ey must become good
at using all the interpersonal skills discussed in this part of Exploring Manage-
ment 3/e—power and infl uence, communication, motivation, teamwork, con-
fl ict, and negotiation.
||| Leaders use position power to achieve infl uence.
Are you surprised that our discussion of leadership starts with power? Harvard
professor Rossabeth Moss Kanter once called it “America’s last great dirty word.” 5
She worries that too many managers are uncomfortable with the concept and
don’t realize it is indispensable to leadership.
Power is the ability to get someone else to do something you want done, the ability to make things happen the way you want them to. Isn’t that a large part
of management, being able to infl uence other people? So, where and how do
managers get power?
Most often we talk about two sources of managerial power
that you might remember by this equation 6 :
Managerial Power � Position Power � Personal Power.
First is the power of the position, being “the manager.” Th is
power includes rewards, coercion, and legitimacy. Second is
the power of the person, who you are and what your pres-
ence means in a situation. Th is power includes expertise and
reference. Of course, some of us do far better than others at
mobilizing and using the diff erent types of power. 7
If you look at the small fi gure, you’ll see that reward power is the capability to off er something of value as a means of achieving infl uence. To use reward power,
a manager says, in eff ect: “If you do what I ask, I’ll give you a reward.” Common
rewards are things like pay raises, bonuses, promotions, special assignments, and
compliments. As you might expect, reward power can work well as long as people
want the reward and the manager or leader makes it continuously available. But
take the value of the reward or the reward itself away, and the power is quickly lost.
Coercive power is the capability to punish or withhold positive outcomes as a way of infl uencing others. To mobilize coercive power, a manager is really say-
ing: “If you don’t do what I want, I’ll punish you.” Managers have access to lots
of possible punishments, including reprimands, pay penalties, bad job assign-
ments, and even termination. But how do you feel when on the receiving end of
such threats? If you’re like me, you’ll most likely resent both the threat and the
person making it. You might act as requested or at least go through the motions,
but you’re unlikely to continue doing so once the threat no longer exists.
Legitimate power is the capacity to infl uence through formal authority. It is the right of the manager, or person in charge, to exercise control over persons in
subordinate positions. To use legitimate power, a manager is basically saying:
“I am the boss; therefore, you are supposed to do as I ask.” When an instructor
assigns homework, exams, and group projects, don’t you most often do what is re-
quested? Why? You do it because the requests seem legitimate to the course. But
if the instructor moves outside course boundaries, perhaps asking you to attend a
sports event, the legitimacy is lost and your compliance is less likely.
Power is the ability to get someone else to do something you want done.
Reward power achieves infl uence by off ering something of value.
Coercive power achieves infl uence by punishment.
Legitimate power achieves infl uence by formal authority.
Power of the POSITION: Based on things managers can offer to others
Rewards: “If you do what I ask, I’ll give you a reward.”
Coercion: “If you don’t do what I ask, I’ll punish you.”
Legitimacy: “Because I am the boss, you must do as I ask.”
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EXPLORING MANAGEMENT260
||| Leaders use personal power to achieve infl uence.
After all is said and done, we need to admit that position power alone isn’t go-
ing to be suffi cient for any manager. In fact, how much personal power you can
mobilize through expertise and reference may well make the diff erence someday
between success and failure in a leadership situation—and even in a career.
As shown in the small fi gure, expert power is the ability to infl uence the behav- ior of others because of special knowledge and skills. When a manager uses expert
power, the implied message is: “You should do what I want because of my special
expertise or information.”
A leader’s expertise may come from technical understanding or
access to information relevant to the issue at hand. It can be ac-
quired through formal education and evidenced by degrees and cre-
dentials. It is also acquired on the job, through experience, and by
gaining a reputation as someone who is a high performer and really
understands the work. Building expertise in these ways, in fact, may
be one of your biggest early career challenges.
Th ere’s still more to personal power. Th ink of all the television
commercials that show high-visibility athletes and personalities advertising con-
sumer products. What’s really going on here? Th e intent is to attract customers
Expert power achieves infl uence by special knowledge.
DO YOURSELF SOME GOOD
AND SCHEDULE A POWER
TRIP—YOUR CAREER
DEPENDS UPON IT!
People who believe good work in life gets noticed and leads to just rewards should take pause. Research shows the most critical factor for success is having power—authority and con- trol over work environments, resources, and decisions.
In the book Power (2010, HarperCollins), author Jeffrey Pfeffer says research shows a person’s organizational power correlates positively with career success, job performance, sal- ary, and even one’s lifespan. He urges people to use political savvy to rise within hierarchies to control more resources and decisions and build power, status, and infl uence.
Pfeffer says research links political savvy to career success. Effective leaders who are critical of others are seen as intel- ligent, while less effective leaders who are nice to others are viewed as weak.
Many people face obstacles and fail to gain power. They believe the world is just—rewards for good deeds and
punishments for bad ones—and fail to learn from situations, both good and bad, and from people, even those they dis- like. They fear failure so they avoid trying to preserve their self-image.
Pfeffer believes that attaining power requires will and skill, so personal qualities of ambition, energy, and focus are needed. Ambition keeps attention on achieving infl uence over others, especially those higher up. Energy fuels hard work and effort; it is contagious and signals commitment to others. Focus limits activities and skills to areas that will lead to more power, status, and infl uence.
REFLECT AND REACT
Think about the formal or informal hierarchies that you belong to. How are members selected and dismissed, and, how are members’ tasks assigned? How are resources selected and used? How are decisions made and by whom? Are those in power perceived positively, negatively, intelligent, or weak? Do you agree that some people fail to gain power since they fear failure and avoid trying?
■ POWER BY JEFFREY PFEFFER
Manager’s Library A PERSON’S ORGANIZATIONAL POWER CORRELATES
POSITIVELY WITH CAREER SUCCESS AND SALARY. {
Power of the PERSON: Based on how managers are viewed by others
Expertise —as a source of special knowledge and information
Reference —as a person with whom others like to identify
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Leadership ■ Chapter 11 261
to the products through identifi cation with the athletes and personalities. Th e
same holds true in leadership. Referent power is the ability to infl uence the behavior of others because they admire and want to identify positively with you.
When a manager uses referent power, the implied message is: “You should do
what I want in order to maintain a positive self-defi ned relationship with me.”
If referent power is so valuable, do you know how to get it? It comes in large
part from good interpersonal relationships, ones that create admiration and re-
spect for us in the eyes of others. My wife sums this up very simply by saying: “It’s
a lot easier to get people to do what you want when they like you than when they
dislike you.” Doesn’t this make sense? Th is is good advice for how to approach
your job and the people with whom you work every day.
||| Leaders bring vision to leadership situations. “Great leaders,” it is said, “get extraordinary things done in organizations by in-
spiring and motivating others toward a common purpose.” 8 In other words, they
use their power exceptionally well. And frequently today, successful leadership
is associated with vision—a future that one hopes to create or achieve in order to improve upon the present state of aff airs. According to the late John Wooden,
Referent power achieves infl uence by personal identifi cation.
A vision is a clear sense of the future.
Dr. Lorraine Monroe’s career in the New York City Schools be- gan as a teacher. She went on to serve as assistant principal, principal, and vice chancellor for curriculum and instruction. But her career really took off when she founded the Freder- ick Douglass Academy, a public school in Harlem, where she grew up. Under her leadership as principal, the school became highly respected for educational excellence. The academy’s namesake was an escaped slave who later became a promi- nent abolitionist and civil rights leader.
Monroe sees leadership as vision driven and follower cen- tered. She believes leaders must always start at the “heart of the matter” and that “the job of a good leader is to articulate a vision that others are inspired to follow.” She believes in mak- ing sure all workers know that they are valued and that their advice is welcome. She also believes that workers and manag- ers should always try to help and support one another. “I have never undertaken any project,” she says, “without fi rst imagin- ing on paper what it would ultimately look like . . . all the doers who would be responsible for carrying out my imaginings have to be informed and let in on the dream.”
As a consultant on public leadership Monroe states: “We can reform society only if every place we live—every school, workplace, church, and family—becomes a site of reform.” She also runs the Lorraine Monroe Leadership Institute. Its goal is to train educational leaders in visionary leadership and help them go forth to build schools that transform children’s lives.
Lorraine Monroe’s many leadership ideas are summarized in what is called the “Monroe Doctrine.” It begins with this advice: “The job of the leader is to uplift her people—not just as members of and contributors to the organization, but as individuals of infi nite worth in their own right.”
WHAT’S THE LESSON HERE?
Follower-centered leadership is high on Lorraine Monroe’s list of priorities. And she’s made a fi ne career by putting its prin- ciples to work. What is there in the Monroe Doctrine that can help you succeed as a leader? Do you have what it takes to truly value people who look up to you for leadership?
■ LORRAINE MONROE’S LEADERSHIP TURNS VISION INTO INSPIRATION
Role Models “THE JOB OF A GOOD LEADER IS TO UPLIFT HER PEOPLE . . .
AS INDIVIDUALS OF INFINITE WORTH IN THEIR OWN RIGHT.” {
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EXPLORING MANAGEMENT262
a standout men’s basketball coach at UCLA for 27 years: “Eff ective leadership
means having a lot of people working toward a common goal. And when you have
that with no one caring who gets the credit, you’re going to accomplish a lot.” 9
Th e term visionary leadership describes a leader who brings to the situation a clear and compelling sense of the future, as well as an understanding of the
actions needed to get there successfully. 10
But simply having the vision of a desir-
able future is not enough. Truly great leaders are extraordinarily good at turning
their visions into accomplishments. Th is means being good at communicating
the vision and getting people motivated and inspired to pursue the vision in their
daily work. You can think of it this way. Visionary leadership brings meaning to
people’s work; it makes what they do seem worthy and valuable.
||| Leaders display diff erent traits in the quest for leadership eff ectiveness.
For centuries, people have recognized that some persons use power well and per-
form successfully as leaders, whereas others do not. You’ve certainly seen this
yourself. How can such diff erences in leadership eff ectiveness be explained?
An early direction in leadership research tried to answer this question by iden-
tifying traits and personal characteristics shared by well-regarded leaders. 11
Not
surprisingly, results showed that physical characteristics such as height, weight,
and physique make no diff erence. But a study of over 3,400 managers found that
followers rather consistently admired leaders who were honest, competent,
forward-looking, inspiring, and credible. 12
Another comprehensive review is
summarized in Table 11.1—Traits Often Shared by Eff ective Leaders.13 You might use this list as a quick check of your leadership potential.
Visionary leadership brings to the situation a clear sense of the future and an understanding of how to get there.
Table 11.1 Traits Often Shared by Effective Leaders
Drive—Successful leaders have high energy, display initiative, and are tenacious. Self-confi dence—Successful leaders trust themselves and have confi dence in their abilities. Creativity—Successful leaders are creative and original in their thinking. Cognitive ability—Successful leaders have the intelligence to integrate and interpret information. Business knowledge—Successful leaders know their industry and its technical foundations. Motivation—Successful leaders enjoy infl uencing others to achieve shared goals. Flexibility—Successful leaders adapt to fi t the needs of followers and the demands of situations. Honesty and integrity—Successful leaders are trustworthy; they are honest, predictable, and dependable.
||| Leaders display diff erent styles in the quest for leadership eff ectiveness.
In addition to leadership traits, researchers have also studied how successful and
unsuccessful leaders behave when working with followers. Most of this research
focused on two sets of behaviors: task-oriented behaviors and people-oriented
behaviors. A leader high in concern for task plans and defi nes work goals, as-
signs task responsibilities, sets clear work standards, urges task completion, and
monitors performance results. A leader high in concern for people acts warm
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Leadership ■ Chapter 11 263
and supportive toward followers, maintains good relations with them, respects
their feelings, shows sensitivity to their needs, and displays trust in them.
Leaders who show diff erent combinations of task and people behaviors
are often described as having unique leadership styles, such as you have prob- ably observed in your own experiences. A popular summary of classic leadership
styles used by managers is shown in Figure 11.2.14
Someone who emphasizes task over people is often described as an autocratic leader. Th is manager focuses on authority and obedience, delegates little, keeps information to himself or herself, and tends to act in a unilateral command-and-
control fashion. Have you ever worked for someone fi tting this description? How
would you score his or her leadership eff ectiveness?
A leader who emphasizes people over task is often referred to as a human relations leader. Th is leader is interpersonally engaging, cares about others, is sensitive to feelings and emotions, and tends to act in ways that emphasize har-
mony and good working relationships.
Interestingly, researchers at fi rst believed that the human relations style
was the most eff ective for a leader. However, after pressing further, the conclu-
sion emerged that the most eff ective leaders were strong in concerns for both
people and task. 15
Sometimes called a democratic leader, a manager with this style shares decisions with followers, encourages participation, and supports the
teamwork needed for high levels of task accomplishment.
One result of this research on leader behaviors was the emergence of train-
ing programs designed to help people become better leaders by learning how to
be good at both task-oriented and people-oriented behaviors. How about you?
Where do you fi t on the above leadership diagram? What leadership training
would be best for you? Hopefully you’re not starting out as an “impoverished”
manager with a laissez-faire leader, low on both task and people concerns.
Leadership style is the recurring pattern of behaviors exhibited by a leader.
An autocratic leader acts in unilateral command-and-control fashion.
A human relations leader emphasizes people over tasks.
A democratic leader encourages participation with an emphasis on task and people.
A laissez-faire leader is disengaged, showing low task and people concerns.
FIGURE 11.2 What Are the Classic Leadership Styles? It is common to describe leaders in terms of how their day-to-day styles show concern for
people and concern for task. In this fi gure the leader low in concern for both people and task
is described as “laissez-faire” and very ineff ective. Th e leader high in concern for task but low
in concern for people is “autocratic” and focused on performance. Th e leader high in concern
for people and low in concern for task has a “human relations” style that focuses mainly on
people and relationships. Th e “democratic” leader is high in concern for both people and task.
Th is person is often highly successful as a true team manager who is able to engage people to
accomplish common goals.
Concern for Task
HighLow
C o
n c e rn
f o
r P
e o
p le
High
Low
Human Relations
Leader
Country Club Manager— Focuses on people’s needs,
building relationships
Laissez-Faire
Leader
Impoverished Manager— Focuses on minimum effort to get work done
Democratic Leader
Team Manager— Focuses on building
participation and support for a shared purpose
Autocratic Leader
Authority-Obedience Manager—
Focuses on efficiency of tasks and operations
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EXPLORING MANAGEMENT264
Takeaway 11.1 What Are the Foundations for
Eff ective Leadership?
Rapid Review • Leadership, as one of the management functions, is the process of inspiring others
to work hard to accomplish important tasks.
• Leaders use power from two primary sources: position power—which includes rewards, coercion, and legitimacy, and personal power—which includes expertise
and reference.
• Th e ability to communicate a vision or clear sense of the future is considered essential to eff ective leadership.
• Personal characteristics associated with leadership success include honesty, com- petency, drive, integrity, and self-confi dence.
• Research on leader behaviors focused attention on concerns for task and concerns for people, with the leader high on both and using a democratic style considered
most eff ective.
Questions for Discussion 1. When, if ever, is a leader justifi ed in using coercive power?
2. How can a young college graduate gain personal power when moving into a new
job as team leader?
3. Why might a leader with a human relations style have diffi culty getting things
done in an organization?
Be Sure You Can • illustrate how managers use position and personal power • defi ne vision and give an example of visionary leadership • list fi ve traits of successful leaders • describe alternative leadership styles based on concern for task and concern for
people
What Would You Do? Some might say it was bad luck. Others will tell you it’s life and you’ d better get used
to it. You’ve just gotten a new boss, and within the fi rst week it was clear to everyone
that she is as “autocratic” as can be. Th e previous boss was very “democratic,” and
so is the next-higher-level manager, with whom you’ve always had a good working
relationship. Is there anything you and your co-workers can do to remedy this situa-
tion without causing anyone, including the new boss, to lose their jobs?
STUDY GUIDE
Terms to Defi ne
Autocratic leader
Coercive power
Democratic leader
Expert power
Human relations leader
Laissez-faire leader
Leadership
Leadership style
Legitimate power
Power
Referent power
Reward power
Vision
Visionary leadership
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Leadership ■ Chapter 11 265
Takeaway 11.2 What Can We Learn from the
Contingency Leadership Th eories?
ANSWERS TO COME
■ Fiedler’s contingency model matches leadership styles with situational diff erences.
■ Th e Hersey-Blanchard situational leadership model matches leadership styles with the maturity of followers.
■ House’s path-goal theory matches leadership styles with task and follower characteristics.
■ Leader-member exchange theory describes how leaders treat in-group and out-group followers.
■ Th e Vroom-Jago model describes a leader’s choice of alternative decision- making methods.
Even as you consider your leadership style and tendencies, you should
know that researchers eventually concluded that no one style always works best.
Not even the democratic, or “high-high,” leader is successful all of the time. Th is
fi nding led scholars to explore a contingency leadership perspective, one that recognizes that what is successful as a leadership style varies according to the
nature of the situation and people involved.
||| Fiedler’s contingency model matches leadership styles with situational diff erences.
One of the first contingency models of leadership was put forth by Fred
Fiedler. He proposed that leadership success depends on achieving a proper
match between your leadership style and situational demands. 16
He also be-
lieved that each of us has a predominant leadership style that is strongly
rooted in our personalities. This is important because it suggests that a per-
son’s leadership style, yours or mine, is going to be enduring and hard to
change.
Fiedler uses an instrument called the least-preferred co-worker scale (LPC) to
classify our leadership styles as either task motivated or relationship motivated.
Th e LPC scale is available in the end of book Skill-Building Portfolio. Why not
complete it now and see how Fiedler would describe your style?
Leadership situations are analyzed in Fiedler’s model according to three
contingency variables—leader-member relations, task structure, and position
power. Th ese variables can exist in eight diff erent combinations, with each rep-
resenting a diff erent leadership challenge. Th e most favorable situation pro-
vides high control for the leader. It has good leader–member relations, high
task structure, and strong position power. Th e least favorable situation puts the
leader in a low control setting. Leader–member relations are poor, task struc-
ture is low, and position power is weak.
Th e contingency leadership perspective suggests that what is successful as a leadership style varies according to the situation and the people involved.
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EXPLORING MANAGEMENT266
Fiedler’s research revealed an interesting pattern when he studied the eff ective-
ness of diff erent styles in diff erent leadership situations. As shown in Figure 11.3,
a task-motivated leader is most successful in either very favorable (high-control)
or very unfavorable (low-control) situations. In contrast, a relationship-motivated
leader is more successful in situations of moderate control.
Don’t let the apparent complexity of the fi gure fool you. Fiedler’s logic is
quite straightforward and, if on track, has some interesting career implications.
It suggests that you must know yourself well enough to recognize your pre-
dominant leadership style. You should seek out or create leadership situations
for which this style is a good match. And, you should avoid situations for which
your style is a bad match.
Let’s do some quick examples. First, assume that you are the leader of a team
of bank tellers. Th e tellers seem highly supportive of you, and their job is clearly
defi ned. You have the authority to evaluate their performance and to make pay
and promotion recommendations. Th is is a high-control situation consisting of
good leader–member relations, high task structure, and high position power. By
checking Figure 11.3, you can see that a task-motivated leader is recommended.
Now suppose you are chairperson of a committee asked to improve labor-
management relations in a manufacturing plant. Although the goal is clear, no
one knows exactly how to accomplish it—task structure is low. Further, not every-
one believes that a committee is even the right way to approach the situation—
poor leader–member relations are likely. Finally, committee members are free to
quit any time they want—you have little position power. Figure 11.3 shows that in
this low-control situation, a task-motivated leader should be most eff ective.
Finally, assume that you are the new head of a fashion section in a large de-
partment store. Because you won the job over one of the popular sales clerks you
now supervise, leader–member relations are poor. Task structure is high since
the clerk’s job is well defi ned. Your position power is low because clerks work
under a seniority system, with a fi xed wage schedule. Figure 11.3 shows that this
moderate-control situation requires a relationship-motivated leader.
FIGURE 11.3 What Are the Best Matches of Leadership Style and Situation According to Fiedler’s Contingency Model? Fiedler believes that leadership success requires the right style-situation match. He classifi es leadership
styles as either task motivated or relationship motivated, and views them as strongly rooted in our
individual personalities. He describes situations according to the leader’s position power, quality of
leader-member relations, and amount of task structure. In situations that are most favorable and
unfavorable for leaders, his research shows the task-motivated style as the best fi t. In more intermediate
situations, the relationship-motivated style provides the best fi t.
High-control
Situations
Moderate-control
Situations
Low-control
Situations
Best Fit = Task-motivated Leader
Best Fit = Relationship-motivated Leader
I III
Leader–member relations
Task structure
Position power
IV V VI VII VIIIII
Strong Weak
High Low
Weak StrongStrong
Good Poor
Low High
Weak WeakStrong
Poor
Low
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Leadership ■ Chapter 11 267
||| Th e Hersey-Blanchard situational leadership model matches leadership styles with the maturity of followers.
In contrast to Fiedler’s notion that leadership style is hard to
change, the Hersey-Blanchard situational leadership model
suggests that successful leaders do adjust their styles. Th ey
do so contingently and based on the maturity of followers,
as indicated by their readiness to perform in a given situa-
tion. 17
“Readiness,” in this sense, is based on how able and
willing or confi dent followers are to perform required tasks.
As shown in Figure 11.4, the possible combinations of task and relationship behaviors result in four leadership styles.
• Delegating—allowing the group to take responsibility for
task decisions; a low-task, low-relationship style
• Participating—emphasizing shared ideas and participative
decisions on task directions; a low-task, high-relationship
style
• Selling—explaining task directions in a supportive and per-
suasive way; a high-task, high-relationship style
• Telling—giving specifi c task directions and closely super-
vising work; a high-task, low-relationship style
Th e delegating style works best in high-readiness situations
with able and willing or confi dent followers. Th e telling style
works best at the other extreme of low readiness, where followers are unable and
unwilling or insecure. Th e participating style is recommended for low-to-moderate
readiness ( followers able but unwilling or insecure); the selling style works best for
moderate-to-high readiness ( followers unable but willing or confi dent).
Hersey and Blanchard further believe that leadership styles should be adjusted
as followers change over time. Th e model also implies that if the correct styles are
used in lower-readiness situations, followers will “mature” and grow in ability,
willingness, and confi dence. Th is allows the leader to become less directive as
followers mature. Although this situational leadership model is intuitively ap-
pealing, limited research has been accomplished on it to date. 18
||| House’s path-goal theory matches leadership styles with task and follower characteristics.
Another contingency leadership approach is the path-goal theory advanced by
Robert House. 19
Th is theory suggests that leaders are eff ective when they help
followers move along paths through which they can achieve both work goals
and personal goals. Th e best leaders create positive path-goal linkages, raising
motivation by removing barriers and rewarding progress.
Like Fiedler’s approach, House’s path-goal theory seeks the right fi t between
leadership and situation. But unlike Fiedler, House believes that a leader can
move back and forth among the four leadership styles: directive, supportive,
achievement-oriented, and participative.
FIGURE 11.4 What Are the Leadership Implications of the Hersey-Blanchard Situational Leadership Model? Th e Hersey-Blanchard situational leadership model
suggests that successful leaders adjust their styles based
on the maturity of followers or how willing and able they
are to perform in a given situation. Th e four style-follower
matches are: delegating style for able and willing followers;
participating style for able but unwilling followers; selling
style for unable but willing followers; and telling style for
unable and unwilling followers.
Participating
Share ideas
Followers able, unwilling, insecure
Selling
Explain decisions
Followers unable, willing, confident
Delegating
Turn over decisions
Followers able, willing, confident
Telling
Give instructions
Followers unable, unwilling, insecure
Task Behavior
Guidance Required
R e la
ti o
n s h
ip B
e h
a v
io r
S u p p o rt
R e q u ir e d
HighLow
High
Low
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EXPLORING MANAGEMENT268
When choosing among the diff erent styles, House
suggests that the leader’s job is to “add value” to a situ-
ation. Th is means acting in ways that contribute things
that are missing and not doing things that can other-
wise take care of themselves. If you are the leader of a
team whose members are expert and competent at their
tasks, for example, why would you need to be directive?
Members have the know-how to provide their own direc-
tion. More likely, the value you can add to this situation
would be found in a participative leadership style that
helps unlock the expertise of team members and apply it
fully to the tasks at hand.
Path-goal theory provides a variety of research-based
guidance of this sort to help leaders contingently match
their styles with situational characteristics. 20
When job
assignments are unclear, directive leadership helps to clarify task objectives and
expected rewards. When worker self-confi dence is low, supportive leadership can
increase confi dence by emphasizing individual abilities and off ering needed as-
sistance. When task challenge is insuffi cient in a job, achievement-oriented lead-
ership helps to set goals and raise performance aspirations. When performance
incentives are poor, participative leadership might clarify individual needs and
identify appropriate rewards.
This contingency thinking has contributed to the recognition of what are
called substitutes for leadership.21 These are aspects of the work setting and the people involved that can reduce the need for a leader’s personal involve-
ment. In effect, they make leadership from the “outside” unnecessary because
leadership is already provided from within the situation.
Possible substitutes for leadership include subordinate characteristics such as
ability, experience, and independence; task characteristics such as how routine
it is and the availability of feedback; and organizational characteristics such as
clarity of plans and formalization of rules and procedures. When these substi-
tutes are present, managers are advised to avoid duplicating them. Instead, they
should concentrate on doing other and more important things.
||| Leader-member exchange theory describes how leaders treat in-group and out-group followers.
One of the things you may have noticed in your work and study groups is the
tendency of leaders to develop “special” relationships with some team mem-
bers. Th is notion is central to leader–member exchange theory, or LMX theory
as it is often called. 22
Th e theory is highlighted in the nearby fi gure and rec-
ognizes that in most, or at least many, leadership situations, not everyone is
treated the same. People fall into “in-groups” and “out-groups,” and the group
you are in can have quite a signifi cant infl uence on your experience with the
leader.
Th e premise underlying leader–member exchange theory is that as a leader
and follower interact over time, their exchanges end up defi ning the follower’s
Substitutes for leadership are factors in the work setting that direct work eff orts without the involvement of a leader.
Four Leadership Styles in
House’s Path-Goal Th eory
1. Directive leader—lets others know what is ex-
pected; gives directions, maintains standards
2. Supportive leader—makes work more pleas-
ant; treats others as equals acts friendly, shows
concern
3. Achievement-oriented leader—sets challenging
goals; expects high performance, shows
confi dence
4. Participative leader—involves others in decision
making; asks for and uses suggestions
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Leadership ■ Chapter 11 269
role. 23
Th ose in a leader’s in-group are often considered
the best performers. Th ey enjoy special and trusted high-
exchange relationships with the leader that can translate
into special assignments, privileges, and access to infor-
mation. Th ose in the out-group are often excluded from
these benefi ts due to low-exchange relationships with the
leader.
For the follower in a high-LMX relationship, being
part of the leader’s inner circle or in-group can be a
real positive. It’s often motivating and satisfying to be
on the inside of things in terms of getting rewards and
favorable treatments. Being in the out-group because
of a low-LMX relationship, however, can be a real nega-
tive, bringing fewer rewards and less favorable treat-
ment. As to the leader, it is nice to be able to call on and depend upon the
loyal support of those in the in-group. But the leader may also be missing out
on opportunities that might come from working more closely with out-group
members.
Research on leader–member exchange theory places most value on its useful-
ness in describing leader–member interactions. Th e notions of high-LMX and
low-LMX relationships seem to make sense and correspond to working realities
experienced by many people. Look around and you’re likely to see examples of
this in classroom situations between instructors and certain students, and in
work situations between bosses and certain subordinates. In such settings, re-
search fi nds that members of in-groups get more positive performance evalua-
tions, report higher levels of satisfaction, and are less prone to turnover than are
members of out-groups. 24
||| Th e Vroom-Jago model describes a leader’s choice of alternative decision-making methods.
Yet another contingency leadership theory focuses on how managers lead
through their use of decision-making methods. Th e Vroom-Jago leader-partici-
pation model views a manager as having three decision options, and in true con-
tingency fashion, no one option is always superior to the others. 25
1. Authority decision—Th e manager makes an individual decision about how to solve the problem and then communicates the decision to the group.
2. Consultative decision—Th e manager makes the decision after sharing the problem with and getting suggestions from individual group members or the
group as a whole.
3. Group decision—The manager convenes the group, shares the problem, and then either facilitates a group decision or delegates the decision to the
group.
Leadership success results when the manager’s choice of decision-making
method best matches the nature of the problem to be solved. 26
Th e rules for
making the choice involve three criteria: (1) decision quality—based on who has
An authority decision is made by the leader and then communicated to the group.
A consultative decision is made by a leader after receiving information, advice, or opinions from group members.
A group decision is made by group members themselves.
Leader–
Member
Exchange
Relationships
Leader–
Member
Exchange
Relationships
Followers over time defined into “in-group”
Followers over time
defined into “out-group”
Compatibility Competency Personality
Perceptions
of Followers
“–” “+”
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EXPLORING MANAGEMENT270
the information needed for problem solving; (2) decision acceptance—based on the
importance of follower acceptance of the decision to its eventual implementa-
tion; and (3) decision time—based on the time available to make and imple-
ment the decision. Th ese rules are shown in Figure 11.5. In true contingency fashion each of the decision methods is appropriate in
certain situations, and each has its advantages and disadvantages. 27
Authority
decisions work best when leaders have the expertise needed to solve the prob-
lem, are confi dent and capable of acting alone, others are likely to accept and
implement the decision they make, and little time is available for discussion. By
contrast, consultative and group decisions are recommended when:
• Th e leader lacks suffi cient expertise and information to solve this problem alone.
• Th e problem is unclear and help is needed to clarify the situation. • Acceptance of the decision and commitment by others are necessary for
implementation.
• Adequate time is available to allow for true participation.
Using consultative and group decisions off ers important leadership benefi ts. 28
Participation helps improve decision quality by bringing more information to
bear on the problem. It helps improve decision acceptance as others gain un-
derstanding and become committed to the process. It also contributes to leader-
ship development by allowing others to gain experience in the problem-solving
process. However, a potential cost of participation is lost effi ciency. Participation
often adds to the time required for decision making, and leaders don’t always
have extra time available. When problems must be resolved immediately, the au-
thority decision may be the only option. 29
Consultative decisions Group decisionsAuthority decision
LOWHIGH
YESNO
FOLLOWERSLEADER
Time pressure for decision making?
Acceptance and commitment critical for implementation?
Who has information and expertise?
Recommended Decision Methods
FIGURE 11.5 What Are the Leadership Implications of the Vroom-Jago Leader- Participation Model? Th e leader-participation model suggests that leaders are eff ective when they use the appropriate
decision method to solve a problem situation. Th ree criteria govern the choice among possible
authority, consultative, and team or group decisions: (1) decision quality—based on who has
the information needed for problem solving; (2) decision acceptance—based on the importance
of follower acceptance of the decision to its eventual implementation; and (3) decision time—
based on the time available to make and implement the decision.
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Leadership ■ Chapter 11 271
Takeaway 11.2 What Can We Learn from the
Contingency Leadership Th eories?
Rapid Review • Fiedler’s contingency model describes how situational diff erences in task struc-
ture, position power, and leader–member relations may infl uence the success of
task-motivated and relationship-motivated leaders.
• Th e Hersey-Blanchard situational model recommends using task-oriented and people-oriented behaviors, depending on the “maturity” levels of followers.
• House’s path-goal theory describes how leaders add value to situations by using supportive, directive, achievement-oriented, and/or participative styles as needed.
• Leader–member exchange theory recognizes that leaders respond diff erently to followers in their in-groups and out-groups.
• Th e Vroom-Jago leader-participation theory advises leaders to choose decision- making methods—authority, consultative, group—that best fi t the problems to
be solved.
Questions for Discussion 1. What are the potential career development lessons of Fiedler’s contingency lead-
ership model?
2. What are the implications of follower maturity for leaders trying to follow the
Hersey-Blanchard situational leadership model?
3. Is it wrong for a team leader to allow the formation of in-groups and out-groups
in his or her relationships with team members?
Be Sure You Can • explain Fiedler’s contingency model for matching leadership style and situation • identify the three variables used to assess situational favorableness in Fiedler’s
model
• identify the four leadership styles in the Hersey-Blanchard situational leadership model
• explain the importance of follower “maturity” in the Hersey-Blanchard model • describe the best use of directive, supportive, achievement-oriented, and partici-
pative leadership styles in House’s path-goal theory
• explain how leader–member exchange theory deals with in-groups and out- groups among a leader’s followers
What Would You Do? You’ve just been hired as a visual eff ects artist by a top movie studio. But the team
you are joining has already been together for about two months. Th ere’s obviously
an in-group when it comes to team leader and team member relationships. Th is
job is important to you; the movie is going to be great résumé material. But you’re
worried about the leadership dynamics and your role as a newcomer to the team.
What can you do to get on board as soon as possible and be valued as a team
member?
STUDY GUIDE
Terms to Defi ne
Authority decision
Consultative decision
Contingency
leadership
perspective
Group decision
Substitutes for
leadership
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EXPLORING MANAGEMENT272
You should now be thinking seriously about your leadership qualities,
tendencies, styles, and eff ectiveness. You should also be thinking about your
personal development as a leader. And, in fact, if you look at what people say
about leaders in their workplaces, you should be admitting that most of us have
considerable room to grow in this regard. 30
||| Transformational leadership inspires enthusiasm and great performance.
It is popular to talk about “superleaders,” persons whose visions and strong
personalities have an extraordinary impact on others. 31
Martin Luther
King, in his famous “I have a dream” speech delivered in August 1963 on
the Washington Mall, serves as a good example. Some call people like King
charismatic leaders because of their ability to inspire others in exceptional ways. We used to think charisma was limited to only a few lucky persons.
Today, it is considered one of several personal qualities—including honesty,
credibility, and competence, that we should be able to develop with fore-
sight and practice.
Leadership scholars James MacGregor Burns and Bernard Bass have
pursued this theme. They begin by describing the traditional leader-
ship approaches we have discussed so far as transactional leadership.32 You might picture the transactional leader engaging followers in a somewhat
mechanical fashion, “transacting” with them by using power, employing be-
haviors and styles that seem to be the best choices at the moment for getting
things done.
What is missing in the transactional approach, say Burns and Bass, is atten-
tion to things typically linked with superleaders—enthusiasm and inspiration,
for example. Th ese are among the charismatic qualities that they associate with
something called transformational leadership.33
Transformational leaders use their personalities to inspire followers and get
them so highly excited about their jobs and organizational goals that they strive
for truly extraordinary performance accomplishments. Indeed, the easiest way to
A charismatic leader develops special leader-follower relationships and inspires followers in extraordinary ways.
Transactional leadership directs the eff orts of others through tasks, rewards, and structures.
Transformational leadership is inspirational and arouses extraordinary eff ort and performance.
Takeaway 11.3 What Are Current Issues and Directions
in Leadership Development?
ANSWERS TO COME
■ Transformational leadership inspires enthusiasm and great performance
■ Emotionally intelligent leadership handles emotions and relationships well
■ Interactive leadership emphasizes communication and participation
■ Moral leadership builds trust from a foundation of personal integrity
■ Servant leadership is follower centered and empowering
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Leadership ■ Chapter 11 273
spot a truly transformational leader is through his or her followers. Th ey are likely
to be enthusiastic about the leader and loyal and devoted to his or her ideas, and
to work exceptionally hard together to support them.
Th e goal of achieving excellence in transformational leadership is a stiff
personal development challenge. It is not enough to possess leadership traits,
know the leadership behaviors, and understand leadership contingencies. One
must also be prepared to lead in an inspirational way and with a compelling
personality. Transformational leaders raise the confi dence, aspirations, and
performance of followers through these special qualities. 34
• Vision—has ideas and a clear sense of direction; communicates them to others;
develops excitement about accomplishing shared “dreams”
• Charisma—uses the power of personal reference and emotion to arouse others’
enthusiasm, faith, loyalty, pride, and trust in themselves
• Symbolism—identifi es “heroes” and holds spontaneous and planned ceremo-
nies to celebrate excellence and high achievement
• Empowerment—helps others grow and develop by removing performance ob-
stacles, sharing responsibilities, and delegating truly challenging work
• Intellectual stimulation—gains the involvement of others by creating awareness
of problems and stirring their imaginations
• Integrity—is honest and credible; acts consistently and out of personal convic-
tion; follows through on commitments
||| Emotionally intelligent leadership handles emotions and relationships well.
The role of personality in transformational leadership raises another area
of inquiry in leadership development—emotional intelligence. Popularized by the work of Daniel Goleman, emotional intelligence, or EI for short, is
an ability to understand emotions in yourself and others, and use this un-
derstanding to handle one’s social relationships effectively. 35
“Great leaders
move us,” say Goleman and his colleagues. “Great leadership works through
emotions.” 36
Emotional intelligence is an important infl uence on leadership success, es-
pecially in more senior management positions. In Goleman’s words: “Th e higher
the rank of the person considered to be a star performer, the more emotional
intelligence capabilities showed up as the reason for his or her eff ectiveness.” 37
Th is is a pretty strong endorsement for making EI one of your leadership
assets. 38
Consider the four primary emotional intelligence competencies shown in
the small fi gure. Self-awareness is the ability to understand our own moods
and emotions, and to understand their impact on our work and on
others. Social awareness is the ability to empathize, to understand
the emotions of others, and to use this understanding to better deal
with them. Self-management, or self-regulation, is the ability to think
before acting and to be in control of otherwise disruptive impulses.
Relationship management is the ability to establish rapport with
others in ways that build good relationships and influence their
emotions in positive ways.
Emotional intelligence (EI) is the ability to manage our emotions in leadership and social relationships.
Self- awareness
Social awareness
Emotional intelligence
competencies
Self- management
Relationship management
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EXPLORING MANAGEMENT274
||| Interactive leadership emphasizes communication, listening, and participation.
When Sara Levinson was President of NFL Properties Inc., she once asked the all-
male members of her management team: “Is my leadership style diff erent from
a man’s?” 39
Would you be surprised to learn that they answered “Yes,” telling her
that just by asking the question she was providing evidence of the diff erence?
Th ey described her as a leader who emphasized communication, always gather-
ing ideas and opinions from others. And when Levinson probed further by asking
“Is this a distinctly ‘female’ trait?” they again said “yes” it was.
Are there gender diff erences in leadership? Before you jump in with your own
answer, let’s be clear on three things. First, research largely supports the gender similarities hypothesis that males and females are very similar to one another in terms of psychological properties.
40 Second, research leaves no doubt that both
women and men can be eff ective leaders. 41
Th ird, what research does show is that
men and women are sometimes perceived as using diff erent styles, perhaps arriv-
ing at leadership success from diff erent angles. 42
A recent study employing 3,608 assessments found that women were rated
more highly than men in all but one area of leadership—visioning. 43
A possible
explanation is that women aren’t considered as visionaries because they are per-
ceived as acting less directive as leaders. And indeed, some studies report that
male leaders are viewed as directive and assertive, using position power to get
things done in traditional command-and-control ways. 44
Other studies report
female leaders acting more participative than men. Th ey are also rated by peers,
subordinates, and supervisors as strong on motivating others, emotional intelli-
gence, persuading, fostering communication, listening to others, mentoring, and
supporting high-quality work. 45
Th e gender similarities hypothesis holds that males and females have similar psychological makeups.
Kraft Foods Feeds Its Sweet Tooth
Leaders Provide the Roadmaps
When Kraft Foods was bidding to buy Cadbury, Irene Rosenfeld was often
in the news. She was leading a dramatic attempt to capture the British
candymaker against its wishes. It was all part of Rosenfeld’s desire to trans-
form Kraft—a fi rm she described as “not living up to our potential.” Her
roadmap to making Kraft a global powerhouse in snacks and confectionery,
was one of growth. Th is included making the Cadbury acquisition against all
odds. And she succeeded.
Rosenfeld is described as a risk taker who leads by pushing decision
authority down the hierarchy. She lets managers of Kraft’s major brands have
control of their budgets and operations. She focuses on top management
teamwork to bring perspectives in from all parts of the company. And she
urges top managers to focus resources on what they do best in their customer
markets. Keeping her turnaround strategy on track is always top priority.
To create change, Rosenfeld says you need to “get the right people on the
bus,” “give them a roadmap,” and “communicate frequently, consistently and
honestly.”
Th is example of Irene
Rosenfeld is designed to
get you thinking about
your leadership qualities
and looking at the leader-
ship models that abound
in your experiences. Just
who is the leader in you?
What can you do to keep
that leader growing and
confi dent in the days and
years ahead?
F I N D I N S P I R A T I O N
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Leadership ■ Chapter 11 275
Th is pattern of behaviors associated with female leaders has been called
interactive leadership.46 Interactive leaders are democratic, participative, and inclusive, often approaching problems and decisions through teamwork.
47
Th ey focus on building consensus and good interpersonal relations through
emotional intelligence, communication, and involvement. Th ey tend to get
things done with personal power, seeking infl uence over others through sup-
port and interpersonal relationships.
Rosabeth Moss Kanter says that in many ways “Women get high ratings on
exactly those skills required to succeed in the Global Information Age, where
teamwork and partnering are so important.” 48
Her observations are backed up
by data that show fi rms having more female directors and executives outperform
others. 49
But let’s be careful. One of the risks here is placing individual men and
women into boxes in which they don’t necessarily belong. 50
Perhaps we should
focus instead on the notion of interactive leadership. Th e likelihood is that this
style is a very good fi t with the needs of today’s organizations and workers. 51
And
isn’t there every reason to believe that both men and women can do interactive
leadership equally well? What do you think?
||| Moral leadership builds trust from a foundation of personal integrity.
As discussed many times in this book, society expects organizations to be run
with moral leadership. Th is is leadership by ethical standards that clearly meet the test of being “good” and “correct.”
52 We should expect anyone in a
leadership position to practice high ethical standards of behavior and help
others to also behave ethically in their work. But the facts don’t always support
this aspiration.
Interactive leadership is strong on communicating, participation, and dealing with problems by teamwork.
Moral leadership has integrity and appears to others as “good” or “right” by ethical standards.
Harris Interactive periodically conducts surveys of workers’ at- titudes toward their jobs and employers. The results for “lead- ers” and “top managers” reveal lots of shortcomings: • 37% believe their top managers display integrity and morality. • 39% believe leaders most often act in the best interest of
organization. • 22% see leaders as ready to admit mistakes. • 46% believe their organizations give them freedom to do
their jobs.
• 25% of women and 16% of men believe their organizations pick the best people for leadership.
• 33% of managers are perceived by followers as “strong leaders.”
YOUR THOUGHTS?
How do the leaders you have experienced stack up—”strong or weak,” “moral or immoral”? What makes the most differ- ence in the ways leaders are viewed in the eyes of followers?
■ WORKERS REPORT SHORTCOMINGS OF LEADERS AND TOP MANAGERS
Facts to Consider ONLY 37% OF WORKERS IN A HARRIS SURVEY BELIEVE
THEIR MANAGERS DISPLAY “INTEGRITY AND MORALITY.” {
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EXPLORING MANAGEMENT276
Are you surprised by the Harris Poll reported in the previous Facts to Consider?
Why are so few people willing to describe their top managers as acting with
“integrity and morality”? 53
Based on that result, it may not surprise you that a
Business Week survey found that just 13% of top executives at large U.S. fi rms
rated “having strong ethical values” as a top leadership characteristic. 54
In contrast to the fi ndings described in these surveys, is there any doubt
that society today is demanding more ethical leadership in our organizations?
Even if they don’t always do so, we still want leaders to act ethically and main-
tain an ethical organizational culture. We want leaders to both help and re-
quire others to behave ethically in their work. 55
Hopefully this theme has been
well communicated throughout this book. Hopefully too, you will agree that
long-term success in work, and in life, can be built only on a foundation of
solid ethical behavior. 56
But where do we start when facing up to the challenge of building personal
capacities for ethical leadership? A good answer is integrity.57 You must start with honest, credible, and consistent behavior that puts your values into action.
Words like “principled” and “fair” and “authentic” should come immediately
to mind.
When a leader has integrity, he or she earns the trust of followers. And when
followers believe that their leaders are trustworthy, they are more willing to try
to live up to the leader’s expectations. Southwest Airlines CEO Gary Kelly seems
to have gotten the message. He says: “Being a leader is about character . . . being
straightforward and honest, having integrity, and treating people right.” And
there’s a payoff . One of his co-workers says this about Kelly’s leadership impact:
“People are willing to run through walls for him.” 58
Integrity in leadership is honesty, credibility, and consistency in putting values into action.
Management scholars like to talk about the “zone of indiffer- ence” in leadership. It basically identifi es the range of requests that a follower is willing to comply with just because someone is his or her boss.
But some bosses take things into ambiguous territory. They may ask us to do things that are not really within the job de- scription and/or that don’t really benefi t the employing organi- zation. Sure we’re getting paid to do these things, but is it only the boss that benefi ts?
What if your boss wants to pay you overtime to make a set of presentation PowerPoints for a speech he is giving at a con- ference for his volunteer organization? Suppose the boss asks you to write a technology blog for the fi rm, but to do so during your free time on the weekend? Or what about a boss who
views you as her personal assistant and consistently expects you to run personal errands—pick up dry cleaning, take the pet to the vet, make weekend dinner reservations, arrange her vacation travel?
YOU DECIDE
By helping the boss with these and similar requests, you may benefi t directly from pay and privileges. You may also benefi t indirectly through ingratiating yourself and gaining a positive leader-follower relationship. And the boss gains as well. But when there is little or no benefi t to the organization that is pay- ing the bill, what is the ethical response on your part? Do you say “Yes”? Do you say “No”? Just where do you draw the line on your zone of indifference?
■ WHEN THE BOSS ASKS TOO MUCH
Ethics Check IS DOING PERSONAL ERRANDS FOR THE
BOSS PART OF THE JOB DESCRIPTION? {
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Leadership ■ Chapter 11 277
||| Servant leadership is follower centered and empowering.
A classic and valuable observation about great leaders is that they view leader-
ship as a responsibility, not a rank. 59
Th is view is consistent with the concept of
servant leadership. It is based on a commitment to serving others and to helping people use their talents to full potential while working together in organizations
that benefi t society. 60
You might think of servant leadership by asking this question: Who is most
important in leadership, the leader or the followers? For those who believe in
servant leadership, there is no doubt about the correct answer: the followers.
Servant leadership is “other centered,” not “self-centered.” And once one shifts
the focus away from the self and toward others, what does that generate in terms
of leadership opportunities? Empowerment, for one thing. Th is is the process of giving people job freedom and helping them gain power to achieve infl uence
within the organization. 61
Max DePree, former CEO of Herman Miller and a noted leadership author,
praises leaders who “permit others to share ownership of problems—to take
possession of the situation.” 62
Lorraine Monroe of the School Leadership Acad-
emy says: “Th e real leader is a servant of the people she leads . . . a really great
boss is not afraid to hire smart people. You want people who are smart about
things you are not smart about.” 63
Robert Greenleaf, who is credited with coin-
ing the term “servant leadership,” says: “Institutions function better when the
idea, the dream, is to the fore, and the person, the leader, is seen as servant to
the dream.” 64
Th ink about these ideas and then reach back and take a good look in the
mirror. Is the leader in you capable of being a servant?
Servant leadership means serving others and helping them use their talents to help organizations best serve society.
Empowerment gives people job freedom and power to infl uence aff airs in the organization.
Even though we can get overly enamored with the notion of the “great” or “transformational” leader, it is just one among many leadership fundamentals that are enduring and impor- tant. This chapter covers a range of theories and models useful for leadership development. Each is best supported by a base of personal integrity.
Leaders with integrity are honest, credible, humble, and consistent in all that they do. They walk the talk by living up to personal values in all their actions. Transformational leader- ship operates on a foundation of integrity. The very concept
of moral leadership is centered on integrity. And, servant lead- ership represents integrity in action. Why is it, then, that in the news and in everyday experiences we so often end up wonder- ing where leadership integrity has gone?
■ INTEGRITY
Explore Yourself LEADERS WITH INTEGRITY ARE HONEST,
CREDIBLE, HUMBLE, AND CONSISTENT. {
Get to know yourself better by taking the self-assessment
on Least Preferred Co-Worker Scale and completing
the other activities in the Exploring Management Skill-
Building Portfolio.
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EXPLORING MANAGEMENT278
Takeaway 11.3 What Are Current Issues and Directions
in Leadership Development?
Rapid Review • Transformational leaders use charisma and emotion to inspire others toward ex-
traordinary eff orts to achieve performance excellence.
• Emotional intelligence, the ability to manage our emotions and relationships ef- fectively, is an important leadership capability.
• Th e interactive leadership style, sometimes associated with women, emphasizes communication, involvement, and interpersonal respect.
• Moral or ethical leadership is built from a foundation of personal integrity, creat- ing a basis for trust and respect between leaders and followers.
• A servant leader is follower-centered, not self-centered, and empowers others to unlock their personal talents in the quest for goals and accomplishments that
help society.
Questions for Discussion 1. Should all managers be expected to excel at transformational leadership?
2. Do women lead diff erently than men?
3. Is servant leadership inevitably moral leadership?
Be Sure You Can • diff erentiate transformational and transactional leadership • list the personal qualities of transformational leaders • explain how emotional intelligence contributes to leadership success • discuss research fi ndings on interactive leadership • explain the role of integrity as a foundation for moral leadership • explain the concept of servant leadership
What Would You Do? Okay, so it’s important to be “interactive” in leadership. By personality, though, you
tend to be a bit withdrawn. In fact, if you could do things by yourself, that’s the way
you would behave. Yet here you are taking over as a manager as the fi rst upward
career step in your present place of employment. How do you master the challenge
of succeeding with interactive leadership in the new role?
STUDY GUIDE
Terms to Defi ne
Charismatic leader
Emotional
intelligence (EI)
Empowerment
Gender similarities
hypothesis
Integrity
Interactive leadership
Moral leadership
Servant leadership
Transactional
leadership
Transformational
leadership
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Leadership ■ Chapter 11 279
1. When managers use off ers of rewards and threats
of punishments to try to get others to do what
they want them to do, they are using which type of
power?
(a) formal authority
(b) position
(c) referent
(d) personal
2. When a manager says, “Because I am the boss, you
must do what I ask,” what power base is being put
into play?
(a) reward
(b) legitimate
(c) moral
(d) referent
3. Th e personal traits that are now considered impor-
tant for managerial success include .
(a) self-confi dence
(b) gender
(c) age
(d) personality
4. In the research on leader behaviors, which style of
leadership describes the preferred “high-high” com-
bination?
(a) transformational
(b) transactional
(c) laissez-faire
(d) democratic
5. In Fiedler’s contingency model, both highly favor-
able and highly unfavorable leadership situations
are best dealt with by a -motivated
leadership style.
(a) task
(b) vision
(c) ethics
(d) relationship
6. Which leadership theorist argues that one’s leader-
ship style is strongly anchored in personality and
therefore very diffi cult to change?
(a) Daniel Goleman
(b) Peter Drucker
(c) Fred Fiedler
(d) Robert House
7. Vision, charisma, integrity, and symbolism are all attri-
butes typically associated with leaders.
(a) people-oriented
(b) democratic
(c) transformational
(d) transactional
8. In terms of leadership behaviors, someone who
focuses on doing a very good job of planning work
tasks, setting performance standards, and monitor-
ing results would be described as .
(a) task oriented
(b) servant oriented
(c) achievement oriented
(d) transformational
9. In the discussion of gender and leadership, it was
pointed out that some perceive women as having
tendencies toward , a style that seems
a good fi t with developments in the new workplace.
(a) interactive leadership
(b) use of position power
(c) command-and-control
(d) transactional leadership
10. In House’s path-goal theory, a leader who sets chal-
lenging goals for others would be described as using
the leadership style.
(a) autocratic
(b) achievement-oriented
(c) transformational
(d) directive
C H
A PTER 1
1
TP
Multiple-Choice Questions
TestPrep 11
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EXPLORING MANAGEMENT280
11. Someone who communicates a clear sense of the
future and the actions needed to get there is consid-
ered a leader.
(a) task-oriented
(b) people-oriented
(c) transactional
(d) visionary
12. Managerial Power � Power �
Power.
(a) Reward; Punishment
(b) Reward; Expert
(c) Legitimate; Position
(d) Position; Personal
13. Th e interactive leadership style is characterized
by .
(a) inclusion and information sharing
(b) use of rewards and punishments
(c) command-and-control behavior
(d) emphasis on position power
14. A leader whose actions indicate an attitude of “do as
you want and don’t bother me” would be described
as having a(n) leadership style.
(a) autocratic
(b) country club
(c) democratic
(d) laissez-faire
15. Th e critical contingency variable in the Hersey-
Blanchard situational model of leadership is
.
(a) follower maturity
(b) LPC
(c) task structure
(d) emotional intelligence
Short-Response Questions
16. Why are both position power and personal power essential in management?
17. Use Fiedler’s terms to list the characteristics of situations that would be extremely favorable and extremely
unfavorable to a leader.
18. Describe the situations in which House’s path-goal theory would expect (a) a participative leadership style and
(b) a directive leadership style to work best.
19. How do you sum up in two or three sentences the notion of servant leadership?
Integration and Application Question
20. When Marcel Henry took over as leader of a new product development team, he was both excited and apprehen-
sive. “I wonder,” he said to himself on the fi rst day in his new assignment, “if I can meet the challenges of leadership.”
Later that day, Marcel shares this concern with you during a coff ee break.
Question: How would you describe to Marcel the personal implications of current thinking on transformational and moral leadership and how they might be applied to his handling of this team setting?
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Leadership ■ Chapter 11 281
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 11: Least Preferred Co-Worker Scale
■ CLASS EXERCISE 11: Leading by Participation
■ TEAM PROJECT 11: Leadership Believe-It-Or-Not
C H
A PTER 1
1
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot Short for Statistical Analysis System, SAS is a set of integrated software tools that help decision makers
cope with unwieldy amounts of unrelated data. It’s the
primary product of North Carolina-based SAS Institute,
self-described as the “leader in business analytics soft-
ware.” While SAS is its primary product, the company
has developed a peripheral business around supporting
and training SAS users. One user describes its value as
“empowering people with data to make effi cient, eff ective
decisions earlier.” With Jim
Goodnight at the helm, it’s
gained an impressive ros-
ter of clients: 92 of the top 100 Fortune Global 500 com-
panies, more than 45,000 businesses, universities, and
government agencies, with customers in 121 diff erent
countries. If you look below the surface, you’ll fi nd that
Goodnight’s special approach to leadership is as great
as the fi rm’s software.
■ CHAPTER 11 CASE SAS: Business Decisions at the Speed of Information
Don’t Miss This Selection from Cases for Critical Thinking
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 11
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You don’t have to look in a mirror to gain more self-awareness. You don’t have to look in a mirror to gain more self-awareness.
What does your smartphone screen say about your personality?What does your smartphone screen say about your personality?
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12 Individual
Behavior
Th ere’s Beauty in Individual Diff erences
1. Understand how
perceptions infl uence
individual behavior.
2. Understand how
personalities infl uence
individual behavior.
3. Understand how
attitudes, emotions,
and moods infl uence
individual behavior.
YOUR CHAPTER 12
TAKEAWAYS
Management Live
Ambition and The Social Network
A ppearing at a time when social media seem to rule the
online world, Sony’s movie Th e Social Network made
$23 million on opening weekend. It’s based on Facebook’s
visionary and controversial founder Mark Zuckerberg ( Jesse
Eisenberg).
Although Zuckerberg calls it pure “fi ction,” the movie raises ethical questions
about his actions while developing the initial website, refi ning it, and eventually
turning it into a global company valued at over $50 billion. Two former Harvard
classmates, Cameron and Tyler Winklevoss, sued him, claiming the original
idea was theirs. Another early collaborator and co-founder, Eduardo Saverin,
was initially left out of the new fi rm’s fi nancial gains.
Entertainment Weekly asks: “Why did Zuckerberg betray these people? Or, in
fact, did he really?”
One thing that cannot be denied is Zuckerberg’s ambition, the desire to succeed and reach for high goals. He’s the youngest self-made billionaire in
business history. As the movie shows, ambition is one of those personality traits
that can certainly have a big impact on individual behavior—both for the good
and for the bad.
Why don’t you watch Th e Social Network and discuss with your friends and
classmates how diff erent personalities and talents played out in creating the
Facebook revolution? What can you learn that might help you deal with the
ethics and intricacies of human behavior in work situations?
Explore Yourself More on ambition.
Role Models Richard Branson leads with
personality and fl amboyance
Ethics Check Personality test required
Facts to Consider Trends show job satisfaction
drifting lower
Manager’s Library Women Count by
Susan Bulkeley
Butler
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
283
M L W
S
B
M
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EXPLORING MANAGEMENT284
Some years ago, Karen Nussbaum founded an organization called 9 to 5,
devoted to improving women’s salaries and promotion opportunities in the
workplace. She had just left her job as a secretary at Harvard University. Describ-
ing what she calls “the incident that put her over the edge,” Nussbaum says: “One
day I was sitting at my desk at lunchtime, when most of the professors were out.
A student walked into the offi ce and looked me dead in the eye and said, ‘Isn’t
anyone here’?” Nussbaum started 9 to 5 with a commitment to “remake the sys-
tem so that it does not produce these individuals.” 1
When people communicate with one another, everything passes through two
silent but infl uential shields: the “perceptions” of the sender and the receiver.
Perception is the process through which people receive and interpret informa- tion from the environment. It is the way we form impressions about ourselves,
other people, and daily life experiences.
As suggested in Figure 12.1, you might think of perception as a bubble that surrounds us and signifi cantly infl uences the way we receive, interpret, and pro-
cess information received from our environments. 2 And because our individual
idiosyncrasies, backgrounds, values, and experiences infl uence our perceptions,
this means that people can and do view the same things quite diff erently. Th ese
diff erences in perceptions infl uence how we communicate and behave in rela-
tionship to one another.
Perception is the process through which people receive and interpret information from the environment.
Takeaway 12.1 How Do Perceptions Infl uence
Individual Behavior?
ANSWERS TO COME
■ Perceptual distortions can obscure individual diff erences.
■ Perception can cause attribution errors as we explain events and problems.
■ Impression management is a way of infl uencing how others perceive us.
Perceptual Distortions Stereotypes Halo effects Selective perception Projection
Sender’s perceptions
SENDERSENDER
Receiver’s perceptions
RECEIVERRECEIVER FEEDBACK
MESSAGE
FIGURE 12.1 How Does Perception Infl uence Communication? Perception is the process of receiving and interpreting information from our environment. It acts
as a screen or fi lter through which we interpret messages in the communication process. And
perceptions infl uence how we behave in response to information received. Because people often
perceive the same things quite diff erently, perception is an important issue in respect to individual
behavior at work. Perceptual distortions in the form of stereotypes, halo eff ects, projection, and
selective perception can lead to inaccurate assumptions regarding other people and events.
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Individual Behavior ■ Chapter 12 285
||| Perceptual distortions can obscure individual diff erences.
Given the complexity of the stimuli constantly fl owing toward us from our
environments, human beings use various means of simplifying and organizing
their perceptions. One of the most common is the stereotype. Th is occurs when you identify someone with a group or category, and then use the attributes as-
sociated with the group or category to describe the indi-
vidual. Although this makes things easier by reducing the
need to deal with unique individual characteristics, it is
an oversimplifi cation. By relying on the stereotype, we end
up missing the real individual.
As the 9 to 5 example showed, how we perceive and re-
late to one another often leaves room for improvement.
Some of the stereotypes used in the workplace, and in life
in general, relate to such factors as gender, age, race, and
physical ability.
Consider how gender stereotyping might cause manag-
ers to misconstrue work behavior. If they see men in a dis-
cussion, they might think they are discussing a new deal; if
it’s a group of women, they might perceive them as gossip-
ing. And how does gender stereotyping infl uence opportu-
nity? Only a small portion of U.S. managers sent on
international assignments are women. Do you wonder
why? A Catalyst study of women in global business blames
gender stereotypes that place women at a disadvantage to
men for these jobs. Th e perception seems to be that women
lack the abilities or willingness for working abroad. 3
A halo eff ect occurs when we use one characteristic of a person or situation to form an overall impression. You probably do this quite often, as do I. When
meeting someone new, for example, receiving a positive smile might create a
halo eff ect that results in a positive impression. By contrast, the halo eff ect of an
unfamiliar hairstyle or manner of dressing may create a negative impression.
Halo eff ects cause the same problems as stereotypes. Th ey obscure individual
diff erences. Th e person who smiles might have a very negative work attitude; the
person with the unique hairstyle might be a top performer. Halo eff ects are espe-
cially signifi cant in performance evaluations where one factor, such as a person’s
punctuality or lack of it, may become the halo that inaccurately determines the
overall performance rating.
Selective perception is the tendency to focus attention on those aspects of a situation or person that reinforce or appear consistent with one’s existing be-
liefs, needs, or actions. 4 We screen out the rest. Th is often happens in organiza-
tions when people from diff erent departments or functions—such as marketing
or information systems, for example—tend to see things only from their own
point of view.
Like the other perceptual distortions, selective perception can bias our views
of situations and individuals. One of the great benefi ts of teamwork and consul-
tative decision making is the pooling of ideas and perceptions of many people,
thus making it harder for selective perception to create problems.
A stereotype assigns attributes commonly associated with a group to an individual.
A halo eff ect uses one attribute to develop an overall impression of a person or situation.
Selective perception focuses attention on things consistent with existing beliefs, needs, or actions.
Common Perceptual Distortions
• Stereotypes—put people into categories and then
use attributes of the category to describe the
individual. Example: He’s close to retirement; too
old to learn the new technology.
• Halo Eff ects—use one characteristic of a per-
son or situation to form an overall impression.
Example: She’s always at work early; she’s a great
performer.
• Selective Perception—focuses attention on things
consistent with existing beliefs, needs, and ac-
tions. Example: Sales are down; I knew the new
product design was fl awed.
• Projection—assumes others are just like us and
assigns our attributes to them. Example: I’ll
schedule planning meetings for 7:30 am; it feels
good to get an early start.
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EXPLORING MANAGEMENT286
Projection occurs when we assign our personal attributes to other indi- viduals. Some call this the “similar-to-me” error. An example is to assume
that other persons share our needs, desires, and values. Suppose that you en-
joy a lot of responsibility and challenge in your work as a team leader. You
might try to increase responsibilities and challenges for team members,
wanting them to experience the same satisfactions as you. But this involves
projection. Instead of designing jobs to best fit their needs, you have designed
their jobs to fit yours. An individual team member may be quite satisfied and
productive doing his or her current job, one that seems routine to you. We
can control projection errors through self-awareness and a willingness to
communicate and empathize with other persons, that is, to try to see things
through their eyes.
Projection assigns personal attributes to other individuals.
A WOMAN’S WORK IS
NOT YET DONE
Although women com- pose half of the workforce, they account for only 3% of Fortune 500 CEOs. Sev- enty percent of women with children work, and forty percent are their family’s primary breadwin-
ner, yet women earn 78 cents for every dollar men earn. Haven’t women shown that these numbers are simply
unacceptable? In the book Women Count (2010, Purdue University Press),
author Susan Bulkeley Butler urges women to stop accepting statistics that underrepresent their leadership value and, in- stead, take action. She says women can shift their paradigm of success and stop thinking about others fi rst. Butler advises women to start by fi rst helping themselves, which may require rebalancing roles in their work, home, and personal life. She states that women can’t master these roles separately and suffer from obligation guilt. They must redefi ne the roles with the help of employers.
An example is the attorney who relocated so her children’s grandparents could assist with childcare. The fi rm assigned her cases she could work on from home and the fl exibility in rebalancing her work, family, and personal roles was essential to her success.
In this book, Butler cites research that women are good for performance. Companies with the most women, either on their Board of Directors or in top management positions, outperform those with the least women by 53% or 35%, respectively, mea- sured by return on equity. She asserts that this is because women possess behavioral advantages over men—things like being more compassionate, less ego-driven, listening better, taking fewer risks, and tending to be consensus-builders. Butler be- lieves organizations should increase female leadership to im- prove performance. This can be done by appointing at least two women to the board, having women report directly to the CEO, and by creating mentoring programs for female leaders.
Policies allowing women to rebalance life roles must also be commonplace. Butler herself mentors female executives and provides organizational resources through her Institute for the Development of Women Leaders.
The bottom line is that action is needed to insure the suc- cession of more women into leadership roles. It may be that a woman’s work is not done until the numbers refl ect that women do really count.
REFLECT AND REACT
Why don’t more women lead more companies? How can work, family, and personal roles of women confl ict? How might organizations better accommodate professional fe- males? What can a woman really do to “balance” multiple role expectations? And by the way, do you agree that women have behavioral advantages over men?
■ WOMEN COUNT BY SUSAN BULKELEY BUTLER
Manager’s Library
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Individual Behavior ■ Chapter 12 287
||| Perception can cause attribution errors as we explain events and problems.
One of the ways in which perception exerts its infl uence on behavior is through
attribution. Th is is the process of developing explanations for events and their perceived causes. It is natural for people to try to explain what they observe and
the things that happen to them. Suppose you perceive that someone else in a job
or student group isn’t performing up to expectations? How do you explain this?
And, depending on the explanation, what do you do to try to correct things?
When considering so-called “poor” performance by someone else, we are likely
to commit something called fundamental attribution error. Th is is a tendency to blame other people when things go wrong, whether or not this is really true. If
I perceive that a student is doing poorly in my course, for example, this error pops
up as a tendency to criticize the student’s lack of ability or unwillingness to study
hard enough. But that perception may not be accurate, as you may well agree.
Perhaps there’s something about the course design, its delivery, or my actions as
an instructor that are contributing to the problem—a defi ciency in the learning
environment, not the individual.
Consider another case. Th is time it’s you having a performance problem—at
school, at work, wherever. How do you explain it? Again, the likelihood of attribu-
tion error is high, this time it is called self-serving bias. It’s the tendency for peo- ple to blame personal failures or problems on external causes rather than accept
personal responsibility. Th is is the “It’s not my fault!” error. Th e fl ip side is to claim
personal responsibility for any successes—“It was me; I did it!”
I am performing
poorly
They are performing
poorly
Fundamental Attribution Error
“It’s their fault.”
Self-Serving Bias
“It’s not my fault.”
Th e signifi cance of these attribution errors can be quite substantial. When
we perceive things incorrectly we are likely to take the wrong actions and miss
solving a lot of problems in the process. Th ink about self-serving bias the next
time you hear someone blaming your instructor for a poor course grade. And
think about the fundamental attribution error the next time you jump on a
group member who didn’t perform according to your standards. Our percep-
tions aren’t always wrong, but they should always be double-checked and
tested for accuracy. Th ere are no safe assumptions when it comes to the power
of attributions.
||| Impression management is a way of infl uencing how others perceive us.
Richard Branson, CEO of the Virgin Group, may be one of the richest and most fa-
mous executives in the world. One of his early business accomplishments was the
successful start-up of Virgin Airlines, now a major competitor of British Airways
(BA). In a memoir, the former head of BA, Lord King, said: “If Richard Branson had
worn a shirt and tie instead of a goatee and jumper, I would not have underesti-
mated him.” 5 Th is is an example of how much our impressions count—both positive
and negative. Knowing this, scholars now emphasize the importance of impression management, the systematic attempt to infl uence how others perceive us.6
Attribution is the process of creating explanations for events.
Th e fundamental attribution error overestimates internal factors and underestimates external factors as infl uences on someone’s behavior.
Self-serving bias underestimates internal factors and overestimates external factors as infl uences on someone’s behavior.
Impression management tries to create desired perceptions in the eyes of others.
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EXPLORING MANAGEMENT288
You might notice that we often do bits and pieces of impression manage-
ment as a matter of routine in everyday life. Th is is especially evident when we
enter new situations—perhaps a college classroom or new work team, what
we post on Facebook or Twitter, and as we prepare to meet people for the fi rst
time, such as going out with a new friend for a social occasion or heading off
to a job interview. In these and other situations we tend to dress, talk, act, and
surround ourselves with things that help convey a desirable self-image to
other persons.
Impression management that is well done can help us advance in jobs and
careers, form relationships with people we admire, and even create pathways
to desired social memberships. Some basic tactics are worth remembering:
knowing when to dress up and when to dress down to convey positive appeal in
certain situations, using words to fl atter other people in ways that generate
positive feelings toward you, making eye contact and smiling when engaged in
conversations to create a personal bond, and displaying a high level of energy
that indicates work commitment and initiative. 7
Could you imagine starting an airline? Richard Branson de- cided he would and called it Virgin Atlantic. His career began in his native England with a student literary magazine and small mail-order record business. Since then he’s built Virgin into one of the world’s most recognized brand names.
Virgin Group is a business conglomerate employing some 25,000 people around the globe. It holds over 200 companies, including Virgin Mobile and the space venture Virgin Galactic. It’s all very creative and ambitious—but that’s Branson. “I love to learn things I know little about” and “before I do anything I fi rst get tons of feedback,” he says.
But if you bump into Branson on the street, you might be surprised. He’s casual, he’s smiling, and he’s fun; he’s also bril- liant when it comes to business and leadership. Branson has been listed among the 25 most infl uential business leaders. His goal is to build Virgin into “the most respected brand in the world.” And as the man behind the brand, he’s described as “fl amboyant,” something he doesn’t deny and also consid- ers a major business advantage that keeps him and his ven- tures in the public eye.
About leadership Branson says: “Having a personality of caring about people is important. . . . You can’t be a good
leader unless you generally like people. That is how you bring out the best in them.” His own style, he claims, was shaped by his family and childhood. At age 10 his mother put him on a 300-mile bike ride to build character and endurance. At 16, he started a student magazine. By the age of 22, he was launching Virgin record stores. And by the time he was 30, Virgin Group was running at high speed.
Now known as Sir Richard after being knighted in 1999, he enjoys Virgin today “as a way of life.” But he adds: “In the next stage of my life I want to use our business skills to tackle social issues around the world. . . . Malaria in Africa kills four million people a year. AIDS kills even more. . . . I don’t want to waste this fabulous situation in which I’ve found myself.”
WHAT’S THE LESSON HERE?
Do actions speak louder than impressions? Richard Branson succeeded while staying true to himself. But then again, he’s been a star right from the beginning and basically “runs his own shows.” If you aren’t at the top, should you be more wor- ried about the impression you give and how it might affect your career?
■ RICHARD BRANSON LEADS WITH PERSONALITY AND FLAMBOYANCE
Role Models “YOU CAN’T BE A GOOD LEADER UNLESS
YOU GENERALLY LIKE PEOPLE.” {
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Individual Behavior ■ Chapter 12 289
Takeaway 12.1 How Do Perceptions Infl uence
Individual Behavior?
Rapid Review • Perception acts as a fi lter through which all communication passes as it travels
from one person to the next.
• Diff erent people may perceive the same things diff erently. • Stereotypes, projections, halo eff ects, and selective perception can distort percep-
tions and reduce communication eff ectiveness.
• Fundamental attribution error occurs when we blame others for their perfor- mance problems, without considering possible external causes.
• Self-serving bias occurs when, in judging our own performance, we take personal credit for successes and blame failures on external factors.
• Th rough impression management, we infl uence the way that others perceive us.
Questions for Discussion 1. How do advertising fi rms use stereotypes to infl uence consumer behavior?
2. Are there times when a self-serving bias is actually helpful?
3. Does the notion of impression management contradict the idea of personal
integrity?
Be Sure You Can • describe how perception infl uences behavior • explain how stereotypes, halo eff ects, selective perceptions, and projection might
operate in the workplace
• explain the concepts of attribution error and self-serving bias • illustrate how someone might use impression management during a job interview
What Would You Do? While standing in line at the offi ce coff ee machine, you overhear the person in front
of you saying this to his friend: “I’m really tired of having to deal with the old-timers
here. It’s time for them to call it quits. Th ere’s no way they can keep up the pace and
handle all the new technology we’re getting these days.” You can listen and forget, or
you can listen and act. What would you do or say here, and why?
STUDY GUIDE
Terms to Defi ne
Attribution
Fundamental
attribution error
Halo eff ect
Impression
management
Perception
Projection
Selective perception
Self-serving bias
Stereotype
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EXPLORING MANAGEMENT290
Think of how many times you’ve complained about someone’s “bad
personality” or told a friend how much you like someone else because they had
such a “nice personality.” Well, the same holds true at work. Perhaps you have
been part of or the subject of conversations like these: “I can’t give him that job.
He’s a bad fi t; with a personality like that, there’s no way he can work with cus-
tomers.” Or “Put Erika on the project; her personality is perfect for the intensity
that we expect from the team.”
In management we use the term personality to describe the combination or overall profi le of enduring characteristics that make each of us unique. And as
the prior examples suggest, this uniqueness can have consequences for how we
behave and how that behavior is regarded by others.
||| Th e Big Five personality traits describe work-related individual diff erences.
We all know that variations among personalities are both real and consequential
in our relationships with everyone from family to friends to co-workers. Although
there are many personality traits, scholars have identifi ed a short list of fi ve that
are especially signifi cant. Known as the Big Five, these personality traits are ex-
traversion, agreeableness, conscientiousness, emotional stability, and openness
to experience. 8
Take a look at the descriptions in Table 12.1—How to Identify the Big Five Per- sonality Traits. You can probably spot them pretty easily in people with whom you
work, study, and socialize, as well as in yourself. And while you’re at it, why not
use the table as a quick check of your personality? Ask: What are the implications
for my interpersonal and working relationships?
A considerable body of research links the Big Five personality traits with work
and career outcomes. Th e expectation is that people with more extraverted,
agreeable, conscientious, emotionally stable, and open personalities will have
more positive relationships and experiences in organizations. 9 Conscientious
persons tend to be highly motivated and high-performing in their work, while
emotionally stable persons tend to handle change situations well. It’s also likely
that Big Five traits are implicit criteria used by managers when making judgments
Personality is the profi le of characteristics making a person unique from others.
Takeaway 12.2 How Do Personalities Infl uence
Individual Behavior?
ANSWERS TO COME
■ Th e Big Five personality traits describe work-related individual diff erences.
■ Th e Myers-Briggs Type Indicator is a popular approach to personality
assessment.
■ Self-monitoring and other personality traits infl uence work behavior.
■ People with Type A personalities tend to stress themselves.
■ Stress has consequences for work performance and personal health.
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Individual Behavior ■ Chapter 12 291
about people at work, handing out job assignments, building teams, and more.
Psychologists even use the Big Five to steer people in the direction of career
choices that may provide the best personality-job fi ts. Extraversion, for example,
is a good predictor of success in management and sales positions.
||| Th e Myers-Briggs Type Indicator is a popular approach to personality assessment.
Another popular approach to personality assessment is the Myers-Briggs Type
Indicator, a sophisticated questionnaire that probes into how people act or feel
in various situations. Called the MBTI for short, it was developed by Katherine
Briggs and her daughter Isabel Briggs-Myers from foundations set forth in the
work of psychologist Carl Jung. 10
Jung’s model of personality diff erences included three main distinctions. First,
extraversion and introversion, as just discussed, were used to describe personal-
ity diff erences in ways people relate with others. Second, Jung described how
people vary in the way they gather information—by sensation (emphasizing de-
tails, facts, and routine) or by intuition (looking for the “big picture” and being
willing to deal with various possibilities). Th ird, he described how they vary in
ways of evaluating information—by thinking (using reason and analysis) or by
feeling (responding to the feelings and desires of others). To the personality
distinctions in Jung’s original model, Briggs and Briggs- Myers added a fourth
dimension—judging or perceiving. It describes how people vary in the ways they
relate to the outside world.
Th e four dimensions of the Myers-Briggs Type Indicator follow. 11
• Extraversion vs. introversion (E or I)—whether a person tends toward being outgoing and sociable or shy and quiet
• Sensing vs. intuitive (S or N)—whether a person tends to focus on details or on the big picture in dealing with problems
• Th inking vs. feeling (T or F)—whether a person tends to rely on logic or emo- tions in dealing with problems
Table 12.1 How to Identify the Big Five Personality Traits
Extraversion An extravert is talkative, comfortable, and confi dent in interpersonal re- lationships; an introvert is more private, withdrawn, and reserved.
Agreeableness An agreeable person is trusting, courteous, and helpful, getting along well with others; a disagreeable person is self-serving, skeptical, and tough, creating
discomfort for others.
Conscientiousness A conscientious person is dependable, organized, and focused on getting things done; a person who lacks conscientiousness is careless, impulsive, and
not achievement oriented.
Emotional stability A person who is emotionally stable is secure, calm, steady, and self-confi dent; a person lacking emotional stability is excitable, anxious, nervous, and
tense.
Openness to experience A person open to experience is broad-minded, imaginative, and open to new ideas; and person who lacks openness is narrow-minded, has few
interests, and resists change.
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EXPLORING MANAGEMENT292
• Judging vs. perceiving (J or P)—whether a person pre- fers order and control or acts with fl exibility and
spontaneity
Based on MBTI scores, an individual is classifi ed into
one of the 16 possible personality types that result from
combinations of these four dimensions. A sample is
shown in the small box. Th e neat and understandable
nature of the classifi cation has made the MBTI very pop-
ular in management training and development, although
it receives mixed reviews from researchers. 12
Employers
and trainers tend to like it because once a person is
“typed” on the Myers-Briggs, for example as an ESTJ or
ISFJ, they can be trained to both understand their own
styles and to learn how to better work with people hav-
ing diff erent styles.
||| Self-monitoring and other personality traits infl uence work behavior.
In addition to the Big Five dimensions and the Myers-Briggs Type Indicator,
other personality traits can infl uence how people behave and work together. 13
Th ose shown in the nearby fi gure include self- monitoring,
locus of control, authoritarianism, Machiavellianism, and
Type A orientation.
Scholars have a strong interest in locus of control, noting that some people believe they control their destinies while
others believe what happens is beyond their control. 14
“Inter-
nals” are more self-confi dent and accept responsibility for
their own actions; “externals” are prone to blaming others and
outside forces when bad things happen. Interestingly, re-
search suggests that internals tend to be more satisfi ed and
less alienated from their work.
Authoritarianism is the degree to which a person defers to authority and accepts status diff erences.
15 Someone with an
authoritarian personality might act rigid and control-oriented
as a leader. Yet, this same person is often subservient as a fol-
lower. People with an authoritarian personality tend to obey orders. Of course,
this can create problems when their supervisors ask them to do unethical or even
illegal things.
In his 16th-century book Th e Prince, Niccolo Machiavelli gained lasting fame
for his advice on how to use power to achieve personal goals. 16
Today we use the
term Machiavellianism to describe someone who acts manipulatively and emo- tionally detached when using power. We usually view a “high-Mach” personality
as exploitative and unconcerned about others, seemingly guided only by a belief
that the end justifi es the means. Th ose with “low-Mach” personalities, by con-
trast, allow others to exert power over them.
Finally, self-monitoring refl ects the degree to which someone is able to adjust and modify behavior in new situations.
17 Persons high in self-monitoring tend to be
Sample Myers-Briggs Types
• ESTJ (extraverted, sensing, thinking, judging)—
practical, decisive, logical, and quick to dig in;
common among managers
• ENTJ (extraverted, intuitive, thinking, judging)—
analytical, strategic, forceful, quick to take
charge; common for leaders
• ISFJ (introverted, sensing, feeling, judging)—
conscientious, considerate, and helpful; common
among team players
• INTJ (introverted, intuitive, thinking, judging)—
insightful, free thinking, determined; common
for visionaries
Machiavellianism
Openness
Self-monitoring
= Big Five
Extraversion
Locus of control
Authoritarianism
Agreeableness
Type A orientation
Conscientiousness
Emotional
stability
INDIVIDUAL
PERSONALITY
VARIATIONS
Locus of control is the extent to which one believes what happens is within one’s control.
Authoritarianism is the degree to which a person defers to authority and accepts status diff erences.
Machiavellianism is the degree to which someone uses power manipulatively.
Self-monitoring is the degree to which someone is able to adjust behavior in response to external factors.
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Individual Behavior ■ Chapter 12 293
learners, comfortable with feedback, and both willing and able to change. Because
they are fl exible, however, others may perceive them as constantly shifting gears and
hard to read. A person low in self-monitoring is predictable and tends to act consis-
tently. But this consistency may not fi t the unique needs of diff ering circumstances.
||| People with Type A personalities tend to stress themselves.
Stress is a state of tension experienced by individuals facing extraordinary de- mands, constraints, or opportunities.
18 As you consider stress in your life and in
your work, you might think about how your personality deals with it. Researchers
describe the Type A personality, also shown among the personality traits in the last fi gure, as someone who is high in achievement orientation, impatience, and
perfectionism. Type A’s are likely to bring stress on themselves, even in circum-
stances that others fi nd relatively stress-free. 19
Th e work environment has enough potential stressors, or sources of stress,
without this added burden of a stress-prone personality. Some 34% of workers in
one survey actually said that their jobs were so stressful that they were thinking
of quitting. 20
Th e stress they were talking about comes from long hours of work,
excessive e-mails, unrealistic work deadlines, diffi cult bosses or co-workers, un-
welcome or unfamiliar work, and unrelenting change. 21
Stress is a state of tension experienced by individuals facing extraordinary demands, constraints, or opportunities.
A Type A personality is oriented toward extreme achievement, impatience, and perfectionism.
Spanx Has Lots of Snap
Real People and Personalities Make Things Happen
Th e headline reads: “Spanx queen leads from the bottom line.” Th e story goes:
Woman unhappy with the way she looks in white pants cuts feet off panty hose,
puts them on, and attends party. Th e result is: Sara Blakely founds a $250�
million business called Spanx.
“I knew this could open up so many women’s wardrobes,” Blakely says. “All
women have that clothing in the back of the closet that they don’t wear because
they don’t like the way it looks.” With this notion, $5,500 of her own money, and
the idea for “body shaping” underwear, she set out to start a business. Her
unique blend of skills and personality made it all work.
When her fi rst attempts to convince manufacturers to make product samples
met with resistance—with one calling it “a stupid idea”—Blakely persisted until
one agreed. She aspired to place Spanx in high-end department stores. But
again, department stores kept turning her down. Still, Blakely kept at it and
fi nally persuaded a buyer at Neiman Marcus to give Spanx its fi rst big chance.
Blakely sent Oprah Winfrey samples, and sales took off after Oprah voted Spanx
“one of her favorite things.”
It was about this time that Blakely recognized her limits and realized addi-
tional skills were needed to handle the fi rm’s fast-paced growth. “I was eager to
delegate my weaknesses,” she said after turning day-to-day operations over to a
chief executive offi cer. Th is left her free to pursue creativity, new products, and
brand development, as well as work with the Sara Blakely Foundation and its
goal of “supporting and empowering women around the world.”
Creative, outgoing,
passionate, driven,
persistent, and ambi-
tious—these adjectives
and more describe Sara
Blakely and her personal-
ity. Th ey can also go a long
way in explaining how and
why she was successful
with Spanx. Any manager
needs to understand
people, both others and
themselves. When you
look in the mirror, what
and whom do you see?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT294
As if work stress isn’t enough for Type A’s to deal with, there’s the added kicker
of stress in our personal lives. Th ings such as family events (e.g., the birth of a new
child), economics (e.g., a sudden loss of extra income), and personal issues (e.g., a
preoccupation with a bad relationship) are all sources of potential emotional
strain. Th ese and other personal stressors can spill over to negatively aff ect our
behavior at work. Of course, the eff ects also hold in reverse; work stressors can
have spillover impact on our personal lives.
||| Stress has consequences for work performance and personal health.
How does all of this add up as an infl uence on your work and life? It’s tempting to
view stress all in the negative. But don’t forget that stress can have its positive
side as well. 22
Take the analogy of a violin. 23
When a violin string is too loose, the
sound produced by even the most skilled player is weak and raspy. When the
string is too tight, the sound gets shrill and the string might even snap. But when
the tension on the string is just right, it creates a beautiful sound. Just enough
stress, in other words, may optimize performance.
Constructive stress is energizing and performance enhancing.24 You’ve prob- ably felt this as a student. Don’t you sometimes do better work “when the pres-
sure is on,” as we like to say? Moderate but not overwhelming stress can help us
by encouraging eff ort, stimulating creativity, and enhancing diligence.
Just like tuning a violin string, however, achieving the right balance of stress for
each person and situation is diffi cult. Destructive stress is dysfunctional because it is or seems to be so intense or long-lasting that it overloads and breaks down a person’s
physical and mental systems. One of its outcomes is job burnout. Th is is a sense of physical and mental exhaustion that drains our energies both personally and profes-
sionally. Another is workplace rage—overly aggressive behavior toward co-workers, bosses, or customers.
25 An extreme example is the “bossnapping” that made the news
in France, where workers at a Caterpillar plant took their plant manager hostage and
held him for 24 hours in protest of layoff s. A local sociologist said: “Kidnapping your
boss is not legal. But it’s a way workers have found to make their voices heard.” 26
Medical research also indicates that too much stress can reduce resistance to
disease and increase the likelihood of physical and/or mental illness. It may con-
tribute to health problems such as hypertension, ulcers, substance abuse, over-
eating, depression, and muscle aches. 27
Constructive stress is a positive infl uence on eff ort, creativity, and diligence in work.
Destructive stress is a negative infl uence on one’s performance.
Job burnout is physical and mental exhaustion from work stress.
Workplace rage is aggressive behavior toward co-workers or the work setting.
1. Always moving, walking, and eating rapidly 2. Impatient, unhappy about waiting 3. Doing or trying to do several things at once 4. Feeling guilty when relaxing
5. Trying to schedule more in less time 6. Using nervous gestures such as clenched fi sts 7. Hurrying or interrupting the speech of others 8. Never satisfi ed with performance
■ HOW TO SPOT TYPE A PERSONALITIES
Tips to Remember TYPE A PERSONALITIES BRING
STRESS ON THEMSELVES. {
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Individual Behavior ■ Chapter 12 295
So what can we do about stress—how can it be managed? Th e best strategy is
to prevent it from reaching excessive levels in the fi rst place. If we can identify our
stressors, whether work-related or personal, we can often take action to avoid or
minimize their negative consequences. And as managers, we can take steps to
help others who are showing stress symptoms. Th ings like temporary changes in
work schedules, reduced performance expectations, long deadlines, and even re-
minders to take time off can all help.
When it comes to taking time off , the latest advice is that you can work better
by working less. A Society for Human Resource Management Survey reports that
some 70% of people suff er from self-imposed pressures and often work late or on
weekends. But a study by the Boston Consulting Group also reports that requir-
ing people to take time off from their work—by not skipping vacations or work-
ing too much overtime, for example, can be benefi cial in terms of greater job
satisfaction and better work-life balance. Th e professional services fi rm KPMG,
for example, follows this advice almost to the letter. Its managers now use “well-
ness scorecards” to track and discuss with employees how well they are doing in
taking their vacation days and not working excessive overtime. 28
Finally, there is really no substitute for personal wellness. In management we use this term to describe the pursuit of a personal health-promotion program.
29 It be-
gins by taking personal responsibility for your physical and mental health. It means
getting rest, getting plenty of exercise, and eating a balanced diet. It means dealing
with addictions to cigarettes, alcohol, or drugs. It means committing to a healthy
lifestyle, one that helps you deal with stress and the demands of life and work.
Personal wellness is the pursuit of a personal health-promotion program.
Dear [your name goes here]: I am very pleased to invite you to a second round of
screening interviews with XYZ Corporation. Your on-campus session with our representative went very well, and we would like to consider you further for a full-time position. Please contact me to arrange a visit date. We will need a full day. The schedule will include several meetings with executives and your potential team members, as well as a round of per- sonality tests.
Thank you again for your interest in XYZ Corp. I look for- ward to meeting you during the next step in our recruiting process.
Sincerely, [signed] Human Resource Director
Getting a letter like this is great news. It’s a nice confi rma- tion of your hard work and performance in college. You obvi- ously made a good fi rst impression. But have you thought about this “personality test” thing? What do you know about them and how they are used for employment screening?
A report in the Wall Street Journal advises that lawsuits can result when employers use personality tests that aren’t specifi - cally designed for hiring decisions. Some people might even consider their use an invasion of privacy.
YOU DECIDE
What are the ethical issues associated with the use of person- ality testing? In which situations might the use of personality tests be an invasion of privacy? Also, suppose that the specifi c personality test being used is not predictive of employee per- formance on the job. Could its use be termed unethical?
■ IS PERSONALITY TESTING IN YOUR FUTURE?
Ethics Check WHEN IS PERSONALITY TESTING AN
INVASION OF PERSONAL PRIVACY? {
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EXPLORING MANAGEMENT296
Takeaway 12.2 How Do Personalities Infl uence
Individual Behavior?
Rapid Review • Th e Big Five personality factors are extraversion, agreeableness, conscientious-
ness, emotional stability, and openness.
• The Myers-Briggs Type Indicator (MBTI) identifies personality types based on extraversion-introversion, sensing-intuitive, thinking-feeling, and judging–
perceiving.
• Additional personality dimensions of work signifi cance are locus of control, au- thoritarianism, Machiavellianism, self-monitoring, and Type A orientation.
• Stress is a state of tension that accompanies extraordinary demands, constraints, or opportunities.
• For some people, having a Type A personality creates stress as a result of continual feelings of impatience and pressure.
• Stress can be destructive or constructive; a moderate level of stress can have a positive impact on performance.
Questions for Discussion 1. Which personality trait would you add to the Big Five to make it the Big “Six”?
2. What are the advantages and disadvantages of having people of diff erent MBTI
types working on the same team?
3. Can you be an eff ective manager and not have a Type A personality?
Be Sure You Can • list the Big Five personality traits and give work-related examples of each • list fi ve more personality traits and give work-related examples for each • list and explain the four dimensions used to create personality types in the MBTI • identify common stressors in work and personal life • describe the Type A personality • diff erentiate constructive and destructive stress • explain personal wellness as a stress management strategy
What Would You Do? You’ve noticed that one of your co-workers is always rushing, always uptight, and
constantly criticizing herself while on the job. She never takes time for coff ee when
the rest of you do, and even at lunch it’s hard to get her to stay and just talk for
awhile. Your guess is that she’s fi ghting stress from some source or sources other
than the nature of the job itself. How can you help her out?
STUDY GUIDE
Terms to Defi ne
Agreeableness
Authoritarianism
Conscientiousness
Constructive stress
Destructive stress
Emotional stability
Extraversion
Job burnout
Locus of control
Machiavellianism
Openness
Personal wellness
Personality
Self-monitoring
Stress
Type A personality
Workplace rage
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Individual Behavior ■ Chapter 12 297
At one time, Challis M. Lowe was one of only two African-American
women among the fi ve highest-paid executives in over 400 U.S. corporations. 30
She attained this success after a 25-year career that included several changes of
employers and lots of stressors—working-mother guilt, a failed marriage, gender
bias on the job, and an MBA degree earned part-time. Th rough it all, she says:
“I’ve never let being scared stop me from doing something. Just because you
haven’t done it before doesn’t mean you shouldn’t try.” Would you agree that
Lowe has what we often call a “can-do” attitude?
||| Attitudes predispose people to act in certain ways.
An attitude is a predisposition to act in a certain way toward people and environ- mental factors.
31 Challis Lowe seemed disposed to take risks and embrace chal-
lenges. Th is positive attitude infl uenced her behavior when dealing with the
inevitable problems, choices, and opportunities of work and career.
To fully understand attitudes, positive or negative, it’s important recognize the
three components shown in the small fi gure. First is the cognitive component,
which refl ects a belief or value. You might believe, for example, that your man-
agement course is very interesting. Second is the aff ective or emotional compo-
nent, which refl ects a specifi c feeling. For example, you might feel very good
about being a management major. Th ird is the behavioral component, which re-
fl ects an intention to behave consistent with the belief and feeling. Using the
same example again, you might say to yourself: “I am going to work hard and try
to get As in all my management courses.”
Have you noticed, however, that attitudes
don’t always predictor behavior? Despite pledg-
ing to work hard as a student, you might not.
Despite wanting a more challenging job, you
might keep the current one because of family or
other nonwork reasons. In such cases we fail to
live up to our own expectations. Usually it’s not
a good feeling.
An attitude is a predisposition to act in a certain way.
Takeaway 12.3 How Do Attitudes, Emotions, and
Moods Infl uence Individual Behavior?
ANSWERS TO COME
■ Attitudes predispose people to act in certain ways.
■ Job satisfaction is a positive attitude toward one’s job and work experiences.
■ Job satisfaction infl uences work behavior.
■ Job satisfaction has a complex relationship with job performance.
■ Emotions and moods are positive and negative states of mind that infl uence
behavior.
Affect BehaviorCognition
“This job isn’t challenging; work is
important to me.”
“I really don’t like my
job.”
“I’m going to ask for a better
job, or quit.”
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EXPLORING MANAGEMENT298
Th e psychological concept of cognitive dissonance describes the discomfort we feel in situations where our attitude is inconsistent with our behavior.
32 Most of us
manage this dissonance by modifying our attitude to better fi t the behavior (“Oh well,
work isn’t really that important, anyway”), changing future behavior to fi t the attitude
(not putting extra time in at work; focusing more attention on leisure and personal
hobbies), or rationalizing in ways that make the attitude and behavior seem compat-
ible (“I’m in no hurry; there will be a lot of opportunities for better jobs in the future”).
||| Job satisfaction is a positive attitude toward one’s job and work experiences.
People hold attitudes about many things in the workplace—bosses, each other,
tasks, organizational policies, performance goals, paychecks, and more. A com-
prehensive or catch-all work attitude is job satisfaction, the degree to which an individual feels positive or negative about various aspects of his or her job and
work experiences. 33
When researchers study and people talk about job satisfaction, several things
are usually at issue. Job satisfaction typically refl ects attitudes toward these as-
pects of the work and social context:
• Th e job itself—responsibility, interest, challenge.
• Quality of supervision—task help, social support.
• Co-workers—harmony, respect, friendliness.
• Opportunities—promotion, learning, growth.
• Pay—actual and comparative.
• Work conditions—comfort, safety, support.
• Security—job and employment.
Cognitive dissonance is discomfort felt when attitude and behavior are inconsistent.
Job satisfaction is the degree to which an individual feels positive about a job and work experience.
When reporters from Fortune asked a sample of American workers about their job satisfaction, they found: • 37% completely satisfi ed • 47% somewhat satisfi ed • 10% somewhat dissatisfi ed • 4% completely dissatisfi ed • 2% not sure
Ongoing research on job satisfaction indicates these trends: • Job satisfaction has been declining since 1995. • Job satisfaction runs higher in smaller fi rms. • Job satisfaction correlates with overall life satisfaction • Job satisfaction is about equal for men and women
• Most people who are dissatisfi ed aren’t making plans to leave their current jobs.
YOUR THOUGHTS?
Do these data seem consistent with your work experiences and those of your friends and family? How do you think the many job layoffs of the recent economic crisis have affected job satisfaction? Are people with jobs going to be “satis- fi ed” just for having them, or will the uncertainty over keep- ing their jobs make them “less satisfi ed” in general? What can a concerned employer do to create conditions for high job satisfaction?
■ TRENDS SHOW JOB SATISFACTION DRIFTING LOWER
Facts to Consider JOB SATISFACTION CORRELATES WITH
OVERALL LIFE SATISFACTION. {
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Individual Behavior ■ Chapter 12 299
If you watch or read the news, you’ll regularly fi nd reports on job satisfac-
tion. You’ll also fi nd lots of job satisfaction studies in the academic literature.
Interestingly, the majority of people tend to report being at least somewhat
satisfi ed with their jobs. But the trend is down. 34
Th e least satisfying things
about people’s jobs often relate to feeling underpaid, not having good career
advancement opportunities, and being trapped in the current job. And in re-
spect to things that create job satisfaction, a global study fi nds pay, contrary to
what you might expect, is less important than things like opportunities to do
interesting work, recognition for performance, work-life balance, chances for
advancement, and job security. 35
||| Job satisfaction infl uences work behavior. At the beginning of this book, we identifi ed two primary goals or concerns of an
eff ective manager—to help others achieve both high performance and job satis-
faction. Are you ready to agree that job satisfaction is important on quality-of-
work-life grounds alone? Don’t people deserve satisfying work experiences? Of
course they do. But an important question remains: Is job satisfaction important
in other than a “feel-good” sense?
Researchers tell us that there is a strong relationship between job satisfaction
and the withdrawal behaviors of absenteeism—not showing up for work, and turnover—quitting one’s job. In respect to absenteeism, workers who are more
satisfi ed with their jobs are absent less often than those who are dissatisfi ed. In
respect to turnover, satisfi ed workers are more likely to stay and dissatisfi ed
workers are more likely to quit their jobs. Th e consequences of these withdrawal
behaviors can be significant. Both absenteeism and excessive turnover are
expensive for employers. In fact, one study found that changing retention rates—
up or down—results in similar changes to corporate earnings. 36
Researchers also identify a relationship between job satisfaction and organi- zational citizenship behaviors.37 Th ese behaviors show up as a willingness to “go beyond the call of duty” or “go the extra mile” in one’s work.
38 A person who
is a good organizational citizen does things that, although not required, help
advance the performance of the organization. You might observe this as a ser-
vice worker who goes to extraordinary lengths to take care of a customer, a team
member who is always willing to take on extra tasks, or a friend who is always
working extra hours without pay just to make sure things are done right for his
employer.
Job satisfaction is also tied with employee engagement. You can recognize this in yourself and in others as a strong sense of belonging or connection with
one’s job and employer. It shows up both in high involvement—being willing
to help others and always trying to do something extra to improve perfor-
mance, and in high commitment—feeling and speaking positively about the
organization. A survey of 55,000 American workers by the Gallup Organization
suggests that more engaged workforces generate higher profi ts for employers. 39
Th ings that counted most toward employee engagement in the Gallup re-
search were believing one has the opportunity to do one’s best every day, be-
lieving one’s opinions are valued, believing fellow workers are committed to
quality, and believing there is a direct connection between one’s work and the
company’s mission.
Withdrawal behaviors include absenteeism (not showing up for work) and turnover (quitting one’s job).
Organizational citizenship behaviors are things people do to go the extras mile in their work.
Employee engagement is a strong sense of belonging and connection with one’s work and employer.
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||| Job satisfaction has a complex relationship with job performance.
Job satisfaction infl uences withdrawal, citizenship, and engagement. But, does it
infl uence performance? Th e data on the job satisfaction and performance rela-
tionship are, as you might expect, somewhat complicated. 40
Con-
sider a sign that once hung in a tavern near a Ford plant in Michigan:
“I spend 40 hours a week here, am I supposed to work too?”
Th ree diff erent arguments on the satisfaction and performance
relationship are shown in the small fi gure. One is that job satisfac-
tion causes performance. Th e second is that performance causes
job satisfaction. Th e third is that job satisfaction and performance
are intertwined, infl uencing one another and mutually linked with
other factors such as available rewards. Can you make a case for
each argument based on your personal experiences?
Recent conclusions are that there is probably a modest link between job satis-
faction and performance. 41
But emphasize the word “modest” in the last sen-
tence. We need to be careful before rushing to conclude that making people
happy is a surefi re way to improve their job performance. Th e reality is that some
people will like their jobs, be very satisfi ed, and still not perform very well. Th at’s
part of the complexity of individual behavior.
Th e link between performance and satisfaction holds pretty much to the
same pattern. High-performing workers are likely to feel satisfi ed. But again, not
everyone is likely to fi t this model. Some people may get their work done and
even meet high performance expectations while still not experiencing high job
satisfaction. Can you think of a time where this was the case for you?
Finally, it is quite likely that job satisfaction and job performance infl uence
each other. But the relationship, the subject of a lot of research, is most likely to
hold under certain conditions. Th e role of rewards is especially important. In
general, high performance followed by rewards that are valued and perceived as
fair will create job satisfaction. Th is satisfaction, in turn, will likely increase moti-
vation to work hard to achieve high performance in the future.
||| Emotions and moods are positive and negative states of mind that infl uence behavior.
In Chapter 1 we fi rst discussed emotional intelligence as an important human skill for managers and an important leadership capability. Daniel Goleman defi nes
EI as an ability to understand emotions in ourselves and in others and to use this
understanding to manage relationships eff ectively. 42
But what is an “emotion?”
And, how does it infl uence our behavior—positively and negatively?
An emotion is a strong feeling directed toward someone or something. For example, you might feel positive emotion or elation when an instructor congrat-
ulates you on a fi ne class presentation; you might feel negative emotion or anger
when an instructor criticizes you in front of the class. In both cases the object of
your emotion is the instructor, but in each case the impact of the instructor’s
behavior on your feelings is quite diff erent. And your behavior in response to the
aroused emotions is likely to diff er as well—perhaps breaking into a wide smile
with the compliment or making a nasty side comment in response to criticism.
Emotional intelligence is an ability to understand emotions and manage relationships eff ectively.
Emotions are strong feelings directed toward someone or something.
“The happy worker is a productive worker” Satisfaction Performance
“The productive worker is a happy worker” Performance Satisfaction
“Perfomance followed by rewards creates satisfaction;
satisfaction influences future performance.” Performance Reward Satisfaction
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Individual Behavior ■ Chapter 12 301
Goleman’s point about emotional intelligence is that we perform better in
work and social situations when we are good at recognizing and dealing with
emotions in ourselves and others. In other words, EI allows us to avoid having
our emotions “get the better of us.”
Whereas emotions tend to be short-term and clearly targeted, moods are generalized positive and negative feelings or states of mind that may persist for
some time. Everyone seems to have occasional moods, and we each know the
full range of possibilities they represent. How often do you wake up in the morn-
ing and feel excited, refreshed, and just happy? Or, wake up feeling low, de-
pressed, and generally unhappy? What are the consequences of these diff erent
moods for your behavior with friends and family, and at work or school?
When it comes to moods and the workplace, a Business Week article claims
that it pays to be likable. 43
Harsh is now out and caring is in. Some CEOs are even
hiring executive coaches to help them manage emotions and moods so as to
come across as more personable and friendly in relationships with others. Th ere’s
a bit of impression management to consider here. If a CEO, for example, goes to a
meeting in a good mood and gets described as “cheerful,” “charming,” “humor-
ous,” “friendly,” and “candid,” she or he may be viewed as on the upswing. But if
the CEO is in a bad mood and comes away perceived as “prickly,” “impatient,”
“remote,” “tough,” “acrimonious,” or even “ruthless,” she or he may be seen as on
the downhill slope.
Researchers are also increasingly interested in mood contagion, the spillover eff ects of one’s mood onto others.
44 Findings indicate that positive emotions of
leaders can be “contagious,” causing followers to display more positive moods
and also be both more attracted to the leaders and willing to rate the leaders
more highly. As you might expect, mood contagion can also have positive and
negative eff ects on the moods of co-workers and teammates, as well as family
and friends. 45
Moods are generalized positive and negative feelings or states of mind.
Mood contagion is the spillover of one’s positive or negative moods onto others.
People are different; our styles vary in the way we work, re- late to others, and even in how we view ourselves. One of the differences you might observe when interacting with other people is in ambition, or the desire to succeed and reach for high goals.
Ambition is one of those traits that can certainly have a big impact on individual behavior. It is evident in how we act and what we try to achieve at work, at home, and in leisure pursuits. It comes out in personality as competitiveness and desire to be the best at something. The more we understand
ambition in our lives, and the more we understand how per- sonality traits infl uence our behavior, the more successful we’re likely to be in accomplishing our goals and helping oth- ers do the same.
■ AMBITION
Explore Yourself AMBITION SHOWS UP IN PERSONALITY AS
COMPETITIVENESS AND A DESIRE TO BE THE BEST. {
Get to know yourself better by taking the Stress Test self-assessment and completing the other activities in the
Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT302
Takeaway 12.3 How Do Attitudes, Emotions, and Moods
Infl uence Individual Behavior?
Rapid Review • An attitude is a predisposition to respond in a certain way to people and things. • Cognitive dissonance occurs when a person’s attitude and behavior are inconsistent. • Job satisfaction is an important work attitude, refl ecting a person’s evaluation of
the job, co-workers, and other aspects of the work setting.
• Job satisfaction infl uences withdrawal behaviors of absenteeism and turnover, and organizational citizenship behaviors.
• Job satisfaction has a complex and reciprocal relationship with job performance. • Emotions are strong feelings that are directed at someone or something; they in-
fl uence behavior, often with intensity and for short periods of time.
• Moods are generalized positive or negative states of mind that can be persistent infl uences on one’s behavior.
Questions for Discussion 1. Is cognitive dissonance a good or bad infl uence on us?
2. How can a manager deal with someone who has high job satisfaction but is a low
performer?
3. What are the lessons of mood contagion for how a new team leader should
behave?
Be Sure You Can • identify the three components of an attitude • explain cognitive dissonance • describe possible measures of job satisfaction • explain the consequences of job satisfaction for absenteeism and turnover • explain the link between job satisfaction, organizational citizenship, and employee
engagement
• list and describe three alternative explanations in the job satisfaction– performance relationship
• explain how emotions and moods infl uence work behavior
What Would You Do? Your team leader has just told you that some of your teammates have complained
to him that you have been in a really bad mood lately and it is rubbing off on the
others. Th ey like you and point out that this isn’t characteristic of you at all. Th ey
don’t know what to do about it. What can you do? Is their anything your team leader
might do to help?
STUDY GUIDE
Terms to Defi ne
Attitude
Cognitive dissonance
Emotion
Emotional intelligence
Employee engagement
Job satisfaction
Mood
Mood contagion
Organizational citizenship behaviors
Withdrawal behaviors
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Individual Behavior ■ Chapter 12 303
1. Among the Big Five personality traits,
indicates someone who tends to be responsible,
dependable, and careful in respect to tasks.
(a) authoritarian
(b) agreeable
(c) conscientious
(d) emotionally stable
2. A person with a/an personality would
most likely act unemotional and manipulative when
trying to infl uence others to achieve personal goals.
(a) extroverted
(b) sensation-thinking
(c) self-monitoring
(d) Machiavellian
3. When a person tends to believe that he or she has
little infl uence over things that happen in life, this
indicates a/an personality.
(a) low emotional stability
(b) external locus of control
(c) high self-monitoring
(d) intuitive-thinker
4. How is a person with an authoritarian personality
expected to act?
(a) Strong tendency to obey orders.
(b) Challenges the authority of others.
(c) Tries to play down status diff erences.
(d) Always fl exible in personal behavior.
5. A new team leader who designs jobs for persons
on her work team mainly “because I would prefer
to work the new way rather than the old,” is
committing a perceptual error known as
.
(a) the halo eff ect
(b) stereotyping
(c) impression management
(d) projection
6. If a manager allows one characteristic of a person—say,
a pleasant personality—to bias performance ratings of
that individual overall, the manager is falling prey to a
perceptual distortion known as .
(a) the halo eff ect (b) impression management
(c) stereotyping (d) projection
7. Use of special dress, manners, gestures, and vocabu-
lary words when meeting a prospective employer in
a job interview are all examples of how people use
in daily life.
(a) the halo eff ect
(b) impression management
(c) introversion
(d) mood contagion
8. is a form of attribution error that
involves blaming the environment for problems that
we may have caused ourselves.
(a) Self-serving bias
(b) Fundamental attribution error
(c) Projection
(d) Self-monitoring
9. is a form of attribution error that
involves blaming others for problems that they may
not have caused for themselves.
(a) Self-serving bias
(b) Fundamental attribution error
(c) Projection
(d) Self-monitoring
10. Th e component of an attitude is what
indicates a person’s belief about something, while
the component indicates a specifi c
positive or negative feeling about it.
(a) cognitive; aff ective
(b) emotional; aff ective
(c) cognitive; attributional
(d) behavioral; attributional
C H
A PTER 1
2
TP
Multiple-Choice Questions
TestPrep 12
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EXPLORING MANAGEMENT304
11. Th e term for the discomfort someone feels when his
or her behavior turns is inconsistent with a previ-
ously expressed attitude is .
(a) alienation
(b) cognitive dissonance
(c) job dissatisfaction
(d) job burnout
12. Job satisfaction is known from research to be a
strong predictor of .
(a) job performance (b) job burnout
(c) conscientiousness (d) absenteeism
13. A person who is always willing to volunteer for extra
work or to help someone else with his or her work is
acting consistent with strong .
(a) job performance
(b) self-serving bias
(c) emotional intelligence
(d) organizational citizenship
14. A/an represents a rather intense but
short-lived feeling about a person or a situation,
whereas a/an describes a more
generalized positive or negative state of mind.
(a) stressor; role ambiguity
(b) external locus of control; internal locus of
control
(c) self-serving bias; halo eff ect
(d) emotion; mood
15. Which statement about the job satisfaction–job
performance relationship is most true based on
research?
(a) A happy worker will be a productive worker.
(b) A productive worker will be a happy worker.
(c) A productive worker well rewarded for perfor-
mance will be a happy worker.
(d) Th ere is no relationship between being happy
and being productive in a job.
Short-Response Questions
16. What is the most positive profi le of Big Five personality traits in terms of positive impact on work behavior?
17. What is the relationship between personality and stress?
18. How does the halo eff ect diff er from selective perception?
19. If you were going to develop a job satisfaction survey, exactly what would you try to measure?
Integration and Application Question
20. When Scott Tweedy picked up a magazine article on “How to Manage Health Care Workers,” he was pleased to
fi nd some apparent advice. Scott was concerned about poor performance by several of the respiratory therapists
in his clinic. Th e author of the article said that the “best way to improve performance is to make your workers
happy.” Well, Scott was happy upon reading this and made a pledge to himself to start doing a much better job of
“making the therapists happy in the future.”
Questions: Is Scott on the right track? Should he charge ahead as planned, or should he be concerned about this advice? What do we know about the relationship between job satisfaction and performance, and how can this
understanding be used by Scott in this situation?
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Individual Behavior ■ Chapter 12 305
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 12: Stress Test
■ CLASS EXERCISE 12: Job Satisfaction Preferences
■ TEAM PROJECT 12: Diffi cult Personalities
C H
A PTER 1
2
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Don’t Miss These Selections from Cases for Critical Thinking
Snapshot Social networking websites are a dime a dozen these days, so how does Facebook stay at the
top? By expanding its user base and working with de-
velopers and advertisers to create fresh content that
keeps users at the site for hours on end. But can Face-
book keep up the growth while defl ecting concerns
about its leadership?
Despite all of its successes, the management team of
Facebook knows that they have serious work ahead in
order to change the per-
ception of advertisers, de-
velopers, and even some
users regarding their ability to lead Facebook success-
fully and profi tably into the future of social networking.
Will adding experienced management alter advertisers’
stereotypes about youthful Silicon Valley CEOs? Can
Facebook overcome the bad impression being commu-
nicated about its privacy gaff es?
■ CHAPTER 12 CASE Facebook: Social Networking is Big Business
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 12
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When J. K. Rowling fi nished the fi rst of her Harry Potter books,
she was a single mother living on just over $100 a week. “ You
sort of start thinking anything’s possible,” she once said, “if
you’ve got enough nerve.”
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13 Motivation
Respect Unlocks Human Potential
1. Describe how human
needs infl uence
motivation to work.
2. Identify how thoughts
and decisions aff ect
motivation to work.
3. Understand how
reinforcement
infl uences motivation
to work.
YOUR CHAPTER 13
TAKEAWAYS
Management Live
Engagement and The Incredibles
M r. Incredible (voiced by Craig T. Nelson) is no longer
allowed to be a superhero. In his new life, he is Bob Parr, an ordinary
claims adjuster for Insuricare. He works in a cubicle in a massive
offi ce complex. Parr hates his job because it is monotonous and because it
doesn’t use his special skills. And, because his boss prohibits him from helping
truly needy customers. When Gilbert Huph (voiced by Wallace Shawn) calls Parr
into his offi ce for a lecture and threatens to fi re him, it pushes Parr to the
breaking point.
What is the diff erence between someone who dislikes her or his job and one
who does not? A lot comes down to engagement—aspects of the work experience that create a sense of connection to the job and organization.
Workers who are engaged generally have positive attitudes toward their jobs,
co-workers, and the organization. Disengaged workers, like Bob Parr,
experience negative emotions and attitudes. Th ey become largely unmotivated
to work hard.
Th e content, process, and reinforcement theories discussed in the chapter
off er a variety of ways to motivate employees and keep them engaged. Yet these
theories are not limited to employees. What about your classmates? Do they act
engaged in academics? If you were working on a team project with them, is
there anything you could do to increase their engagement and increase the
chances of high performance by the team?
Explore Yourself More on engagement
Role Models Charlie Butcher shared his
wealth with employees
Ethics Check Information goldmine is an
equity dilemma
Facts to Consider Europe turning to quotas to
increase female board members
Manager’s Library Drive by Daniel
Pink
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
307
M L D
P
M
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EXPLORING MANAGEMENT308
Did you know that J. K. Rowling’s first Harry Potter book was rejected
by 12 publishers? 1 Th ank goodness she didn’t give up. In management we use the
term motivation to describe forces within the individual that account for the level, direction, and persistence of eff ort expended at work. Simply put, a highly
motivated person works hard at a job; an unmotivated person does not. A man-
ager who leads through motivation creates conditions that consistently inspire
other people to work hard.
A highly motivated workforce is obviously indispensable. So how do we get
there? Why do some people work enthusiastically, persevering in the face of dif-
fi culty and often doing more than required to turn out an extraordinary perfor-
mance? Why do others hold back, quit at the fi rst negative feedback, and do the
minimum needed to avoid reprimand or termination?
||| Maslow described a hierarchy of needs topped by self-actualization.
One of the best starting points in exploring the issue of motivation are theories
from psychology that deal with diff erences in individual needs—unfulfi lled de- sires that stimulate people to behave in ways that will satisfy them. And as you
might expect, there are diff erent theories about human needs and how they may
aff ect people at work.
Abraham Maslow’s theory of human needs is an important foundation in the
history of management thought. He described a hierarchy built on a foundation
of lower-order needs (physiological, safety, and social concerns) and moving up to higher-order needs (esteem and self-actualization).2 Whereas lower-order needs focus on physical well-being and companionship, the higher-order needs
refl ect psychological development and growth.
A key part of Maslow’s thinking relies on two principles. Th e defi cit principle
states that a satisfi ed need is not a motivator of behavior. People act in ways
that satisfy deprived needs, ones for which a “defi cit” exists. We eat because we
are hungry ; we call a friend when we are lonely ; we seek approval from others
when we are feeling insecure. Th e progression principle states that people try to
satisfy lower-level needs fi rst and then move step-by-step up the hierarchy. Th is
happens until the level of self-actualization is reached. Th e more these needs
Motivation accounts for the level, direction, and persistence of eff ort expended at work.
A need is an unfulfi lled physiological or psychological desire.
Lower-order needs are physiological, safety, and social needs in Maslow’s hierarchy.
Higher-order needs are esteem and self-actualization needs in Maslow’s hierarchy.
Takeaway 13.1 How Do Human Needs Infl uence
Motivation to Work?
ANSWERS TO COME
■ Maslow described a hierarchy of needs topped by self-actualization.
■ Alderfer’s ERG theory deals with existence, relatedness, and growth needs.
■ McClelland identifi ed acquired needs for achievement, power, and affi liation.
■ Herzberg’s two-factor theory focuses on higher-order need satisfaction.
■ Th e core characteristics model integrates motivation and job design.
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Motivation ■ Chapter 13 309
are satisfi ed, the stronger they will grow. Maslow believes opportunities for
self-fulfi llment should continue to motivate a person as long as the other needs
remain satisfi ed.
Maslow’s theory is a good starting point for examining human needs and their
potential infl uence on motivation. It seems to make sense, for example, that
managers should try to understand the needs of people working with and for
them. And isn’t it a manager’s job to help others fi nd ways of satisfying their
needs through work? Figure 13.1 gives some suggestions along these lines.
||| Alderfer’s ERG theory deals with existence, relatedness, and growth needs.
A well-regarded alternative to Maslow’s work is the ERG theory proposed by
Clayton Alderfer. 3 His theory collapses Maslow’s fi ve needs into three. Existence
needs are desires for physiological and material well-being. Relatedness needs are desires for satisfying interpersonal relationships. Growth needs are desires for continued psychological growth and development.
Growth needs are essentially the higher-order needs in Maslow’s hierarchy.
And they are important. Consider this example. 4 During the recent recession,
Laine Seator lost her management job and started volunteering. She now puts in
35-hour weeks working for fi ve diff erent organizations. She’s fi nding that her
time helping others is well spent; she’s gaining new skills in grant writing and
strategic planning that should help with future job hunting. “In a regular job,” she
says, “you’d need to be a director or management staff to be able to do these types
of things, but on a volunteer basis they welcome the help.” And at a United Way in
Existence needs are desires for physiological and material well-being.
Relatedness needs are desires for satisfying interpersonal relationships.
Growth needs are desires for continued psychological growth and development.
What satisfies higher-order needs?
Self-actualization needs
Esteem needs
Responsibility of an important job Promotion to higher-status job Praise and recognition from boss
What satisfies lower-order needs?
Social needs Friendly co-workers Interaction with customers Pleasant supervisor
Safety needs Safe working conditions Job security Base compensation and benefits
Physiological needs
Rest and refreshment breaks Physical comfort on the job Reasonable work hours
Creative and challenging work Participation in decision making Job flexibility and autonomy
FIGURE 13.1 What Are the Opportunities for Need Satisfaction in Maslow’s Hierarchy? For higher-order need satisfaction, people realize self-actualization by doing creative and
challenging work and participating in important decisions; they boost self-esteem through
promotions and praise, and by having responsibility for an important job. For lower-order need
satisfaction, people meet social needs through positive relationships with co-workers,
supervisors, and customers; they achieve safety needs in healthy working conditions and a secure
job with good pay and benefi ts; and they realize physiological needs by having reasonable work
hours and comfortable work spaces.
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EXPLORING MANAGEMENT310
Boise, Idaho, volunteer Rick Overton says: “It’s hard to describe how much better
it feels to get to the end of the day and, even if you haven’t made any money, feel
like you did some good for the world.” Don’t Laine and Rick sound like motivated
workers fi nding lots of higher-order growth need satisfaction through volunteer
and nonprofi t work?
It’s worth noting that ERG theory rejects Maslow’s defi cit and progression
principles. Instead, Alderfer suggests that any or all of the needs can infl uence
individual behavior at any given time. He also believes that a satisfi ed need
doesn’t lose its motivational impact. Instead, Alderfer describes a frustration-
regression principle through which an already-satisfi ed lower-level need can be-
come reactivated when a higher-level need cannot be satisfi ed. Perhaps this is
why unionized workers frustrated by assembly-line jobs (lacking growth need
satisfaction) give so much attention in labor negotiations to things like job secu-
rity and wage levels (off ering existence need satisfaction).
You shouldn’t be quick to reject either Maslow or Alderfer in favor of the other.
Although questions can be raised about both theories, each adds value to our
understanding of how individual needs can infl uence motivation. 5 And you
should notice that Maslow’s higher-order needs match up with Alderfer’s growth
needs.
||| McClelland identifi ed acquired needs for achievement, power, and affi liation.
In the late 1940s, David McClelland and his colleagues began experimenting with
the Th ematic Apperception Test (TAT) of human psychology. 6 Th e TAT asks peo-
ple to view pictures and write stories about what they see. Researchers then ana-
lyze the stories, looking for themes that display individual needs.
From this research McClelland identifi ed three acquired needs that he consid-
ers central to understanding human motivation. Th e need for achievement is the desire to do something better or more effi ciently, to solve problems, or to
master complex tasks. Th e need for power is the desire to control other people, to infl uence their behavior, or to be responsible for them. Th e need for affi liation is the desire to have friendly and warm relations with other people.
McClelland encourages managers to learn how to recognize the strength of
these needs in themselves and in other people. Because each need can be
associated with a distinct set of work preferences, his insights off er helpful
ideas for designing jobs and creating work environments that are rich in poten-
tial motivation.
Consider someone high in the need for achievement. Do you, for example, like
to put your competencies to work, take moderate risks in competitive situations,
and often prefer to work alone? Need achievers are like this, and their
work preferences usually follow a pattern. Persons high in need for
achievement like work that off ers challenging but achievable goals,
feedback on performance, and individual responsibility. If you take one
or more of these away, they are likely to become frustrated and their
performance may suff er. As a manager, these preferences off er pretty
straightforward insights for dealing with a high need achiever. And if
you are high in need for achievement, these are things you should be
talking about with your manager.
Need for achievement is the desire to do something better, to solve problems, or to master complex tasks.
Need for power is the desire to control, infl uence, or be responsible for other people.
Need for affi liation is the desire to establish and maintain good relations with people.
Work Preferences of High Need Achievers
• Individual responsibilities
• Challenging but achievable goals
• Performance feedback
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Motivation ■ Chapter 13 311
McClelland’s theory off ers good insights about the other needs as well. People
high in the need for affi liation prefer jobs off ering companionship, social ap-
proval, and satisfying interpersonal relationships. People high in the need for
power are motivated to behave in ways that have a clear impact on other people
and events; they enjoy being in positions of control.
Importantly, McClelland distinguishes between two forms of the power
need. 7 Th e need for personal power is exploitative and involves manipulation
purely for the sake of personal gratifi cation. As you might imagine, this type of
power need is not respected in management. By contrast, the need for social
power is the positive face of power. It involves the use of power in a socially re-
sponsible way, one that is directed toward group or organizational objectives
rather than personal ones. Th is need for social power is essential to managerial
leadership.
One interesting extension of McClelland’s research found that successful
senior executives tended to have high needs for social power that, in turn,
were higher than otherwise strong needs for affiliation. Can you explain these
results? It may be that managers high in the need for affiliation alone may let
their desires for social approval interfere with business decisions. But with a
higher need for power, they may be more willing to sometimes act in ways
that other persons may disagree with. In other words, they’ ll do what is best
for the organization even if it makes some people unhappy. Does this make
sense?
HopeLab Fights Disease with Fun
There Are Many Pathways to Motivation
While many teens play video games just for fun, teens with cancer can now play
ones that can help them beat the disease. Picture a teenager who has a tough
time keeping up with cancer medication schedules. Now imagine him playing
the video game called Re-Mission and maneuvering a nanobot called Roxxi
through the body of a cancer patient to destroy cancer cells. And, then think
about an article in the medical journal Pediatrics that says teen patients who
play the game at least one hour a week do a better job sticking to their medica-
tion schedules.
What’s going on here is the brainchild of HopeLab, founded by Pam Omidyar,
an immunology researcher and gaming enthusiast who saw the possible link
between games and fi ghting disease. Th e nonprofi t’s mission is combining
“rigorous research with innovative solutions to improve the health and quality
of life of young people with chronic illness.”
HopeLab is led by president and CEO Pat Christen. She came to the position
after 20 years of nonprofi t management experience, including president and
executive director of the San Francisco AIDS Foundation and president of the
Pangaea Global AIDS Foundation. Her career began in Kenya, East Africa, where
she served as a Peace Corps volunteer. Christen now focuses her talents on
helping HopeLab fi nd innovative ways to improve the lives of young people
fi ghting illnesses.
Re-Mission is one positive
step in the war against
childhood cancer. With
the founding vision of
Pam Omidyar and the
strategic leadership of Pat
Christen, HopeLab
received the Social
Enterprise Award of the
Year from Fast Company
magazine. One of its
current priorities is to
unleash the power of
video gaming to help in
the fi ght against
childhood obesity. Th ink
about how creative
approaches to motivation
can improve lives and
empower people.
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT312
||| Herzberg’s two-factor theory focuses on higher-order need satisfaction.
Frederick Herzberg’s work on human needs took a slightly diff erent route. He
began with extensive interviews of people at work and then content-analyzed
their answers. Th e result is known as the two-factor theory. 8
When questioned about what “turned them on,” Herzberg found that workers
mainly talked about the nature of the job itself— such things as a sense of achieve-
ment, feelings of recognition, a sense of responsibility, the opportunity for ad-
vancement, and feelings of personal growth. In other words, they told him about
what they did. Herzberg called these satisfi er factors, or motivator factors, and described them as part of job content. Th ey are consistent with the higher-order
needs of Maslow, growth needs of Alderfer, and achievement and power needs of
McClelland.
When questioned about what “turned them off ,” Herzberg found that his re-
spondents talked about quite diff erent things—working conditions, interper-
sonal relations, organizational policies and administration, technical quality of
supervision, and base wage or salary. Th ey were telling him about where they
worked, not about what they did. Herzberg called these hygiene factors and de- scribed them as part of job context. Th ey seem most associated with Maslow’s
lower-order needs, Alderfer’s existence and relatedness needs, and McClelland’s
affi liation need.
Herzberg’s two-factor theory is shown in Figure 13.2. Hygiene factors infl u- ence job dissatisfaction, while satisfi er factors infl uence job satisfaction. Th e
distinction is important. Herzberg is saying that you can’t increase job satisfac-
tion by improving the hygiene factors. You will only get less dissatisfaction.
Although minimizing dissatisfaction is a worthy goal, you can’t expect much by
way of increased motivation. At least that’s his theory.
A satisfi er factor is found in job content, such as a sense of achievement, recognition, responsibility, advancement, or personal growth.
A hygiene factor is found in the job context, such as working conditions, interpersonal relations, organizational policies, and salary.
JOB DISSATISFACTION
Improving the satisfier factors
increases job satisfaction
Improving the hygiene factors
decreases job dissatisfaction
Herzberg’s
Two-Factor
Principles
• Working conditions • Co-worker relations • Policies and rules • Supervisor quality • Base wage, salary
JOB SATISFACTION
Influenced by
Satisfier Factors
• Achievement • Recognition • Responsibility • Work itself • Advancement • Personal growth
Influenced by
Hygiene Factors
FIGURE 13.2 What Are the Motivational Implications of Job Content and Job Context in Herzberg’s Two-Factor Th eory? Scholars criticize this theory because of its research foundations. However, Herzberg makes an
interesting and useful distinction between the motivational implications of job content and job
context. He believes that you can’t increase job satisfaction and motivation by improving hygiene
factors in the job context, for example, by increasing wages. Th is only reduces levels of
dissatisfaction. Instead, he argues in favor of improving satisfi er factors in the job content, things
like responsibility and recognition. In the two-factor theory, such changes are pathways to higher
job satisfaction and motivation.
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Motivation ■ Chapter 13 313
Although scholars have criticized Herzberg’s research as method-bound and
diffi cult to replicate, the two-factor theory makes us think about both job con-
tent and job context. 9 It cautions managers not to expect too much by way of
motivational gains from investments in things like pleasant work spaces and
even high base salaries. Instead, it focuses our attention on building jobs to pro-
vide opportunities for responsibility, growth, and other sources of higher-order
need satisfactions. And to create these high-content jobs, Herzberg suggests al-
lowing people to manage themselves and exercise self-control over their work.
||| Th e core characteristics model integrates motivation and job design.
If you really think about it, you should see that for a job to be highly motivational
there has to be a good fi t between the needs and talents of the individual and
tasks to be performed. And as you might expect, just what constitutes a good fi t
is going to vary from one individual and situation to the next. Job design is the allocation of specifi c work tasks to individuals and groups.
10 It’s goal is a good
person-job fi t.
Herzberg, known for the two-factor theory just discussed, poses the job design
challenge this way: “If you want people to do a good job, give them a good job to
do.” 11
He goes on to argue that this is best done through job enrichment, the practice of designing jobs rich in content that off ers opportunities for higher-or-
der need satisfaction. For him, an enriched job allows the individual to perform
planning and controlling duties normally done by supervisors. In other words,
job enrichment involves a lot of self-management.
Modern management theory values job enrichment and its motivating po-
tential. However, in true contingency fashion, it recognizes that not everyone
may have needs consistent with enriched jobs. Th e core characteristics model
developed by J. Richard Hackman and his associates helps managers design jobs
that best fi t the needs of diff erent people. 12
Figure 13.3 shows that the core characteristics model approaches job design with a focus on fi ve “core” job characteristics: skill variety, task identity, task
Job design is the allocation of specifi c work tasks to individuals and groups.
Job enrichment increases job content by adding work planning and evaluating duties normally performed by the supervisor.
Critical
psychological states
Experienced meaningfulness of the work
Experienced responsibility for outcomes of the work
Knowledge of actual results of the work
Knowledge and skill Context satisfactions
Skill variety
Task significance
Autonomy
Feedback
Task identity
Core job
characteristics
High internal work motivation
High growth satisfaction
High general job satisfaction
High work effectiveness
Job
outcomes
Moderators
Employee growth-need strength
FIGURE 13.3 How Do Core Characteris- tics Infl uence Motivation Th rough Job Design? Th is model shows how jobs can be
designed according to fi ve core
characteristics—skill variety, task
identity, task signifi cance,
autonomy, and feedback. Jobs that
are high in these characteristics
provide job holders with
experienced meaningfulness and
responsibility as well as knowl-
edge of results. Under the right
contingency conditions—high
growth need strength and
satisfaction with job context—
these critical psychological states
are motivational and set the stage
for positive job outcomes.
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EXPLORING MANAGEMENT314
signifi cance, autonomy, and job feedback. Can you think of specifi c jobs that
might score high and low on these characteristics? Here’s a bit more detail on
them.
1. Skill variety—the degree to which a job requires a variety of diff erent activities
to carry out the work and involves the use of a number of diff erent skills and
talents of the individual
2. Task identity—the degree to which the job requires completion of a “whole”
and identifi able piece of work, one that involves doing a job from beginning to
end with a visible outcome
3. Task signifi cance—the degree to which the job has a substantial impact on the
lives or work of other people elsewhere in the organization or in the external
environment
4. Autonomy—the degree to which the job gives the individual freedom, inde-
pendence, and discretion in scheduling work and in choosing procedures for
carrying it out
5. Feedback from the job itself—the degree to which work activities required by
the job result in the individual obtaining direct and clear information on his
or her performance
Th e higher a job scores on the fi ve core characteristics, the more enriched it is.
But as you consider this model, don’t forget the contingency logic. It recognizes
that not everyone will be a good fi t for a highly enriched job. Whether they do fi t
or not depends on the presence of three “moderators” also shown Figure 13.3.
People are expected to respond most favorably to job enrichment when they have
strong growth needs, have appropriate job knowledge and skills, and are other-
wise satisfi ed with the job context. When these conditions are weak or absent,
the fi t between the individual and an enriched job may turn out less favorably
than expected.
There’s a lot of attention being given these days to the levels of engagement displayed by people at work. Differ- ences in job engagement are evident in a variety of ways. Is someone enthusiastic or lethargic, diligent or lazy, willing to do more than expected or at best willing to do only what is expected?
Managers want high engagement by members of their work units and teams, and the ideas of this chapter offer many insights on how to create engagement by using the different theories of motivation.
Take a look around the classroom. What do you see and what would you predict for the future of your classmates based on the engagement they now show as students? Who might you want to hire for an important job someday, and who would you pass on?
■ ENGAGEMENT
Explore Yourself LOOK AROUND THE CLASSROOM; WHO WOULD YOU
WANT TO HIRE FOR AN IMPORTANT JOB SOMEDAY? {
y p
Get to know yourself better by taking the Two-Factor
Profi le self-assessment and completing the other activities in
the Exploring Management Skill-Building Portfolio.
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Motivation ■ Chapter 13 315
Takeaway 13.1 How Do Human Needs Infl uence
Motivation to Work?
Rapid Review • Motivation involves the level, direction, and persistence of eff ort expended at
work; a highly motivated person can be expected to work hard.
• Maslow’s hierarchy of human needs is moves from lower-order physiological, safety, and social needs up to higher-order ego and self-actualization needs.
• Alderfer’s ERG theory identifi es existence, relatedness, and growth needs. • McClelland’s acquired needs theory identifi es the needs for achievement, affi lia-
tion, and power, all of which may infl uence what a person desires from work.
• Herzberg’s two-factor theory identifi es satisfi er factors in job content as infl u- ences on job satisfaction; hygiene factors in job context are viewed as infl uences
on job dissatisfaction.
• Th e core characteristics model of job design focuses on skill variety, task identity, task signifi cance, autonomy, and feedback.
Questions for Discussion 1. Was Maslow right in suggesting we each have tendencies toward self- actualization?
2. Is high need for achievement always good for managers?
3. Why can’t job enrichment work for everyone?
Be Sure You Can • describe work practices that can satisfy higher-order needs in Maslow’s hierarchy • contrast Maslow’s hierarchy with ERG theory • explain needs for achievement, affi liation, and power in McClelland’s theory • diff erentiate the needs for personal and social power • describe work preferences for a person with a high need for achievement • describe diff erences in hygiene and satisfi er factors in Herzberg’s theory • explain how a person’s growth needs and job skills might aff ect his or her re-
sponses to job enrichment
What Would You Do? At a campus recreation center that you manage, two student workers are being con-
sidered for promotions. One works really well with people and seems to thrive on
teamwork and social interaction. Th e other tackles tough jobs with enthusiasm and
always want to do her best, while preferring to do things alone rather than with oth-
ers. Fortunately for you, the center’s staff is expanding and you can design jobs to
best fi t each student. What jobs would you create for them?
STUDY GUIDE
Terms to Defi ne
Existence needs
Growth needs
Higher-order needs
Hygiene factors
Job design
Job enrichment
Lower-order needs
Motivation
Need
Need for achievement
Need for affi liation
Need for power
Relatedness needs
Satisfi er factors
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EXPLORING MANAGEMENT316
Have you ever received an exam or project grade and felt good about it,
only to get discouraged when you hear about someone who didn’t work as hard
getting the same or better grade? Or have you ever suff ered a loss of motivation
when the goal set by your boss or instructor seems so high that you don’t see any
chance at all of succeeding?
My guess is that most of us have had these types of experiences, and perhaps
fairly often. Th ey raise the question of exactly what infl uences decisions regard-
ing whether to work hard or not in various situations? Th e equity, expectancy,
and goal-setting theories of motivation all off er possible answers.
||| Equity theory explains how social comparisons motivate individual behavior.
Th e equity theory of motivation is best known in management through the work
of J. Stacy Adams. 13
Based on the logic of social comparisons, it pictures us con-
tinually checking our rewards for work accomplished against those of others.
Any perceived inequities in these comparisons are uncomfortable. Th is makes us
motivated to act in ways that restore a sense of equity to the situation. Th ink of it
this way.
are compared to Personal rewards
vis-a-vis personal inputs
with the result of
Others’ rewards vis-a-vis
others’ inputs ` `
Perceived Equity
The individual is comfortable and satisfied with the situation.
Perceived Inequity
The individual feels discomfort and acts to eliminate the felt inequity.
Check these equity dynamics against your own experiences. How have you re-
acted when your grade seems unfair compared with others? Did you reduce your
eff orts in the future . . . drop the course . . . rationalize that you really didn’t work that
hard . . . complain to the instructor and request a higher grade? All of these are
Takeaway 13.2 How Do Th ought Processes and
Decisions Aff ect Motivation to Work?
ANSWERS TO COME
■ Equity theory explains how social comparisons motivate individual behavior.
■ Expectancy theory considers Motivation � Expectancy � Instrumentality � Valence.
■ Goal-setting theory shows that well-chosen and well-set goals can be
motivating.
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Motivation ■ Chapter 13 317
ways to reduce the perceived grading inequity. And they are the same types of
behaviors that perceived inequity can motivate people to engage in at work. Only
instead of grades, the sources of inequity are more likely to be pay raises, job as-
signments, work schedules, offi ce “perks,” and the like. Pay, of course, is the really
big one!
Research on equity theory has largely occurred in the laboratory. It is most
conclusive with respect to perceived negative inequity—feeling uncomfortable at being unfairly treated. People who feel underpaid, for example, may experi-
ence disappointment or even a sense of anger. Th ey will be motivated to try to
restore perceived equity to the situation. Th is might be done by reducing work
eff orts to compensate for the missing rewards, asking for more rewards or better
treatment, or even by quitting the job. 14
Interestingly, there is also some evidence for an equity dynamic among people
who feel overpaid. Th is perceived positive inequity is associated with a sense of guilt. It is discomfort felt over benefi tting from unfair treatment. Th e individual is
motivated to restore perceived equity by doing such things as increasing the
quantity or quality of work, taking on more diffi cult assignments, or working
overtime. Do you think this really happens? What if one of your instructors de-
cides to infl ate the grades of students on early assignments, thinking that per-
ceived positive inequities will motivate them to study harder for the rest of the
course? Would you work harder or perhaps work less?
Perceived negative inequity is discomfort felt over being harmed by unfair treatment.
Perceived positive inequity is discomfort felt over benefi tting from unfair treatment.
A worker opens the top of the offi ce photocopier and fi nds a document someone has left behind. It’s a list of performance evaluations, pay, and bonuses for 80 co-workers. She reads the document. Lo and behold, someone she considers a “non- starter” is getting paid more than others regarded as “super workers.” New hires are also being brought in at much higher pay and bonuses than those of existing staff. And to make matters worse, she’s in the middle of the list and not near the top where she would have expected to be. The fact is she makes a lot less money than many others.
Looking at the data, she begins to question why she is spending extra hours working on her laptop evenings and weekends at home, trying to do a really great job for the fi rm. She wonders to herself: “Should I pass this information around anonymously so that everyone knows what’s going on? Or should I quit and fi nd another employer who fully values me for my talents and hard work?”
In the end she decided to quit, saying: “I just couldn’t stand the inequity.” She also decided not to distribute the informa- tion to others in the offi ce because “it would make them de- pressed, like it made me depressed.”
YOU DECIDE
What would you do? Obviously, you are going to be con- cerned, and perhaps upset. Would you hit “print,” make about 80 copies, and put them in everyone’s mailboxes—or even just leave them stacked in a couple of convenient locations? That would get the information out into the gossip chains pretty quickly. But is this ethical? If you don’t send out the informa- tion, is it ethical to let other workers go about their days with inaccurate assumptions about the fi rm’s pay practices? By quit- ting and not sharing the information, did this worker commit an ethics mistake?
■ INFORMATION GOLDMINE IS AN EQUITY DILEMMA
Ethics Check “SHOULD I PASS THIS INFORMATION AROUND ANONYMOUSLY
SO THAT EVERYONE KNOWS WHAT’S GOING ON?” {
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EXPLORING MANAGEMENT318
Although there are no clear answers available in equity theory, there are some
very good insights. Th e theory is a reminder that rewards perceived as equitable
should positively aff ect satisfaction and performance; those perceived as inequi-
table may create dissatisfaction and cause performance problems. 15
Probably the
best advice is to anticipate potential equity problems whenever rewards of any
type are being allocated.
We should also recognize that people may compare themselves not only with
co-workers but with others elsewhere in the organization, including senior
executives, and even persons employed by other organizations. And we should
remember that people behave according to their perceptions. If someone per-
ceives inequity, it is likely to aff ect his or her behavior whether the manager sees
the situation the same way or not.
||| Expectancy theory considers Motivation � Expectancy � Instrumentality � Valence.
Victor Vroom off ers another approach to understanding motivation. His expec-
tancy theory asks: What determines the willingness of an individual to work hard
at tasks important to the organization? 16
Vroom answers this question with an
equation:
Motivation � Expectancy � Instrumentality � Valence
Th e terms in this expectancy equation are defi ned as follows. Expectancy is a person’s belief that working hard will result in achieving a desired level of task
performance (sometimes called eff ort-performance expectancy). Instrumental- ity is a person’s belief that successful performance will lead to rewards and other potential outcomes (sometimes called performance-outcome expectancy).
Valence is the value a person assigns to the possible rewards and other work- related outcomes. Th ink of them this way.
Th e use of multiplication signs in the expectancy equation (M � E � I � V)
has important implications. Mathematically speaking, a zero at any location on
the right side of the equation will result in zero motivation. Th is means that we
cannot neglect any of the three factors—expectancy, instrumentality, or valence.
In order for motivation to be high, all three must be positive.
Are you ready to test this theory? Most of us assume that people will work
hard to get promoted. But is this necessarily true? Expectancy theory predicts
that motivation to work hard for a promotion will be low if any one or more of
three conditions apply. If expectancy is low, motivation suff ers. Th e person feels
that he or she cannot achieve the performance level necessary to get promoted.
Expectancy is a person’s belief that working hard will result in high task performance.
Instrumentality is a person’s belief that various outcomes will occur as a result of task performance.
Valence is the value a person assigns to work-related outcomes.
to achieve
“Can I achieve the desired level of task
performance?”
Expectancy Instrumentality
“What work outcomes will be received as a result of the performance?”
Valence
“How highly do I value work outcomes?”
and realizetask performance
work-related outcomes
Person exerts work effort
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Motivation ■ Chapter 13 319
So why try? If instrumentality is low, motivation suff ers. Th e person lacks confi -
dence that high performance will actually result in being promoted. So why try?
If valence is low, motivation suff ers. Th e person doesn’t want a promotion, pre-
ferring less responsibility in the present job. So, if it isn’t a valued outcome, why
work hard to get it?
Figure 13.4 summarizes the management implications of expectancy theory. It is a reminder that diff erent people are likely to come up with diff erent answers
to the question: Why should I work hard today? Knowing that their answers will
diff er, Vroom’s point is that each person must be respected as an individual with
unique work needs, preferences, and concerns. His theory identifi es the follow-
ing ways to do this while creating work environments that are high in motivat-
ing potential.
To have high expectancies, people must believe in their abilities; they must be-
lieve that if they try hard to do something, they can perform well at it. Managers
can help build these expectancies by selecting workers with the right abilities for
the jobs to be done, providing them with the best training and development, and
supporting them with resources so that the jobs can be done very well. All of
these factors stimulate motivation based on something called self-effi cacy, a person’s belief that they are capable of performing a task.
To have high instrumentalities, people must perceive that their performance
accomplishments will be followed by desired work outcomes. In others words,
they believe that performance will lead to valued rewards. Managers can create
positive instrumentalities by taking care to clarify the rewards to be gained by
high performance. Th ey must also continually confi rm this “promise,” so to speak,
Self-effi cacy is a person’s belief that they are capable of performing a task.
To Maximize Instrumentality
Make the person feel competent and capable of achieving the desired
performance level
To Maximize Valence
Clarify psychological contracts Communicate performance– outcome possibilities Demonstrate what rewards are contingent on performance
Identify individual needs Adjust rewards to match these needs
Select workers with ability Train workers to use ability Support work efforts Clarify performance goals
Make the person confident in understanding which rewards and
outcomes will follow performance accomplishments
Make the person understand the value of various possible rewards
and work outcomes
To Maximize Expectancy
FIGURE 13.4 How Can Managers Use the Insights of the Expectancy Th eory of Motivation? Managers should act in ways that maximize expectancies, instrumentalities, and valences for
others. To maximize expectancy, they need to hire capable workers, train and develop them
continuously, and communicate goals and confi dence in their skills. To maximize instrumentality,
managers must clarify and stand by performance-reward linkages. Finally, to maximize valence,
they need to understand individual needs and try to tie work outcomes to important sources of
need satisfaction.
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EXPLORING MANAGEMENT320
by actually delivering the expected results. Any disconfi rmation or failure to de-
liver will diminish the instrumentality.
To have high and positive valences, people must value the outcomes associated
with high performance. Th is means that the reward being off ered is what they
really want. Of course, this is a major source of individual diff erences. But manag-
ers should be able to use insights of the content theories—Maslow, Alderfer,
McClelland, for example—to best match important individual needs with the
rewards and outcomes that can be earned through high performance.
||| Goal-setting theory shows that well-chosen and well-set goals can be motivating.
When Steven A. Davis was a child, he got a lot of encouragement from his par-
ents: “Th ey never said that because you are an African American you can only go
this far or do only this or that,” he says, “they just said ‘go for it.’ ” Davis also says
that when he graduated from college, he set goals—to be corporate vice presi-
dent in 10 years and a president in 20. He made it; Davis rose through a variety of
management jobs to become president of Long John Silver’s, part of Yum! Brands,
Inc. He is now CEO of Bob Evans Farms in Columbus, Ohio. 17
Victor Vroom would point out that Davis’s parents increased his motivation by
creating high positive expectancy during his school years. Edwin Locke would
add that Davis found lots of motivation through the goals he set as a college grad-
uate. His goal-setting theory recognizes the motivational infl uence of task goals. 18
Th e basic premise is that task goals can be highly motivating, but only if they are
the right goals and if they are set in the right ways. 19
Goals give direction to people in their work. Goals clarify the performance ex-
pectations between leaders and followers, among co-workers, and even across
subunits in an organization. Goals establish a frame of reference for task feed-
back, and they provide a foundation for control and self-management. 20
In these
and related ways, Locke believes goal setting is a very practical and powerful
motivational tool.
• Set specifi c goals—avoid more generally stated ones, such as “Do your best.”
• Set challenging goals—when realistic and attainable, they motivate better than easy ones.
• Build commitments—people work harder for goals they ac- cept and believe in.
• Clarify priorities—expectations should be clear on which goals to pursue fi rst.
• Provide good feedback—people need to know how well they are doing.
• Reward results—give reinforcement; don’t let accomplish- ments pass unnoticed.
■ HOW TO MAKE GOAL SETTING WORK FOR YOU
Tips to Remember “DO YOUR BEST” ISN’T GOOD ENOUGH
WHEN IT COMES TO GOAL SETTING. {
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Motivation ■ Chapter 13 321
It’s no secret that females are underrepresented relative to men on corporate boards. In Europe the data are being scruti- nized and quotas are being discussed as possible ways to re- solve the disparity. Diane Segalen, senior executive at a Paris- based executive search company, says: “Some men over 60 think suitable females don’t exist because they have never had women as their peers. They think women can’t take the pres- sure involved in serving on a board.” • An offi cial British study questioned why the proportion of
nonexecutive board seats fi lled by females at FTSE 100 fi rms was stalled at 12.5%.
• British headhunter fi rms are under threat of facing manda- tory quotas for female board candidates unless the fi gures rise to 25% by 2015.
• France has already adopted a mandatory quota of 40% female board members by 2015 for fi rms with over 500 employees and $72 million in sales.
• With the quota in place, the proportion of board seats fi lled by women at French fi rms is expected to move from 7% to 20% within a year.
YOUR THOUGHTS?
When it comes to getting women their fair shares of board seats, is current underrepresentation a “pipeline” problem— just not enough qualifi ed women available for these senior positions at this point in time? Or, is it a “discrimination” problem—men at the top of headhunting fi rms and corpora- tions still aren’t ready to open the doors to female candi- dates? And when it comes to correcting the problem, is it enough to keep the data in front of the decision makers and hope for change? Or, are quotas like the one used in France the way to go?
■ EUROPE TURNING TO QUOTAS TO INCREASE FEMALE BOARD MEMBERS
Facts to Consider “SOME MEN OVER 60 THINK WOMEN CAN’T TAKE THE
PRESSURE INVOLVED IN SERVING ON A BOARD.” {
But what is a motivational goal? Research by Locke and his associates indi-
cates that managers and team leaders should focus on how specifi c and diffi cult
goals are, and how likely it is that others will accept and commit to them. 21
As you
might suspect, this is a tall order. It is no easy task for managers to work with
others to set the right goals in the right ways. And as Tips to Remember recom-
mends, an important key to the goal-setting process is participation. Goals are
most motivating when the individual has participated in setting them.
Although all this sounds ideal and good, we have to be realistic. We can’t al-
ways choose our own goals; there are many times in work when goals come to us
from above and we are expected to help accomplish them. Does this mean that
the motivational properties of goal setting are lost? Not necessarily; even though the
goals are set, there may be opportunities to participate in how to best pursue
them. Locke’s research also suggests that workers will respond positively to
externally imposed goals if they trust the supervisors assigning them and they
believe the supervisors will adequately support them.
Th e practice of management by objectives, discussed in Chapter 6 as an integra-
tive approach to planning and controlling, can be a good example. When done well,
MBO brings together team leaders and team members in a participative process of
goal setting and performance review. Consistent with goal-setting theory, the posi-
tive impact of MBO is most likely when specifi c and diffi cult goals are set in ways
that create mutual understanding and increase acceptance and commitment.
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EXPLORING MANAGEMENT322
Takeaway 13.2 How Do Th ought Processes and
Decisions Aff ect Motivation to Work?
Rapid Review • Adams’s equity theory recognizes that social comparisons take place when re-
wards are distributed in the workplace.
• In equity theory, any sense of perceived inequity is considered a motivating state that causes a person to behave in ways that restore equity to the situation.
• Vroom’s expectancy theory states that Motivation � Expectancy � Instrumentality � Valence.
• Managers using expectancy theory are advised to make sure rewards are achiev- able (maximizing expectancies), predictable (maximizing instrumentalities), and
individually valued (maximizing valence).
• Locke’s goal-setting theory emphasizes the motivational power of goals that are specifi c and challenging as well as set through participatory means.
Questions for Discussion 1. Is it against human nature to work harder as a result of perceived positive inequity?
2. Can a person with low expectancy ever be motivated to work hard at a task?
3. Will goal-setting theory work if the goals are fi xed and only the means for achiev-
ing them are open for discussion?
Be Sure You Can • explain the role of social comparison in Adams’s equity theory • list possible ways people with felt negative inequity may behave • diff erentiate the terms “expectancy,” “instrumentality,” and “valence” • explain the reason for “�” signs in Vroom’s expectancy equation, M � E � I � V • explain Locke’s goal-setting theory • describe the link between goal-setting theory and MBO
What Would You Do? It’s apparent that Kate isn’t happy. Because of her great performance as a Web
designer, you just promoted her to team leader for Web Design Services. But you
notice that she appears anxious, stressed, and generally unhappy in the new
assignment. Th is is quite a contrast from the highly motivated and happy Kate you
knew in her old job. What might be wrong here and what can you, as her supervisor,
do to fi x it?
STUDY GUIDE
Terms to Defi ne
Expectancy
Instrumentality
Perceived negative
inequity
Perceived positive
inequity
Self-effi cacy
Valence
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Motivation ■ Chapter 13 323
The theories discussed so far focus on people satisfying needs, resolving
felt inequities, and/or pursuing positive expectancies and task goals. Instead of
looking within the individual to explain motivation in these ways, reinforcement
theory takes a diff erent approach. It views human behavior as determined by its
environmental consequences.
||| Operant conditioning infl uences behavior by controlling its consequences.
Th e premises of reinforcement theory rely on what E. L. Th orndike called the law of eff ect: People repeat behavior that results in a pleasant outcome and avoid behavior that results in an unpleasant outcome.
22 Psychologist B. F. Skinner used
this notion to popularize the concept of operant conditioning. Th is is the pro- cess of infl uencing behavior by manipulating its consequences.
23 You may think
of operant conditioning as learning by reinforcement, and Figure 13.5 shows how managers stimulate it through four reinforcement strategies.
24
Th e law of eff ect states that behavior followed by pleasant consequences is likely to be repeated; behavior followed by unpleasant consequences is not.
Operant conditioning is the control of behavior by manipulating its consequences.
Takeaway 13.3 How Does Reinforcement Infl uence
Motivation to Work?
ANSWERS TO COME
■ Operant conditioning infl uences behavior by controlling its consequences.
■ Positive reinforcement connects desirable behavior with pleasant
consequences.
■ Punishment connects undesirable behavior with unpleasant consequences.
MANAGER’S
OBJECTIVE
INDIVIDUAL
BEHAVIOR
REINFORCEMENT
STRATEGY
TYPE OF
REINFORCEMENT
Positive reinforcement
Negative reinforcement
Extinction
Punishment
High-quality
production
Stop complaints
Withhold praise and rewards
Reprimand employee
Praise employee; recommend pay
increase
Meets production goals with zero defects
Meets production goals but with high percentage defects
FIGURE 13.5 How Can Managers Use Reinforcement Strategies to Infl uence Work Behavior? To strengthen quality work, a
supervisor might use positive
reinforcement by praising the
individual or negative
reinforcement by no longer
complaining to him about
poor-quality work. To
discourage poor-quality work, a
supervisor might use extinction
(withholding things that are
positively reinforcing, such as
outcomes) or punishment
(associating the poor-quality
work with unpleasant results for
the individual).
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EXPLORING MANAGEMENT324
Positive reinforcement strengthens or increases the frequency of desirable behavior by making a pleasant consequence contingent on its occurrence.
Example: A manager nods to express approval to someone who makes a useful
comment during a staff meeting. Negative reinforcement increases the fre- quency of or strengthens desirable behavior by making the avoidance of an un-
pleasant consequence contingent on its occurrence. Example: A manager who
has nagged a worker every day about tardiness does not nag when the worker
comes to work on time.
Punishment decreases the frequency of or eliminates an undesirable behavior by making an unpleasant consequence contingent on its occurrence. Example: A
manager issues a written reprimand to an employee whose careless work creates
quality problems. Extinction decreases the frequency of or eliminates an unde- sirable behavior by making the removal of a pleasant consequence contingent on
its occurrence. Example: After observing that co-workers are providing social ap-
proval to a disruptive employee, a manager counsels co-workers to stop giving
this approval.
If you look again at the case described in Figure 13.5, you’ll see that the super-
visor’s goal is to improve work quality by an individual performer as part of a
total quality management program. Th is goal can be reached if she can get the
individual to show more positive quality behaviors and stop engaging in ones
that harm or disregard quality goals. Notice that both the positive and negative
reinforcement strategies are used to strengthen desirable behavior when it oc-
curs. Th e punishment and extinction strategies are used to weaken or eliminate
undesirable behaviors.
Positive reinforcement strengthens a behavior by making a desirable consequence contingent on its occurrence.
Negative reinforcement strengthens a behavior by making the avoidance of an undesirable consequence contingent on its occurrence.
Punishment discourages a behavior by making an unpleasant consequence contingent on its occurrence.
Extinction discourages a behavior by making the removal of a desirable consequence contingent on its occurrence.
At the age of 83, Charlie Butcher sold his family fi rm. It was a good deal for Charlie and family—$18 million! But there’s more to this story than personal gain. Charlie shared the $18 million with the fi rm’s employees!
He handed out checks the day after the sale, written to an average of $55,000 per person. President Paul P. McClaughlin said the employees “just fi lled up with tears. They would just throw their arms around Charlie and give him a hug.” Butcher’s administrative assistant, Lynne Ouellette, summed it up this way: “Charlie really wanted to take care of the hourly folks and people who put in a lot of years.”
If you knew Charlie, they say, this wouldn’t be a surprise. He always believed in people. This was just another chance to confi rm the theory that he’d been practicing for years—treat
talented people well and they’ll create business success. “When people are happy in their jobs,” said Charlie, “they are at least twice as productive.”
And he meant it. Charlie once told an interviewer that it was the employees that made his business successful. In his words, “When the opportunity came to put my money where my mouth was, that’s exactly what I did.”
WHAT’S THE LESSON HERE?
Charlie’s gone now, but his obituary called him a businessman “known for his generosity and passion for knowledge and jus- tice.” He was the model loyal employer. But you don’t have to be the owner of a business to do good things for other peo- ple. Isn’t that the goal for any manager?
■ CHARLIE BUTCHER SHARED HIS WEALTH WITH EMPLOYEES
Role Models “CHARLIE REALLY WANTED TO TAKE CARE OF THE HOURLY
FOLKS AND PEOPLE WHO PUT IN A LOT OF YEARS.” {
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Motivation ■ Chapter 13 325
||| Positive reinforcement connects desirable behavior with pleasant consequences.
Among the reinforcement strategies, positive reinforcement deserves special at-
tention. It should be part of any manager’s motivational strategy. In fact, it should
be part of our personal life strategies as well—as parents working with children,
for example. One of the ways to mobilize the power of positive reinforcement is
through shaping. Th is is the creation of a new behavior by the positive reinforce- ment of successive approximations to it.
Sir Richard Branson, well-known founder of Virgin Group, is a believer in pos-
itive reinforcement. “For the people who work for you or with you, you must lav-
ish praise on them at all times,” he says. “If a fl ower is watered, it fl ourishes. If not,
it shrivels up and dies.” 25
David Novak, CEO of Yum! Brands, Inc., is another be-
liever. He claims “you can never underestimate the power of telling someone he’s
doing a good job.” 26
Whether we are talking about verbal praise, a pay raise, or any other forms
of positive reinforcement, two laws govern the process. Th e law of contingent reinforcement states: For a reward to have maximum reinforcing value, it must be delivered only if the desired behavior is exhibited. Th e law of immediate reinforcement states: Th e more immediate the delivery of a reward after the occurrence of a desirable behavior, the greater the reinforcing value of the
reward. Table 13.1—Guidelines for Positive Reinforcement and Punishment— pre sents several useful guidelines for using these two laws.
Shaping is positive reinforcement of successive approximations to the desired behavior.
Law of contingent reinforcement—deliver the reward only when desired behavior occurs.
Law of immediate reinforcement—deliver the reward as soon as possible after the desired behavior occurs.
Table 13.1 Guidelines for Positive Reinforcement and Punishment
Positive Reinforcement • Clearly identify desired work behaviors.
• Maintain a diverse inventory of rewards.
• Inform everyone what must be done to get rewards.
• Recognize individual diff erences when allocating rewards.
• Follow the laws of immediate and contingent reinforcement.
Punishment • Tell the person what is being done wrong.
• Tell the person what is being done right.
• Make sure the punishment matches the behavior.
• Administer the punishment in private.
• Follow the laws of immediate and contingent reinforcement.
||| Punishment connects undesirable behavior with unpleasant consequences.
As a reinforcement strategy, punishment tries to eliminate undesirable behavior
by making an unpleasant consequence contingent with its occurrence. To punish
an employee, for example, a manager may deny a valued reward—such as verbal
praise or merit pay, or deliver an unpleasant outcome—such as a verbal repri-
mand or pay reduction.
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EXPLORING MANAGEMENT326
Like positive reinforcement, punishment can be done poorly or it can be
done well. All too often, it is done both too frequently and poorly. If you look
again at Table 13.1, you’ll fi nd advice on how to best handle punishment when
it is necessary.
Whether talking about using punishment or positive reinforcement, some
people complain about the underlying reinforcement principles. They believe
that any use of operant conditioning techniques ignores the individuality of
people, restricts their freedom of choice, and fails to recognize they can be
motivated by things other than extrinsic rewards. Critics view this as inap-
propriate manipulation and control of human behavior. Others agree that re-
inforcement involves the control of behavior but argue that control is part of
every manager’s job. The ethical issue, they say, isn’t whether to use reinforce-
ment principles, but whether or not we use them well—in the performance
context of the organization and in everyday living. 27
How about you? Do you
see reinforcement theory as full of useful insights, or as something to be
feared?
WHAT DRIVES YOU?
Two human drives are well described in motiva- tion theory. One is our self-guided biological drive for food, water, and sex—survival and procre- ation. The second is our drive to respond to re- wards and punishment from external sources, or
“extrinsic motivation.” For example, you may get a job to buy groceries and provide for your family, work overtime if offered bonus pay, and avoid errors if threatened termination.
In the book Drive (2009, Riverhead Books), author Daniel Pink argues that more attention should be given to a third drive he calls “intrinsic motivation.” It includes our desire to do activities because we enjoy and are gratifi ed by them. They give us purpose and satisfy our need to do what we choose and value without others telling us. We do them not because we need to (buy groceries), or have to (avoid errors), but because we want to (enjoy work).
Pink uses the term “Motivation 3.0” to refl ect this third drive and recommends that managers change reward systems in order to improve opportunities for intrinsic motivation. He
points out that the economy has shifted from algorithmic work—routine, ruled-based work like product assembly, to- ward heuristic work—knowledge-driven, creative work that requires intuition and self-direction. Reward systems need to shift too. Extrinsic rewards like pay that drive algorithmic work might appeal to heuristic workers initially. But once a “base- line” level of security is achieved, motivation becomes more linked to things that excite and give them purpose.
Some companies tap intrinsic motivation by giving workers free time, perhaps 20% or so, to engage in projects they choose with colleagues. This allows them to engage in self-guided work while applying favorite skills in a meaningful setting. Many innovations have emerged from these approaches.
REFLECT AND REACT
Do you do most activities because you have to or because you want to? Make a list of activities within each category. What rewards or punishments from others drive you to do things that you have to? Why do you do the things you want to? How would you feel if you went two weeks doing only things that you had to? And, by the way, a lot of people are still doing routine algorithmic work in this economy. Can Pink’s ideas with Motivation 3.0 also apply well with algorithmic workers?
■ DRIVE BY DANIEL H. PINK
Manager’s Library
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Motivation ■ Chapter 13 327
Takeaway 13.3 How Does Reinforcement Infl uence
Motivation to Work?
Rapid Review • Reinforcement theory views human behavior as determined by its environmental
consequences.
• Th e law of eff ect states that behavior followed by a pleasant consequence is likely to be repeated; behavior followed by an unpleasant consequence is unlikely to be
repeated.
• Managers use strategies of positive reinforcement and negative reinforcement to strengthen desirable behaviors.
• Managers use strategies of punishment and extinction to weaken undesirable work behaviors.
• Positive reinforcement and punishment both work best when applied according to the laws of contingent and immediate reinforcement.
Questions for Discussion 1. Is operant conditioning a manipulative way to infl uence human behavior?
2. When is punishment justifi able as a reinforcement strategy?
3. Is it possible for a manager, or parent, to only use positive reinforcement?
Be Sure You Can • explain the law of eff ect and operant conditioning • illustrate how positive reinforcement, negative reinforcement, punishment, and
extinction can infl uence work behavior
• explain the reinforcement technique of shaping • describe how managers can use the laws of immediate and contingent reinforce-
ment when allocating rewards
• list ways to make punishment eff ective
What Would You Do? You can predict with great confi dence that when Jason comes to a meeting of your
student team, he will spend most of his time cracking jokes, telling stories, and
otherwise entertaining other team members. He doesn’t do any real work. In fact,
his behavior makes it hard for the team to accomplish much in its meetings. But
Jason’s also a talented guy. How can you put reinforcement theory to work here and
turn Jason into a solid team contributor?
STUDY GUIDE
Terms to Defi ne
Extinction
Law of contingent
reinforcement
Law of eff ect
Law of immediate
reinforcement
Negative reinforcement
Operant conditioning
Positive reinforcement
Punishment
Shaping
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EXPLORING MANAGEMENT328
1. Maslow’s progression principle stops working at the
level of needs.
(a) growth (b) self-actualization
(c) achievement (d) self-esteem
2. Lower-order needs in Maslow’s hierarchy corre-
spond to needs in ERG theory.
(a) growth (b) affi liation
(c) existence (d) achievement
3. A worker high in need for power in
McClelland’s theory tries to use power for the good
of the organization.
(a) position (b) expert
(c) personal (d) social
4. In the theory of motivation, an
individual who feels underrewarded relative to a
co-worker might be expected to reduce his or her
work eff orts in the future.
(a) ERG (b) acquired needs
(c) two-factor (d) equity
5. Which of the following is a correct match?
(a) McClelland–ERG theory
(b) Skinner–reinforcement theory
(c) Vroom–equity theory
(d) Locke–expectancy theory
6. In Herzberg’s two-factor theory, base pay is consid-
ered a/an factor.
(a) hygiene (b) satisfi er
(c) equity (d) higher-order
7. Th e expectancy theory of motivation says that
Motivation � Expectancy � Instrumentality � .
(a) Rewards
(b) Valence
(c) Equity
(d) Growth
8. When a team member shows strong ego needs in
Maslow’s hierarchy, the team leader should fi nd
ways to link this person’s work with .
(a) compensation tied to team performance
(b) individual praise and recognition
(c) social interaction with other team members
(d) challenging individual performance goals
9. When someone has a high and positive “expec-
tancy” in expectancy theory of motivation, this
means that the person .
(a) believes he can achieve performance expectations
(b) highly values the rewards being off ered
(c) sees a performance–reward link
(d) believes rewards are equitable
10. Th e law of states that behavior
followed by a positive consequence is likely to be
repeated, whereas behavior followed by an undesir-
able consequence is not likely to be repeated.
(a) reinforcement (b) contingency
(c) goal setting (d) eff ect
11. When a job allows a person to do a complete unit of
work, it is high on which core characteristic?
(a) task identity (b) task signifi cance
(c) task autonomy (d) feedback
12. is a positive reinforcement strategy
that rewards successive approximations to a
desirable behavior.
(a) Extinction (b) Negative reinforcement
(c) Shaping (d) Merit pay
13. Th e purpose of negative reinforcement as an
operant conditioning technique is to .
(a) punish bad behavior
(b) discourage bad behavior
(c) encourage desirable behavior
(d) cancel the eff ects of shaping
C H
A
PTER 1 3
TP
Multiple-Choice Questions
TestPrep 13
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Motivation ■ Chapter 13 329
14. Th e premise of reinforcement theory is:
(a) behavior is a function of environment
(b) motivation comes from positive expectancy
(c) higher-order needs stimulate hard work
(d) rewards considered unfair are de-motivators
15. Both Barry and Marissa are highly motivated students.
Knowing this, I can expect them to be .
(a) hard working (b) high performing
(c) highly satisfi ed (d) highly dissatisfi ed
Short-Response Questions
16. What preferences does a person high in the need for achievement bring to the workplace?
17. How can a team leader use goal-setting theory in working with individual team members?
18. What are three ways a worker might react to perceived negative inequity over a pay raise?
19. How can shaping be used to encourage desirable work behaviors?
Integration and Application Question
20. I overheard a conversation between two Executive MBA students. One was telling the other: “My fi rm just con-
tracted with Musak to have mood music piped into the offi ces at various times of the workday.” Th e other replied:
“Th at’s a waste of money; there should be better things to do if the fi rm is really interested in increasing motiva-
tion and performance.” Question: Is the second student right or wrong, and why?
C H
A
PTER 1 3
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot Panera’s success has come partly from its ability to predict long-term trends and orient the com-
pany toward innovation to fulfi ll consumers’ desires. Its
self-perception as a purveyor of artisan bread well pre-
dated the current national trend for fresh bread and the
explosion of artisan bakeries throughout metropolitan
America. For Panera Bread, a company able to success-
fully spot long-term trends in the food industry, artisan-
style bread served with deli sandwiches and soups is a
combination proven to
please the hungry masses.
Panera has demonstrat-
ed that sticking to company ideals while successfully
forecasting and then leading the response to long-term
industry trends will please customers time and time
again. Th e low-carb craze didn’t faze Panera, but can
this company continue to navigate the changing dietary
trends in today’s unstable market?
■ CHAPTER 13 CASE Panera Bread: Staying Ahead of Long-Term Trends
Don’t Miss This Selection from Cases for Critical Thinking
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 13: Two-Factor Profi le
■ CLASS EXERCISE 13: Why We Work
■ TEAM PROJECT 13: CEO Pay
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“Th e way a team plays as a whole determines its success. You
may have the greatest bunch of individual stars in the world,
but if they don’t play together, the club won’t be worth a dime.”
Former UCLA coach John Wooden
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14 Teams and
Teamwork
Two Heads Really Can Be Better Th an One
1. Understand the
importance of teams
and teamwork.
2. Identify the building
blocks of successful
teamwork.
3. Understand how
managers create and
lead high-performance
teams.
YOUR CHAPTER 14
TAKEAWAYS
Management Live
Team Contributions and Lost
P icture a mysterious island and a group of random strangers
brought together by a plane crash. Th ere is little hope of
rescue. You’ve probably been there before, at least vicariously.
It’s the setting for the hit television series Lost.
In episode 5 of season 1 a doctor, Jack Shephard (Matthew Fox), strikes off on
his own to deal with personal demons. He ends up discovering a source of clean
water and realizes it is the key to keeping everyone alive.
Upon returning to the crash site, Jack fi nds several of the survivors fi ghting
for control of the remaining bottled water. He interrupts the fi ght and delivers
what becomes the guiding mantra of the series—“live together, die alone.” Jack
implores each person to fi gure out what they can contribute to the good of all,
and then make the commitment to everyone else that they’ll really do it.
If you watch Lost episodes, you’ll fi nd quite a bit going on about the lessons of
teamwork and team contributions. Team success always depends on members contributing in a wide variety of ways to help the team reach its goals. Most
teams underperform not because they lack talent and energy. Th ey do poorly
because members can’t overcome the diffi culties of working together.
Pick a recent team experience of yours. Make a good realistic assessment of the
teamwork that took place—the good parts and the rough spots. What could you
have contributed that would have helped the team? Th is chapter has lots of ideas
on teamwork and team success. As you read on, make becoming a strong team
contributor a personal development goal.
Explore Yourself More on team contributions
Role Models Amazon’s Jeff Bezos bets big on
teams
Ethics Check Social loafi ng is closer than
you think
Facts to Consider Unproductive meetings are
major time wasters
Manager’s Library Crowdsourcing by
Jeff Howe
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
331
M L C
J
M
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EXPLORING MANAGEMENT332
We are all part of teams every day, and it’s time to recognize a basic fact:
Teams are hard work, but they are worth it. Th e beauty of teams is accomplishing
something far greater than what’s possible for an individual alone. Indeed, two
heads can be better than one. But the key word is “can.” While we all know that
teams can be great, they’re often not. Have you ever heard someone say “Too
many cooks spoil the broth” or “A camel is an elephant put together by a
committee”?
So let’s start this discussion realistically. On one level there seems little to
debate. Groups and teams have a lot to off er organizations. But at another
level you have to sometimes wonder if the extra eff ort is really worth it. Th ere
are times when teams can be more pain than gain. Th ere’s a lot to learn about
them, their roles in organizations, and how we participate in and help lead
them for real performance gains. 1
||| Teams off er synergy and other benefi ts to organizations and their members.
A team is a small group of people with complementary skills who work together to accomplish shared goals while holding each other mutually accountable for
performance results. 2 Teams are essential to organizations of all types and sizes.
Many tasks are well beyond the capabilities of individuals alone. 3 And in this
sense, teamwork, people actually working together to accomplish a shared goal, is a major performance asset.
4
Th e term synergy means the creation of a whole that exceeds the sum of its parts. When teams perform well, it’s because of synergy that pools many diverse
talents and eff orts to create extraordinary results.
Check research on success in the NBA. Scholars fi nd that both good and bad
basketball teams win more the longer the players have been together. Why? A
“teamwork eff ect” creates wins because players know one another’s moves
and playing tendencies. Shift to the hospital operating room. Scholars notice
the same heart surgeons have lower death rates for similar procedures per-
formed in hospitals where the surgeons did more operations. Why? A teamwork
eff ect—the doctors had more time working together with the surgery teams—
A team is a collection of people who regularly interact to pursue common goals.
Teamwork is the process of people actively working together to accomplish common goals.
Synergy is the creation of a whole greater than the sum of its individual parts.
Takeaway 14.1 Why Is It Important to Understand
Teams and Teamwork?
ANSWERS TO COME
■ Teams off er synergy and other benefi ts to organizations and their members.
■ Teams often suff er from common performance problems.
■ Organizations are networks of formal teams and informal groups.
■ Organizations use committees, task forces, and cross-functional teams.
■ Virtual teams are increasingly common in organizations.
■ Self-managing teams are a form of job enrichment for groups.
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Teams and Teamwork ■ Chapter 14 333
anesthesiologists, nurses, and other surgical techni-
cians. Th ey say it’s not only the surgeon’s skills that
count; the skills of the team and the time spent working
together count too. 5
Don’t forget—teams are not only good for perfor-
mance, they’re also good for their members. 6 Just as in
life overall, being part of a work team or informal group
can strongly infl uence our attitudes and behaviors. Th e
personal relationships can help with job performance—
making contacts, sharing ideas, responding to favors,
and bypassing roadblocks. And being part of a team
often helps satisfy important needs that are unfulfi lled
in the regular work setting or life overall. Teams provide
members with social relationships, security, a sense of belonging, and emotional
support.
||| Teams often suff er from common performance problems.
Notwithstanding all the positive talk, we all know that working in teams isn’t
always easy or productive. Problems not only happen; they are common. 7 One
of the most troublesome is social loafi ng—the presence of one or more “free- riders” who slack off and allow other team members to do most of the work.
8
For whatever reason, perhaps the absence of spotlight on personal perfor-
mance, individuals sometimes work less hard, not harder, when they are part of
a group.
What can a team leader do when someone is free-riding? Th e possibilities
include a variety of actions to make individual contributions more visible—
rewarding individuals for their contributions, making task assignments more
interesting, and keeping group size small so that free-riders are more notice-
able. Th is makes the loafers more susceptible to pressures from peers and to
critical leader evaluations. And if you’ve ever considered free-riding as a team
member, think again. You may get away with it in the short term, but your repu-
tation will suff er and sooner or later it will be “pay back” time.
Other common problems of teams include personality confl icts and work
style diff erences that disrupt relationships and accomplishments. Sometimes
group members battle over goals or competing visions. Sometimes they with-
draw from active participation due to uncertainty over tasks and relationships.
Ambiguous agendas or ill-defi ned problems can cause teamwork fatigue. And,
motivation often falls when teams work too long on the wrong things, and end
up having little to show for it.
Finally, not everyone is always ready to jump in and do a great job on a team.
Th is might be due to personality or high need for individual achievement. It may
also stem from confl icts with other work deadlines and personal priorities. Low
enthusiasm for group work may also result from bad past experiences on poorly
organized and run teams, as well as from meetings that seem to lack purpose.
Th ese and other diffi culties can easily turn the great potential of teams into frus-
tration and failure.
Social loafi ng is the tendency of some people to avoid responsibility by free-riding in groups.
Why Teams Are Good for Organizations
• More resources for problem solving
• Improved creativity and innovation
• Improved quality of decision making
• Greater commitment to tasks
• Increased motivation of members
• Better control and work discipline
• More individual need satisfaction
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EXPLORING MANAGEMENT334
||| Organizations are networks of formal teams and informal groups.
A formal team is offi cially designated for a specifi c organizational purpose. You’ll fi nd such teams described by diff erent labels on organization charts—
examples are departments (e.g., market research department), work units (e.g.,
audit unit), teams (e.g., customer service team), or divisions (e.g., offi ce prod-
ucts division).
Formal teams are headed by supervisors, managers, department heads, team
leaders, and the like. It is common, in fact, to describe organizations as interlock-
ing networks of teams in which managers and leaders play “linking pin” roles. 9
Th is means that they serve both as head of one work team and as a regular member
in the next-higher-level one. It’s important to recognize, as shown here, that
A formal team is offi cially recognized and supported by the organization.
Supervisor Helpful participantNetwork facilitator External coach
Psychology study: A German researcher asks people to pull on a rope as hard as they can. First, individuals pull alone. Sec- ond, they pull as part of a group. Results show people pull harder when working alone than when working as part of a team. Such social loafi ng is the tendency to reduce effort when working in groups.
Faculty offi ce: A student wants to speak with the instructor about his team’s performance on the last group project. There were four members, but two did almost all of the work. The two loafers largely disappeared, showing up only at the last minute to be part of the formal presentation. His point is that the team was disadvantaged because the two free-riders caused a loss of performance capacity.
Telephone call from the boss: “John, I really need you to serve on this committee. Will you do it? Let me know tomorrow.” In thinking about this, I ponder: I’m overloaded, but I don’t want
to turn down the boss. I’ll accept but let the committee mem- bers know about my situation. I’ll be active in discussions and try to offer viewpoints and perspectives that are helpful. How- ever, I’ll let them know up front that I can’t be a leader or volunteer for any extra work.
YOU DECIDE
Whether you call it social loafi ng, free-riding, or just plain old slacking off, the issue is the same. What right do some people have to sit back in team situations and let other people do all or most of the work? Is this ethical? Does everyone in a group have an ethical obligation to do his or her fair share of the work? And when it comes to John, does the fact that he is go- ing to be honest with the other committee members make any difference? Isn’t he still going to be a loafer that gets credit with the boss for serving on the committee? Would it be more ethical for him to decline becoming a part of this committee?
■ SOCIAL LOAFING IS CLOSER THAN YOU THINK
Ethics Check “I’LL BE ACTIVE IN DISCUSSIONS, BUT I CAN’T BE A
LEADER OR VOLUNTEER FOR ANY EXTRA WORK.” {
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Teams and Teamwork ■ Chapter 14 335
managers play more than one role in groups and teams. Although often serving
as the supervisor or team leader, they also act as network facilitators, helpful
participants, and external coaches.
Th e informal structure of an organization also consists of informal groups. Th ey emerge from natural or spontaneous relationships, not required ones. Some
are interest groups whose members pursue a common cause, such as a women’s
career network. Some are friendship groups that develop for a wide variety of per-
sonal reasons, including shared hobbies and other nonwork interests. Others are
support groups in which members basically help one another out in work and per-
sonal aff airs.
||| Organizations use committees, task forces, and cross-functional teams.
You will fi nd many types of formal teams and groups in organizations. 10
A
committee brings together people outside of their daily job assignments to work in a small team for a specifi c purpose. Th e task agenda is focused and ongoing.
For example, an organization may have standing committees for diversity and
compensation. 11
A designated head or chairperson typically leads the committee
and is held accountable for its performance.
Project teams or task forces put people together to work on common prob- lems, but on a temporary rather than continuing basis. Project teams, for ex-
ample, might be formed to develop a new product or service, redesign workfl ows,
or provide specialized consulting for a client. 12
A task force might be formed to
address employee retention problems or come up with ideas for improving work
schedules. 13
Th e cross-functional team brings together members from diff erent functional units.
14 Th ey are supposed to work together on specifi c problems or tasks,
An informal group is unoffi cial and emerges from relationships and shared interests among members.
A committee is designated to work on a special task on a continuing basis.
A project team or task force is convened for a specifi c purpose and disbands after completing its task.
A cross-functional team operates with members who come from diff erent functional units of an organization.
A survey of some 38,000 workers around the world links low productivity with bad meetings, poor communication, and unclear goals. • 69% of meetings attended are considered ineffective. • 32% of workers complain about team communication. • 31% complain about unclear objectives and priorities.
YOUR THOUGHTS?
Do these data match your experiences with team meetings? Given the common complaints about meetings, what can a team leader do to improve them? Think about the recent meetings you have attended. In what ways were the best meetings different from the worst ones? Did your behavior play a signifi cant role in both these cases?
■ UNPRODUCTIVE MEETINGS ARE MAJOR TIME WASTERS
Facts to Consider WORKERS AROUND THE WORLD SAY
MOST MEETINGS ARE “INEFFECTIVE.” {
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EXPLORING MANAGEMENT336
sharing information and exploring new ideas. Th ey are expected to help knock
down the “walls” that otherwise separate departments and people in the orga-
nization. Tom’s of Maine, for example, uses “Acorn Groups”—symbolizing the
fruits of the stately oak tree—to help launch new products. Members work on
new ideas from concept to fi nished product. Th e goal is to minimize problems
and maximize effi ciency through cross-departmental cooperation. 15
Some organizations also use employee involvement teams. Th ese groups of workers meet on a regular basis with the goal of using their expertise and
experience for continuous improvement. Th e quality circle, for example, is a team that meets regularly to discuss and plan specifi c ways to improve work
quality. 16
||| Virtual teams are increasingly common in organizations.
A vice president for human resources at Marriott once called electronic meetings
“the quietest, least stressful, most productive meetings you’ve ever had.” 17
She
was talking about a type of group that is increasingly common in today’s organi-
zations—the virtual team.18 Its members work together and solve problems through computer-mediated rather than face-to-face interactions. Th e constant
emergence of new technologies is making virtual collaboration both easier and
more common. At home it may be Skype or Facebook; at the offi ce it’s likely to be
any number of in-house or other web-based meeting resources. 19
As you probably realize already from working in college study teams, virtual
teamwork has many advantages. Th e virtual environment allows teamwork by
people who may be located at great distances from one another. Th is off ers cost
and time effi ciencies. It makes it easy to widely share lots of information, keep
records of team activities, and maintain databases. And, it can help reduce in-
terpersonal problems that might otherwise occur when team members are
dealing face-to-face with controversial issues. 20
An employee involvement team meets on a regular basis to help achieve continuous improvement.
A quality circle is a team of employees who meet periodically to discuss ways of improving work quality.
Members of a virtual team work together and solve problems through computer-based interactions.
• Select team members high in initiative and capable of self-starting.
• Select members who will join and engage the team with positive attitudes.
• Select members known for working hard to meet team goals. • Begin with social messaging that allows members to exchange
information about one another to personalize the process.
• Assign clear goals and roles so that members can focus while working alone and also know what others are doing.
• Gather regular feedback from members about how they think the team is doing and how it might do better.
• Provide regular feedback to team members about team accomplishments.
• Make sure the team has the best technology.
■ STEPS TO SUCCESSFUL VIRTUAL TEAMS
Tips to Remember VIRTUAL TEAMS NEED THE RIGHT MEMBERS,
GOALS, FEEDBACK, AND TECHNOLOGY. {
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Teams and Teamwork ■ Chapter 14 337
Are there any downsides to virtual teams? Yes, for sure. Th ey often occur for
the same reasons as in other groups. 21
Social loafi ng can still occur, goals may
be unclear, meeting requests may be too frequent. Members of virtual teams
can also have diffi culties establishing good working relationships. Th e lack of
face-to-face interaction limits the role of emotions and nonverbal cues in the
communication, and may depersonalize member relations. 22
Yet as more peo-
ple gain experience, teams working in virtual space rather than face-to-face
are proving their performance potential. 23
In fact, they’re becoming a way of
organizational life.
||| Self-managing teams are a form of job enrichment for groups.
In a growing number of organizations, traditional work units of supervisors and
subordinates are being replaced with self-managing teams. Sometimes called autonomous work groups, these are teams whose members have been given col-
lective authority to make many decisions about how they work, ones previously
made by higher-level managers. 24
Th e expected advantages include better perfor-
mance, decreased costs, and higher morale.
As shown in Figure 14.1, the “self-management” responsibilities of self- managing teams include planning and scheduling work, training members in
various tasks, distributing tasks, meeting performance goals, ensuring high
quality, and solving day-to-day operating problems. In some settings the team’s
authority may even extend to “hiring” and “fi ring” its members when neces-
sary. A key feature is multitasking, in which team members each have the skills
to perform several diff erent jobs.
Members of a self-managing team have the authority to make decisions about how they share and complete their work.
Top manager
Middle manager
Self-managing team
Supervisor Team done by
Team management Planning and scheduling work Assignment of work tasks Training members Performance evaluation Quality control
Top manager
Middle manager
Supervisor
Work unit
New StructureTraditional Structure
Team- leader
FIGURE 14.1 What Are the Management Implications of Self-Managing Teams? Members of self-managing teams make decisions together on team membership, task plans and job assignments, training and
performance evaluations, and quality control. Because they essentially manage themselves in these ways, they no longer need a
traditional supervisor or department head. Instead, the team leader performs this role with the support of team members. Th e team
leader and team as a whole report to the next higher level of management and are held accountable for performance results.
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EXPLORING MANAGEMENT338
Takeaway 14.1 Why Is It Important to Understand
Teams and Teamwork?
Rapid Review • A team consists of people with complementary skills working together for shared
goals and holding one another accountable for performance.
• Teams benefi t organizations by providing for synergy that allows the accomplish-
ment of tasks that are beyond individual capabilities alone.
• Social loafi ng and other problems can limit the performance of teams.
• Organizations use a variety of formal teams in the form of committees, task forces,
project teams, cross- functional teams, and virtual teams.
• Self-managing teams allow team members to perform many tasks previously
done by supervisors.
Questions for Discussion 1. Do committees and task forces work better when they are given short deadlines?
2. Are there some things that should be done only by face-to-face teams, not vir-
tual ones?
3. Why do people in teams often tolerate social loafers?
Be Sure You Can • defi ne “team” and “teamwork”
• describe the roles managers play in teams
• explain synergy and the benefi ts of teams
• discuss social loafi ng and other potential problems of teams
• diff erentiate formal and informal groups
• explain how committees, task forces, and cross-functional teams operate
• describe potential problems faced by virtual teams
• list the characteristics of self-managing teams
What Would You Do? It’s time for the fi rst meeting of the task force that you have been assigned to lead.
Th is is a big opportunity for you, since it’s the fi rst time your boss has given you this
level of responsibility. Th ere are seven members of the team, all of whom are your
peers and co-workers. Th e task is to develop a proposal for increased use of fl exible
work schedules and telecommuting in the organization. What will your agenda be
for the fi rst meeting, and what opening statement will you make?
STUDY GUIDE
Terms to Defi ne
Committee
Cross-functional team
Employee involvement
team
Formal team
Informal group
Project team
Quality circle
Self-managing team
Social loafi ng
Synergy
Task force
Team
Teamwork
Virtual team
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Teams and Teamwork ■ Chapter 14 339
After talking about the types of teams in organizations, it’s time to
talk about the teamwork that can make them successful. 25
Look at Figure 14.2. It diagrams a team as an open system that, like the organization itself, transforms
a variety of inputs into outputs. 26
It also shows that an eff ective team should be accomplishing three output goals—task performance, member satisfaction, and
team viability. 27
Th e fi rst outcome of an eff ective team is high task performance. When you are
on a team, ask: Did we accomplish our tasks and meet expectations? Th e second
An eff ective team achieves high levels of task performance, membership satisfaction, and future viability.
Takeaway 14.2 What Are the Building Blocks of
Successful Teamwork?
ANSWERS TO COME
■ Teams need the right members and other inputs to be eff ective.
■ Teams need the right processes to be eff ective.
■ Teams move through diff erent stages of development.
■ Team performance is aff ected by norms and cohesiveness.
■ Team performance is aff ected by task and maintenance roles.
■ Team performance is aff ected by communication networks.
Inputs
Team process
The way members work together to transform inputs into outputs
• Norms • Cohesion • Roles • Communication • Decision making • Conflict
Throughputs
Team effectiveness
Accomplishment of desired outcomes
• Task performance • Member satisfaction • Team viability
Outputs
Feedback
Organizational
setting
Resources Technology Structures Rewards Information
Team size
Number of members Even-odd number
Clarity Complexity
Nature of task
Membership
composition
Abilities Values Personalities Diversity
FIGURE 14.2 What Are the Foundations of Team Eff ectiveness? An eff ective team achieves high levels of task performance and member satisfaction, and remains
viable for the future. Th e foundations of eff ectiveness begin with inputs—things such as
membership composition, nature of the task, resources and support in the organizational setting,
and team size. Th e foundations of eff ectiveness further rest with team process—how well the
members utilize their talents and other inputs to create the desired outputs. Key process factors
on any team include the stages of development, norms and cohesion, task and maintenance
activities, communication, and decision making.
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EXPLORING MANAGEMENT340
outcome of an eff ective team is member satisfaction. Ask: Are we individually and
collectively pleased with our participation in the process? Th e third outcome of
an eff ective team is viability for future action. Ask: Can this team be successful
again in the future? 28
You might hear an eff ective team described as one that has “the right players
in the right seats on the same bus, headed in the same direction.” 29
Th e open-
systems model in Figure 14.2 shows this thinking. A team’s eff ectiveness is infl u-
enced by inputs—getting the right players and putting them in the right seats,
and by process—making sure everyone knows they’re on the same bus and
headed in the same direction. You can remember the implications with this team eff ectiveness equation.
Team Eff ectiveness � Quality of Inputs � (Process Gains � Process Losses)
||| Teams need the right members and other inputs to be eff ective.
Th e foundations for team eff ectiveness are set when a team is formed. Th e better
the inputs, you might say, the more likely that the team will achieve success. One
of the most important inputs of any group is the nature of the membership. You
can think of a team’s membership composition as human capital available in its mix of abilities, skills, backgrounds, and experiences. For anyone creating a team,
this raises one of the most important decisions to be made: Just who should be
selected to be on the team?
In an ideal world, managers carefully form teams by choosing team members
whose talents and interests fi t well with the job to be done. If you were in charge
of a new team, wouldn’t you want to start this way? It makes good sense, but re-
search raises some interesting issues.
It turns out that the most creative teams include a mix of experienced people
and those who haven’t worked together before. 30
Th e experienced members
have the connections while the newcomers add fresh thinking. Researchers
also warn about risks when team members are too similar in background,
training, and experience. Such teams tend to underperform even though the
members may feel very comfortable with one another. 31
What are your experi-
ences on this issue? Do you get along better in teams whose members are pretty
much all alike? Have you encountered problems on teams whose members are
diverse?
Another input that infl uences team eff ectiveness is the nature of the task.
Clearly defi ned tasks make it easier for team members to combine their work ef-
forts. Complex tasks require more information exchange and intense interaction
than do simpler tasks. Th ink task complexity the next time you fl y. And check out
the ground crews. You should notice some similarities between them and teams
handling pit stops for NASCAR racers. In fact, if you fl y United Airlines, there’s a
good chance the members of the ramp crews have been through “Pit Crew U.”
United is among many organizations sending employees to Pit Instruction &
Training in Mooresville, North Carolina. Real racing crews at this facility have
trained United’s ramp workers to work under pressure while meeting the goals of
teamwork, safety, and job preparedness. Th e goal is better teamwork to reduce
aircraft delays and service inadequacies. 32
Membership composition is the mix of abilities, skills, backgrounds, and experiences among team members.
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Teams and Teamwork ■ Chapter 14 341
Predictably, the organizational setting infl uences team outputs. A key issue
here is support—how well the organization supports the team in terms of infor-
mation, material resources, technology, organization structures, available re-
wards, and even physical space. Having support, as we have all probably
experienced, can make a big diff erence in how well we perform in groups and
individually.
Team size also makes a diff erence. Th e number of potential interactions in-
creases geometrically as teams increase in size. Th is aff ects how members com-
municate, work together, handle disagreements, and reach agreements. So how
big should a team be? In general, teams larger than six or seven members can be
diffi cult to manage for the purpose of creative problem solving. Amazon.com’s
founder and CEO Jeff Bezos is a great fan of teams. But he has a simple rule when
it comes to team size: If creativity is a goal, no team should be larger than two
pizzas can feed. 33
Also, when voting is required, teams with odd numbers of
members help to prevent ties.
Amazon.com’s founder and CEO Jeff Bezos is one of America’s top businesspersons and a technology visionary. He’s also a great fan of teams. Bezos coined a simple rule when it comes to sizing the fi rm’s product development teams: If two pizzas aren’t enough to feed a team, it’s too big.
The business plan for Amazon originated while Bezos was driving cross-country. He started the fi rm in his garage, and even when the worth of his Amazon stock grew to $500 million, he was still driving a Honda and living in a small apartment in downtown Seattle.
Bezos is clearly a unique personality and also one with a great business mind. His goal with Amazon was to “create the world’s most customer-centric company, the place where you can fi nd and buy anything you want online.” Many would say he has already succeeded.
If you go to Amazon.com and click on the “Gold Box” at the top, you’ll be tuning in to his vision. It’s a place for special deals, lasting only an hour and offering everything from a power tool to a new pair of shoes. If you join Amazon Prime and “One-Click” your way to free shipping and a hassle-free checkout, you’re benefi ting from his vision as well. And, of course, there’s the Kindle e-reader. Not only did it become Amazon’s best selling product ever, it made electronic books an everyday reality—one that competitors have been racing to
also take advantage of. Such innovations don’t just come out of the blue. They’re part and parcel of the management phi- losophy Bezos has instilled at the fi rm.
The Gold Box, One-Click, Kindle, and other Amazon suc- cessful innovations are products of many teams that are “small” and “fast-moving” “innovation engines.” These teams typically have fi ve to eight members and thrive on turning new ideas into business potential.
Bezos views Amazon’s two-pizza teams as a way of fi ght- ing bureaucracy and decentralizing, even as the company grows large and very complex. He is also a fan of what he calls fact-based decisions. He says they help to “overrule the hierarchy. The most junior person in the company can win an argument with the most senior person with fact- based decisions.”
WHAT’S THE LESSON HERE?
Don’t expect to spot a stereotyped corporate CEO in Jeff Bezos. His standard offi ce attire is still blue jeans and a blue-collared shirt. A family friend describes him and his wife as “very playful people.” Perhaps “playful” is another word for the two-pizza team, as long as its members also keep their eyes on keeping the business successful. What do you think?
■ AMAZON’S JEFF BEZOS BETS BIG ON TEAMS
Role Models AMAZON’S CEO SAYS “IF TWO PIZZAS AREN’T
ENOUGH TO FEED A TEAM, IT’S TOO BIG.” {
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EXPLORING MANAGEMENT342
||| Teams need the right processes to be eff ective. Although having the right inputs available to a team is important, it’s not a guar-
antee of success. Team process counts, too. Th is is the heart of teamwork—the way the members of any team actually work together as they transform inputs
into outputs. Also called group dynamics, the process aspects of any group or
team include how members get to know one another, develop expectations and
loyalty, communicate, handle confl icts, and make decisions.
Again, don’t forget the equation: Team Eff ectiveness � Quality of Inputs �
(Process Gains � Process Losses). A positive process takes full advantage of
group inputs and creates gains that raise team eff ectiveness. But any problems
with group process can quickly drain energies and create losses that reduce ef-
fectiveness. When the internal dynamics fail in any way, team eff ectiveness
quickly suff ers. Haven’t you been on teams where people seemed to spend more
time dealing with personality confl icts than with the task?
||| Teams move through diff erent stages of development.
A synthesis of research suggests that fi ve distinct phases occur in the life cycles of
teams. 34
Known as the stages of team development, they are:
1. Forming—a stage of initial orientation and interpersonal testing
2. Storming—a stage of confl ict over tasks and working as a team
3. Norming—a stage of consolidation around task and operating agendas
4. Performing—a stage of teamwork and focused task performance
5. Adjourning—a stage of task completion and disengagement
An eff ective team meets and masters key process challenges
as it moves through each of these stages. One of the challenges
is membership diversity. As shown in the nearby fi gure, diverse
teams often experience process complications that can hurt
eff ectiveness. But if they are well handled, real benefi ts are
possible. Diverse teams expand the variety of talents, ideas, per-
spectives, and experiences available for problem solving. 35
Th is
can help improve long-term performance.
Th e forming stage of team development is one of initial task
orientation and interpersonal testing. New members are likely
to ask: What can or does the team off er me? What will they ask
me to contribute? Can my eff orts serve team needs while also
meeting my needs? In this stage, people begin to identify with other members
and with the team itself. Th ey focus on getting acquainted, establishing interper-
sonal relationships, discovering what is considered acceptable behavior, and
learning how others perceive the team’s task. Diffi culties in the forming stage
tend to be greater in more culturally and demographically diverse teams.
Th e storming stage of team development is a period of high emotionality. Tension
often emerges between members over tasks and interpersonal concerns. Th ere
may be periods of confl ict, outright hostility, and even infi ghting as some individu-
als try to impose their preferences on others. But this is also the stage where mem-
bers start to clarify task agendas and understand one another. Attention begins to
Team process is the way team members work together to accomplish tasks.
T e a m
P e rf
o rm
a n
c e
Team Development Stages / Time
Forming – Storming Norming – Performing
Critical Zone
Effective Team
Process gains > losses
Ineffective Team
Process losses > gains
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Teams and Teamwork ■ Chapter 14 343
shift toward mastering obstacles, and team members start looking for ways to
meet team goals while also satisfying individual needs. As the prior fi gure shows,
the storming stage is part of a “critical zone” in team development where process
failures cause lasting problems but process successes set the foundations for
future eff ectiveness.
Cooperation is an important issue for teams in the norming stage of team devel-
opment. At this point, members of the team begin to better coordinate their eff orts
as a working unit and operate with shared rules of conduct. Th e team feels a sense
of leadership, with each member starting to play a
useful role. Most interpersonal hostilities give way to
a precarious balancing of forces as norming builds
initial integration. Norming is also part of the critical
zone of team development. When it is well managed,
team members are likely to develop initial feelings of
closeness and a sense of shared expectations. Th is
helps protect the team from disintegration while
members continue their eff orts to work well together.
Teams in the performing stage of team develop-
ment are mature, organized, and well functioning.
Th is is a stage of total integration in which team
members are able to creatively deal with complex
tasks and interpersonal confl icts. Th e team has a
clear and stable structure, members are motivated
by team goals, and the process scores high on the
criteria of team maturity shown in Figure 14.3.36
Th e adjourning stage of team development is the
fi nal stage for temporary committees, task forces, and
project teams. Here, team members prepare to
achieve closure and disband, ideally with a sense that
they have accomplished important goals.
1. Trust among members
3. Open communications
4. Approach to decisions
5. Leadership sharing
6. Acceptance of goals
7. Valuing diversity
8. Member cohesiveness
9. Support for each other
10. Performance norms
2. Feedback mechanisms
1
Very poor Very good
2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
1 2 3 4 5
FIGURE 14.3 What Are the Criteria for Assessing the Process Maturity of a Team? Teams vary greatly in the degree of maturity they achieve and
demonstrate in day-to-day behavior. Th ese criteria are helpful for
assessing the development and maturity of a team as it moves through
various phases—from forming to storming to norming to performing.
We would expect that teams would start to show strong positives on
these criteria as members gain experience with one another in the
norming stage of team development. We would expect teams to have
consistently strong positive scores in the performing stage.
If teams and teamwork are a major part of how organizations operate today, team contributions have to be considered one of the most essential career skills.
We need to be able to contribute as team members in many different ways so that our teams can reach their performance potential. But experience proves time and time again that teams often underperform or, at least, lose time and effective- ness as members struggle with a variety of process diffi culties.
Take a good, hard look at the teams that you participate in. While so doing, make a realistic self-assessment of your
team contributions as well as those of other members. Ask: How can the insights of this chapter help me build team skills so that I can help turn teamwork potential into real team achievements?
■ TEAM CONTRIBUTIONS
Explore Yourself TEAMS OFTEN UNDERPERFORM BECAUSE MEMBERS
ARE STRUGGLING WITH PROCESS DIFFICULTIES. {
Get to know yourself better by taking the self-assessment on
Team Leader Skills and completing the other activities in the Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT344
||| Team performance is aff ected by norms and cohesiveness.
Have you ever felt pressure from other group members when you do something
wrong—come late to a meeting, fail to complete an assigned task, or act out of char-
acter? What you are experiencing is related to group norms, or behaviors expected of team members.
37 A norm is a rule or standard that guides behavior. And when a
norm is violated, team members are usually pressured to conform. In the extreme,
violating a norm can result in expulsion from the group or social ostracism.
Any number of norms can be operating in a group at any given time. During
the forming and storming stages of development, norms often focus on expected
attendance and levels of commitment. By the time the team reaches the perform-
ing stage, norms have formed around adaptability, change, and desired levels of
achievement. And without a doubt, one of the most important norms for any
team is the performance norm. It defi nes the level of work eff ort and perfor- mance that team members are expected to contribute.
It shouldn’t surprise you that teams with positive performance norms are
more successful than those with negative performance norms. But how do you
build teams with the right norms? Actually, there are a number of things leaders
can and should do. 38
• Act as a positive role model.
• Reinforce the desired behaviors with rewards.
• Control results by performance reviews and regular feedback.
• Train and orient new members to adopt desired behaviors.
• Recruit and select new members who exhibit the desired behaviors.
• Hold regular meetings to discuss progress and ways of improving.
• Use team decision-making methods to reach agreement.
Whether the team members will accept and conform to norms is largely
determined by cohesiveness, the degree to which members are attracted to and motivated to remain part of a team.
39 Members of a highly cohesive team value
their membership. Th ey try to conform to
norms and behave in ways that meet the expec-
tations of other members, and they get satisfac-
tion from doing so. In this way, at least, a highly
cohesive team is good for its members. But
does the same hold true for team performance?
Figure 14.4 shows that teams perform best when the performance norm is positive and
cohesiveness is high. In this best-case sce-
nario, cohesion results in conformity to the
positive norm, which ultimately benefi ts
team performance. When the performance
norm is negative in a cohesive team, however,
high conformity to the norm creates a worst-
case scenario. In this situation, members join
together in restricting their eff orts and perfor-
mance contributions.
A norm is a behavior, rule, or standard expected to be followed by team members.
Th e performance norm defi nes the eff ort and performance contributions expected of team members.
Cohesiveness is the degree to which members are attracted to and motivated to remain part of a team.
High performance Strong commitments to
positive norms
Low performance Strong commitments to
negative norms
T e a m
C o
h e
s iv
e n
e s s
Negative Positive
Performance Norms
H ig
h L o w
Moderate performance Weak commitments to
positive norms
Low-to-moderate performance Weak commitments to
negative norms
FIGURE 14.4 How Do Norms and Cohesiveness Infl uence Team Performance? Group norms are expected behaviors for team members; cohesiveness is the
strength of attraction members feel toward the team. When cohesiveness is
high, conformity to norms is high. Positive performance norms in a highly
cohesive group create a desirable situation, with high-performance outcomes
likely. However, negative performance norms in a highly cohesive group can be
troublesome; conformity by members to the negative norms creates low-
performance outcomes.
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Teams and Teamwork ■ Chapter 14 345
What are the implications of this relationship between norms and cohesive-
ness? Basically it boils down to this: Each of us should be aware of what can be
done to build both positive norms and high cohesiveness in our teams. In respect
to cohesiveness, this means such things as keeping team size as small as possible,
working to gain agreements on team goals, increasing interaction among mem-
bers, rewarding team outcomes rather than individual performance, introducing
competition with other teams, and putting together team members who are very
similar to one another.
||| Team performance is aff ected by task and maintenance roles.
Research on the group process identifi es two types of activities that are essential
if team members are to work well together over time. 40
Task activities contribute directly to the team’s performance purpose; maintenance activities support the emotional life of the team as an ongoing social system. Although you might ex-
pect that these are things that team leaders or managers should be doing, this is
only partially correct. In fact, all team members should share the responsibilities
for task and maintenance leadership.
The concept of distributed leadership in teams makes every member con- tinually responsible for both recognizing when task or maintenance activi-
ties are needed, and taking actions to provide them. Leading through task
activities involves making an effort to define and solve problems and advance
work toward performance results. Without task activities, such as initiating
agendas and sharing information, teams have difficulty accomplishing their
objectives. Leading through maintenance activities, such as encouraging oth-
ers and reducing tensions, helps strengthen and perpetuate the team as a so-
cial system.
As shown below, both task and maintenance activities stand in distinct con-
trast to dysfunctional or disruptive behaviors. Th ese include obvious self- serving behaviors that you often see and perhaps even engage in yourself—things such as
aggressiveness, excessive joking, and nonparticipation. Th ink about this the next
time one of your groups is drifting in the direction of ineff ectiveness. Th ink also
what you and others can do to correct things.
A task activity is an action taken by a team member that directly contributes to the group’s performance purpose.
A maintenance activity is an action taken by a team member that supports the emotional life of the group.
Distributed leadership is when any and all members contribute helpful task and maintenance activities to the team.
Disruptive behaviors are self-serving and cause problems for team eff ectiveness.
Distributed leadership
roles in teams
Initiating Information sharing Summarizing
Gatekeeping Encouraging
Elaborating Opinion giving
Following Harmonizing Reducing tension
Competing Withdrawal Horsing around Seeking recognition
Being aggressive Blocking Self-confessing Seeking sympathy
Team leaders
provide task activities
Team leaders
avoid and discourage
disruptive activities
Team leaders
provide maintenance activities
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EXPLORING MANAGEMENT346
||| Team performance is aff ected by communication networks.
Teams use the diff erent communication networks shown in Figure 14.5 as they work and interact together.
41 In a decentralized communication network, all
members communicate directly with one another. Sometimes called the all-
channel or star structure, this arrangement works well for tasks that require lots
of creativity, information processing, and problem solving. Use of a decentralized
communication network creates an interacting team in which all members ac-
tively work together and share information. Member satisfaction on successful
interacting teams is usually high.
A decentralized communication network allows all members to communicate directly with one another.
FIGURE 14.5 What Communication Networks Are Used in Teams? Members of teams communicate
and interact together in diff erent
ways. A decentralized structure
is where all members communi-
cate with one another. It works
best when tasks are complex and
the need for information sharing
is high. When tasks are simple
and easily broken down into
small parts, a centralized
struc ture works well. It coor-
dinates members’ communi-
cations through one central
point. A restricted communica-
tion network sometimes forms
when subgroups break off to do
separate work or due to member
alienation. Any lack of
communication between the
subgroups can create
performance problems.
PATTERN CHARACTERISTICSDIAGRAM
High interdependency around a common task Best at complex tasks
Decentralized
communication
network
Centralized
communication
network
Independent individual efforts on behalf of common task Best at simple tasks
Interacting Team
Coacting Team
Counteracting Team
Restricted
communication
network
Subgroups in disagreement with one another Slow task accomplishment
When tasks are more routine and less demanding, team members can often
divide up the work and then simply coordinate the fi nal results. Th is is best done
with a centralized communication network, sometimes called the wheel or chain structure. It has a central “hub” through which one member, often the team
leader, collects information from and distributes information to all others. Th is
creates a coacting team whose members work independently and pass com-
pleted tasks to the hub. Th ere, they are put together into a fi nished product. Th e
hub member often experiences the most satisfaction on successful coacting
teams.
When teams break into subgroups, either on purpose or because members are
experiencing issue-specifi c disagreements, this may create a restricted com- munication network. Left unmanaged, this counteracting team environment can deteriorate to the point where subgroups fail to adequately communicate
with one another and even engage in outwardly antagonistic relations. Although
these situations create problems, there are times when counteracting teams
might be intentionally set up to encourage confl ict, increase creativity, and help
double check the quality of specifi c decisions or chosen courses of action.
In a centralized communication network, communication fl ows only between individual members and a hub or center point.
Subgroups in a restricted communication network contest one anothers’ positions and restrict interactions with one another.
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Teams and Teamwork ■ Chapter 14 347
Takeaway 14.2 What Are the Building Blocks of
Successful Teamwork?
Rapid Review • An eff ective team achieves high levels of task performance, member satisfaction,
and team viability.
• Important team input factors include the membership characteristics, nature of
the task, organizational setting, and group size.
• A team matures through various stages of development, including forming, storm-
ing, norming, performing, and adjourning.
• Norms are the standards or rules of conduct that infl uence the behavior of team
members; cohesion is the attractiveness of the team to its members.
• In highly cohesive teams, members tend to conform to norms; the best situation
is a team with positive performance norms and high cohesiveness.
• Distributed leadership occurs when team members step in to provide helpful task
and maintenance activities and discourage disruptive activities.
• Eff ective teams make use of alternative communication networks and interaction
patterns to best complete tasks.
Questions for Discussion 1. What happens if a team can’t get past the storming stage?
2. What can a manager do to build positive performance norms on a work team? 3. Why would a manager ever want to reduce the cohesion of a work group?
Be Sure You Can • list the outputs of an eff ective team
• identify inputs that infl uence team eff ectiveness
• discuss how diversity infl uences team eff ectiveness
• list fi ve stages of group development
• explain how norms and cohesion infl uence team performance
• list ways to build positive norms and change team cohesiveness
• illustrate task, maintenance, and disruptive activities in teams
• describe how groups use decentralized and centralized communication networks
What Would You Do? For quite some time now, you’ve been concerned about a drop in the performance
of your work team. Although everyone seems to like one another, the “numbers” in
terms of measured daily accomplishments are on the decline. It’s time to act. What
will you look at, and why, to determine where and how steps might be taken to im-
prove the eff ectiveness of this work team?
STUDY GUIDE
Terms to Defi ne
Centralized
communication
network
Cohesiveness
Decentralized
communication
network
Disruptive behaviors
Distributed leadership
Eff ective team
Maintenance activity
Membership
composition
Norm
Performance norm
Restricted
communication
network
Task activity
Team eff ectiveness
equation
Team process
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EXPLORING MANAGEMENT348
There’s quite a bit of agreement about the characteristics of high-
performance teams. Here’s a quick summary of what we know. 42
Th ey have clear
and elevating goals. Th ey are results-oriented and their members are hardwork-
ing. Th ey have high standards of excellence in a collaborative team culture. Th ey
get solid external support and recognition for their accomplishments. And they
have strong and principled leaders. It’s a great list, isn’t it? But how do we get and
stay there?
Although we know that high-performance teams generally share the char-
acteristics noted above, not all teams reach this level of excellence. Just as in
the world of sports, there are many things that can go wrong and cause problems
for work teams.
||| Team building helps team members learn to better work together.
One of the ways to grow capacity for long-term team eff ectiveness is a practice
known as team building. Th is is a set of planned activities used to analyze the functioning of a team and then make changes to increase its oper ating eff ective-
ness. 43
Most systematic approaches to team building begin with awareness that a
problem may exist or may develop within the team. Members then work together
to gather data and fully understand the problem. Action plans are made and im-
plemented. Results are evaluated by team members. As diffi culties or new prob-
lems are discovered, the team-building process recycles.
Th ere are many ways to gather data on team functioning, including structured
and unstructured interviews, questionnaires, team meetings, and reality experi-
ences. Regardless of the method used, the basic principle of team building remains
the same—a careful and collaborative assessment of team inputs, processes, and
results. It works best when all members participate in data gathering and analysis,
and collectively decide on actions to be taken.
Team building can be done with or without the help of outside consultants.
It can also be done in the workplace or in off-site locations. It is increasingly
popular, for example, to engage in outdoor activities—obstacle courses or
special events—to create enthusiasm for a team building experience. One
trainer says: “ We throw clients into situations to try and bring out the traits
of a good team.” 44
Team building involves activities to gather and analyze data on a team and make changes to increase its eff ectiveness.
Takeaway 14.3 How Can Managers Create and Lead
High-Performance Teams?
ANSWERS TO COME
■ Team building helps team members learn to better work together.
■ Team performance is aff ected by use of decision-making methods.
■ Team performance suff ers when groupthink leads to bad decisions.
■ Team performance benefi ts from good confl ict management.
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Teams and Teamwork ■ Chapter 14 349
||| Team performance is aff ected by use of decision-making methods.
Th e best teams don’t limit themselves to just one decision-making method. Edgar Schein, a respected scholar and consultant, describes six ways teams
make decisions. 45
He and other scholars note that teams ideally choose and use
methods that best fi t the problems at hand. 46
But mistakes are often made.
In decision by lack of response, one idea after another is suggested without any
discussion taking place. When the team fi nally accepts an idea, all alternatives
have been bypassed and discarded by simple lack of response rather than by crit-
ical evaluation. In decision by authority rule, the leader, manager, committee
head, or some other authority fi gure makes a decision for the team. Although
time- effi cient, the quality of the decision depends on whether the authority fi g-
ure has the necessary information. Its implementa-
tion depends on how well other team members
accept the top-down approach. In decision by mi-
nority rule, two or three people dominate by “rail-
roading” the team into a decision. How often have
you heard: “Does anyone object? Okay, let’s go
ahead with it.”
One of the most common ways teams make de-
cisions, especially when early signs of disagree-
ment arise, is decision by majority rule. Although
consistent with democratic methods, it is often
used without awareness of potential downsides.
When votes are taken some people will be “win-
ners” and others will be “losers.” In all likelihood,
you’ve been on the losing side at times. How did it
Decision making is the process of making choices among alternative courses of action.
Keys to Consensus Decisions
• Don’t argue blindly; consider others’ reactions to your
points.
• Don’t change your mind just to reach quick agreement.
• Avoid confl ict reduction by voting, coin tossing, bargaining.
• Keep everyone involved in the decision process.
• Allow disagreements to surface so that things can be
deliberated.
• Don’t focus on winning versus losing; seek acceptable
alternatives.
• Discuss assumptions, listen carefully, and encourage
inputs by all.
Fast Lanes for NASCAR Teams
The Beauty Is in the Teamwork
When a NASCAR driver pulls in for a pit stop, the pit crew must jump in to
perform multiple tasks fl awlessly and in perfect order and unison. A second
gained or lost can be crucial to a NASCAR driver’s performance. “You can’t win a
race with a 12-second stop, but you can lose it with an 18-second stop,” says pit
crew coach Trent Cherry.
Pit crew members execute intricate maneuvers while taking care of tire
changes, car adjustments, fueling, and related matters on a crowded pit lane.
Each crew member is an expert at one task but fully aware of how it fi ts with
every other. Duties are carefully scripted for each peak individual performance
and choreographed to fi t together seamlessly at the team level. If the jacker is
late, for example, the wheel changer can’t pull the wheel.
Th e best crews plan and practice over and over again, getting ready for the
big test of race day performance. Th e crew chief makes sure that everyone is in
shape, well trained, and ready to go. “I don’t want seven all-stars,” Trent Cherry
says, “I want seven guys who work as a team.”
NASCAR pit crews don’t
just get together and “wing
it” on race days. Members
are carefully selected for
their skills and attitudes.
Teams practice, practice,
and practice. And, the pit
crew leader doesn’t
hesitate to make changes
when things aren’t going
well. Is this a model for
teams everywhere?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT350
feel? If you’re like me, it may have made you feel left out, unenthusiastic about
supporting the majority decision, and even hoping for a future chance to win.
Teams are often encouraged to try for decision by consensus. Th is is where full discussion leads to most members favoring one alternative, with the other mem-
bers agreeing to support it. Even those opposed to the decision know that the
others listened to their concerns. Consensus doesn’t require unanimity, but it
does require that team members be able to argue, debate, and engage in reason-
able confl ict, while still listening to and getting along with one another. 47
A decision by unanimity means all team members agree on the course of action
to take. Th is is the ideal state of aff airs but it is also very diffi cult to reach. One of
the reasons that teams sometimes turn to authority decisions, majority voting, or
even minority decisions is the diffi culty of managing team processes to achieve
consensus or unanimity.
||| Team performance suff ers when groupthink leads to bad decisions.
How often have you held back stating your views in a meeting, agreed to some-
one else’s position when it really seemed wrong, or gone along with a boss’s sug-
gestions even though you disagreed? 48
If and when you do these things, you are
likely trapped by groupthink, the tendency for members of highly cohesive groups to lose their critical evaluative capabilities.
49 It occurs when teams strive
too hard to reach agreement and avoid disagreement. 50
Teams suff ering groupthink often fi t the description shown in Table 14.1— Symptoms of Groupthink. Th ey act this way because members try to hold the
group together and maintain harmony at all costs. Th ey don’t do anything that
might detract from feelings of goodwill. Instead of raising critical questions about
a suggested course of action, for example, they hold them back. But when mem-
bers publicly agree with a suggestion while privately having serious doubts about
it, groupthink often delivers a bad decision.
Consensus is reached when all parties believe they have had their say and been listened to, and agree to support the group’s fi nal decision.
Groupthink is a tendency for highly cohesive teams to lose their evaluative capabilities.
Table 14.1 Symptoms of Groupthink
Illusions of invulnerability—Members assume that the team is too good for criticism or is
beyond attack.
Rationalizing unpleasant and disconfi rming data—Members refuse to accept contradic-
tory data or to thoroughly consider alternatives.
Belief in inherent group morality—Members act as though the group is inherently right
and above reproach.
Stereotyping competitors as weak, evil, and stupid—Members refuse to look realistically at
other groups.
Applying direct pressure to deviants to conform to group wishes—Members refuse to toler-
ate anyone who suggests the team may be wrong.
Self-censorship by members—Members refuse to communicate personal concerns to the
whole team.
Illusions of unanimity—Members accept consensus prematurely, without testing its
completeness.
Mind guarding—Members protect the team from hearing disturbing ideas or outside
viewpoints.
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Teams and Teamwork ■ Chapter 14 351
Psychologist Irving Janis fi rst described groupthink using well-known histori-
cal blunders—the lack of preparedness of U.S. naval forces for the Japanese at-
tack on Pearl Harbor, and the failed Bay of Pigs invasion under President
Kennedy. 51
It has also been linked to fl awed U.S. decision making during the
Vietnam war, events leading up to the NASA space shuttle disasters, and failures
of intelligence agencies regarding the presence of weapons of mass destruction
in Iraq.
But, be aware, groupthink isn’t limited to big government or big corporate
decision making. It appears all too often in any team, at any level, in all sorts of
organizations. Hasn’t it been part of your experience?
When you are leading or are part of team heading toward groupthink, don’t
think there’s no way out. Janis notes, for example, that after suff ering the Bay of
Pigs fi asco, President Kennedy approached the Cuban missile crisis quite dif-
ferently. He purposely did not attend some cabinet discussions and allowed the
group to deliberate without him. His absence helped the cabinet members talk
IS “CROWDSOURCING”
THE WAVE OF THE
FUTURE?
How would you defi ne a collection of individuals working together to achieve a common pur- pose? To “digital immi- grants”—people who are
discovering and adapting to Internet use—the response is typically an “organization.” But to “digital natives”—people born during the Internet Age—the reply might be an “online community.” In the past, newspaper editors gathered staffs to determine the news. But nowadays, online “bloggers,” “dis- cussion boards,” and “trending now” topics provide much of the news content that is consumed.
In the book Crowdsourcing (2008, Crown Business), au- thor Jeff Howe discusses how the Internet has shifted the par- adigm of organizations, teamwork, and innovation. He believes past generations of workers viewed teamwork as physical ac- tions of paid experts, guided by managers telling them what to do. But new generations may view teamwork as primarily a virtual effort of unpaid volunteers, guided by popular opinion that permits them to do what they enjoy. For example, Henry Ford once directed automobile assembly by paying laborers in a Detroit factory. Today, “hobbyists” from across the globe compile encyclopedias on Wikipedia.com for free.
Howe calls this “crowdsourcing”—Internet teamwork that draws on talents of amateurs to create value comparable to companies of paid experts. Marketocracy.com produces “crowd wisdom” by aggregating 70,000 investors into portfolio management, tracking trends to generate stock tips. Digg.com uses “crowd voting” of six million user ratings to promote top news stories, while Kiva.org relies on “crowd funding” to gather fi nancing from individuals for small busi- ness loans. Wikipedia uses “crowd creation” to create and update an online encyclopedia.
Howe believes crowdsourcing shifts an organization’s approach to intellectual capital. Beliefs were that small numbers of like-minded professionals innovated in closed settings, and ideas advanced slowly under secrecy. Crowdsourcing allows large audiences of diverse hobbyists to generate ideas in digital transparency, and innovations accelerate quickly in open examination. So, many organizations now supplement standard knowledge work by crowdsourcing as well.
REFLECT AND REACT
How might crowdsourcing work for routine subjects like book editing and video surveillance? How about for complex sub- jects like crime investigation and alternative energy develop- ment? How might contributors be paid for crowdsourcing? Should the crowd remain anonymous, or be identifi ed? Should the crowd be led or guided? And by the way, is there a risk of groupthink in crowdsourcing?
■ CROWDSOURCING BY JEFF HOWE
Manager’s Library
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EXPLORING MANAGEMENT352
more openly and be less inclined to try and say things consistent with his own
thinking. When a decision was fi nally reached, the crisis was successfully
resolved.
In addition to having the leader absent for some team discussions, Janis has
other advice on how to get a team that is moving toward groupthink back on
track. 52
You can assign one member to act as a critical evaluator or “devil’s advo-
cate” during each meeting. Subgroups can be assigned to work on issues and
then share their fi ndings with the team as a whole. Outsiders can be brought in
to observe and participate in team meetings, and off er their advice and view-
points on both team processes and tentative decisions. And, the team can hold a
“second chance” meeting after an initial decision is made to review, change, and
even cancel it. With actions like these available, there’s no reason to let group-
think lead a team down the wrong pathways.
||| Team performance benefi ts from good confl ict management.
In interpersonal relationships and on a team, the ability to deal with confl icts is
critical. But “confl ict” is one of those words like “communication” or “power.” We
use it a lot, but rarely think it through to the specifi cs.
At its core confl ict involves disagreements among people. And in our experi- ences, it appears in two quite diff erent forms.
53 Substantive confl ict involves dis-
agreements over such things as goals and tasks, the allocation of resources, the
distribution of rewards, policies and procedures, and job assignments. You are in
a substantive confl ict with a teammate when, for example, each of you wants to
solve a problem by following a diff erent strategy. Emotional confl ict results from feelings of anger, distrust, dislike, fear, and resentment as well as relationship
problems. You know this form of confl ict as a clash of personalities or emotions—
when you don’t want to agree with another person just because you don’t like or
are angry with him or her.
With all this potential for confl ict in and around teams, how do you and others
deal with it? Most people respond to confl ict through diff erent combinations of
cooperative and assertive behaviors. 54
Figure 14.6 shows how this results in fi ve confl ict management styles—avoidance, accommodation, competition, com-
promise, and collaboration. 55
In avoidance, everyone withdraws and pretends that confl ict doesn’t really exist, hoping that it will simply go away. You might think of this as teammates
mad about a missed deadline and each unwilling to mention it to the other. In
accommodation, peaceful coexistence is the goal. Diff erences are played down and areas of agreement are highlighted, even though the real cause for the con-
fl ict doesn’t get addressed. Both avoidance and accommodation are forms of
lose-lose confl ict. No one achieves her or his true desires, and the underlying con-
fl ict remains unresolved, often to recur in the future.
In competition, one party wins through superior skill or outright domination. Although the fi rst example that may come to mind is sports, competition is com-
mon in work teams. It occurs as authoritative command by team leaders and as
railroading or minority domination by team members. In compromise, trade-off s are made, with each party giving up and gaining something of value. Both competi-
tion and compromise are forms of win-lose confl ict. Each party strives to gain at the
Confl ict is a disagreement over issues of substance and/or an emotional antagonism.
Substantive confl ict involves disagreements over goals, resources, rewards, policies, procedures, and job assignments.
Emotional confl ict results from feelings of anger, distrust, dislike, fear, and resentment as well as from personality clashes.
Avoidance pretends that a confl ict doesn’t really exist.
Accommodation, or smoothing, plays down diff erences and highlights similarities to reduce confl ict.
Competition, or authoritative command, uses force, superior skill, or domination to win a confl ict.
Compromise occurs when each party to the confl ict gives up something of value to the other.
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Teams and Teamwork ■ Chapter 14 353
other’s expense. But whenever one party loses something, seeds for future confl ict
remain in place.
Unlike the prior methods, collaboration tries to fi nd and address the problem and reconcile the real diff erences underlying a confl ict. As you would expect, it is
often time-consuming and stressful. But it’s also the most eff ective confl ict
management style in terms of real confl ict resolution.
Collaboration turns a diffi cult situation into a win-win
confl ict. Th ings are resolved to everyone’s mutual
benefi t—no avoiding, no smoothing, no domination,
and no compromising. A real agreement is reached.
From experience, you should recognize that this approach
depends on the willingness of everyone to dig in, con-
front the issues, and openly and honestly discuss them.
When it works, collaboration eliminates the underlying
causes of a confl ict and creates positive conditions for
future teamwork.
Th e small box is a reminder that each of the fi ve
confl ict management styles can be useful. 56
Most of us
probably use each at least some of the time. But we
should make good choices, being sure to fi t our style to
the requirements of each unique confl ict situation. It’s
also worth remembering that unresolved or sup-
pressed confl icts often sow the seeds for future con-
fl icts. Only true confl ict resolution, characteristic of the collaborative style, eliminates the underlying
causes of a confl ict in ways that should prevent similar
confl icts in the future.
Collaboration, or problem solving, involves working through confl ict diff erences and solving problems so everyone wins.
Confl ict resolution is the removal of the substantive and/or emotional reasons for a confl ict.
Collaboration or
Problem Solving
Searching for a solution that meets each other's needs
Accommodation or
Smoothing
Playing down the conflict and seeking harmony among parties
Degree of Assertiveness
D e g
re e o
f C
o o
p e ra
ti v e n
e s s
Competition or Authoritative
Command
Forcing a solution to impose one’s will on the other party
Avoidance or Withdrawal
Denying the existence of conflict and hiding one’s true feelings
HighLow
High
Low
Compromise
Bargaining for gains and losses to each party
FIGURE 14.6 What Are the Five Common Styles of Confl ict Management? In confl ict situations, a combination of cooperative and aggressive behaviors results in fi ve
possible confl ict management styles. Competition occurs when aggression dominates our
behavior, and accommodation occurs when cooperation dominates. Avoidance occurs with both
low aggression and cooperation, whereas compromise occurs with moderate amounts of both.
When both cooperation and aggression are high, true collaboration and problem solving are more
likely to occur.
When to Use Alternative Confl ict Management Strategies
• Collaboration, or problem solving, is the preferred
way to gain true confl ict resolution when time
and cost permit.
• Avoidance, or withdrawal, may be used when an
issue is trivial, when more important issues are
pressing, or when people need to cool down
temporarily and regain perspective.
• Competition, or authoritative command, may be
used when quick and decisive action is vital or
when unpopular actions must be taken.
• Accommodation, or smoothing, may be used when
issues are more important to others than to
yourself or when you want to build “credits” for
use in later disagreements.
• Compromise may be used to arrive at temporary
settlements of complex issues or to arrive at
expedient solutions when time is limited.
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EXPLORING MANAGEMENT354
Takeaway 14.3 How Can Managers Create and Lead
High-Performance Teams?
Rapid Review • Team building is a collaborative approach to improving group process and
performance.
• Teams can make decisions by lack of response, authority rule, minority rule, ma-
jority rule, consensus, and unanimity.
• Groupthink is the tendency of members of highly cohesive teams to lose their
critical evaluative capabilities and make poor decisions.
• Confl ict occurs as disagreements between people over substantive or emotional
issues.
• Tendencies toward cooperativeness and assertiveness create the interpersonal
confl ict management styles of avoidance, accommodation, compromise, compe-
tition, and collaboration.
Questions for Discussion 1. How does consensus diff er from unanimity in group decision making? 2. Is groupthink found only in highly cohesive teams, or could it exist in pre- cohesive
ones?
3. When is it better to avoid confl ict rather than directly engage in it?
Be Sure You Can • describe how team building might help one of your groups
• list and discuss the diff erent ways groups make decisions
• defi ne the term “groupthink” and identify its symptoms
• list at least four ways teams can avoid groupthink
• diff erentiate substantive and emotional confl ict
• explain the confl ict management styles of avoidance, accommodation, competi-
tion, compromise, and collaboration
What Would You Do? Th e members of the executive compensation committee that you are chairing show
a high level of cohesiveness. It’s obvious that they enjoy being part of the committee
and are proud to be on the board of directors. But the committee is about to
approve extraordinarily high bonuses for the CEO and fi ve other senior executives.
Th is is occurring at a time when executive pay is getting lots of criticism from the
press, unions, and the public at large. What can you do to make sure groupthink isn’t
causing this committee to potentially make a bad decision?
STUDY GUIDE
Terms to Defi ne
Accommodation
Avoidance
Brainstorming
Collaboration
Competition
Compromise
Confl ict
Confl ict resolution
Consensus
Decision making
Emotional confl ict
Groupthink
Substantive confl ict
Team building
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Teams and Teamwork ■ Chapter 14 355
1. occurs when a group of people is able
to achieve more than its members could by working
individually.
(a) Distributed leadership
(b) Consensus
(c) Team viability
(d) Synergy
2. One of the recommended strategies for dealing with
a group member who engages in social loafi ng is
to .
(a) redefi ne tasks to make individual contributions
more visible
(b) ask another member to encourage this person
to work harder
(c) give the person extra rewards and hope he or
she will feel guilty
(d) just forget about it
3. An eff ective team is defi ned as one that achieves
high levels of task performance, high member
satisfaction, and .
(a) resource effi ciency
(b) team viability
(c) group consensus
(d) creativity
4. In the open-systems model of teams, the
is an important input factor.
(a) communication network
(b) decision-making method
(c) performance norm
(d) diversity of membership
5. A basic rule of team dynamics might be stated this
way: Th e greater the in a team, the
greater the conformity to norms.
(a) membership diversity
(b) cohesiveness
(c) task clarity
(d) competition among members
6. Th e team eff ectiveness equation states the
following: Team Eff ectiveness � Quality of Inputs �
( � Process Losses).
(a) Process Gains
(b) Leadership Impact
(c) Membership Ability
(d) Problem Complexity
7. Members of a team become more motivated
and better able to deal with confl ict
during the stage of team
development.
(a) forming
(b) norming
(c) performing
(d) adjourning
8. A team member who does a good job at summariz-
ing discussion, off ering new ideas, and clarifying
points made by others is providing leadership by
contributing activities to the group
process.
(a) required
(b) task
(c) disruptive
(d) maintenance
9. A team performing very creative and unstructured
tasks is most likely to succeed using .
(a) a decentralized communication network
(b) decisions by majority rule
(c) decisions by minority rule
(d) more task than maintenance activities
10. One way for a manager to build positive norms
within a team is to __________.
(a) act as a positive role model
(b) increase group size
(c) introduce groupthink
(d) isolate the team
C H
A PTER 1
4
TP
Multiple-Choice Questions
TestPrep 14
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EXPLORING MANAGEMENT356
11. Th e best way to try to increase the cohesiveness of a
team would be to .
(a) start competition with other groups
(b) add more members
(c) reduce isolation from other groups
(d) increase the diversity of members
12. A decision is one in which all
members agree on the course of action to be
taken.
(a) consensus
(b) unanimous
(c) majority
(d) synergy
13. Groupthink is most likely to occur in teams that
are .
(a) large in size
(b) diverse in membership
(c) high performing
(d) highly cohesive
14. When people are highly cooperative but not very
assertive in a confl ict situation, the likelihood is
that they will be using which confl ict management
style?
(a) avoidance
(b) authoritative
(c) accommodation
(d) collaboration
15. Th e interpersonal confl ict management style with
the greatest potential for true confl ict resolution is
.
(a) compromise
(b) competition
(c) avoidance
(d) collaboration
Short-Response Questions
16. What are the major diff erences among a task force, an employee involvement group, and a self-managing team?
17. How can a manager infl uence team performance by modifying group inputs?
18. How do cohesiveness and performance norms together infl uence team performance?
19. What are two symptoms of groupthink and two possible remedies for them?
Integration and Application Question
20. Mariel Espinoza has just been appointed manager of a production team operating the 11 p.m. to 7 a.m. shift in a
large manufacturing fi rm. An experienced manager, Mariel is pleased that the team members seem to really like
and get along well with one another, but she notices that they also appear to be restricting their task outputs to
the minimum acceptable levels.
Question: How might Mariel improve this situation?
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Teams and Teamwork ■ Chapter 14 357
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 14: Team Leader Skills
■ CLASS EXERCISE 14: Understanding Team Dynamics
■ TEAM PROJECT 14: Superstars on the Team
C H
A PTER 1
4
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot Pixar’s movies—including the Toy Story movies, Th e Incredibles, Cars, Ratatouille, and Up—have
succeeded largely because Pixar has focused on employ-
ing computer graphics (CG) technology to make the
characters, scenery, and minute details as realistic as
possible.
Th is is a direct result of the synergy between Pixar’s
creative teams, who develop the story and characters,
and its technical teams
who program—and fre-
quently develop—the ani-
mation software used to breathe life into each movie.
Each forces the other to innovate, and together they
successfully balance the latest technology with a back-
to-basics focus on interesting characters in compelling
stories.
■ CHAPTER 14 CASE Pixar: Animated Geniuses
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 14
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A survey at the University of New Hampshire showed that 65%
of business students sent text messages during classes; 49% felt
guilty about it; 36% said it should be prohibited.
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15 Communication
Listening Is the Key to Understanding
1. Understand the nature
of communication and
when it is eff ective.
2. Identify the major
barriers to eff ective
communication.
3. Discuss ways
to improve
communication with
people at work.
YOUR CHAPTER 15
TAKEAWAYS
Management Live
Communication/Networking and The Devil Wears Prada
W ho wears Prada? In the hit movie Th e Devil Wears
Prada there is no doubt that it is Miranda Priestly
(Meryl Streep). She’s quite a contrast to her new
assistant Andrea Sachs (Anne Hathway). “Andy” is clearly out of her element
when it comes to working in the fashion industry. As an assistant to the
demanding Miranda, editor-in-chief of Runway magazine, she frequently fi nds
herself assigned to impossible tasks.
In one scene Andy is sent to retrieve sketches from designer James Holt
(Daniel Sunjata) and gets buried in a party. She meets famed writer Christian
Th ompson (Simon Baker), and their conversation centers on career talk. But it’s
easy to see that Th ompson has other motives. While Andy recognizes this to a
degree, she also realizes this relationship could have real value in terms of
helping her meet Miranda’s “impossible demands.”
Th ere are many work themes in this movie, from good boss/bad boss issues
to everyda y “how do you get along in a tough job” insights. Th e next time you
watch it, however, check how the various players use communication and networking skills—not the kind you do on Facebook or Twitter, but the face-to- face variety.
Management consultant William C. Byham says it is important to forge
“deliberate connections” on the job. Th ese connections become networks for
learning, collaboration, and work accomplishment. Th ey help us build
all-important social capital, the capacity to enlist the help and support of others
when it is needed.
Explore Yourself More on communication and
networking
Role Models Th e Limited’s Linda Heasley gives
others reasons to work with her
Ethics Check In France, it’s bloggers beware
Facts to Consider Employees should worry about
electronic monitoring
Manager’s Library Collaboration by
Morten Hansen
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
359
M L C
M
M
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EXPLORING MANAGEMENT360
Communication is at the heart of the management process. You might
think of it as the glue that binds together the four functions of planning, organiz-
ing, leading, and controlling. 1 Planning is accomplished and plans are shared
through the communication of information. Organizing identifi es and structures
communication linkages among people and positions. Leading uses communica-
tion to achieve positive infl uence over organization members and stakeholders.
And, controlling relies on communication to process information to assess and
measure performance results.
In the above respects and many more, managers act as information nerve cen-
ters. Th ey are continually gathering information, processing it, using it for prob-
lem solving, and sharing it with others. 2 Th ey are also entwined in complex webs
of interpersonal networks through which they implement work priorities and
agendas. 3 As Pam Alexander, former CEO of Ogilvy Public Relations Worldwide,
says: “Relationships are the most powerful form of media. Ideas will only get you
so far these days. Count on personal relationships to carry you further.” 4
In many ways communication is all about building something all managers
need—social capital. It is the capacity to attract support and help from others to get things done. Whereas intellectual capital is basically what you know, social
capital comes from who you know and how well you relate to them.
Given all this, would it surprise you that when the American Management As-
sociation asked members to rate the communication skills of their managers, only
22.1% rated them “high”? 5 Th e respondents also rated their bosses only slightly
above average on transforming ideas into words, credibility, listening and asking
questions, and written and oral presentations. 6 And even
though communication skills regularly top the lists of
characteristics looked for by corporate recruiters, why is
it that 81% of college professors in one survey rated high
school graduates as “fair” or “poor” in writing clearly?
Take the nearby communication quick-check. Can
you convince a recruiter that you have the communica-
tion skills necessary for success in your career fi eld?
Strength in these skills should help diff erentiate you
from others wanting the same job or internship. But
how do you stack up? What work do you have left to do
in these areas?
Social capital is the capacity to attract support and help from others in order to get things done.
Takeaway 15.1 What Is Communication and
When Is It Eff ective?
ANSWERS TO COME
■ Communication is a process of sending and receiving messages with
meanings attached.
■ Communication is eff ective when the receiver understands the sender’s
messages.
■ Communication is effi cient when it is delivered at low cost to the sender.
■ Communication is persuasive when the receiver acts as the sender intends.
Communication Quick-Check— Rate Your Skills
• Use e-mail and social media well
• Write concise memos, letters, reports
• Network with peers and mentors
• Run meetings, contribute to meetings
• Give persuasive presentations
• Able to give and receive feedback
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Communication ■ Chapter 15 361
||| Communication is a process of sending and receiving messages with meanings attached.
Communication is an interpersonal process of sending and receiving symbols with messages attached to them. Although the defi nition sounds simple and
commonsense enough, there is a lot of room for error when we actually imple-
ment the process. Th ere are many places where things can go wrong and our
communications end up misunderstood or poorly received.
Figure 15.1 summarizes the key elements in the communication process. A sender encodes an intended message into meaningful symbols, both verbal and
nonverbal. He or she sends the message through a communication channel to a
receiver, who then decodes or interprets its meaning. Th is interpretation may or
may not match the sender’s original intentions. When present, feedback reverses
the process and conveys the receiver’s response back to the sender.
Communication is the process of sending and receiving symbols with meanings attached.
Message Channel
Feedback Channel
Encodes
Intended meaning
Receiver
Decodes
Perceived meaning
Sender
FIGURE 15.1 What Are the Major Elements in the Process of Interpersonal Communication? Th e communication process begins when a sender encodes an intended meaning into a message.
Th is message is then transmitted through a channel to a receiver. Th e receiver next decodes the
message into perceived meaning. Finally, the receiver may transmit feedback back to the sender. Th e
communication process is eff ective when the perceived meaning of the receiver is the same as the
intended meaning of the sender.
A useful way to describe the communication process shown in the fi gure is as
a series of questions. “Who?” (sender) “says what?” (message) “in what way?”
(channel) “to whom?” (receiver) “with what result?” (interpreted meaning). To
check the outcome it’s important to ask yet another important question: Do re-
ceiver and sender understand things in the same ways?
||| Communication is eff ective when the receiver understands the sender’s messages.
Th e ability to communicate well both orally and in writing is a critical managerial
skill and the foundation of eff ective leadership. Th rough communication, people
exchange and share information, and infl uence one another’s attitudes, behav-
iors, and understandings. Communication allows managers to establish and
maintain interpersonal relationships, listen to others, deal with confl icts, negoti-
ate, and otherwise gain the information needed to make decisions. But all this
assumes that the communication goes as intended.
As much as communication is part of our everyday lives, we often fail in using
it to our best advantage. One problem is that we take our abilities for granted and
end up being disappointed when the process breaks down. Another is that we are
too busy, or too lazy, to invest enough time in making sure that the process really
works. Th ese problems point to issues of “eff ectiveness” and “effi ciency” in the
communication process.
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EXPLORING MANAGEMENT362
In management, we say that eff ective communication occurs when the receiver fully understands the sender’s intended message. In other words, the
intended meaning matches the received meaning. As you well know, this outcome
doesn’t always happen.
How often have you wondered what an instructor really wants in an assign-
ment or struggled to understand a point during class lecture? How often have
you been angry when a friend or loved one just “didn’t seem to get” your message
and, unfortunately, didn’t respond in the desired way? And, how often have you
sent an SMS or e-mail, or left a voice message, only to receive back a confused or
even angry reply that wasn’t at all appropriate to your intended message? Th ese
are all examples of well-intentioned communications that weren’t eff ective.
Th ings don’t have to be this way. But it does take eff ort to achieve eff ective com-
munication in work and personal aff airs.
||| Communication is effi cient when it is delivered at low cost to the sender.
One reason why communication is not always eff ective—and the prior examples
are good cases in point—is a trade-off between eff ectiveness and effi ciency.
Effi cient communication occurs at minimum cost in terms of resources expended. Th ese costs, time and convenience, in particular, often become very
infl uential in how we choose to communicate.
In eff ective communication the receiver fully understands the intended meaning.
Effi cient communication occurs at minimum cost to the sender.
Would you like to work for a boss who encourages you to keep your eyes open for other job opportunities? Well, that’s exactly what Linda Heasley’s team at The Limited heard. As president and CEO, she says it’s her job to “re-recruit them every day and give them a reason to choose to work for us and for me as opposed to anyone else.” She describes this approach as part of a leadership philosophy based on the belief that “it’s not about me . . . it’s very much about the team.”
Newcomers to Heasley’s team are advised to follow a 90- day rule when it comes to communication. Based on her expe- rience living in Thailand as a high school exchange student, she believes in taking the fi rst 90 days to “watch and listen,” trying “not to talk at meetings,” and working to build relation- ships. And when it comes to performance, she also says: “I like to know the bad news as soon as you know it—I promise no recriminations—but I will expect to know what we could’ve avoided so it doesn’t happen again.”
Heasley took over The Limited when the company’s stores were struggling for profi tability. She acted decisively to refocus
on core target customers while reducing costs and remodeling sales spaces. And she focused on recruiting staff who would fi nd excitement in the challenges ahead. When asked what she looks for in hiring, Heasley highlights things like passion, curiosity, energy, willingness to take risks, and a sense of humor. During interviews she uses proven questions to try to draw out job candidates and discover their capabilities. She might ask “What books have you read lately?” or “Can you describe a challenging situation you’ve been in and where you took a controversial position?”
WHAT’S THE LESSON HERE?
Linda Heasley seems very comfortable with herself and her role as president and CEO of this major company. Can you see where communication is one of her strengths? Would you respond well to a leader like this? In what respects might Heasley become a role model for your personal leadership approach someday?
■ THE LIMITED’S LINDA HEASLEY GIVES OTHERS REASONS TO WORK WITH HER
Role Models “I LIKE TO KNOW THE BAD NEWS AS SOON AS YOU
KNOW IT . . . I PROMISE NO RECRIMINATIONS.” {
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Communication ■ Chapter 15 363
Picture your instructor speaking individually, face-to-face, with each student
about this chapter. Although most likely very eff ective, it would certainly be ineffi -
cient in terms of the cost of his or her time. Th is is why we often send text mes-
sages, leave voice-mail messages, chat online, and use e-mail rather than speak
directly with other people. Th ese alternatives are more effi cient than one-on-one
and face-to-face communications. Th ey may also allow us to avoid the discom-
fort of dealing with a diffi cult matter face-to-face. But while quick and easy, are
these effi cient communications always eff ective?
Th e next time you have something important to communicate, you might pause
and consider the trade-off s between eff ectiveness and effi ciency. A low-cost
approach such as a text message may save time, but it may not result in the other
party getting the real intended meaning. By the same token, an eff ective
communication may not always be effi cient. If a team leader visits each team
member individually to explain a new change in procedures, this may guarantee
that everyone truly understands the change. It will also take a lot of the leader’s time.
A team meeting is much more effi cient. In these and other ways, potential give and
take between eff ectiveness and effi ciency must be recognized in communication.
||| Communication is persuasive when the receiver acts as the sender intends.
In personal life and at work we often want not just to be heard, but to be followed.
We want our communication to “persuade” the other party to believe or behave
in a specifi c way that we intend. Persuasive communication gets someone else to accept, support, and act consistent with the sender’s message.
7
If you agree that managers get most things done through other people, you
should also agree that managers must be very good at persuasive
communication. Yet scholar and consultant Jay Conger believes that many
Persuasive communication presents a message in a manner that causes others to accept and support it.
Effective communication and networking skills are essential for turning ideas into actions, being credible, listening and asking questions, and giving written and oral presentations. You might think that the attention given to them as critical management and career skills is overdone. But such attention is warranted.
Recruiters give these skills high priority when screening candidates for college internships and fi rst jobs. Employers consider it essential that workers be able to communicate well both orally and in writing and be able to network with others for collaboration and work accomplishment.
This chapter offers many insights to help you develop com- munication and networking skills. They are key foundations of one’s social capital, or capacity to enlist the help and support of others when needed. Communication and networking are ways of getting work done with the support of other people.
■ COMMUNICATION AND NETWORKING
Explore Yourself RECRUITERS GIVE THESE SKILLS HIGH PRIORITY WHEN SCREENING
CANDIDATES FOR COLLEGE INTERNSHIPS AND FIRST JOBS. {
Get to know yourself better by taking the self-assessment on
Feedback and Assertiveness and completing the other act-
ivities in the Exploring Management Skill-Building Portfolio.
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EXPLORING MANAGEMENT364
Jay-Z Raps to a Business Empire
Talent Points Way to Corporate Power
Decisions . . . hunches . . . achievements? It’s all about being tuned into the
environment.
Th at’s a message well learned years ago by a young rapper just breaking into
the music scene and calling himself Jay-Z. He could have been doing something
else with his time, but he wasn’t; he could have stopped with the music, but he
didn’t. As his lyrics state: “No lie, just know I chose my own fate. I drove by the
fork in the road and went straight.” Now past the age of 40, he’s still rapping,
but his rare talent with communication is serving him well in more ways than
this one.
Born Shawn Carter, Jay-Z started as a street busker, went on to get his own
label Roc-A-Fella Records, made lots more music, won 10 Grammy awards, and
became CEO of Def Jam Records. But the Jay-Z story doesn’t end with hip-hop.
He turned a talent for communication into shrewd entrepreneurship that
includes not only Roc Nation, the latest incarnation of Roc-A-Fella Records, but
also part ownership of the New Jersey Nets, the marketing fi rm Translation, and
brand partnerships with the likes of Hewlett-Packard and Microsoft. His hard
work and success have led to a listing as one of Forbes magazine’s “Richest
People in America,” and he tells the story in his fi rst book, Decoded.
Was it luck that moved him toward fame and fortune or something else? Raw
talent alone isn’t enough to succeed in the music business. At some point, as
with all occupations, success happens when talent is partnered with insight,
intuition, and an ability to make the right decisions. Jay-Z obviously made the
connections and uses his communication skills to great business advantage.
“Th is guy from out in the
projects who didn’t
graduate from high school
is now living this sort of
life,” he says. “And this is
how he got there.” Jay-Z’s
lyrics don’t always tell an
easy story or recommend
a solution. But they do
make the case for how
communication can
partner with other talents
and positive goals to help
create career success.
F I N D I N S P I R A T I O N
managers “confuse persuasion with bold stands and aggressive arguing.” 8 Th is
sounds a lot like the so-called “debates” that we watch on television as
advocates of diff erent political viewpoints face off against one another. A lot is
said, some of it quite aggressively, but little in the way of infl uence on the other
speaker or the listening audience really takes place. An overly confrontational
or uncompromising approach can also raise questions about one’s credibility.
Conger goes on to defi ne credible communication as that which earns trust, respect, and integrity in the eyes of others. He says it is a learned skill, one
based on the personal powers of expertise and reference. And without credibility,
he claims there is little chance for successful persuasion.
Th e late Sam Walton, Walmart’s founder, was considered a master of
persuasive communication. Consider an example—classic Walton in action. 9
Sam stops by to visit a Memphis store and calls everyone to the front, saying:
“Northeast Memphis, you’re the largest store in Memphis, and you must have
the best fl oor-cleaning crew in America. Th is fl oor is so clean, let’s sit down on
it.” Picture this. Walton is kneeling casually while wearing his Walmart baseball
cap. He congratulates the employees on their fi ne work. “I thank you. Th e
company is so proud of you we can hardly stand it,” he says. “But, you know
that confounded Kmart is getting better, and so is Target. So what’s our
challenge?” Walton answers his own question: Customer service. Can’t you
just see everyone present taking his message to heart?
Credible communication earns trust, respect, and integrity in the eyes of others.
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Takeaway 15.1 What Is Communication and
When Is It Eff ective?
Rapid Review • Communication is the interpersonal process of sending and receiving symbols
with messages attached to them.
• Eff ective communication occurs when the sender and the receiver of a message
both interpret it in the same way.
• Effi cient communication occurs when the sender conveys the message at low
cost.
• Persuasive communication results in the recipient acting as the sender intends.
• Credibility earned by expertise and good relationships is essential to persuasive
communication.
Questions for Discussion 1. Why do recruiters place so much emphasis on the communications skills of
job candidates?
2. Can you describe a work situation where it’s okay to accept less communication
eff ectiveness in order to gain communication effi ciency?
3. What can a manager do to gain the credibility needed for truly persuasive
communication?
Be Sure You Can • describe the communication process and identify its key components
• defi ne and give an example of eff ective communication
• defi ne and give an example of effi cient communication
• explain why an eff ective communication is not always effi cient
• explain the role of credibility in persuasive communication
What Would You Do? Your boss just sent a text message that he wants you at a meeting starting at 3 p.m.
Your daughter is performing in a program at her elementary school at 2:45 p.m., and
she wants you to attend. You’re out of the offi ce making sales calls and have
scheduled appointments to put you close to the school in the early afternoon. Th e
offi ce is a long way across town. Do you call him, text him, or send him an e-mail?
What exactly will you say in your communication to him?
STUDY GUIDE
Terms to Defi ne
Communication
Credible communication
Eff ective communication
Effi cient communication
Persuasive communication
Social capital
365Communication ■ Chapter 15
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EXPLORING MANAGEMENT366
When Yoshihiro Wada was president of Mazda Corporation, he used
interpreters when meeting with representatives of the fi rm’s U.S. joint venture
partner, Ford. He estimated that he lost 20% of his intended meaning in the
exchange between himself and the interpreter, and another 20% between the in-
terpreter and the Americans. 10
Th ese and other language problems are to be expected in international
business. It’s not easy to communicate in a second language, and messages do
get lost in translation. But do you recognize how problems creep into everyday
communications, not just the international or cross-cultural ones?
Look at Figure 15.2. It updates our description of the communication process to include noise—anything that interferes with the eff ectiveness of communica- tion. Common sources of noise that often create communication barriers include
poor choice of channels, poor written or oral expression, failure to recognize
nonverbal signals, physical distractions, and status diff erences.
Noise is anything that interferes with the communication process.
Takeaway 15.2 What Are the Major Barriers to
Eff ective Communication?
ANSWERS TO COME
■ Poor use of channels makes it hard to communicate eff ectively.
■ Poor written or oral expression makes it hard to communicate eff ectively.
■ Failure to spot nonverbal signals makes it hard to communicate eff ectively.
■ Physical distractions make it hard to communicate eff ectively.
■ Status diff erences make it hard to communicate eff ectively.
Noise
Improper channels Poor expression Failure to spot nonverbals Physical distractions Status differences
Feedback Channel
Message Channel Encodes
Intended meaning
Receiver
Decodes
Perceived meaning
Sender
FIGURE 15.2 How Does Noise Interfere with the Communication Process? Among the types of noise that can interfere with the eff ectiveness of communication, the following
are well worth noting: Semantic problems in the forms of poor written or oral expression, the
absence of feedback, improper choice and use of communication channels, physical distractions,
status diff erences between senders and receivers, and cultural diff erences can all in one way or
another complicate the communication process. Unless these factors are given attention, they can
reduce communication eff ectiveness.
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Communication ■ Chapter 15 367
||| Poor use of channels makes it hard to communicate eff ectively.
People communicate with one another using a variety of communication channels, or mediums used to carry the message.
11 A poor choice of channel often causes
problems because of diff erences in channel richness, the capacity to carry infor- mation in an eff ective manner.
12 We all need to understand the limits of the
possible channels and choose wisely when using them for communication.
Th e small fi gure shows that face-to-face communication is very high in richness.
Th ese channels are personal and can help create a supportive, even inspirational,
relationship between sender and receiver. Th ey work especially well when we need
to convey complex or diffi cult messages, and when we need immediate feedback.
Written channels like memos, e-mails, and text messages are much less rich. Th ey
are impersonal, one-way interactions with limited opportunity for feedback.
A communication channel is the medium used to carry a message.
Channel richness is the capacity of a communication channel to eff ectively carry information.
Postings, e-bulletins,
reports
Memos, letters
E-mail, blogs, podcasts, voice-mail
Low
Richness
• Impersonal • One-way • Fast
High
Richness
• Personal • Two-way • Slow
Telephone, instant
messaging
Face-to-face meetings, online
conferences
Richness of Communication Channel
||| Poor written or oral expression makes it hard to communicate eff ectively.
A survey of 150 companies by the National Commission on Writing found that over
one-third of their employees were considered defi cient in writing skills and that
employers were spending over $3 billion each year on remedial training. 14
Consider
the following “baffl egab” found among some executive communications.
A business report said: “Consumer elements are continuing to stress
the fundamental necessity of a stabilization of the price structure at a
lower level than exists at the present time.” Why couldn’t the report say:
“Consumers want prices to come down and stay down.”?
A manager said: “Substantial economies were affected in this division
by increasing the time interval between distributions of data-eliciting forms
to business entities.” Why couldn’t the manager say: “The division saved
money by sending out fewer surveys.”?
It takes a lot of practice to write a concise letter or report, or deliver a great oral
presentation. Th ere’s no getting around it, good writing and good speaking are
products of plain old hard work. 13
But it’s well worth the investment. How many
drafts do you write for memos, letters, and reports? Are you getting so used to
texting that you can’t write a proper sentence? How often do you practice for an
oral presentation? Are you well informed on the tips that follow in Table 15.1?
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EXPLORING MANAGEMENT368
||| Failure to spot nonverbal signals makes it hard to communicate eff ectively.
Th e ways we use nonverbal communication can also work for or against our communication eff ectiveness. It takes place through hand movements, facial
expressions, body posture, eye contact, and the use of interpersonal space. 15
And it can be a powerful means of transmitting messages.
Research shows that up to 55% of a message’s impact comes through nonver-
bal communication. 16
A good listener, for example, knows how to read the
“body language” of a speaker while listening to the words being spoken. In fact,
a potential side eff ect of the growing use of electronic media is that the added
value of reading nonverbal signals, such as gestures, voice intonation, or eye
movements, gets lost.
Th ink of how nonverbal signals play out in your own communications. A sim-
ple hand gesture, for example, can show whether someone is positive or negative,
excited or bored, or even engaged or disengaged while interacting with you. 17
Sometimes our body may be “talking” even as we otherwise maintain silence.
And when we do speak, our body may “say” diff erent things than our words con-
vey. Th is is called a mixed message, when a person’s words communicate one thing while his or her nonverbal actions communicate something else.
||| Status diff erences make it hard to communicate eff ectively.
Th e risk of ineff ective communication is high when people are communicating
upward in organizations—with their boss in particular. Haven’t you heard people
say things like this? “Criticize my boss? I’d get fi red.” “It’s her company, not mine.”
“I can’t tell him that; he’ll just get mad at me.”
Nonverbal communication takes place through gestures, expressions, posture, and even use of interpersonal space.
A mixed message results when words communicate one message while actions, body language, or appearance communicates something else.
Table 15.1 Essential Ingredients of Successful Presentations
Be prepared—Know what you want to say; know how you want to say it; rehearse saying it.
Set the right tone—Focus on your audience; make eye contact and act pleasantly and confi dently.
Sequence your points—State your purpose, make important points, follow with details, and then summarize.
Support your points—Give specifi c reasons for your points; state them in under- standable terms.
Accent the presentation—Use good visual aids; provide supporting handouts when possible.
Add the right amount of polish—Attend to details; have room, materials, and arrangements ready to go.
Check the technology—Check everything ahead of time; make sure it works and know how to use it.
Don’t bet on the Internet—Beware of plans to make real-time Internet visits; save sites on a disk and use a browser to open the fi le.
Be professional—Be on time; wear appropriate attire; act organized, confi dent, and enthusiastic.
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Communication ■ Chapter 15 369
We have to be realistic; the hierarchy of authority is always a potential barrier
to eff ective communication between lower and higher levels in organizations. It
causes a tendency known as fi ltering—the intentional distortion of information to make it appear favorable to the recipient. You know this as “telling the boss or
instructor what he or she wants to hear.” And it’s more common than many peo-
ple think. Consultant Tom Peters calls it “Management Enemy Number 1.” He
also says that “once you become a boss you will never hear the unadulterated
truth again.” 18
Whether caused by fear of retribution for bringing bad news, an unwillingness
to identify personal mistakes, or just a general desire to please, the end result of
fi ltering is the same. Lower levels “cleanse” the information sent to higher levels.
Th en the higher levels, although well intentioned, make poor decisions because
the information used is inaccurate or incomplete.
||| Physical distractions make it hard to communicate eff ectively.
Don’t neglect how physical distractions can disrupt communication. Have
you ever tried to talk with someone—perhaps your boss—about an important
matter, only to have that conversation interrupted by phone calls? Any number
of distractions, from drop-in visitors to instant messages to ringing cell phones,
can interfere with the eff ectiveness of a communication attempt. Some of these
distractions are evident in the following conversation between an employee,
George, and his manager. 19
Okay, George, let’s hear your problem [phone rings, boss picks it up,
promises to deliver a report “just as soon as I can get it done”]. Uh, now,
where were we—oh, you’re having a problem with your technician. She’s
[manager’s secretary brings in some papers that need his immediate
signature; secretary leaves]—you say she’s overstressed lately, wants to
leave. I tell you what, George, why don’t you [phone rings again, lunch
partner drops by], uh, take a stab at handling it yourself. I’ve got to
go now.
Besides what may have been poor intentions in the fi rst place, the manager in
this example did not do a good job of communicating with George. Th is problem
could easily have been avoided or at least minimized through proper planning.
Adequate time should have been set aside for the meeting; instructions could
have been given to avoid interruptions such as telephone calls and drop-in visi-
tors. Th e big lesson here is: Plan ahead. When someone needs to communicate
with you, set aside adequate time, choose the right location, and take steps to
avoid interruptions—including turning the cell phone off .
Filtering is the intentional distortion of information to make it more favorable to the recipient.
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EXPLORING MANAGEMENT370
Takeaway 15.2 What Are the Major Barriers to
Eff ective Communication?
Rapid Review • Noise interferes with the eff ectiveness of communication.
• Poor choice of channels can reduce communication eff ectiveness.
• Poor written or oral expression can reduce communication eff ectiveness.
• Failure to accurately read nonverbal signals can reduce communication
eff ectiveness.
• Filtering caused by status diff erences can reduce communication eff ectiveness.
Questions for Discussion 1. When is texting not an appropriate way to convey a message in a work situation?
2. If someone just isn’t a good writer or speaker, what can he or she do to improve
communication skills?
3. How can a higher-level manager avoid the problem of fi ltering when lower-level
staff ers pass information upward to her?
Be Sure You Can • list common sources of noise that can interfere with eff ective communication
• discuss how the choice of channels infl uences communication eff ectiveness
• give examples of poor language choices in written and oral expression
• clarify the notion of mixed messages and how nonverbals aff ect communication
• explain how fi ltering operates in upward communication
What Would You Do? As the senior member of your work team, the other members have come to you and
pointed out that there is no possibility that they can complete the current project
on time. In fact, they expect to be at least two weeks late. Th is is a “pet” project for
your boss, and your understanding is that she has a lot riding on its success for her
career advancement. She is aloof and very formal in her dealings with you. Now
you’re in the middle. What actions will you take and why?
STUDY GUIDE
Terms to Defi ne
Channel richness
Communication channel
Filtering
Mixed message
Noise
Nonverbal communication
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Communication ■ Chapter 15 371
Communication! Most of us probably get it right some of the time but
also make our fair share of mistakes. Th at’s what happened to Richard Herlich.
Before participating in workshops held at the Center for Creative Leadership, or
CCL, 20
he said: “I thought I had the perfect style.” But in feedback sessions follow-
ing role-playing exercises, he learned that wasn’t how others saw him. He was
actually perceived as aloof and a poor communicator. Back on his new job as a
director of marketing, Richard made it a point to meet with his team, discuss his
style, and become more involved in their projects.
With so much room for error, don’t you wonder how we ever communicate
eff ectively? Fortunately, there are a number of things we can do to give things the
best possible chance. Th ey include active listening, constructive use of feedback,
opening upward communication channels, understanding the use of space,
utilizing technology, and valuing diversity.
||| Active listening helps people say what they really mean.
When people talk, they are trying to communicate something. Th at “something”
may or may not be what they are saying. Th is is why managers must be so good at
listening. According to the late John Wooden, legendary UCLA men’s basketball
coach, “Many leaders don’t listen. We’d all be a lot wiser if we listened more—not just
hearing the words, but listening and not thinking about what you are going to say.” 21
Active listening is the process of taking action to help others say what they really mean.
22 It requires being sincere while listening to someone, and trying to
fi nd the full meaning of a message. It also involves being disciplined, controlling
one’s emotions, and withholding premature evaluations that turn off rather than
turn on the other party’s willingness to communicate.
Th e contrast in how a “passive” listener and an “active” listener might act is
shown in these alternative workplace conversations.
Question 1: “Don’t you think employees should be promoted on the basis of
seniority?”
Passive listener’s response: “No, I don’t!”
Active listener’s response: “It seems to you that they should, I take it?”
Active listening helps the source of a message say what he or she really means.
Takeaway 15.3 How Can We Improve Communication
with People at Work?
ANSWERS TO COME
■ Active listening helps people say what they really mean.
■ Constructive feedback is specifi c, timely, and relevant.
■ Offi ce spaces can be designed to encourage interaction and communication.
■ Transparency and openness ensure that accurate information is shared.
■ Appropriate use of technology can facilitate more and better communication.
■ Sensitivity and etiquette can improve cross-cultural communication.
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EXPLORING MANAGEMENT372
Question 2: “What does the supervisor expect us to do about these out-of-date
computers?”
Passive listener’s response: “Do the best you can, I guess.”
Active listener’s response: “You’re pretty disgusted with those machines,
aren’t you?”
Th e prior examples help show how active listening can facilitate communication
in diffi cult circumstances, rather than discourage it. But it isn’t easy to do. As you
think further about active listening skills, keep these rules in mind. 23
1. Listen for message content: Try to hear exactly what content is being conveyed
in the message.
2. Listen for feelings: Try to identify how the source feels about the content in the
message.
3. Respond to feelings: Let the source know that her or his feelings are being
recognized.
4. Note all cues: Be sensitive to nonverbal and verbal messages; be alert for
mixed messages.
5. Paraphrase and restate: State back to the source what you think you are hearing.
||| Constructive feedback is specifi c, timely, and relevant.
When Lydia Whitfi eld was a marketing vice president at Avaya, she was surprised
when she asked one of her managers for feedback. He said: “You’re angry a lot.”
Whitfi eld learned that “What he and other employees saw as my anger, I saw as
my passion.” 24
Feedback is the process of telling other people how you feel about something they did or said, or about the situation in general. And, like active listening, the
art of giving feedback is an indispensable skill. When poorly given, critical
feedback can easily come off as threatening and create more resentment than
positive action. When feedback is well delivered (see Tips), however, the receiver
is more likely to listen and carefully consider the message. 25
Feedback is the process of telling someone else how you feel about something that person did or said.
• Choose the right time—Give feedback at a time when the receiver seems most willing or able to accept it.
• Be genuine—Give feedback directly and with real feeling, based on trust between you and the receiver.
• Be specifi c—Make feedback specifi c rather than general; use clear and recent examples to make points.
• Stick to the essentials—Make sure the feedback is valid; limit it to things the receiver can be expected to do something about.
• Keep it manageable—Give feedback in small doses; never give more than the receiver can handle at any particular time.
■ HOW TO GIVE CONSTRUCTIVE FEEDBACK
Tips to Remember WHEN WE TRY TO GIVE FEEDBACK, NOT
EVERYONE WANTS TO LISTEN. {
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Communication ■ Chapter 15 373
||| Offi ce spaces can be designed to encourage interaction and communication.
Look at the following fi gures and think about your offi ce and those of persons
you often visit. What messages do the layouts and furnishings send to visitors?
It’s not only individual offi ces that count in this respect. Architects and consul-
tants help executives build entire offi ce spaces that are conducive to the intense,
multilevel, and cross-functional communications desired today.
“I am the boss!” “I am the boss, but let’s talk” “Forget I’m the boss, let’s talk”
Th e way we use space, proxemics, is an important but sometimes neglected infl uence on communication.
26 We know that physical distance between people
conveys varying intentions in terms of intimacy, openness, and status as they
communicate with one another. But we might not be as sensitive to how the
physical layout of an offi ce can do the same things.
When former Google executive Tim Armstrong became CEO of AOL, for ex-
ample, one of his fi rst decisions was to remove the glass doors separating the
executive offi ces from other workers. Th e only way to open them previously had
been with a company key card. 27
And at b&a advertising in Dublin, Ohio, “open
space” supports the small ad agency’s emphasis on creativity; after all, its Web
address is www.babrain.com. Face-to-face communication is the rule to the
point where internal e-mail among employees is banned at b&a. Th ere are no of-
fi ces or cubicles, and all offi ce equipment is portable. Desks have wheels so that
informal meetings can happen by people repositioning themselves for spontane-
ous collaboration. Even the formal meetings are held “standing up” in the com-
pany kitchen. 28
||| Transparency and openness ensure that accurate and timely information is shared.
HCL Industries is a large technology outsourcing fi rm. CEO Vineet Nayar believes
that one of his most important tasks is to create a “culture of trust.” And to do
that, he says, you have to create transparency. At HCL this means that the fi rm’s
fi nancial information is fully posted on the internal Web site. Nayar says “We put
all the dirty linen on the table.” Transparency also means that the results of 360�
feedback reviews for HCL’s 3,800 managers, including Nayar’s, are posted on the
internal Web site. And when managers present plans to the top management
team, Nayar insists that they get posted too so that others can read and comment
Proxemics is the study of the way we use space.
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EXPLORING MANAGEMENT374
IS THE SUM OF THE
PARTS GREATER THAN
THE WHOLE?
Human beings are social creatures and prefer to join groups rather than go it alone. Organizations attempt to capture these dynamics using team goals. The results can
sometimes be impressive, but the process is often problem- atic. Ideally, the sum of individual contributions gathered through sharing should exceed any outcomes reached by indi- viduals working alone.
In the book Collaboration (2009, Harvard Business Press), author Morten Hansen suggests that group efforts often fail and are more costly than their results justify. He thinks man- agers assign collaborative projects too frivolously since there is a belief that teamwork is always better than individual as- signment. But it isn’t, and can be costly to organizations in terms of time, expense, and lost productivity. His research fi nds that “good collaboration” is possible under the proper conditions and can improve sales, reduce costs, and enhance effi ciency in organizations. Managers must recognize the bar- riers that prevent benefi cial team interactions and work to overcome them.
Hansen lists four communication problems for team mem- bers. First, individuals are hesitant to reach out to others for help since they believe in self-reliance. Second, people are un- willing to help others since they fear it will diminish their power of expertise. Third, members are unable to fi nd experts in large or complex organizations, or they have limited contacts in their networks. And four, they are uncomfortable sharing with people they don’t know on a personal level.
To solve this Hansen believes managers must appreciate how diffi cult collaboration is and limit its use. He thinks im- proved organizational sharing begins with recruiting and hir- ing members who can overcome communication barriers. These types of individuals are able to unify with others in com- mon goals since they possess “T-shaped” skills—they work well within their discipline (the vertical bar), but also across other disciplines (the horizontal bar). Managers can also en- courage members to build and use personal networks within the organization to alleviate discomfort. Collaborative results should then sum to greater values than individual outcomes.
REFLECT AND REACT
How have the four communication barriers affected teams that you’ve been on? Would it have been possible to select mem- bers that wouldn’t have had these problems? Why is it that team projects in a course can create problems or generate poor results compared with individual projects?
■ COLLABORATION BY MORTEN HANSEN
Manager’s Library
on them. Why? By the time a plan is approved, it’s likely to be a good one, because
of the “massive collaborative learning that took place.” 29
Communication transparency involves being honest and openly sharing ac- curate and complete information about the organization and workplace aff airs.
It’s absence is evident when managers try to hide such information and restrict
the access of organizational members to it. Whereas lack of transparency creates
conditions for distrust and harmful rumor, full transparency may have a positive
impact on trust and employee engagement.
Transparency and openness in communication is a characteristic of open-book management, where managers provide employees with essential fi nancial infor- mation about their companies. Th is willingness to open the books was evident in
the HCL Industries example. At Bailard, Inc., a private investment fi rm, openness
extends to salaries. If you want to know what others are making at the fi rm, all you
need to do is ask the chief fi nancial offi cer. Th e fi rm’s co-founder and CEO Th omas
Bailard says this approach is a good way to defeat offi ce politics. “As a manager,” he
says, “if you know that your compensation decisions are essentially going to be
public, you have to have pretty strong convictions about any decision you make.” 30
Communication transparency involves being honest and openly sharing accurate and complete information.
In open-book management managers provide employees with essential fi nancial information about their employers.
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Communication ■ Chapter 15 375
||| Appropriate use of technology can facilitate more and better communication.
Knowing how and when to use e-mail, text messaging, and social networking is
now a top issue in workplace communications. But the goal always has to be ap-
propriate—not inappropriate—use. “Th nx for the IView! I Wud Luv to Work 4
U!!;)” may be quite understandable “textspeak” for some people, but it isn’t the
follow-up message that most employers like to receive from job candidates. 31
When Tory Johnson, President of Women for Hire
Inc., received a thank-you note by e-mail from an intern
candidate, it included “hiya,” “thanx,” three exclamation
points—“!!!,” and two emoticons �☺. She says: “Th at e- mail just ruined it for me.” Th e risk of everyday short-
hand in e-mails and texting is that we become too casual
overall in its use, forgetting that how a message is re-
ceived is in large part determined by the receiver. Even
though textspeak and emoticons are the norm in social
networks, for example, staffi ng executives at KPMG,
which hires hundreds of new college grads and interns each year, consider them
“not professional.”
Communication technology has created another force to be reckoned with—
the electronic grapevine. Electronic messages fl y with speed and intensity around organizations and the Internet at large, assisted by blogs, chat rooms,
tweets, and more. Th e results can be functional when the information is accu-
rate and useful, but dysfunctional when the information is false, distorted,
malicious, or rumor based.
Not too long ago a YouTube video appeared showing two Domino’s Pizza em-
ployees doing all sorts of nasty things to sandwiches they were making for deliv-
ery. It went viral, and Domino’s faced a crisis of customer confi dence. Although
the video was pulled by one of its creators—who apologized for “faking” how
they worked—both employees were fi red. But negative chat had already spread
around the Internet, and the Domino’s brand was damaged. Th e fi rm’s manage-
ment fi nally created a Twitter account to present its own view of the situation
and posted a YouTube video message from the CEO. 32
Th e electronic grapevine uses computer technologies to transmit information around informal networks inside and outside of organizations.
Underground Boss Opens Communication Channels
CEO Stephen Martin “went underground” at a fi rm in England for two weeks.
He posed with an assumed name as an offi ce worker and kept his ears and
eyes open wide while going about his daily work. After the experience,
Martin said: “They (workers) said things to me that they never would have
told their manager”. . . . “Our key messages were just not getting through
to people” . . . “We were asking the impossible of some of them.” But when
he shared these concerns with the fi rm’s managers, the response was: “They
never told us that!”
Millennial text to Baby Boomer:
Omg sorry abt mtg nbd 4 now b rdy nxt time g2g ttl
Baby Boomer text to Millennial:
Missed you at meeting. It was important. Don’t
forget next one. Stop by offi ce.
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EXPLORING MANAGEMENT376
When the CEO of Facebook, Mark Zuckerberg, says that privacy is “no longer
a social norm,” it’s time to take the issue very seriously in personal aff airs and at
work. Employers are concerned that too much work time gets spent with per-
sonal texting, Web browsing, and social networking. 33
Employees are concerned
that employers are eavesdropping, but they can also be casual and inappropri-
ate in how they act and what they put out on the Web. Consider this tweet that
became an Internet sensation: “Cisco just off ered me a job! Now I have to weigh
the utility of a fatty paycheck against the daily commute to San Jose and hating
the work.” 34
What would you do if you were the recruiter who had just made this
job off er?
Th e best advice on electronic privacy is still pretty simple and well worth
remembering. Don’t ever assume you have it, and act accordingly.
||| Sensitivity and etiquette can improve cross-cultural communication.
After taking over as the fi rst American to be CEO of the Dutch publisher Wolters
Kluwer, Nancy McKinstry initiated major changes—cutting staff , restructuring
divisions, and investing in new business areas. She fi rst described the new
strategy as “aggressive” in speaking with her management team. But after learning
the word wasn’t well received by Europeans, she switched to “decisive.” 35
“I was
coming across as too harsh, too much of a results-driven American to the people
I needed to get on board,” says McKinstry. It was a nice lesson in cross-cultural
communication.
Without a doubt cultural diff erences are a ready source of potential problems
in communication. But keep in mind that you don’t have be doing international
business or taking a foreign vacation for this point to be relevant. Th ink about
it—going to work, to class, and out to shop is a cross-cultural journey for most
of us today.
An American Management Association survey of 304 U.S. companies found the following: • 66% monitor Internet connections. • 65% block Web sites: pornography (96%), games (61%), social
networking (61%), shopping/auction (27%), and sports (21%). • 45% track keystrokes and keyboard time. • 43% store and review computer fi les. • 43% monitor e-mail. • 45% monitor telephone time and numbers dialed.
• �25% have fi red employees for misuse of e-mail. • �30% have fi red employees for misuse of the Internet.
YOUR THOUGHTS?
Is this type of employer “snooping” justifi ed? What boundar- ies should be set on employer invasion of employee privacy? Is there anything special about the fact that in the advertising industry the majority of executives thought personal Web surf- ing was alright?
■ EMPLOYEES SHOULD WORRY ABOUT ELECTRONIC MONITORING
Facts to Consider 65% OF EMPLOYERS BLOCK SOME WEBSITES
FROM INTERNAL VIEWING. {
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Communication ■ Chapter 15 377
You should recall that ethnocentrism is a major source of intercultural diffi - culties. It is the tendency to consider one’s culture superior to any and all others.
Any such tendencies can hurt cross-cultural communication in at least three
ways. First, they may cause someone to not listen well to what others have to say.
Second, they may cause someone to address or speak with others in ways that
alienate them. And third, they may involve use of inappropriate stereotypes.
Just recognizing tendencies toward ethnocentrism is helpful. You can spot it in
conversations as arrogance in tone, manners, gestures, and words. But success in
cross-cultural communication also takes sensitivity and a willingness to learn about
how diff erent people see, do, and interpret things. Th is involves cultural etiquette, the use of appropriate manners, language, and behaviors
when communicating with people from other cultures.
Knowing the etiquette helps us avoid basic cross-
cultural mistakes. Messages can easily get lost in trans-
lation, as advertising miscues often demonstrate. A
Pepsi ad in Taiwan that intended to say “the Pepsi gen-
eration” came out as “Pepsi will bring your ancestors
back from the dead.” A KFC ad in China intended to
convey “fi nger lickin’ good” came out as “eat your fi n-
gers off .” 36
Nonverbals are important too. Th e American
“thumbs-up” sign is an insult in Ghana and Australia.
Signaling “okay” with thumb and forefi nger circled to-
gether is not okay in parts of Europe. Whereas we wave
“hello” with an open palm, in West Africa it’s an insult
suggesting the other person has fi ve fathers. 37
Ethnocentrism is the tendency to consider one’s culture superior to any and all others.
Cultural etiquette is use of appropriate manners and behaviors in cross-cultural situations.
Sample Cultural Variations in Nonverbal Communications
• Eye movements (oculesics)—Chinese and Japa-
nese may show anger only in their eyes, a point
often missed by Westerners.
• Touching (haptics)—Asian cultures typically
dislike touching behaviors; Latin cultures tend to
use them in communicating.
• Body motions (kinesics)—Gestures, shrugs, and
blushes can mean diff erent things; “thumbs up”
means “A-OK” in America but is vulgar in the
Middle East.
It is easy and tempting to set up your own blog, write about your experiences and impressions, and then share your thoughts with others online. So, why not do it?
Catherine Sanderson, a British citizen living and working in Paris, might have asked this question before launching her blog, Le Petite Anglaise. At one point it was so “successful” that she had 3,000 readers. But, the Internet diary included reports on her experiences at work—and her employer wasn’t happy when it became public knowledge.
Even though Sanderson was blogging anonymously, her photo was on the site, and the connection was eventually discovered. Noticed, too, was her running commentary about bosses, colleagues, and life at the offi ce. One boss,
she wrote, “calls secretaries ’typists.’” A Christmas party was described in detail, including an executive’s “unforgivable faux pas.”
It’s all out now and Sanderson is upset. She says that she was “dooced”—a term used to describe being fi red for what one writes in a blog. She wants fi nancial damages and confi r- mation of her rights, on principle, to have a private blog.
YOU DECIDE
Just what are the ethics issues here—from the blogger’s and the employer’s perspectives? What rights do workers have when it comes to communicating in public about their work experiences and impressions?
■ IN FRANCE, IT’S BLOGGERS BEWARE
Ethics Check SHE SAYS THAT SHE WAS “DOOCED”—A TERM USED TO DESCRIBE
BEING FIRED FOR WHAT ONE WRITES IN A BLOG. {
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EXPLORING MANAGEMENT378
Takeaway 15.3 How Can We Improve Communication
with People at Work?
Rapid Review • Active listening, through refl ecting back and paraphrasing, can help overcome
barriers and improve communication.
• Organizations can design and use offi ce architecture and physical space to im-
prove communication.
• Information technology, such as e-mail, instant messaging, and intranets, can
improve communication in organizations, but it must be well used.
• Ethnocentrism, a feeling of cultural superiority, can interfere with cross-cultural
communication; with sensitivity and cultural etiquette it can be improved.
Questions for Discussion 1. Which rules for active listening do you think most people break?
2. Is transparency in communications a sure winner, or could a manager have prob-
lems with it?
3. How could you redesign your offi ce space, or that of your instructor or boss, to
make it more communication-friendly?
Be Sure You Can • role play the practice of active listening
• list the rules for giving constructive feedback
• explain how space design infl uences communication
• identify ways technology utilization infl uences communication
• explain the concept of cultural etiquette
What Would You Do? Th e restaurant you own and manage is being hit hard by a bad economy. Th e num-
ber of customers is down, as is the amount of the average dinner bill. Previously
you’ve maintained a staff of 12, but it’s obvious that you’re going to have to cut back
so that the payroll covers no more than 8. One of the staff has just told you that
someone is tweeting that the restaurant is going to close its doors after the week-
end. Everyone is “buzzing” about the news. How do you deal with this situation?
STUDY GUIDE
Terms to Defi ne
Active listening
Communication transparency
Cultural etiquette
Electronic grapevine
Ethnocentrism
Feedback
Open-book management
Proxemics
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379Communication ■ Chapter 15
1. Who is responsible for encoding a message in the
communication process?
(a) sender
(b) receiver
(c) observer
(d) consultant
2. Issues of “respect” and “integrity” are associated
with in communication.
(a) noise
(b) fi ltering
(c) credibility
(d) ethnocentrism
3. Which is the best example of a supervisor making
feedback descriptive rather than evaluative?
(a) You are a slacker.
(b) You are not responsible.
(c) You cause me lots of problems.
(d) You have been late to work three days this month.
4. When interacting with an angry co-worker who is
complaining about a work problem, a manager
skilled at active listening would most likely try to
.
(a) suggest that the conversation be held at a better
time
(b) point out that the conversation would be better
held at another location
(c) express displeasure in agreement with the
co-worker’s complaint
(d) rephrase the co-worker’s complaint to encour-
age him to say more
5. When the intended meaning of the sender and the
interpreted meaning of the receiver are the same,
communication is .
(a) eff ective (b) persuasive
(c) passive (d) effi cient
6. What happens when a communication is persua-
sive?
(a) Th e receiver understands the message.
(b) Th e sender feels good about the message.
(c) Th e receiver acts as the sender intended.
(d) Th e sender becomes a passive listener.
7. How can a manager build credibility for persuasive
communications?
(a) Make sure rewards for compliance with requests
are clear.
(b) Make sure penalties for noncompliance with
requests are clear.
(c) Make sure everyone knows who the boss is.
(d) Make sure to establish good relationships with
others.
8. One of the rules for giving constructive feedback is
to make sure that it is always .
(a) general rather than specifi c
(b) indirect rather than direct
(c) given in small doses
(d) delivered at a time convenient for the sender
9. When a worker receives an e-mail memo from the
boss with information about changes to his job
assignment and ends up confused because he
doesn’t understand it, the boss has erred by making
a bad choice of for communicating
the message.
(a) words (b) channels
(c) nonverbals (d) fi lters
10. Th e safest conclusion about privacy in electronic
communications is .
(a) it’s guaranteed by law
(b) it’s not a problem
(c) it really doesn’t exist
(d) it can be password protected
C H
A PTER 1
5
TP
Multiple-Choice Questions
TestPrep 15
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EXPLORING MANAGEMENT380
11. A/An is higher in channel richness
than a/an .
(a) memo; voice-mail
(b) letter; video conference
(c) instant message; e-mail
(d) voice mail; telephone conversation
12. Th e negative eff ects of status diff erences on
communication between lower and higher levels
in organizations show up in the form of
.
(a) fi ltering
(b) MBWA
(c) ethnocentrism
(d) passive listening
13. A manager who understands the infl uence of
proxemics in communication is likely to
.
(a) avoid sending mixed messages
(b) arrange work spaces to encourage interaction
(c) be very careful choosing written words
(d) send frequent e-mail messages to team
members
14. When a person’s words say one thing but his or her
body language suggests something quite diff erent,
the person is sending .
(a) a mixed message
(b) noise
(c) social capital
(d) destructive feedback
15. If a visitor to a foreign culture makes gestures
commonly used at home even after learning that
they are off ensive to locals, the visitor can be
described as .
(a) a passive listener
(b) ethnocentric
(c) more effi cient than eff ective
(d) an active listener
Short-Response Questions
16. What is the goal of active listening?
17. Why do managers sometimes make bad decisions based on information received from their subordinates?
18. What are four errors managers might make when trying to give constructive feedback to others?
19. How does ethnocentrism infl uence cross-cultural communication?
Integration and Application Questions
20. Glenn was recently promoted to be the manager of a new store being opened by a large department store chain.
He wants to start out right by making sure that communications are always good between him, the six depart-
ment heads, and the 50 full-time and part-time sales associates. He knows he’ll be making a lot of decisions in the
new job, and he wants to be sure that he is always well informed about store operations. He always wants to make
sure everyone is always “on the same page” about important priorities. Put yourself in Glenn’s shoes.
Questions: What should Glenn do right from the start to ensure that he and the department managers com- municate well with one another? How can he open up and maintain good channels of communication with the
sales associates?
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Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 15: Feedback and Assertiveness
■ CLASS EXERCISE 15: Communication and Teamwork Dilemmas
■ TEAM PROJECT 15: How Words Count
C H
A PTER 1
5
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Communication ■ Chapter 15
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot Whether or not you tweet, there’s no de- nying that Twitter’s having a profound eff ect on the
way we communicate with each other and the outside
world.
Is the popular microblogging service reinventing
communication or just abbreviating it? Do tweets con-
tribute to the conversation or dumb it down?
Many social media researchers, sociologists, and
corporate marketing experts are asking themselves
the same question:
Does Twitter en-
able eff ective com-
munication, or is it
a distraction?
“It adds a layer of information and connection to
peo ple’s lives that wasn’t there before,” Evan Williams
says. “It has the potential to be a really substantial part
of how people keep in touch with each other.”
■ CHAPTER 15 CASE Twitter: Redefi ning Communication
381
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 15
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A day at work, a trip to the store, a visit with friends—all bring
diversity into our lives. Even a walk across the college campus
can be a trip around the world, if you’re willing to take it.
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16 Diversity and
Global Cultures
Th ere Are New Faces in the Neighborhood
1. Understand what
we need to know
about diversity in the
workplace.
2. Understand what we
need to know about
diversity among
global cultures.
YOUR CHAPTER 16
TAKEAWAYS
Management Live
Diversity Maturity and Finding Forrester
F inding Forrester is an intriguing story about the relationship
between an aging and reclusive Caucasian writer—William
Forrester (Sean Connery), and a young African-American
from the projects—Jamal Wallace (Rob Brown). Jamal fi rst enters Forrester’s
apartment through a fi re escape window. It is the fulfi llment of a dare by
friends. Forrester catches Wallace, who escapes by running out the front door.
Later, they come face-to-face in the apartment when Wallace writes a 5,000-
word essay to appease the reclusive tenant.
Th e two become fast friends, but only after Forrester tests Wallace’s mettle by
pretending to be racist. He is anything but that. But Wallace’s literature
professor, Robert Crawford (F. Murray Abraham), is racist. He fi nds it hard to
believe that Wallace, a star athlete, can perform in the class as well as he does
on the basketball court.
Th e roles of Forrester and Crawford provide excellent examples of diff ering
levels of diversity maturity, the ability to respect and work with others who may be ethnically and culturally diff erent. Personal attitudes and actions stem from
our diversity maturity. When Forrester invites Wallace into his apartment it is
clear he already trusts the young man. When Crawford refers to Wallace’s
“previous education” and “background,” it is evident that he is biased.
Most of us have inherent bias. Give yourself a good honest self-check on
diversity maturity. If the results are not what you hoped, begin to think about
what you can do to improve.
Explore Yourself More on diversity maturity
Role Models David Segura Is Hispanic
Business Entrepreneur of
the Year
Ethics Check Fair-Trade Fashion
Facts to Consider Employee morale varies around
the world.
Manager’s Library Half the Sky by
Nicholas D.
Kristof and Sheryl
WuDunn
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
383
M L H
N
K
W
M
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EXPLORING MANAGEMENT384
In Chapter 1 we first discussed diversity in respect to age, race, ethnicity,
gender, physical ability, and sexual orientation. A broad defi nition of workplace
diversity would also include diff erences in such areas as religious beliefs, education, experience, family status, national cultures, and perhaps more.
1 In his book Beyond
Race and Gender, diversity consultant R. Roosevelt Th omas Jr. goes so far as to say that
“diversity includes everyone . . . white males are as diverse as their colleagues.” 2 He also
says that diversity is good for organizations, a source of competitive advantage. Pic-
ture an organization whose diverse employees possess a mix of talents and perspec-
tives, and refl ect the fi rm’s customers and clients. Wouldn’t this be good for business?
||| Th ere is a business case for diversity. Research reported in the Gallup Management Journal shows that establishing a
racially and ethnically inclusive workplace is good for morale. In a study of 2,014
American workers, those who felt included were more likely to stay with their
employers and recommend them to others. Survey questions asked such things
as “Do you always trust your company to be fair to all employees?” “At work, are
all employees always treated with respect?” “Does your supervisor always make
the best use of employees’ skills?” 3 Th e New York research group Catalyst also
reports that companies with a greater percentage of women on their boards out-
perform those whose boards have the lowest female representation. 4
Studies and evidence like that just cited point toward what some call a strong
“business case for diversity.” 5 Th omas Kochan and his colleagues at MIT agree.
But, they found in their research that the hoped-for advantages are gained only
when managers make diversity a priority through training and supportive human
resource practices. 6 Th ey say:
To be successful in working with and gaining value from diversity requires
a sustained, systemic approach and long-term commitment. Success is
facilitated by a perspective that considers diversity to be an opportunity
for everyone in an organization to learn from each other how better to
accomplish their work and an occasion that requires a supportive and
cooperative organizational culture as well as group leadership and process
skills that can facilitate effective group functioning.
Diversity describes race, gender, age, and other individual diff erences.
Takeaway 16.1 What Should We Know About Diversity
in the Workplace?
ANSWERS TO COME
■ Th ere is a business case for diversity.
■ Inclusive organizational cultures value and support diversity.
■ Organizational subcultures can create diversity challenges.
■ Minorities and women suff er diversity bias in many situations.
■ Managing diversity should be a top leadership priority.
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Diversity and Global Cultures ■ Chapter 16 385
||| Inclusive organizational cultures value and support diversity.
Just how do managers go about leveraging diversity in the workplace? Many organiza-
tions seem to be good or relatively good at attracting new employees of diverse back-
grounds to join, but they aren’t always successful in keeping them for the long term.
Th is problem of high employee turnover among minorities and women has been
called the revolving door syndrome. 7 It can refl ect a lack of inclusivity in the employ-
ing organizations—the degree to which they are open to anyone who can perform a
job, regardless of race, sexual preference, gender, or other diversity attribute. 8
Look around. Th ink about how people are treating those who diff er from
themselves. What about your experiences at school and at work? Are you and
others always treated with respect and inclusion? Or do you sense at times disre-
spect and exclusion?
Th e model for inclusivity is the multicultural organization that displays com- mitments to diversity like those in Table 16.1—Characteristics of Multicultural Organizations.
9 One such organization is Xerox, the fi rst Fortune 500 fi rm to have an
African-American woman, Ursula Burns, as CEO and also the fi rst to have one
woman succeed another as CEO. When praising Burns’s appointment, Ilene Lang,
head of the nonprofi t Catalyst, which supports women in business, said: “Most
companies have one woman who might be a possibility to become CEO; Xerox has
a range of them.” Th e fi rm has an Executive Diversity Council, runs diversity leader-
ship programs, and evaluates managers on how well they recruit and develop em-
ployees from underrepresented groups. Harvard professor David Th omas says
Xerox has “a culture where having women and people of color as candidates for
powerful jobs has been going on for two decades.” 10
Inclusivity is how open the organization is to anyone who can perform a job.
A multicultural organization is based on pluralism and operates with inclusivity and respect for diversity.
Table 16.1 Characteristics of Multicultural Organizations
Pluralism—Members of minority and majority cultures infl uence key values and policies.
Structural integration—Minority-culture members are well represented at all levels and
in all responsibilities.
Informal network integration—Mentoring and support groups assist career development
of minority-culture members.
Absence of prejudice and discrimination—Training and task force activities support the
goal of eliminating culture-group biases.
Minimum intergroup confl ict—Members of minority and majority cultures avoid destruc-
tive confl icts.
||| Organizational subcultures can create diversity challenges.
We have to be realistic in facing up to the challenges in creating truly multicultural
organizations. It isn’t always easy to get the members of a workforce to really respect
and work well with one another. One of the reasons is the existence of organiza- tional subcultures, informal groupings of persons that form around such things as gender, age, race and ethnicity, and even job functions. People can get so caught
up in their subcultures that they identify and interact mostly with others who are
like themselves. Th ey may develop tendencies toward ethnocentrism, acting in ways that suggest that their subculture is superior to all others. All of this creates
diversity challenges that can make it harder for people to work well together.
Organizational subcultures are groupings of people based on shared demographic and job identities.
Ethnocentrism is the belief that one’s membership group or subculture is superior to all others.
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EXPLORING MANAGEMENT386
Occupational subcultures develop as people form shared identities around the work that they do. Some employees may consider themselves “systems people” who
are very diff erent from “those marketing people” and even more diff erent still from
“those fi nance people.” Even at school, in course project groups, have you noticed how
students tend to identify with their majors? Don’t some look down on others they
consider to be pursuing “easy” majors and view their majors as the superior ones?
Diff erences in ethnic or national subcultures exist among people from various races, language groups, regions, and countries. And as we all know, it can sometimes
be hard to work well with persons whose backgrounds are very diff erent from our
own. Th e best understanding is most likely gained through direct contact and from
being open-minded. Although one may speak in everyday conversations about
“African-American” or “Latino” or “Anglo” cultures, one has to wonder: Are these
subcultures truly understood? 11
If improved cross-cultural understandings can help
people work better across national boundaries, how can we create the same under-
standings to help people from diff erent racial subcultures work better together?
Gender subcultures form from shared identities among persons of the same gender. Some research shows, for example, that when men work together the
subculture refl ects a competitive atmosphere. Sports metaphors are common,
and games and stories often deal with winning and losing. 12
When women work
together, a rather diff erent subculture may form with more emphasis on personal
relationships and collaboration. 13
Age is the basis for generational subcultures in organizations.14 Harris and Conference Board polls report that younger workers tend to be more dissatisfi ed
Occupational subcultures form among people doing the same kinds of work.
Ethnic or national subcultures form among people from the same races, language groupings, regions, and nations.
Gender subcultures form among people of the same gender.
Generational subcultures form among people in similar age groups.
David Segura grew up in a family of executives. His grandpar- ents were Mexican immigrants, fi nding work in the automotive industry, and his father worked at Ford Motor Company. And after graduating from the University of Michigan–Dearborn with a degree in computer science he, too, joined Ford. But Segura wanted more—a business of his own.
After doing some IT consulting, Segura founded VisionIT Inc., with $100 and one client. Today his fi rm is a $225� million company serving many Fortune 500 clients. It provides IT staff- ing, managed services, and consulting services based on what Segura calls the FAST approach—focused on clients, agile, streamlined, and rich with talented people. About being suc- cessful in the technology industry, where Hispanics are not well represented, Segura says: “VisionIT is a fi rm of much diversity and we are showing that a company is at its best when it fully utilizes the talents of all backgrounds and ethnicities.”
Hispanic Business magazine named Segura its Hispanic Entrepreneur of the Year, based on the success of his fi rm and
his commitment to the community. When accepting the award, he said it was a “truly humbling experience” and thanked the VisionIT team “whose shared vision and commitment made this day possible.” Segura has also received the Ernst & Young Entrepreneur of the Year award.
When Segura became an entrepreneur he saw it as a way to have a positive impact on society. He continues to pursue that impact not only by running a successful large business, but also by helping young people enter the world of IT through college scholarships and company internships.
WHAT’S THE LESSON HERE?
David Segura is a great example of entrepreneurial success, and he’s also a role model for younger members of the Hispanic and minority communities. He has succeeded in an industry that isn’t well represented by Hispanics, showing that cultural diversity can be a real business advantage. How good are you at embrac- ing such diversity and engaging people of different cultures?
■ DAVID SEGURA IS HISPANIC BUSINESS ENTREPRENEUR OF THE YEAR
Role Models “. . . A COMPANY IS AT ITS BEST WHEN IT FULLY UTILIZES THE
TALENTS OF ALL BACKGROUNDS AND ETHNICITIES.” {
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Diversity and Global Cultures ■ Chapter 16 387
than older workers. 15
Th ey are also described as more short-term oriented, giving
higher priority to work-life balance, and expecting to hold several jobs during
their careers. 16
Imagine the confl icts that can occur when members of todays col-
lege generation go to work for older managers who grew up with quite diff erent
life experiences and even values. Have you had a confl ict with a parent, perhaps
over a lifestyle or authority issue, that might foreshadow similar ones you might
encounter at work someday?
||| Minorities and women suff er diversity bias in many situations.
Th e term “diversity” basically means the presence of diff erences, and that’s
potentially challenging in its own right. But diversity issues in organizations are
further complicated because such diff erences and subcultures are often distrib-
uted unequally in the power structure. Let’s be honest. Most senior executives in
large businesses are still older, white, and male. Th ere is more diversity among
lower and middle levels of most organizations than at the top. And for some
women and minority workers, the glass ceiling depicted in Figure 16.1 can be a real barrier to career advancement.
17
Minorities and women can face diversity challenges that range from misun-
derstandings, to lack of sensitivity, to glass ceiling limitations, to outright job dis-
crimination and various types of harassment. Data from the U.S. Equal
Employment Opportunity Commission (EEOC), for example, report that sex dis-
crimination is a factor in an increasing number of bias suits fi led by workers. Sexual
harassment in the form of unwanted sexual advances, requests for sexual favors,
and sexually laced communications is another problem. One survey found some
45% of minority respondents had experienced abuse as targets of off ensive jokes
and conversations in the workplace. Th e EEOC also reports an increase in fi lings
of pregnancy and pay discrimination complaints. A senior executive expressed
her surprise upon fi nding out that the top performer in her work group, an
African-American male, was paid 25% less than anyone else. Th is wasn’t because
his pay had been cut to that level; it was because his pay increases had always
trailed those given to white co-workers. Th e diff erences added up signifi cantly over
time, but no one noticed or stepped forward to make the adjustment. 18
Th e glass ceiling is a hidden barrier to the advancement of women and minorities.
Dominant
Subculture:
White males
Minority Subcultures:
Women, people of color,
other minorities
• Hold most top positions
• Present at all levels
• Included in entry-level hiring
• Hold few top positions
• Distributed in middle levels
• Included in entry-level hiring
Glass ceiling limiting advancement of women and minorities
FIGURE 16.1 How Do Glass Ceilings Con- strain Career Advancement for Women and Minorities? Organizations consist of a
majority culture (often white
males) and minority cultures
(including women, people of
color, and other minorities). It is
likely that members of the
majority culture will dominate
higher management levels. One
of the potential consequences is
a “glass ceiling” eff ect that,
although not publicized, acts as
a barrier that sometimes makes
it hard for women and minorities
to advance and gain entry into
higher management ranks.
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EXPLORING MANAGEMENT388
People respond to bad treatment at work in diff erent ways. Some may challenge
the system by fi ling complaints, pursuing harassment and discrimination charges, or
taking legal action. Some may quit to look for better positions elsewhere or to pursue
self-employment opportunities. Some may try to “fi t in,” to adapt through bicultural- ism by displaying majority culture characteristics that seem necessary to succeed in the work environment. For example, gays, lesbians, bisexuals, and transgenders
might hide their sexual orientations and gender identities; an African- American or
Hispanic manager might avoid using words or phrases that white colleagues would
consider subculture slang; a woman might use football or baseball metaphors in con-
versations with men to gain acceptance into male-dominated career networks.
||| Managing diversity should be a top leadership priority.
What can leaders and managers do so that people under their care are treated
inclusively? Th e answer begins with a willingness to recognize that, regardless of
their backgrounds, most workers want the same things. Th ey want respect for
their talents; they want to be fairly treated; they want to be able to work to the best
of their abilities; they want to achieve their full potential. Meeting these expecta-
tions requires the best in diversity leadership.
Th e small fi gure describes what R. Roosevelt Th omas calls a continuum of lead-
ership approaches to diversity. 19
At one end is affi rmative action. Here, leadership
commits the organization to hiring and advancing minorities and women. You
might think of this as advancing
diversity by increasing the repre-
sentation of diverse members in
the organization’s workforce. But
this is only a partial solution, and
the revolving door syndrome may
Biculturalism is when minority members adopt characteristics of majority cultures in order to succeed.
Managing Diveristy Achieve full
utilization of diverse human resources
Valuing Differences Build quality
relationships with respect for diversity
Affirmative Action Create upward mobility
for minorities and women
Today’s organizations and the nature of our global workforce demand diversity maturity from anyone who is serious about career success. Being mature about diversity means being able to answer a confi dent “yes” to questions such as these: • Do you accept responsibility for improving your performance? • Do you understand diversity concepts? • Do you make decisions about others based on their abilities? • Do you understand that diversity issues are complex? • Are you able to cope with tensions in addressing diversity?
• Are you willing to challenge the way things are? • Are you willing to learn continuously?
Be honest; admit where you still have work left to do. Use your answers to help set future goals to ensure that your actions, not just your words, consistently display positive diversity values.
■ DIVERSITY MATURITY
Explore Yourself ARE YOU WILLING TO COPE WITH TENSIONS
IN ADDRESSING DIVERSITY? {
Get to know yourself better by taking the self-assessment on
Diversity Awareness and completing the other activities in the Exploring Management Skill-Building Portfolio.
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Diversity and Global Cultures ■ Chapter 16 389
even negate some of its positive impact. Th omas says that the “assumption is that
once you get representation, people will assimilate. But we’re actually seeing that
people are less willing to assimilate than ever before.” 20
A step beyond affi rmative action is what Th omas calls valuing diversity. Here,
a leader commits the organization to education and training programs designed
to help people better understand and respect diff erences. Th e goal is to teach
people of diverse backgrounds more about one another and how to work well
together. Th omas says this training should help us deal with “similarities, diff er-
ences and tensions.” And it should help us answer a fundamental question: “Can
I work with people who are qualifi ed that are not like me?” 21
Th e fi nal step in Th omas’s continuum is managing diversity. A leader who ac- tively manages diversity is always seeking ways to make an organization truly multi-
cultural and inclusive—and keep it that way. For example, Eastman Kodak has been
praised by Business Ethics magazine for “leading-edge anti-discrimination policies
toward gay, bisexual, and transgender employees.” It has also received a perfect score
from the Human Rights Campaign for its eff orts to end sexual discrimination. 22
As pointed out earlier regarding the business case for diversity, Th omas argues
quite forcibly that leaders have a performance incentive to embrace managing diver-
sity. 23
A diverse workforce off ers a rich pool of talents, ideas, and viewpoints that can
help solve complex problems. A diverse workforce also aligns well with needs and
expectations of diverse customers and stakeholders. 24
Michael R. Losey, former pres-
ident of the Society for Human Resource Management (SHRM), says, “Companies
must realize that the talent pool includes people of all types, including older workers;
persons with disabilities; persons of various religious, cultural, and national back-
grounds; persons who are not heterosexual; minorities; and women.” 25
Managing diversity is building an inclusive work environment that allows everyone to reach his or her potential.
New Continent Attracts Walmart Global Giant
Dear Walmart: “Welcome to South Africa.”
When Walmart closed the deal to buy 51% ownership of South Africa’s
Massmart, it joined forces with an established and successful retailer. And the
decision was strategic. “Th e more we learn about South Africa and the sur-
rounding countries, the more we are convinced that this is an important region
with attractive growth characteristics,” says Doug McMillon, head of Walmart
International. It’s a belief confi rmed by Massmart’s local record. “Yeah, people
here love it,” says one of the store’s sales persons, “by midday there is a stampede
through the doors.”
Massmart operates 288 stores, mostly in South Africa but also in 14 other
southern African countries. Th e fi rm has prospered from a growing middle class
and an acceptance by locals of the “shopping mall” experience. Walmart hopes
to join right in. But the fi rm also plans to fi nd the right fi t with African cultures
with the assistance of its local partner. All expectations are that the local
management will be retained and valued.
CEO Grant Pattison says Massmart will operate with regional sensitivity.
Th is means that Walmart’s corporate culture, which originated in founder
Sam Walton’s hometown of Bentonville, Arkansas, will have some adapting to
do. “Not everyone comes in the morning and does the rah-rah thing,” says
Pattison. “Not everyone does the Walmart cheer.”
It’s a long way from
Arkansas to South Africa,
and it’s a big step across
cultures. But that’s the
nature of business these
days, and we all have to be
prepared to work well
across diverse cultural
boundaries. How
experienced are you at
cross-cultural
relationships, whether in
the neighborhood or while
traveling? What do you
need to know to succeed
in a globally connected
world of work?
F I N D I N S P I R A T I O N
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EXPLORING MANAGEMENT390
Takeaway 16.1 What Should We Know About Diversity
in the Workplace?
Rapid Review • Workforce diversity can improve business performance by expanding the talent
pool of the organization and establishing better understandings of customers and
stakeholders.
• Inclusivity is a characteristic of multicultural organizations that values and re-
spects diversity of their members.
• Organizational subcultures, including those based on occupational, functional,
ethnicity, nationality, age, and gender diff erences, can create diversity challenges.
• Minorities and women can suff er diversity bias in such forms as job and pay dis-
crimination, sexual harassment, and the glass ceiling eff ect.
• A top leadership priority should be managing diversity to develop an inclusive
work environment within which everyone is able to reach their full potential.
Questions for Discussion 1. What subcultures do you see operating at work and/or in school, and how do
they aff ect relationships and daily events?
2. What are some of the things organizations and leaders can do to reduce diversity
bias faced by minorities and women in the workplace?
3. What does the existence of an affi rmative action policy say about an organiza-
tion’s commitment to diversity?
Be Sure You Can • identify major diversity trends in American society
• explain the business case for diversity
• explain the concept of inclusivity
• list characteristics of multicultural organizations
• identify subcultures common to organizations
• discuss the types of employment problems faced by minorities and women
• explain Th omas’s concept of managing diversity
What Would You Do? One of your co-workers brought along his friend to lunch. When discussing his new
female boss, the friend says: “It really irritates me not only that she gets the job just
because she’s a woman, but she’s also Hispanic. Th ere’s no way that someone like me
had a chance given her pedigree. And she now has the gall to act as if we’re all one
big happy team and the rest of us should accept her leadership. As for me, I’ll do my
best to make it diffi cult for her to succeed.” It was uncomfortable for you just to hear
this. Your co-worker looks dismayed but isn’t saying anything. What do you do? Just
let the comment go, or something more?
STUDY GUIDE
Terms to Defi ne
Biculturalism
Diversity
Ethnic or national
subcultures
Ethnocentrism
Gender subcultures
Generational
subcultures
Glass ceiling
Inclusivity
Managing diversity
Multicultural
organization
Occupational
subcultures
Organizational
subcultures
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Diversity and Global Cultures ■ Chapter 16 391
Takeaway 16.2 What Should We Know About Diversity
Among Global Cultures?
ANSWERS TO COME
■ Culture shock comes from discomfort in cross-cultural situations.
■ Cultural intelligence is the capacity to adapt to foreign cultures.
■ Th e “silent” languages of cultures include context, time, and space.
■ Hofstede identifi es fi ve value diff erences among national cultures.
■ Country clusters show cultural diff erences.
A trip to the grocery store, a day spent at work, a visit to our children’s
schools—all are possible opportunities for us to have cross-cultural experiences.
And you have to admit, there are a lot of new faces in the neighborhood. At my
university even a walk across campus can be a trip around the world, but we have
to be willing to take it. How about you? Do you greet, speak with, and actively
engage people of other cultures? Or are you shy, hesitant, and even inclined to
avoid them? 26
||| Culture shock comes from discomfort in cross-cultural situations.
Maybe it is a bit awkward to introduce yourself to an international student or
foreign visitor to your community. Maybe the appearance of a Muslim woman in
a headscarf or a Nigerian man in a long overblouse is unusual to the point of
being intimidating. Maybe, too, when we do meet or work with someone from
another culture, we experience something well known to international travelers
as culture shock. Th is is a feeling of confusion and discomfort when in or dealing with an unfamiliar culture.
Global businesses are concerned about culture shock because they need their
employees to be successful as they travel and work around the world. Perhaps this
understanding might also be applied to our everyday cross-cultural experiences
right here at home. Listed below are stages that are often encountered as someone
adjusts to the unfamiliar setting of a new culture. Th e assumption is that knowing
about the stages can help us better deal with them. 27
• Confusion—First contacts with the new culture leave you anxious, uncomfort-
able, and in need of information and advice.
• Small victories—Continued interactions bring some “successes,” and your con-
fi dence grows in handling daily aff airs.
• Honeymoon—Th is is a time of wonderment, cultural immersion, and even in-
fatuation, with local ways viewed positively.
• Irritation and anger—Th is is a time when the “negatives” overwhelm the “posi-
tives” and the new culture becomes a target of your criticism.
• Reality—Th is is a time of rebalancing; you are able to enjoy the new culture
while accommodating its less desirable elements.
Culture shock is the confusion and discomfort that a person experiences when in an unfamiliar culture.
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EXPLORING MANAGEMENT392
||| Cultural intelligence is the capacity to adapt to foreign cultures.
A U.S. businessman once went to meet a Saudi Arabian offi cial. He sat in the
offi ce with crossed legs and the sole of his shoe exposed. He didn’t know this is a
sign of disrespect in the local culture. He passed documents to the host using his
left hand, which Muslims consider unclean. And, he declined when coff ee was
off ered. Th is suggested criticism of the Saudi’s hospitality. What was the price for
these cultural miscues? A $10 million contract was lost to a Korean executive bet-
ter versed in Saudi ways. 28
Some might say that this American’s behavior was ethnocentric, so self-centered
that he ignored and showed no concern for the culture of his Arab host. Others
might excuse him as suff ering from culture shock. Maybe he was so uncomfortable
upon arrival in Saudi Arabia that all he could think about was off ering his contract
and leaving as quickly as possible. Still others might give him the benefi t of the
doubt. It could have been that he was well intentioned but didn’t have time to learn
about Saudi culture before making the trip.
Regardless of the possible reasons for the cultural miscues, they still worked to
the businessman’s disadvantage. Th ere is also no doubt that he failed to show
cultural intelligence—the ability to adapt and adjust to new cultures.29 People with cultural intelligence have high cultural self-awareness and are fl exible in
dealing with cultural diff erences. In cross-cultural situations they are willing to
learn from what is unfamiliar, and modify their behaviors to act with sensitivity
toward other cultures’ ways. In other words, someone high in cultural intelli-
gence views cultural diff erences not as threats but as learning opportunities.
Cultural intelligence is probably a good indicator of someone’s capacity for
success in international assignments and in relationships with persons of diff er-
ent cultures. How would you rate yourself ? Could cultural intelligence be one of
your important personal assets?
Cultural intelligence is the ability to adapt to new cultures.
A worldwide study shows that the morale of workers varies from one country to the next. FDS International of the United Kingdom surveyed 13,832 workers in 23 countries. Here is how selected countries ranked based on employee reports of job satisfaction, quality of employer-employee relations, and work-life balance.
Top-Ranked—1. Netherlands, 2. Ireland and Thailand, 3. Switzerland, 4. Denmark, 5. United Kingdom.
Some Others—10. United States, 11. Canada, 12. Poland, 13. Korea, 14. Australia, 15. Japan.
YOUR THOUGHTS?
Why do you think employee morale in the United States and Canada trails that of other countries such as the Netherlands, Ireland, and Switzerland? Why might one Asian country such as Thailand score very high in employee morale and another such as Korea score much lower? Are there cultural factors that might make a difference in how employees respond to a sur- vey about their workplace morale?
■ EMPLOYEE MORALE VARIES AROUND THE WORLD
Facts to Consider THE HIGHEST MORALE IS FOUND AMONG
WORKERS IN THE NETHERLANDS {
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Diversity and Global Cultures ■ Chapter 16 393
||| Th e “silent” languages of cultures include context, time, and space.
It is easy to recognize diff erences in the spoken and written languages used by
people around the world. And foreign-language skills can open many doors to
cultural understanding. But anthropologist Edward T. Hall points out that there
are other “silent” languages of culture that are also very signifi cant. 30
If we look and listen carefully, Hall believes we should recognize how cul-
tures diff er in the ways their members use language in communication. 31
In
low- context cultures most communication takes place via the written or spo- ken word. Th is is common in the United States, Canada, and Germany, for
example. As the saying goes: “We say (or write) what we mean, and we mean
what we say.”
In high-context cultures things are diff erent. What is actually said or written may convey only part, and sometimes a very small part, of the real message. Th e
rest must be interpreted from nonverbal signals and the situation as a whole—
things such as body language, physical setting, and even past relationships among
the people involved. Dinner parties and social gatherings in high-context cul-
tures allow potential business partners to get to know one another. Only after the
relationships are established is it possible to make business deals.
Hall also notes that the way people approach and deal with time varies across
cultures. He describes a monochronic culture as one in which people tend to do one thing at a time. Th is is typical of the United States, where most businesspeople
schedule a meeting for one person or group to focus on one issue for an allotted
time period. 32
And if someone is late for one of those meetings or brings an unin-
vited guest, we tend not to like it.
Members of a polychronic culture are more fl exible about time and who uses it. Th ey often try to work on many diff erent things at once, perhaps not in any
particular order. An American visitor (monochronic culture) to an Egyptian cli-
ent (polychronic culture) may be frustrated, for example, by interruptions as the
client deals with people continually fl owing in and out of his offi ce.
In addition, Hall points out that cultures vary in how they value and use space.
He describes cultural tendencies in terms of proxemics, or how people use space to communicate. Americans tend to like and value their own space, perhaps as
Low-context cultures emphasize communication via spoken or written words.
High-context cultures rely on nonverbal and situational cues as well as spoken or written words in communication.
In monochronic cultures people tend to do one thing at a time.
In polychronic cultures people accomplish many diff erent things at once.
Proxemics is the study of how people use interpersonal space.
Workers who make mistakes in Haier’s Chinese factories are made to stand
on special footprints and publicly criticize themselves by pointing out what
they did wrong and what lessons they have learned. When this practice
was implemented at a new factory in South Carolina, American workers
protested—they thought it was humiliating. But Haier executives didn’t
force the Americans to accept this practice; they changed their approach.
American workers now stand in the footprints as public recognition when
they do exceptional work. Because the Chinese managers listened and
learned from their experiences, they ended up with a local practice that fi ts
both corporate values and the local culture.
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EXPLORING MANAGEMENT394
much space as they can get. We like big offi ces, big homes, big yards; we get
uncomfortable in tight spaces and when others stand too close to us in lines.
When someone “talks right in our face,” we don’t like it; the behavior may even
be interpreted as an expression of anger.
If you visit Japan you’ll notice the diff erence in proxemics very quickly. Space
is precious in Japan; it is respected and its use is carefully planned. Small, tidy
homes, offi ces, and shops are the norm; gardens are tiny but immaculate; public
spaces are carefully organized for most effi cient use.
||| Hofstede identifies five value diff erences among national cultures.
Understanding the silent languages just discussed is a good place to start in
cultural appreciation, but cultures are still more complex. Scholars off er many
models and useful perspectives. 33
One of the most discussed is Geert Hofstede,
who explores value diff erences among national cultures. 34
His work began
with a study of employees of a U.S.-based corporation operating in 40 coun-
tries. Hofstede identifi ed the four cultural dimensions of power distance, un-
certainty avoidance, individualism-collectivism, and masculinity-femininity. 35
Later studies resulted in the addition of a fi fth dimension, time orientation. 36
Figure 16.2 shows a sample of how national cultures varied in his research. Can you see why Hofstede’s cultural dimensions can be signifi cant in business
and management?
Perhaps you’re one of a growing number of consumers who like to shop “fair trade.” Does it feel good when you buy cof- fee, for example, that is certifi ed as grown by persons who were paid fairly for their labor? But what about clothing?
At least one retailer wants to be considered as selling fair- trade fashion. Fair Indigo, launched by former executives of major fashion retailers, presents itself as “a new clothing com- pany with a different way of doing business” that wants to “create stylish, high-quality clothes while paying a fair and meaningful wage to the people who produce them.” Pointing out that there is no certifying body for fair-trade apparel, Fair Indigo offers this guarantee: “We will therefore guarantee that every employee who makes our clothing is paid a fair wage, not just a legal minimum wage, as is the benchmark in the industry.”
Fair Indigo’s representatives travel the globe searching for small factories and cooperatives that meet their standards. By doing so, they’re bucking industry trends in outsourcing and contract manufacturing. Fair Indigo’s CEO, Bill Bass, says: “The whole evolution of the clothing and manufacturing in- dustry has been to drive prices and wages down, shut factories and move work to countries with lower wages. We said, ’we’re going to reverse this and push wages up.’”
YOU DECIDE
Are you willing to pay a bit more for a fair-trade product? And what do you think about Fair Indigo’s business model? Is it “fashion” that sells apparel, or fashion plus conditions of origin? Is Fair Indigo at the forefront of the next new wave of value creation in retailing—fair-trade fashion?
■ FAIR-TRADE FASHION
Ethics Check ARE YOU WILLING TO PAY MORE
FOR FAIR-TRADE PRODUCTS? {
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Diversity and Global Cultures ■ Chapter 16 395
Power distance is the degree to which a society accepts or rejects the unequal distribution of power in organizations and society. In high power distance cul-
tures such as Japan, we expect to fi nd great respect for age, status, and titles.
Could this create problems for an American visitor used to the informalities of a
more moderate power distance culture, and perhaps accustomed to fi rst names
and casual dress in the offi ce?
Uncertainty avoidance is the degree to which a society tolerates or is uncom- fortable with risk, change, and situational uncertainty. In high uncertainty avoid-
ance cultures, such as France, one would expect to fi nd a preference for structure,
order, and predictability. Could this be one of the reasons why the French seem to
favor employment practices that provide job security?
Individualism-collectivism is the degree to which a society emphasizes indi- vidual accomplishments and self-interests, versus collective accomplishments
and the interests of groups. In Hofstede’s data the United States had the highest
individualism score of any country. Don’t you fi nd the “I” and “me” words used a
lot in our conversations and meetings? I’m always surprised how often they oc-
cur in student team presentations. What are the implications of our cultural
tendency toward individualism when we try to work with people from more col-
lectivist national cultures?
Masculinity-femininity is the degree to which a society values assertiveness and materialism, versus feelings, relationships, and quality of life.
37 You might
think of it as a tendency to emphasize stereotypical masculine or feminine traits
and attitudes toward gender roles. Visitors to Japan, with the highest mascu-
linity score in Hofstede’s research, may be surprised at how restricted career
Power distance is the degree to which a society accepts unequal distribution of power.
Uncertainty avoidance is the degree to which a society tolerates risk and uncertainty.
Individualism-collectivism is the degree to which a society emphasizes individuals and their self-interests.
Masculinity-femininity is the degree to which a society values assertiveness and materialism.
Japan Mexico USA
Masculinity Femininity
SwedenThailand
India Philippines Japan USA
High power distance Low power distance
Australia
Costa RicaJapan France
High uncertainty avoidance
SwedenUSA
Low uncertainty avoidance
USA Australia Japan
Individualism Collectivism
Mexico Thailand
NetherlandsUSA
Short-term thinking Long-term thinking
JapanIndia
FIGURE 16.2 How Do Countries Compare on Hofstede’s Five Dimensions of National Cultures? Countries vary on Hofstede’s fi ve dimensions of value diff erences in national cultures. For
example, Japan scores somewhat comparatively higher on power distance and substantially
higher on uncertainty avoidance and masculinity; the United States is much more individualistic
and short-term oriented. Th e implications of such cultural diff erences can be signifi cant. Imagine
what they might mean when international business executives try to make deals around the
world or when representatives of national governments try to work out problems.
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EXPLORING MANAGEMENT396
opportunities can be for women. 38
Th e Wall Street Journal comments: “In Japan,
professional women face a set of socially complex issues—from overt sexism to
deep-seated attitudes about the division of labor.” One female Japanese manager
says: “Men tend to have very fi xed ideas about what women are like. 39
Time orientation is the degree to which a society emphasizes short-term or long-term goals and gratifi cations.
40 Americans are notorious for being impa-
tient and wanting quick, even instantaneous, gratifi cation. Even our companies
are expected to achieve short-term results; those failing to meet quarterly fi nan-
cial targets often suff er immediate stock price declines. Many Asian cultures are
quite the opposite, valuing persistence and thrift, being patient and willing to
work for long-term success.
Although Hofstede’s ideas are insightful, his fi ve value dimensions off er only a
ballpark look at national cultures, a starting point at best. And Hofstede himself
warns that we must avoid the ecological fallacy.41 Th is is acting with the mis- taken assumption that a generalized cultural value, such as individualism in
American culture or masculinity in Japanese culture, applies always and equally
to all members of the culture.
Time orientation is the degree to which a society emphasizes short-term or long-term goals.
Th e ecological fallacy assumes that a generalized cultural value applies equally well to all members of the culture.
WOMAN AREN’T THE PROBLEM:
THEY ’RE THE SOLUTION
An ancient Chinese proverb claims that “women hold up half the sky.” But the harsh reality is that women are oppressed throughout the devel-
oping world in ways that most Westerners are oblivious to. Sex traffi cking, rape, and maternal mortality—death after child- birth—are but a few gender-specifi c human rights routinely violated in third world countries.
In the book Half the Sky, authors Nicolas Kristof and Sheryl WuDunn outline the prevalence of indignities suffered by poor, uneducated women around the globe. They offer well- thought-out ideas for eliminating that injustice, and equate the modern oppression of women worldwide to that of slav- ery. They argue that since slavery was legal, it was readily identifi ed and defeated. However, inhumane treatments of underprivileged women are illegal and continue despite the rule of law.
Kristof and WuDunn, both Pulitzer Prize-winning journal- ists, state that “gendercide”—the daily slaughter of girls in the developing world—takes more lives in one decade than any genocide did in the entire 20th century. The authors travel the world writing and working to fi ght oppressive practices, but are resigned to harsh realities. Victimized women are
poor, uneducated, and powerless in their societies. Crimes against them are hidden from the developing world, and of- ten tolerated in their male-dominated cultures. Even subju- gated females react in disdain when the authors intervene, proclaiming “these are our problems, not yours!”
This book offers practical solutions in what the authors frame as a moral and political movement to emancipate women. They suggest that Westerners fi rst recognize injus- tices, then speak against them. Ordinary citizens can initiate change by volunteering with global organizations that fi ght oppression, or simply joining e-mail lists. The authors believe that educating maltreated women—teaching them their moral rights and the economic means to maintain independence— are key. They advocate for female leadership in countries with
masculine power structures.
REFLECT AND REACT
Are our diversity initiatives toward women properly focused on a global scale? For example, is it more important to increase the ranks of female executives in Fortune 500 corporations, or to stop global “gendercide”? Do you agree that moral and economic education can empower poor, uneducated women to stand against injustice? And by the way, does the plight of victimized women get lost sometimes when we are too quick to embrace and accept so-called cultural differences?
■ HALF THE SKY BY NICHOLAS KRISTOF AND SHERYL WUDUNN
Manager’s Library
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Diversity and Global Cultures ■ Chapter 16 397
||| Country clusters show cultural diff erences. In project GLOBE, short for Global Leadership and Organizational Behavior
Eff ectiveness, a team of international researchers led by Robert House con-
vened to study leadership, organizational practices, and diversity among
world cultures. 42
Th ey studied 62 countries and discovered they fall into ten
culture clusters. Countries within a cluster tend to share societal culture prac-
tices with one another, while also diff ering in many ways from countries in
other clusters.
GLOBE researchers use nine dimensions to describe the culture clusters. 43
Two dimensions are direct fi ts with Hofstede: power distance, which is higher in
Confucian Asia and lower in Nordic Europe, and uncertainty avoidance, which is
high in Germanic Europe and low in the Middle East.
Th ree other GLOBE dimensions are similar to Hofstede’s.
Gender egalitarianism is the degree to which a culture
minimizes gender inequalities, similar to Hofstede’s
masculinity-femininity. It is high in Eastern and Nordic
Europe and low in those of the Middle East. Future orien-
tation is the degree to which members of a culture are
willing to look ahead, delay gratifi cation, and make in-
vestments for longer-term payoff s, similar to Hofstede’s
time orientation. Germanic and Nordic Europe are high
on future orientation; Latin America and the Middle East
are low. Institutional collectivism is the extent to which a
society emphasizes and rewards group action and
accomplishments versus individual ones, similar to
Hofstede’s individualism- collectivism. Confucian Asia
and Nordic Europe score high in institutional collectiv-
ism, while Germanic and Latin Europe score low.
Th e remaining four GLOBE dimensions off er additional insights. In-group col-
lectivism is the extent to which people take pride in their families and organiza-
tional memberships, acting loyal and cohesive regarding them. Th is runs high in
Latin America and the Middle East; it tends to be low in Anglo and Germanic
Europe. Assertiveness is the extent to which a culture emphasizes competition
and assertiveness in social relationships, valuing behavior that is tough and
confrontational as opposed to showing modesty and tenderness. Cultures in
Eastern and Germanic Europe score high in assertiveness; those in Nordic Eu-
rope and Latin America score low.
Performance orientation is the degree of emphasis on performance excellence
and improvements. Anglo and Confucian Asia cultures tend to be high in perfor-
mance orientation. Humane orientation refl ects tendencies in a society for people
to emphasize fairness, altruism, generosity, and caring as they deal with one an-
other. It tends to be high in Southern Asia and Sub-Saharan Africa, and to be low
in Latin and Germanic Europe.
Project GLOBE culture clusters
• Latin America—Brazil, Ecuador, Mexico • Anglo—Australia, England, United States • Latin Europe—France, Italy, Spain • Nordic Europe—Denmark, Finland, Sweden • Germanic Europe—Germany, the Netherlands,
Switzerland
• Eastern Europe—Greece, Hungary, Russia • Confucian Asia—China, Japan, Singapore • Southern Asia—India, Malaysia, Philippines • Sub-Saharan Africa—Nigeria, South Africa,
Zambia
• Middle East—Egypt, Kuwait, Turkey
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EXPLORING MANAGEMENT398
Takeaway 16.2 What Should We Know About Diversity
Among Global Cultures?
Rapid Review • People can experience culture shock due to the discomfort experienced in cross-
cultural situations.
• Cultural intelligence is an individual capacity to understand, respect, and adapt to
cultural diff erences.
• Hall’s silent languages of culture include the role of context in communication,
time orientation, and use of interpersonal space.
• Hofstede’s fi ve dimensions of value diff erences in national cultures are power dis-
tance, uncertainty avoidance, individualism-collectivism, masculinity-femininity,
and time orientation.
• Countries tend to fall into culture clusters, with cultures more similar within than
across the clusters.
Questions for Discussion 1. Should religion be included on Hall’s list of the silent languages of culture?
2. Which of Hofstede’s cultural dimensions might pose the greatest challenges to
U.S. managers working in Asia, the Middle East, or Latin America?
3. Even though cultural diff erences are readily apparent around the world, is the
trend today for cultures to converge and become more like one another?
Be Sure You Can • explain culture shock and how people may respond to it
• diff erentiate low-context and high-context cultures, monochronic and poly-
chronic cultures
• list Hofstede’s fi ve dimensions of value diff erences among national cultures
• contrast American culture with that of other countries on each of Hofstede’s
dimensions
• identify similarities and diff erences between the Hofstede and Project GLOBE
cultural dimensions
What Would You Do? You’ve just been asked to join a team being sent to China for 10 days to discuss a
new software development project with your fi rm’s Chinese engineers. It’s your fi rst
trip to China or Asia. In fact, you’ve only been to Europe as part of a study tour when
in college. Th e trip is scheduled four weeks from today. What can you do to prepare
for the trip and for your work with Chinese colleagues? What worries you the most
about the trip and how well you’ll do under the circumstances?
STUDY GUIDE
Terms to Defi ne
Cultural intelligence
Culture shock
Ecological fallacy
High-context culture
Individualism-
collectivism
Low-context culture
Masculinity-femininity
Monochronic culture
Polychronic culture
Power distance
Proxemics
Time orientation
Uncertainty avoidance
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Diversity and Global Cultures ■ Chapter 16 399
1. Which statement is most consistent with argu-
ments that diversity is good for organizations?
(a) Having a diverse workforce guarantees success.
(b) Diversity is easy to manage because it is already
valued by all people.
(c) Diverse workforces are good at dealing with
diverse customers.
(d) When workforces are diverse, organizations can
spend less on training.
2. When members of minority cultures feel that they
have to behave similar to the ways of the majority
culture, this tendency is called .
(a) biculturalism
(b) particularism
(c) the glass ceiling eff ect
(d) multiculturalism
3. Th e beliefs that older workers are not creative and
prefer routine, low-stress jobs are stereotypes that
might create bad feelings among members of
diff erent subcultures in organizations.
(a) gender (b) generational
(c) functional (d) ethnic
4. Among the three leadership approaches to diversity
identifi ed by Th omas, which one is primarily
directed at making sure that minorities and women
are hired by the organization?
(a) equal employment opportunity
(b) affi rmative action
(c) valuing diversity
(d) managing diversity
5. Pluralism and the absence of discrimination and
prejudice in policies and practices are two important
hallmarks of .
(a) the glass ceiling eff ect
(b) a multicultural organization
(c) quality circles
(d) affi rmative action
6. means that an organization fully
integrates members of minority cultures and
majority cultures.
(a) Equal employment opportunity
(b) Affi rmative action
(c) Symbolic leadership
(d) Pluralism
7. When members of the marketing department stick
close to one another, as well as share jokes and even
a slang language, the likelihood is that a/an
subculture is forming.
(a) occupational (b) generational
(c) gender (d) ethnic
8. When someone experiences culture shock on a
study abroad trip, the fi rst stage is likely to be one of
anxiety caused by confusion in the new cultural
setting. What is the next stage in culture shock?
(a) Experiencing a sense of confi dence from small
victories in dealing with diff erences.
(b) Displaying outright irritation and anger at the
ways of this new culture.
(c) Wanting to give up and go home immediately.
(d) Accepting reality and enjoying the good and bad
aspects.
9. When dealing with proxemics as a silent language of
culture, what is the issue of most concern?
(a) How people use the spoken word to communicate.
(b) How people use nonverbal to communicate.
(c) How people use time to communicate.
(d) How people use space to communicate.
10. In cultures, members tend to do one
thing at a time; in cultures, members
tend to do many things at once.
(a) monochronic; polychronic
(b) universal; particular
(c) collectivist; individualist
(d) neutral; aff ective
C H
A PTER 1
6
TP
Multiple-Choice Questions
TestPrep 16
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EXPLORING MANAGEMENT400
Short-Response Questions
16. What is the diff erence between valuing diversity and managing diversity?
17. How can subculture diff erences create diversity challenges in organizations?
18. If you were asked to give a short class presentation on the “silent languages” of culture, what cultural issues
would you talk about and what examples would you give?
19. In what ways can the power distance dimension of national culture become an important issue in management?
Integration and Application Questions
20. A friend in West Virginia owns a small manufacturing fi rm employing about 50 workers. His son spent a semester
in Japan as an exchange student. Upon return, he said to his dad: “Boy, the Japanese really do things right;
everything is organized in teams; decisions are made by consensus, with everyone participating; no one seems to
disagree with anything the bosses say. I think we should immediately start more teamwork and consensus deci-
sion making in our factory.”
Questions: Th e friend asks you for advice. Using insights from Hofstede’s framework, what would you say to him? What diff erences in the Japanese and American cultures should be considered in this situation, and why?
11. When a foreign visitor to India attends a dinner and
criticizes as “primitive” the local custom of eating
with one’s fi ngers, he or she can be described as
acting in a/an way.
(a) culturally intelligent (b) polychronic
(c) monochronic (d) ethnocentric
12. In a high-context culture we would expect to fi nd
.
(a) low uncertainty avoidance
(b) high power distance
(c) use of monochronic time
(d) emphasis on nonverbal and verbal
communication
13. It is common in Malaysian culture for people to
value teamwork and to display great respect for
authority. Hofstede would describe this culture as
high in both .
(a) uncertainty avoidance and feminism
(b) universalism and particularism
(c) collectivism and power distance
(d) long-term orientation and masculinity
14. On which dimension of national culture did the
United States score highest and Japan score highest
in Hofstede’s original survey research?
(a) masculinity, femininity
(b) long-term, short-term
(c) individualism, masculinity
(d) high uncertainty avoidance, collectivism
15. If someone commits what Hofstede calls the
“ecological fallacy,” what are they likely to be doing?
(a) Disregarding monochronic behavior.
(b) Assuming all members of a culture fi t the
popular stereotype.
(c) Emphasizing proxemics over time orientation.
(d) Forgetting that cultural intelligence can be
learned.
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Diversity and Global Cultures ■ Chapter 16 401
C H
A PTER 1
6
SFL StepsforFurtherLearning
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 16: Diversity Awareness
■ CLASS EXERCISE 16: Alligator River Story
■ TEAM PROJECT 16: Job Satisfaction Around the World
Many learning resources are found at the end of the book and online within WileyPLUS.
Toyota’s success in the American auto market is no ac-
cident. Th e company has used strategies honed since
the 1950s to earn and retain customer satisfaction by
producing superior vehicles within a highly effi cient
production environment. Two core philosophies guide
Toyota’s business: (1) creating fair, balanced, mutually
benefi cial relationships with both suppliers and em-
ployees, and (2) strictly adhering to a just-in-time ( JIT)
manufacturing principle.
By substituting discipline
and effi ciency for fanfare,
Toyota has quietly earned a
long-standing reputation for the reliability and quality of
all of its models. Although the company’s domestic com-
petitors have taken notice and now use many of Toyota’s
proven methods, their fi nancial diffi culties make it hard to
keep up the fi ght.
■ CHAPTER 16 CASE Toyota: Looking Far into the Future
Don’t Miss This Selection from Cases for Critical Thinking
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 16
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Th e International Labour Organization reports there are
215 million child laborers worldwide; 115 million of them
work in hazardous conditions.
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17 Globalization
and International
Business
Going Global Isn’t Just for Travelers
1. Discuss ways that
globalization aff ects
international
business.
2. Understand what
global corporations
are and how they
work.
YOUR CHAPTER 17
TAKEAWAYS
Management Live
Cultural Awareness and The Amazing Race
T he popular reality series Th e Amazing Race pits teams of
players in an around-the-world competition. Each week,
contestants race to complete cultural and physical
challenges. Th ey face grueling travel demands within and between countries,
and face unfamiliar languages and customs. To top it off , sleep and eating
schedules are thrown off by global time diff erences.
One thing becomes painfully clear as the race episodes unfold. Many of the
participants do not know a lot about other countries in the world.
Like most of us, race contestants have grown used to the values and patterns
of home. And that’s understandable. But, if you watch closely, you’ll see that
their lack of cultural awareness sometimes refl ects attitudes of superiority. As the race teams come face-to-face with one new culture after another, however,
they learn a lot about themselves in the process.
When Nat Strand and Kat Chang won the $1 million prize, they were the fi rst
female team to do so. Th eir journey took them to 30 cities across four
continents for a total of 32,000 miles. Th ey crossed a lot of national and cultural
boundaries along the way, much as today’s global organizations do.
Th ere’s no better time to check your cultural awareness than now. Th is
chapter discusses many ways you can put it to work in today’s global economy.
And there may well be a million dollar payoff for success in your future—
measured in career success!
Explore Yourself More on cultural awareness
Role Models Les Wexner makes sure Limited
Brands has its passport
Ethics Check Nationalism and protectionism
Facts to Consider Corruption and bribes haunt
global business
Manager’s Library Hot, Flat and
Crowded 2.0 by
Th omas Friedman
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
403
M L H
C
Th
M
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EXPLORING MANAGEMENT404
There is no doubt that our global community is rich with information,
opportunities, controversies, and complications. We get on the spot news
delivered from around the world right to our smart phones. When crises like
the Japanese tsunami or people’s demonstrations in Egypt and Syria happen,
social media like Twitter and Facebook join major news networks in getting
the information out instantaneously. It is possible to board a plane in New
York and fly nonstop to Beijing, China, or Mumbai, India, or Cape Town,
South Africa. Colleges and universities offer a growing variety of study-abroad
programs. In the business world an international MBA is an increasingly de-
sirable credential.
Speaking of the business side of things, here are some conversation starters.
Ben & Jerry’s Ice Cream is owned by the British-Dutch fi rm Unilever; Anheuser-
Busch is now owned by the Belgian fi rm InBev ; Mercedes builds M-class vehicles
in Alabama; India’s Tata Group owns Jaguar, Land Rover, and Tetley Tea. Japan’s
Honda, Nissan, and Toyota get 80% to 90% of their profi ts from sales in America,
while 60% of components for Boeing’s new 787 Dreamliner are made by foreign
fi rms. Nike earns the majority of its sales outside the U.S., and has manufacturing
contracts with over 120 factories in China alone. 1
Th e growing power of global businesses aff ects all of us in roles as citizens,
consumers, and career-seekers. If in doubt, take a look at what you are wearing.
It’s hard to fi nd a garment or a shoe that is really “Made in America.” What
about your T-shirt? Where did you buy it? Where was it made? Where will it
end up?
In a fascinating book called Th e Travels of a T-Shirt in the Global Economy,
economist Pietra Rivoli tracks the origins and disposition of a T-shirt that she
bought while on a vacation to Florida. 2 As shown in Figure 17.1, the common
T-shirt lives a complicated global life. Th e life of Rivoli’s T-shirt begins with cot-
ton grown in Texas. It moves to China, where the cotton is processed and white
T-shirts are manufactured. Th ese are imported by a U.S. fi rm that silk-screens
them and sells them to retail shops for resale to American customers. When cus-
tomers like Rivoli donate used T-shirts to charity, they’re sold to a recycler. In this
case the recycler sells them to a vendor in Africa who distributes them to local
markets, where they are sold yet again to new customers.
Takeaway 17.1 How Does Globalization Aff ect
International Business?
ANSWERS TO COME
■ Globalization involves the growing interdependence of the world’s economies.
■ Globalization creates a variety of international business opportunities.
■ International business is done by global sourcing, import/export, licensing,
and franchising.
■ International business is done by joint ventures and wholly owned subsidiaries.
■ International business is complicated by diff erent legal and political systems.
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Globalization and International Business ■ Chapter 17 405
||| Globalization involves the growing interdependence of the world’s economies.
Th ese travels of a T-shirt leave little doubt that this is the age of the global economy where resource supplies, product markets, and business competition are worldwide in scope.
3 It is also a time when daily living is heavily infl uenced
by the forces of globalization, defi ned in earlier chapters as the process of growing interdependence among the components in the global economy.
4
Harvard scholar and consultant Rosabeth Moss Kanter describes globalization
as “one of the most powerful and pervasive infl uences on nations, businesses,
workplaces, communities, and lives.” 5
What about your work and career plans? Do you have a good idea of how much
globalization aff ects your life? If you come to Ohio, where I live, you’ll fi nd a grow-
ing number of people working for foreign fi rms. 6 Th ey hold jobs created by in-
sourcing, ones provided domestically by foreign employers. At last count there were more than 6 million such jobs in the U.S. economy.
Outsourcing is the other side of the job story. It shifts jobs to foreign locations to save costs by taking advantage of lower-wage skilled labor. John Chambers,
CEO of Cisco Systems Inc., pretty much lays it on the line for all of us when he
says: “I will put my jobs anywhere in the world where the right infrastructure is,
with the right educated workforce, with the right supportive government.” 7
As
you may well know, not everyone is pleased to hear messages like these.
||| Globalization creates a variety of international business opportunities.
Firms like Cisco, Sony, Ford, and IKEA are large international businesses. Th ey con- duct for-profi t transactions of goods and services across national boundaries. Such
businesses, from small exporters and importers to the huge multinational corpora-
tions, form the foundations of world trade. Th ey move raw materials, fi nished prod-
ucts, and specialized services from one country to another in the global economy.
In the global economy, resources, markets, and competition are worldwide in scope.
Globalization is the process of growing interdependence among elements of the global economy.
Insourcing is the creation of domestic jobs by foreign employers.
Outsourcing shifts local jobs to foreign locations to take advantage of lower-wage labor in other countries.
An international business conducts commercial transactions across national boundaries.
FIGURE 17.1 How Does a T-Shirt Travel Th rough the World’s Global Economy? Th is sketch shows the T-shirt
beginning as cotton grown in
Texas that is shipped to China,
where it is processed and white
T-shirts are manufactured. Th e
white shirts come back to the
United States, where they are
silk-screened and sold to retail
shops for resale to customers. If
customers donate used T-shirts to
a charity, they may go to a recycler
who sells them to vendors in
other countries, where the used
T-shirts get sold again to local
customers.
American customer gives used t-shirt to
local charity
Local charity sells used t-shirt to recycling firm
Recycling firm sells t-shirt to vendor in
East Africa
American customer buys new t-shirt at
tourist shop in Florida
American firm buys white t-shirts, silk-
screens them, sells to local vendors
Chinese factory manufactures white t-shirts for export
TRAVELS
OF A T-SHIRT
IN A GLOBAL
ECONOMY
TRAVELS
OF A T-SHIRT
IN A GLOBAL
ECONOMY
FINISH
African customer buys used t-shirt at local market in Tanzania
START
Cotton is raised on west Texas farm
and sold to China
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EXPLORING MANAGEMENT406
And, they all “go global” for good reasons—profi ts, custom-
ers, suppliers, capital, labor, and risk management. 8
Nike may come to mind as an exemplar of interna-
tional businesses; its swoosh is one of the world’s most
globally recognized brands. But did you know that Nike,
headquartered in Beaverton, Oregon, does no domestic
manufacturing? All of its products come from sources
abroad. New Balance, by contrast, still produces at a few
factories in the United States even while making exten-
sive use of global suppliers in China and elsewhere. 9 Al-
though competing in the same industry, Nike and New
Balance are pursuing somewhat diff erent global strate-
gies. But both are also seeking the international business
advantages listed in the box.
Why Businesses Go Global
• Profi ts—gain profi ts through expanded
operations.
• Customers—enter new markets to gain
customers.
• Suppliers—get access to products, services, and
materials.
• Capital—get access to fi nancial resources.
• Labor—get access to low-cost, talented workers.
• Risk—spread assets among multiple countries.
Today you can also add economic development to the list of reasons why
businesses go global. An example is found in Rwanda where coffee giants
Green Mountain Coffee Roasters, Peet’s Coffee & Tea, and Starbucks work
with the nonprofi t TechnoServe. Its goal is to help raise the incomes for
African coffee farmers by improving their production and marketing methods.
Partner fi rms send advisors to teach coffee growers how to meet their
global standards. It’s a win-win. The global fi rm gets a quality product at a
good price, the growers gain skills and market opportunities, and the local
economy improves. Peet’s director of coffee purchasing, Shirin Moayyad,
says: “If they produce a high-quality product we’ll pay more for it.”
||| International business is done by global sourcing, import/export, licensing, and franchising.
Not only is there more than one reason for getting into international business,
there are several ways of doing it. And getting started with the forms of interna-
tional business can be relatively easy.
Global sourcing
Exporting and importing
Licensing and franchising
Joint ventures Foreign subsidiaries
Increasing involvement in ownership and control of foreign operations
Direct investment strategiesMarket entry strategies
A common fi rst step in international business is global sourcing, where a business purchases materials, manufacturing components, or services from
around the world. Th is is basically taking advantage of international wage gaps
by contracting for low-cost goods and services in foreign locations.
In global sourcing, fi rms purchase materials or services around the world for local use.
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Globalization and International Business ■ Chapter 17 407
In automobile manufacturing, for example, global
sourcing may mean getting designs from Italy, instru-
ment panels from Mexico, antilock braking systems from
Germany, and electronics from Malaysia. In services, it
may mean setting up customer-support call centers in
the Philippines, contracting for computer software
engineers in Russia, or having medical X-rays read by
physicians in India. And for those selling toys, shoes, elec-
tronics, clothing, and more—China is the top outsourc-
ing destination. Some call it the factory for the world. 10
A lot of international business involves exporting—selling locally made products in foreign markets, and importing—buying foreign-made products and selling them in domestic markets. Because the growth of export industries
creates local jobs, you’ll often read and hear about governments supporting
these types of business initiatives.
Another form of international business is the licensing agreement, where for- eign fi rms pay a fee for rights to make or sell another company’s products in a
specifi ed region. Th e license typically grants access to a unique manufacturing
technology, special patent, or trademark. One of the business risks of licensing is
counterfeiting. 11
New Balance, for example, licensed a Chinese supplier to pro-
duce one of its brands. Even after New Balance revoked the license, the supplier
continued to produce and distribute “New Barlun” shoes around Asia. New Bal-
ance ended up facing costly and complex litigation in China’s courts. 12
In franchising, a foreign fi rm buys the rights to use another’s name and operating methods in its home country. When companies such as McDonald’s or Subway
franchise internationally, they sell facility designs, equipment, product ingredients,
recipes, and management systems to foreign investors. Th ey also typically retain
certain product and operating controls to protect their brand’s image.
In exporting, local products are sold abroad.
Importing is the process of acquiring products abroad and selling them in domestic markets.
In licensing, one fi rm pays a fee for rights to make or sell another company’s products.
In franchising, a fi rm pays a fee for rights to use another company’s name and operating methods.
The forces of globalization are often discussed in respect to job migration, outsourcing, currency fl uctuations, and the fortunes of global corporations. Yet it is important to remember that globalization is best understood and dealt with in a context of cultural awareness.
It’s only natural that we become used to the ways of our cul- ture. But many of these same values and patterns of behavior can be called into question when we work and interact with persons from different cultures.
Although very comfortable for us, our ways of doing things may seem strange and even, at the extreme, offensive to others
who come from different cultural backgrounds. It’s only natural, too, for cultural differences to be frustrating and even threaten- ing when we come face-to-face with them.
National economies are now global; business is now global; our personal thinking must be global as well.
■ CULTURAL AWARENESS
Explore Yourself NATIONAL ECONOMIES ARE NOW GLOBAL; BUSINESS IS NOW
GLOBAL; OUR PERSONAL THINKING MUST BE GLOBAL AS WELL. {
Get to know yourself better by taking the Global Intelligence self-assessment and completing other activities in the
Exploring Management Skill-Building Portfolio.
China Manufactures for the World
• 70% of the world’s umbrellas
• 60% of the world’s buttons
• 72% of U.S. shoes
• 50% of U.S. appliances
• 80% of U.S. toys
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EXPLORING MANAGEMENT408
||| International business is done by joint ventures and wholly owned subsidiaries.
Sooner or later, some fi rms that are active in international business decide to make
costly direct investments in operations in foreign countries. One way to do this is
by a joint venture. Th is is a co-ownership arrangement in which the foreign and local partners agree to pool resources, share risks, and jointly operate the new
business. Sometimes the joint venture is formed when a foreign partner buys part
ownership in an existing local fi rm. In other cases it is formed when the foreign and
local partners start an entirely new operation together.
International joint ventures are types of global strategic alliances in which foreign and domestic partners cooperate for mutual gains. Each partner hopes to
get from the alliance things they couldn’t do or would have a hard time doing
alone. For the local partner an alliance may bring access to technology and
opportunities to learn new skills. For the outside partner an alliance may bring
access to new markets and customers, and the expert assistance of locals that
understand them. 13
Joint ventures were the business forms of choice for the world’s large auto-
makers when they decided to pursue major operations in China. Recognizing
the local complexities, they decided it was better to cooperate with local part-
ners than try to enter the Chinese markets on their own. Of course, such joint
venture deals pose potential risks. And loss of technology is a big one. Not long
ago, GM executives noticed that a new car from a fast-growing local competitor
looked very similar to one of their models. Th is competitor was partially owned
by GM’s Chinese joint venture partner and GM claims its design was copied.
Th e competitor denied it and continued its plans to export the cars, called
“Cherys,” to global markets including the United States. 14
In contrast to the international joint venture, which is a cross-border partner-
ship, a foreign subsidiary is a local operation completely owned and controlled by a foreign fi rm. It might be a local fi rm that was purchased in its entirety or it
might be a brand-new operation built from start as a greenfi eld venture. Deci- sions to set up foreign subsidiaries are most often made only after foreign fi rms
have gained experience in the local environment through earlier joint ventures.
A joint venture operates in a foreign country through co-ownership with local partners.
In a global strategic alliance, each partner hopes to achieve through cooperation things they couldn’t do alone.
A foreign subsidiary is a local operation completely owned by a foreign fi rm.
A greenfi eld venture establishes a foreign subsidiary by building an entirely new operation in a foreign country.
• Familiar with your fi rm’s major business • Employs a strong local workforce • Values its customers • Values its employees • Has strong local market for its own products
• Has record of good management • Has good profi t potential • Has sound fi nancial standing • Has reputation for ethical decision making • Has reputation for socially responsible practices
■ CHECKLIST FOR CHOOSING A GOOD JOINT VENTURE PARTNER
{
Tips to Remember MAKE SURE THAT YOUR JOINT VENTURE PARTNER
HAS A REPUTATION FOR GOOD ETHICS.
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Globalization and International Business ■ Chapter 17 409
||| International business is complicated by diff erent legal and political systems.
As you might imagine, the more home-country and host-country laws diff er,
the more diffi cult and complex it is for international businesses to operate suc-
cessfully. And the greater the depth of foreign involvement, the more complex
it becomes to understand and adapt to local ways. Intel, for example, was fi ned
$1.45 billion by the European Union for breaking its antitrust laws. Neelie Kroes,
then vice president of the European Commission, said: “Intel has harmed mil-
lions of European consumers by deliberately acting to keep competitors out of
the market for computer chips for many years.” 15
Common legal problems faced by international businesses involve incorpora-
tion practices and business ownership; negotiation and implemention of con-
tracts with foreign parties; handling of foreign exchange; and intellectual
property—patents, trademarks, and copyrights.
Th e issue of intellectual property is particularly sensitive these days. You might
know this best in terms of concerns about movie and music downloads, photo-
copying of books and journals, and sale of fake designer fashions. Many Western
This is a shopping test. What do Victoria’s Secret, C. O. Bigelow, Bath & Body Works, White Barn Candle Co., La Senza, and Henri Bendel have in common? The answer is they all trace their roots back to 1963 and a small women’s clothing store in Columbus, Ohio. That single store has grown into Limited Brands, one of the world’s most admired fashion retailers; Leslie Wexner, its founder, chairman, and CEO, is a member of the retail CEOs all-star team. He’s been praised as a “pio- neer of specialty brands” and someone with special retailing “vision and focus.”
This is a global business test. Where does Limited Brands get its products? The answer is anywhere in the world where it can get quality at low cost. Under Wexner’s leadership, the fi rm has been a major participant in the world of global sourc- ing. To ensure quality and protect its brand, Limited’s supplier and subcontractor relationships are guided by a “What We Stand For” policy designed to ensure ethical operations. The policy states in part: “We expect our suppliers to promote an environment of dignity, respect and opportunity; provide safe and healthy working conditions; offer fair compensation through wages and other benefi ts; hire workers of legal age,
who accept employment on a voluntary basis; and maintain reasonable working hours.”
Interestingly enough, Wexner has been slow to open stores in other countries. He calls the U.S. market the Lim- ited’s “golden goose” and says other retailers have erred by focusing their eyes abroad and neglecting markets at home. But when sales of a Victoria’s Secret store in the São Paulo, Brazil, airport hit $10 million, Wexner had to take notice. You can expect to see more international stores opening soon.
Standing behind the displays and the fashion at Limited Brands is a global operation that depends on vast worldwide networks of suppliers and subcontractors.
WHAT’S THE LESSON HERE?
As with other international fi rms, the Limited’s global reach must be well managed, and its ethical standards must be maintained. Any misstep will quickly be met by bad press, public criticism, a damaged reputation, and consumer defec- tions. What can a leader do to ensure ethical practices in the complex world of global business practices?
■ LES WEXNER MAKES SURE LIMITED BRANDS HAS ITS PASSPORT
Role Models “WE EXPECT OUR SUPPLIERS TO PROMOTE AN ENVIRONMENT
OF DIGNITY, RESPECT AND OPPORTUNITY.” {
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EXPLORING MANAGEMENT410
businesses know it as lost profi ts due to their products or designs being copied
and sold as imitations by foreign fi rms. After a lengthy and complex legal battle,
for example, Starbucks won a major intellectual property case it had taken to the
Chinese courts. A local fi rm was using Starbucks’ Chinese name, “Xingbake”
(Xing means “star” and bake is pronounced “bah kuh”), and was also copying its
café designs. 16
When international businesses believe they are being mistreated in foreign
countries, or when local companies believe foreign competitors are disadvan-
taging them, their respective governments might take the cases to the World Trade Organization (WTO). Th e 140 members of the WTO give one another most favored nation status—the most favorable treatment for imports and ex- ports. Members also agree to work together within its framework to try to re-
solve some international business problems.
Even though WTO members are supposed to give one another most favored
nation status, trade barriers are still common. They include outright tariffs or taxes that governments impose on imports. They also include nontariff barriers that discourage imports in nontax ways such as quotas and govern- ment import restrictions.
Yet another trade barrier emerges as outright protectionism—the attempt by governments to protect local fi rms from foreign competition and save jobs for
local workers. You will see such issues refl ected in many political campaigns and
debates. And the issues aren’t easy. Government leaders face internal political
dilemmas involving the often-confl icting goals of seeking freer international
trade while still protecting domestic industries. Such dilemmas can make it dif-
fi cult for countries to reach international agreements on trade matters and hard
for the WTO to act as a global arbiter of trade issues.
Th e World Trade Organization (WTO) is a global institution established to promote free trade and open markets around the world.
Most favored nation status gives a trading partner the most favorable treatment for imports and exports.
Tariff s are taxes governments levy on imports from abroad.
Nontariff barriers are nontax policies that governments enact to discourage imports, such as quotas and import restrictions.
Protectionism is a call for tariff s and favorable treatments to protect domestic fi rms from foreign competition.
The headline read “Bolivia Seizes Control of Oil and Gas Fields.” The announcement said: “We are beginning by na- tionalizing oil and gas; tomorrow we will add mining, forestry, and all natural resources, what our ancestors fought for.”
The country’s president, Evo Morales, set forth new terms that gave a state-owned fi rm 82% of all revenues, leaving 18% for the foreign fi rms. He said: “Only those fi rms that respect these new terms will be allowed to operate in the country.” The implicit threat was that any fi rms not willing to sign new contracts would be sent home.
While foreign governments described this nationalization as an “unfriendly move,” Morales considered it patriotic. His
position was that any existing contracts with the state were in violation of the constitution, and that Bolivia’s natural resources belonged to its people.
YOU DECIDE
If you were the CEO at one of these global fi rms, do you resist and raise the ethics of honoring your “old” contracts with the Bolivian government? Or do you comply with the new terms being offered? And as an everyday citizen of the world, can you disagree that a country has a right to protect its natural resources from exploitation by foreigners? Just what are the ethics of Morales’s decision?
■ NATIONALISM AND PROTECTIONISM
Ethics Check BOLIVIA’S PRESIDENT TELLS GLOBAL FIRMS THE COUNTRY ’S
NATURAL RESOURCES BELONG TO ITS PEOPLE. {
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Globalization and International Business ■ Chapter 17 411
Takeaway 17.1 How Does Globalization Aff ect
International Business?
Rapid Review • Th e forces of globalization create international business opportunities to pursue
profi ts, customers, capital, and low-cost suppliers and labor in diff erent countries.
• Th e least costly ways of doing business internationally are to use global sourcing,
exporting and importing, and licensing and franchising.
• Direct investment strategies to establish joint ventures or wholly owned subsid-
iaries in foreign countries represent substantial commitments to international
operations.
• Environmental diff erences, particularly in legal and political systems, can compli-
cate international business activities.
• Th e World Trade Organization (WTO) is a global institution established to pro-
mote free trade and open markets around the world.
Questions for Discussion 1. Why would a government want to prohibit a foreign fi rm from owning more than
49% of a local joint venture?
2. Are joint ventures worth the risk of being taken advantage of by foreign partners,
as with GM’s “Chery” case in China?
3. What aspects of the U.S. legal environment might prove complicated for a Rus-
sian fi rm starting new operations in the United States?
Be Sure You Can • explain how globalization impacts our lives
• list fi ve reasons that companies pursue international business opportunities
• describe and give examples of how fi rms do international business by global
sourcing, exporting/importing, franchising/licensing, joint ventures, and foreign
subsidiaries
• discuss how diff erences in legal environments can aff ect businesses operating
internationally
• explain the purpose of the World Trade Organization
What Would You Do? China beckons! Your new design for a revolutionary golf putter has turned out to be
a big hit with your friends and players on the local golf courses. So, you decide to
have them manufactured in China for sale around the world. Th e question is: How
do you start? What form of international business would be best for you at this
point and why? What worries do you have about doing business with a Chinese
supplier? How can you learn more about potential complications in the Chinese
business environment?
STUDY GUIDE
Terms to Defi ne
Exporting
Foreign subsidiary
Franchising
Global economy
Global sourcing
Global strategic
alliance
Globalization
Greenfi eld venture
Importing
Insourcing
International business
Joint venture
Licensing
Most favored nation
status
Nontariff barriers
Outsourcing
Protectionism
Tariff s
World Trade
Organization (WTO)
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EXPLORING MANAGEMENT412
Takeaway 17.2 What Are Global Corporations
and How Do Th ey Work?
ANSWERS TO COME
■ Global corporations or MNCs do substantial business in many countries.
■ Th e actions of global corporations can be controversial at home and abroad.
■ Managers of global corporations face a variety of ethical challenges.
■ Planning and controlling are complicated in global corporations.
■ Organizing can be diffi cult in global corporations.
■ Leading is challenging in global corporations.
If you travel abroad these days, many of your favorite brands and
products will travel with you. You can have a McDonald’s sandwich in 119 coun-
tries, follow it with Häagen-Dazs ice cream in some 50 countries, and then brush
up with Procter & Gamble’s Crest in 80 countries. Economists even use the “Big
Mac” index to track purchasing power parity among the world’s currencies. A re-
cent index listed $3.71 in the U.S., $2.18 in China, and $4.79 in the Euro area. 17
||| Global corporations or MNCs do substantial business in many countries.
A global corporation or multinational corporation (MNC) has extensive inter- national operations in many foreign countries and derives a substantial portion of
its sales and profi ts from international sources. 18
Th e world’s largest MNCs are
identifi ed in annual listings such as Fortune magazine’s Global 500 and the Finan-
cial Times’ FT Global 500. Th ey include names very familiar to consumers, such as
Walmart, BP, Toyota, Nestlé, BMW, Hitachi, Caterpillar, Sony, and Samsung. Also
on the list are some you might not recognize such as big oil and gas producers like
PetroChina (China), Gazprom (Russia), Total (France), and Petrobas (Brazil). 19
Top managers of some multinationals are trying to move their fi rms toward be-
coming transnational corporations. Th at is, they would like to operate worldwide without being identifi ed with one national home.
20 When you buy Nestlé’s products,
for example, do you have any idea that it is a registered Swiss company? Th e fi rm’s
executives view the entire world as their domain for acquiring resources, locating
production facilities, marketing goods and services, and establishing brand image.
Th ey seek total integration of global operations, try to make major decisions from a
global perspective, and have top managers from many diff erent countries.
Most MNCs still retain strong national identifi cations even while operating
around the world. Is there any doubt in your mind that Walmart and HP are
“American” fi rms whereas Nissan and Sony are “Japanese”? Most likely not, but
that may not be the way their executives would like the fi rms viewed. And by the
way, which company is really more American—the Indian giant Tata Group,
which gets more than 50% of its revenues from North America, or IBM, which
gets 65% of its revenues outside of the United States? 21
A global corporation or multinational corporation (MNC) has extensive international business dealings in many foreign countries.
A transnational corporation is an MNC that operates worldwide on a borderless basis.
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Globalization and International Business ■ Chapter 17 413
||| Th e actions of global corporations can be controversial at home and abroad.
Does a company’s nationality matter to the domestic economy? Does it matter
to an American whether local jobs come from a domestic giant such as Verizon
or a foreign one such as Honda? 22
What about the power global fi rms wield in the
world economy? Quite often now we hear concerns about a globalization gap in which large multinationals gain disproportionately from the forces of global-
ization while smaller fi rms and many countries do not. 23
Th e United Nations re-
ports that they hold one-third of the world’s productive assets and control 70% of
world trade. Revenues of Exxon/Mobil, for example, are equivalent to Egypt’s
GDP; Finland’s budget is 20% less than the annual sales of its premier multina-
tional Nokia. 24
Ideally, global corporations and the countries that host their foreign opera-
tions should all benefi t. But as Figure 17.2 shows, things can go both right and wrong in MNC–host country relationships. While the economic power of global
fi rms is undoubtedly good for business leaders and investors, it can be threat-
ening to small and less developed countries and their domestic industries.
MNCs may complain that the host country bars it from taking profi ts out of
country, overprices local resources, and imposes restrictive government rules.
Host countries may accuse the MNCs of hiring the best local talent, failing to
respect local customs, making too much profi t, and failing to transfer really
useful technology. 25
Another complaint is that MNCs may use unfair practices,
such as below-cost pricing, to drive local competitors out of business. Th is is
one of the arguments in favor of protectionism, discussed earlier as the use of
laws and practices to protect a country’s domestic businesses from foreign
competitors.
MNCs can also run into diffi culties in their home or headquarters countries. If
a multinational cuts local jobs and then moves or outsources the work to another
country, local government and community leaders will quickly criticize the fi rm
for its lack of social responsibility. After all, they will say, shouldn’t you be creat-
ing local jobs and building the local economy? Perhaps you might agree with this
view. But can you see why business executives might disagree?
Th e globalization gap involves large global fi rms gaining disproportionately from the global economic versus smaller fi rms and many countries.
Mutual benefits Shared opportunities with potential for Growth Income Learning Development
What should go right
MNC-HOST COUNTRY RELATIONSHIPS
Host-country complaints about MNCs Excessive profits Economic domination Interference with government Hires best local talent Limited technology transfer Disrespect for local customs
MNC complaints about host countries Profit limitations Overpriced resources Exploitative rules Foreign exchange restrictions Failure to uphold contracts
What can go wrong
MNC-HOST COUNTRY RELATIONSHIPS
FIGURE 17.2 What Can Go Right and Wrong in Relationships Between Global Corporations and Th eir Host Countries? When things go right, both the global corporation, or MNC, and its host country gain. Th e global
fi rm gets profi ts or resources, and the host country often sees more jobs and employment
opportunities, higher tax revenues, and useful technology transfers. But when things go wrong,
each fi nds ways to blame the other.
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EXPLORING MANAGEMENT414
||| Managers of global corporations face a variety of ethical challenges.
Th e ethical aspects of international business are often in the news, and it some-
times involves outright corruption. Th is occurs when employees or representa- tives of MNCs resort to illegal practices such as bribes to further their business
interests in foreign countries. Th e Foreign Corrupt Practices Act (FCPA) makes it illegal for U.S. fi rms and their representatives to engage in corrupt practices
overseas. Th is prohibits them from paying or off ering bribes or excessive com-
missions, including nonmonetary gifts, to foreign offi cials or employees of state-
run companies in return for business favors. 26
Although the FCPA makes sense, critics claim that it fails to recognize the
realities of business as practiced in many foreign nations. Th ey believe it puts
U.S. companies at a competitive disadvantage because they can’t off er the same
“deals” as businesses from other nations—deals that the locals may regard as
standard business practices. What do you think? Should U.S. legal standards
apply to American companies operating abroad? Or should they be allowed to
practice business in whatever way the local setting considers acceptable?
Th e fact is that even the most well-intentioned MNCs can end up in trouble-
some relationships with their global suppliers. Global businesses sometimes end
up working with local fi rms best described as sweatshops, places in which em- ployees work at low wages for long hours and in poor, even unsafe, conditions.
27
Microsoft, for example, faced complaints about workers being abused in a fac-
tory in China that supplies some of its electronic devices. Th e National Labor
Committee, a U.S.-based human rights advocacy organization, claimed that the
Chinese factory owners were overworking employees and housing them in bad
conditions. Microsoft’s response was to send independent auditors “to conduct a
complete and thorough investigation.” 28
Another possibility is that global fi rms end up working with contractors who
use child labor, the full-time employment of children for work otherwise done by adults.
29 As you might guess, the owners of such places might be in a good
position to off er low prices to foreign companies buying their products. But
just because the factory is legal by local standards, does this justify doing
business with its owners? Steve Dowling, an Apple spokesperson, says that
Apple regularly audits suppliers “to make sure they comply with Apple’s
strict standards” and that the fi rm also conducts “extensive training pro-
grams to educate workers about their right to a safe and respectful work
environment.” One Apple audit discovered that three of its foreign contrac-
tors had used underage workers. 30
||| Planning and controlling are complicated in global corporations.
Setting goals, making plans, controlling results—all of these standard manage-
ment functions can become quite complicated in the international arena. Pic-
ture a home offi ce somewhere in the United States, say, Chicago. Th e MNC’s
foreign operations are scattered in Asia, Africa, South America, and Europe.
Somehow, planning and controlling must span all locations, meeting both home
offi ce needs and those of foreign affi liates.
Corruption involves illegal practices to further one’s business interests.
Th e Foreign Corrupt Practices Act makes it illegal for U.S. fi rms and their representatives to engage in corrupt practices overseas.
Sweatshops employ workers at very low wages, for long hours, and in poor working conditions.
Child labor is the full-time employment of children for work otherwise done by adults.
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Globalization and International Business ■ Chapter 17 415
One planning issue in international business is currency risk, or fl uctuations in foreign exchange rates. Companies such as McDonald’s and HP, for example, make
a lot of sales abroad. Th ese sales are in foreign currencies. But as exchange rates
vary, the dollar value of sales revenues goes up and down and profi ts are aff ected.
Companies have to plan for the potential positive and nega-
tive impacts of exchange rate fl uctuations.
When the dollar is weak against the euro, it takes more in
dollars to buy one euro. Th is is bad for American consumers
who must pay more to buy European products; it’s good for
European consumers who pay less for American ones. Th is is
also good for American companies who make lots of sales in
euros and then get more when exchanging them for dollars.
But suppose the dollar strengthens against the euro? Is this
good or bad for fi rms with large sales in euro-zone countries?
Th e boxed example shows that it’s bad.
Global businesses must also deal with control issues of political risk, potential losses because of instability and political changes in foreign countries. Th e major
threats of political risk today come from terrorism, civil wars, armed confl icts,
shifting government systems through elections or forced takeovers, and new
laws and economic policies. An example is the surprise nationalization of Bolivia’s
oil and gas industries as described in the earlier ethics check. Although such
things can’t be prevented, they can be anticipated to some extent by a planning
technique called political-risk analysis. It tries to forecast the probability of dis- ruptive events that can threaten the security of a foreign investment. Given the
world we now live in, can you see the high stakes of such analysis?
Currency risk is possible loss because of fl uctuating exchange rates.
Political risk is possible loss because of instability and political changes in foreign countries.
Political-risk analysis forecasts how political events may impact foreign investments.
If you want a world free of corruption and bribes, you have a lot in common with the nonprofi t activist organization Trans- parency International. From its headquarters in Berlin, TI pub- lishes regular surveys and reports on corruption and bribery around the world. Here are some recent data. Corruption: Best and worst out of 180 countries in perceived corruption in doing business.
Best—1. New Zealand, 2. Denmark, 3. (tie) Sweden/ Singapore, 5. Switzerland Worst—180. Somalia, 179. Afghanistan, 178. Myanmar, 177. Sudan, 176. Iraq In Betweens—19. USA, 32. Spain, 55. Greece, 63. Saudi Arabia, 75. Brazil
Bribery: Best and worst of 20 countries in likelihood of home- country fi rms’ willingness to pay bribes abroad. (& � ties)
Best—Belgium & Canada, Netherlands & Switzerland, Germany Worst—Russia, China, Mexico, India, Italy & Brazil In Betweens—Australia, France & United States, Spain, South Korea & Taiwan
YOUR THOUGHTS?
What patterns do you detect in these data, if any? Does it sur- prise you that the United States didn’t make the “best” lists? How would you differentiate between the terms “corruption” and “bribery” as they apply in international business?
■ CORRUPTION AND BRIBES HAUNT GLOBAL BUSINESS
Facts to Consider TRANSPARENCY INTERNATIONAL SEEKS A
WORLD FREE OF CORRUPTION AND BRIBES.{
Scenario 1: Weak dollar
1 $US � 0.75 euro
Euro sales � €100,000
U.S. take-home revenue � $133,000
Scenario 2: Strong dollar
1 $US � 1.25 euros
Euro sales � €100,000
U.S. take-home revenue � $80,000
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EXPLORING MANAGEMENT416
||| Organizing can be diffi cult in global corporations.
Even after plans are in place, it isn’t easy to organize for international operations.
In the early stages of international activities, businesses often appoint someone
or a specifi c unit to handle them. But as global business expands, a more com-
plex arrangement is usually necessary.
One possible choice for organizing an MNC is the global area structure shown
in Figure 17.3. It arranges production and sales functions into separate geo- graphical units and puts top managers in charge—such as Area Manager Africa
or Area Manager Europe. Th is allows business in major areas of the world to be
run by executives with special local expertise.
PRESIDENT
Area Manager North America
Area Manager Latin America
Area Manager Europe
Area Manager Asia
Area Manager Africa
PRESIDENT
Manager
Product Group A
Global area structure
Global product structure
North America Latin America Africa Europe Asia
Manager
Product Group B
Manager
Product Group C
Manager
Product Group D
Area Specialists
FIGURE 17.3 How Can Multinational Corporations Organize for Success in Th eir Global Operations? When the international side of a
business grows, the structure
often gets complicated. One
approach is a global area
structure, which assigns senior
managers to oversee all product
operations in major parts of the
world. Another is the global
product structure, in which area
specialists advise other senior
managers on business practices
in their parts of the world.
Another organizing option is the global product structure, also shown in the
fi gure. It gives worldwide responsibilities to product group managers who are
assisted by area specialists who work as part of the corporate staff . Th ese special-
ists provide expert guidance on the cultures, markets, and unique conditions of
various countries or regions.
||| Leading is challenging in global corporations. As executives in businesses and other types of organizations press forward with
global initiatives, the challenges of leading diverse workforces and dealing with
customers across national and cultural borders have to be mastered. Th ere is no
doubt the forces of globalization and the growth of international businesses are
creating needs for more global managers, ones aware of international develop- ments and competent in working across cultures.
31 In fact, the Wall Street Journal
calls it a business imperative and says that global companies need managers who
“understand diff erent countries and cultures” and “intuitively understand the
markets they are trying to penetrate.” 32
A global manager is culturally aware and informed on international aff airs.
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Globalization and International Business ■ Chapter 17 417
Universal Facilitators of
Leadership Success
• Acting trustworthy, just, honest
• Showing foresight, planning
• Being positive, dynamic, motivating
• Inspiring confi dence
• Being informed and communicative
• Being a coordinator and team builder
Universal Inhibitors of
Leadership Success
• Being a loner
• Acting uncooperative
• Being irritable
• Acting autocratic
A truly global manager is always inquisitive and informed of in-
ternational events and trends in our ever-changing world, such as
those featured throughout this book. A truly global manager is
also culturally sensitive and aware. And, a truly global manager is
highly skilled in leadership competencies that travel well across
cultural boundaries.
Some evidence-based fi ndings on global leadership skills are
shown in the small box. 33
It turns out that universal facilitators of
leadership success are things like being trustworthy, informed,
communicative, and inspiring. Regardless of where they live and
work, people tend to like leaders who give them confi dence and are
good with teamwork. But things like being a loner and acting irri-
table, uncooperative, and autocratic are viewed negatively across
cultures. Th ey are universal inhibitors of leadership success.
So now we come back to you. Are you willing to admit that the
world isn’t just for traveling anymore, and to embrace it as a career
opportunity? Is it possible that you might stand out to a potential
employer as someone with the leadership skills to excel as a global
manager?
WILL GREEN BECOME THE
NEW RED, WHITE, AND
BLUE?
Is it time for America to rebrand itself and begin ‘living the life’ differently? Its economic and consumptive lifestyle relies on
cheap energy from fossil fuels like coal and oil. These are dis- appearing natural resources that also produce pollution. Could a new “green” United States emerge in place of the old “red, white, and blue”?
In the book Hot, Flat, and Crowded 2.0 (2008, Farrar, Straus and Giroux), author Thomas Friedman argues that ris- ing temperatures globally (hot), growing numbers of people with consumptive lifestyles (fl at), and swelling populations (crowded) converge to create fi ve threats to national econo- mies built upon fossil fuel use. He predicts unstable energy markets, repressive dictatorships in oil rich countries, climate change, exploitation of natural resources in poor countries, and biodiversity loss of species and forests containing valu- able medical and scientifi c resources for humankind.
Friedman challenges America to lead a global revolution in green energy production utilizing clean power, energy effi - cient systems, and conservation ethics toward the natural
world. He offers strategies such as regulating automobile fuel effi ciency at 60 mpg, boosting coal-fi red power plant effi ciency by 60% and capturing its carbon, building nuclear power plants, and increasing wind power to displace coal plants and produce hydrogen fuel. He thinks America can leverage its in- novation, entrepreneurship, and idealism and turn these threats into opportunities.
Friedman envisions an energy Internet of “smart” homes and devices where one national power grid links utility companies to programmable appliances and cars. Machines would communi- cate with the grid, adjusting energy needs and use times to level demand, and idle cars could give back stored energy. These re- alities are feasible in the fi rst half of the 21st century. He believes the U.S. can emerge from coal and oil dependence as the world’s leading power, and profi t by selling its new lifestyle to countries around the world that would be green with envy.
REFLECT AND REACT
How can product manufacturers reuse, recycle, or reduce mate- rials used in consumer goods? Is it possible to grow the world’s population and biodiversity at once? How could oil and gas taxes provide incentives for innovations in clean energies like solar, wind, or nuclear? And by the way, does the price of gas or electricity refl ect its environmental or human health costs?
■ HOT, FLAT, AND CROWDED 2.0 BY THOMAS FRIEDMAN
Manager’s Library
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EXPLORING MANAGEMENT418
Takeaway 17.2 What Are Global Corporations
and How Do Th ey Work?
Rapid Review • A global business or multinational corporation (MNC) has extensive operations in
several foreign countries; a transnational corporation attempts to operate with-
out national identity and with a worldwide strategy.
• Global fi rms benefi t host countries by paying taxes, bringing in new technologies,
and creating employment opportunities; they can also harm host countries by
interfering with local government and politics, extracting excessive profi ts, and
dominating the local economy.
• Th e Foreign Corrupt Practices Act prohibits representatives of U.S. international
businesses from engaging in corrupt practices abroad.
• Planning and controlling global operations must take into account such things as
currency risk and political risk in changing environmental conditions.
• Organizing for global operations often involves use of a global product structure
or a global area structure.
• Leading global operations requires universal leadership skills and global manag-
ers who are capable of working in diff erent cultures and countries.
Questions for Discussion 1. Should becoming a transnational corporation be the goal of all MNCs?
2. Is there anything that global fi rms and host governments can do to avoid con-
fl icts and bad feelings with one another?
3. Are laws such as the Foreign Corrupt Practices Act unfair to American compa-
nies trying to compete around the world?
Be Sure You Can • diff erentiate a multinational corporation from a transnational corporation
• list common host-country complaints and three home-country complaints about
MNC operations
• explain the international business challenges of corruption, sweatshops, and child
labor
• discuss the implications of political risk for global businesses
• diff erentiate the global area structure and global product structure
• list possible competencies of global managers
What Would You Do? You’ve just read in the newspaper that one of your favorite brands of sports shoes is
being investigated for being made in sweatshop conditions at factories in Asia. It
really disturbs you, but the shoes are great! One of your friends says it’s time to boy-
cott the brand, but you’re not sure. Will you engage in a personal boycott or not, and
why? Furthermore, why is it that major global fi rms can often get away with these
behaviors?
STUDY GUIDE
Terms to Defi ne
Child labor
Corruption
Currency risk
Expatriate workers
Foreign Corrupt
Practices Act
Global corporation
or multinational
corporation (MNC)
Global manager
Globalization gap
Political risk
Political-risk analysis
Sustainable
development
Sweatshop
Transnational
corporation
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Globalization and International Business ■ Chapter 17 419
1. In addition to gaining new markets, businesses go
international in the search for ____________.
(a) political risk
(b) protectionism
(c) lower labor costs
(d) most favored nation status
2. When Rocky Brands bought 70% ownership of a
manufacturing company in the Dominican
Republic, Rocky was engaging in which form of
international business?
(a) import/export
(b) licensing
(c) foreign subsidiary
(d) joint venture
3. When Limited Brands buys cotton in Egypt and has
pants sewn from it in Sri Lanka according to designs
made in Italy and then sells the pants in the United
States, this is a form of international business
known as ____________.
(a) licensing (b) importing
(c) joint venturing (d) global sourcing
4. When foreign investment creates new jobs that are
fi lled by local domestic workers, some call the result
____________ as opposed to the more controver-
sial notion of outsourcing.
(a) globalization
(b) insourcing
(c) joint venturing
(d) licensing
5. When a Hong Kong fi rm makes an agreement with
the Walt Disney Company to use the Disney logo
and legally make jewelry in the shape of Disney
cartoon characters, Disney is engaging in a form of
international business known as ____________.
(a) exporting
(b) licensing
(c) joint venturing
(d) franchising
6. One major diff erence between an international
business and a transnational corporation is that the
transnational tries to operate ____________.
(a) without a strong national identity
(b) in at least six foreign countries
(c) with only domestic managers at the top
(d) without corruption
7. Th e Foreign Corrupt Practices Act makes it illegal
for ____________.
(a) U.S. businesses to work with subcontractors
running foreign sweatshop operations
(b) foreign businesses to pay bribes to U.S. govern-
ment offi cials
(c) U.S. businesses to make “payoff s” abroad to gain
international business contracts
(d) foreign businesses to steal intellectual
property from U.S. firms operating in their
countries
8. Th e World Trade Organization, or WTO, would
most likely become involved in disputes between
countries over ____________.
(a) exchange rates
(b) ethnocentrism
(c) nationalization
(d) tariff s and protectionism
9. Th e athletic footwear maker New Balance discov-
ered that exact copies of its running shoe designs
were on sale in China under the name “New Barlun.”
Th is is an example of a/an ____________ problem
in international business.
(a) most favored nation
(b) global strategic alliance
(c) joint venture
(d) intellectual property rights
Multiple-Choice Questions
TestPrep 17CH A
PTER 1 7
TP
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EXPLORING MANAGEMENT420
10. When the profi ts of large international businesses
are disproportionately high relative to those of
smaller fi rms and even the economies of some
countries, this is called ____________.
(a) return on risk for business investment
(b) the globalization gap
(c) protectionism
(d) most favored nations status
11. If a new government comes into power and seizes
all foreign assets in the country without any pay-
ments to the owners, the loss to foreign fi rms is con-
sidered a ____________ risk of international
business.
(a) franchise
(b) political
(c) currency
(d) corruption
12. Who gains most when the dollar weakens versus a
foreign currency such as the Brazilian Real?
(a) American consumers of Brazilian products.
(b) Brazilian fi rms selling products in America.
(c) American fi rms selling products in Brazil.
(d) Brazilian consumers of European products.
13. Which of the following is identifi ed by researchers
as a universal inhibitor of leadership success across
cultures?
(a) Being positive.
(b) Acting autocratic.
(c) Being a good planner.
(d) Acting trustworthy.
14. If an international business fi rm has separate vice
presidents in charge of its Asian, African, and
European divisions, it is most likely using a global
____________ structure.
(a) product
(b) functional
(c) area
(d) matrix
15. Which country is often called “the factory for the
world”?
(a) China
(b) Germany
(c) Brazil
(d) United States
Short-Response Questions
16. What is the diff erence between a joint venture and a wholly owned subsidiary?
17. List three reasons why host countries sometimes complain about MNCs.
18. What does it mean in an international business sense if a U.S. senator says she favors “protectionism”?
19. What is the diff erence between currency risk and political risk in international business?
Integration and Application Question
20. Picture yourself sitting in a discussion group at the local bookstore and proudly signing copies of your newly
published book, Business Transitions in the New Global Economy. A book buyer invites a comment from you by
stating: “I am interested in your point regarding the emergence of transnational corporations. But, try as I might,
a company like Ford or Procter & Gamble will always be ‘as American as Apple pie’ for me.”
Questions: How would you respond in a way that both (a) clarifi es the diff erence between a multinational and a transnational corporation, and (b) explains reasons why Ford or P&G may wish not to operate as or be viewed as
“American” companies?
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Globalization and International Business ■ Chapter 17 421
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 17: Global Intelligence
■ CLASS EXERCISE 17: American Football
■ TEAM PROJECT 17: Globalization Pros and Cons
C H
A PTER 1
7
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Snapshot Although the company had been export- ing motorcycles ever since it was founded, it was not
until the late 1980s that Harley-Davidson management
began to think seriously about international markets.
New ads were developed specifi cally for diff erent mar-
kets, and rallies were adapted to fi t local customs. Th e
company also began to actively recruit and develop
dealers in Europe and Japan. It purchased a Japanese
distribution company and built a large parts warehouse
in Germany.
Harley is currently the
number one motorcycle
brand in fi ve European
countries, and number two
in four countries. Th is sus-
tained buying has earned
Harley four consecutive quarters of sales and market
share growth in Europe. Harley has learned from its
international activities and continues to make inroads
in overseas markets including China and India.
■ CHAPTER 17 CASE Harley-Davidson—Style and Strategy Have Global Reach
Don’t Miss This Selection from Cases for Critical Thinking
f l d k
Make notes here on what you’ve learned about yourself from this chapter.
■ LEARNING JOURNAL 17
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“I found my dream job and passion when I was 11—and I still have
it. I love what I do and I am good at it, which makes me incredibly
lucky and blessed.” Buddy Valestro, reality TV’s “Cake Boss.”
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18 Entrepreneurship
and Small Business
Taking Risks Can Make Dreams Come True
1. Understand
the nature of
entrepreneurship and
entrepreneurs.
2. Discuss small
business and how to
start one.
YOUR CHAPTER 18
TAKEAWAYS
Management Live
Risk Taking and The Bourne Ultimatum
I n Th e Bourne Ultimatum, FBI chief Pamela Landy ( Joan Allen)
is trying to track down someone who leaked highly classifi ed
intelligence information to a British newspaper reporter. Th e
reporter is dead and was last seen with rogue CIA operative Jason
Bourne (Matt Damon). Bourne is a highly trained killer who is
looking for Neil Daniels (Colin Stinton), the individual responsible for the leak.
Landy’s team makes contact with Daniels’s assistant, Nicky Parsons ( Julia
Stiles), while Bourne is in the offi ce. In a play to put Bourne at ease, Landy
reveals to Parsons that the CIA is looking for him but that she doesn’t believe he
has anything to do with the leak.
Landy has taken a gamble that Bourne will trust her and make contact. Does the
gamble pay off ? Th at’s the ultimate question for anyone who’s just taken a risk.
Successful entrepreneurs have a tendency toward risk taking, but this does not mean they charge blindly into situations. Th ey’re not gamblers. Th ey
take calculated risks using information and experience to guide them. But
taking risks does mean there is always a chance for failure. Th e true mark of
an accomplished entrepreneur and risk taker is the ability to learn from
mistakes and continue trying.
Your career will have its share of risks. Th ink about the many complexities of
the present job environment and your plans for career success. Could your
ability to deal with risk be a personal strength and competency?
Explore Yourself More on risk taking
Role Models Michelle Greenfi eld makes
power from the sun
Ethics Check Entrepreneurship and
philanthropy
Facts to Consider Minority entrepreneurs are on
the move
Manager’s Library In-N-Out Burger by
Stacy Perman
Explore Yourself Ethih cs Check Manager’s
W H A T ’ S I N S I D E
423
M L I
S
M
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EXPLORING MANAGEMENT424
Need a job? Why not create one? 1 That’s what Jennifer Wright did after
the fi nancial crisis shut down her work as a credit analyst. While back at school in
an MBA program, she worked with a friend’s idea for a better pizza box and en-
tered it in an entrepreneurship competition. Th e “green box,” as she calls it, breaks
into plates and a storage container before it goes for recycling. She got “incredibly
positive” feedback and seed funding to start her business—GreenBox NY.
Retired, feeling a bit old, and want to do more? Not to worry. People aged
55–64 are the most entrepreneurially active in the United States. Realizing that
he needed “someplace to go and something to do” after retirement, Art Koff ,
now 74, started RetiredBrains.com. It’s a job board for retirees and gets thou-
sands of hits a day. It also employs seven people and keeps Koff as busy as he
wants to be.
Struggling with work-life balance as a mother? Concerned about child nutri-
tion? You might fi nd fl exibility and opportunity in entrepreneurship. Denise
Devine was a fi nancial executive with Campbell Soup Co. Now she has her own
company, Froose Brands, that provides nutritional drinks and foods for kids.
Called mompreneurs, women like Devine are fi nding opportunity in market
niches for healthier products they spot as moms. Says Devine: “As entrepreneurs
we’re working harder than we did, but we’re doing it on our own schedules.”
Female, thinking about starting a small business, but don’t have the money?
Get creative and reach out. You might fi nd help with organizations like Count-
Me-In, started by co-founders Nell Merlino and Iris Burnett. It provides micro-
credit loans from $500 to $10,000 to help women start and expand small
businesses. Its unique credit scoring system doesn’t hold things such as a divorce,
time off to raise a family, or age against applicants—all things that might
discourage conventional lenders. Merlino says: “Women own 38% of all busi-
nesses in this country, but still have far less access to capital than men because of
today’s process.” 2
Th ese examples all involve a personal quality that is much valued in today’s
challenging economic times—entrepreneurship, a form of risk taking to achieve business success. People like Jennifer Wright, Art Koff , and Denise Devine acted
on their ideas to create something new for society. Th ey are entrepreneurs, per- sons who are willing to take risks to pursue opportunities that others either fail
to recognize or view as problems or threats.
Entrepreneurship is risk-taking behavior in pursuit of business success.
An entrepreneur is willing to pursue opportunities in situations that others view as problems or threats.
Takeaway 18.1 What Is Entrepreneurship and
Who Are Entrepreneurs?
ANSWERS TO COME
■ Entrepreneurs are risk takers who spot and pursue opportunities
■ Entrepreneurs often share similar backgrounds and experiences
■ Entrepreneurs often share similar personality traits
■ Women and minority entrepreneurs are growing in numbers
■ Social entrepreneurs seek novel solutions to pressing social problems
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Entrepreneurship and Small Business ■ Chapter 18 425
||| Entrepreneurs are risk takers who spot and pursue opportunities.
H. Wayne Huizenga, former owner of AutoNation, Blockbuster Video, and the
Miami Dolphins, and a member of the Entrepreneurs’ Hall of Fame, describes be-
ing an entrepreneur this way: “An important part of being an entrepreneur is a
gut instinct that allows you to believe in your heart that something will work
even though everyone else says it will not.” You say, “I am going to make sure it
works. I am going to go out there and make it happen.” 3 In business we talk about
this as an entrepreneur’s skill at gaining fi rst-mover advantage, moving faster than competitors to spot, exploit, and enter a new market or an unrecognized
niche in an existing one.
So who are these entrepreneurs and who might become one someday? To be-
gin the discussion take a look at Table 18.1—Debunking Common Myths About Entrepreneurs.
4
A fi rst-mover advantage comes from being fi rst to exploit a niche or enter a market.
Table 18.1 Debunking Common Myths About Entrepreneurs
• Entrepreneurs are born, not made.
Not true! Talent gained and enhanced by experience is a foundation for entrepreneur-
ial success.
• Entrepreneurs are gamblers.
Not true! Entrepreneurs are risk takers, but the risks are informed and calculated.
• Money is the key to entrepreneurial success.
Not true! Money is no guarantee of success. Th ere’s a lot more to it than that; many
entrepreneurs start with very little.
• You have to be young to be an entrepreneur.
Not true! Age is no barrier to entrepreneurship; with age often come experience, con-
tacts, and other useful resources.
• You have to have a degree in business to be an entrepreneur.
Not true! But it helps to study and understand business fundamentals.
With the myths out of the way, let’s meet some real entrepreneurs, people who
built successful long-term businesses from good ideas and hard work. 5 As you
read about these creative and confi dent individuals, think about how you might
apply their experiences to your own life and career. After all, it could be very nice
to be your own boss someday.
||| Anita Roddick In 1973, Anita Roddick was a 33-year-old housewife looking for a way to support
herself and her two children. She spotted a niche for natural-based skin and
health care products, and started mixing and selling them from a small shop in
Brighton, England. Th e Body Shop PLC has grown to some 1,500 outlets in 47
countries with 24 languages, selling a product every half-second to one of its 86
million customers. Known for her commitment to human rights, the environ-
ment, and economic development, the late Roddick believed in business social
responsibility, saying: “If you think you’re too small to have an impact, try going to
bed with a mosquito.”
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EXPLORING MANAGEMENT426
||| Earl Graves With a vision and a $175,000 loan, Earl G. Graves Sr. started Black Enterprise
magazine in 1970. Th at success grew into the diversifi ed business information
company Earl G. Graves Ltd.—a multimedia company covering television, ra-
dio, and digital media including BlackEnterprise.com. Among his many ac-
complishments—named by Fortune Magazine as one of the 50 most powerful
and infl uential African Americans in corporate America, recipient of the Life-
time Achievement Award from the National Association of Black Journalists,
and selection for the Junior Achievement Worldwide U.S. Business Hall of
Fame. He has written a best-selling book, How to Succeed in Business Without
Being White, and is a member of many business and nonprofi t boards. Th e
business school at his college alma mater, Baltimore’s Morgan State University,
is named after him. Graves says: “I feel that a large part of my role as publisher
of Black Enterprise is to be a catalyst for black economic development in this
country.”
||| David Th omas Have you had your Wendy’s today? A lot of people have, and there’s quite a story
behind it. Th e late David Th omas opened the fi rst Wendy’s restaurant in Colum-
bus, Ohio, in November 1969. It’s still there, although there are also about 5,000
others now operating around the world. What began as the founder’s dream to
own one restaurant grew into a global enterprise. Th omas went on to become
one of the best-known entrepreneurs and was often called “the world’s most fa-
mous hamburger cook.” But there’s more to Wendy’s than profi ts and business
performance. Th e company strives to help its communities, with a special focus
on schools and schoolchildren. An adopted child, Th omas founded the Dave
Th omas Foundation for Adoption.
||| Caterina Fake and Stewart Butterfi eld From idea to buyout, it only took 16 months. Th at’s quite a benchmark for would-be
Internet entrepreneurs. Welcome to the world of Flickr, started by Caterina Fake
and her husband Stewart Butterfi eld. Th ey took the notion of online photo sharing
and turned Flickr in real time into an almost viral Internet phenomenon. Th ey also
built the fi rm in the online environment without needing start-up capital. Th ey got
the necessary fi nancing from their families, friends, and angel investors. Th e payoff
came when Yahoo! bought them out for $30 million. Fake’s latest venture is Hunch.
com, a Web site designed to help people make decisions—e.g., should I buy that
Porsche? Stewart, meanwhile, started a gaming studio called Tiny Speck. Its fi rst
game, Glitch, is free-to-play.
||| Entrepreneurs often share similar backgrounds and experiences.
Although we might think of all entrepreneurs as founding a new business that
achieves large-scale success, many operate on a smaller and less public scale.
Entrepreneurs also include those who buy a local Subway Sandwich or Papa
John’s franchise, open a small retail shop selling used video games or bicycles, or
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Entrepreneurship and Small Business ■ Chapter 18 427
start a self-employed service business such as fi nancial planning, editorial
services, or management consulting. 6 But what makes these entrepreneurs tick?
Check out the Cake Boss featured in the chapter opening photo. Look again at
the prior stories. Do you see any patterns?
Researchers tell us that most entrepreneurs are very self-confi dent, deter-
mined, self-directing, resilient, adaptable, and driven by excellence. 7 A report in
the Harvard Business Review suggests that they have strong interests in both “cre-
ative production” and “enterprise control.” Entrepreneurs like to start things—cre-
ative production. Th ey enjoy working with the unknown and fi nding unique
solutions to problems. Entrepreneurs also like to run things—enterprise control.
Th ey enjoy making progress toward a goal. Th ey thrive on independence and the
sense of mastery that comes with success. 8
Research fi nds that entrepreneurs tend to have unique backgrounds. 9 Child-
hood experiences and family environment seem to make a diff erence. Evidence
links entrepreneurs with parents who were entrepreneurial and self-employed.
Similarly, entrepreneurs are often raised in families that encourage responsibil-
ity, initiative, and independence. Another pattern is found in career or work his-
tory. Entrepreneurs who try one venture often go on to others, and prior work
experience in the same business area or industry is helpful.
Entrepreneurs also tend to blossum during certain windows of career oppor-
tunity. Most start their business between the ages of 22 and 45, an age spread
that seems to allow for risk taking. However, age is no barrier to entrepreneur-
ship. When Tony DeSio was 50, he founded the Mail Boxes Etc. chain. He sold it
for $300 million when he was 67 and suff ering from heart problems. Within a
year he launched PixArts, another franchise chain based on photography and
art. 10
When asked by a reporter what he liked most about entrepreneurship,
DeSio replied: “Being able to make decisions without having to go through layers
of corporate hierarchy—just being a master of your own destiny.”
Lest we forget, entrepreneurs are also found within larger organizations.
Called intrapreneurs, they are people who step forward and take a risk to intro- duce a new product or process or to pursue innovations that can change the
organization in signifi cant ways.
Intrapreneurs display entrepreneurial behavior as employees of larger fi rms.
Entrepreneurship plays an important role in local economies and the nation as a whole. It can also be a pathway to personal success. There’s probably a bit of entrepreneur in each of us. Just how much probably depends on our tendency toward risk taking. This is a willingness to take action to achieve a goal even in the face of uncertainty. How would others describe you in this regard? How would you describe yourself?
■ RISK TAKING
Explore Yourself THERE’S PROBABLY A BIT OF
ENTREPRENEUR IN EACH OF US. {
Get to know yourself better by taking the self-assessment on
Entrepreneurship Orientation and completing the other activities in the Exploring Management Skill- Building Portfolio.
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EXPLORING MANAGEMENT428
||| Entrepreneurs often share similar personality traits.
While we can’t say that there is bona-fi de entrepreneurial personality, we can say
that researchers do agree that entrepreneurs often share similar personality
traits and characteristics. How about it, is it possible that your personality has
aspects in common with those of successful entrepreneurs? Look at the fi gure.
How many of the boxes could you put a check next to and say with confi dence—
“yes, that’s me for sure”? 11
Here’s some more detail on the personality
traits and characteristics often shared by en-
trepreneurs. Although the list isn’t defi nitive or
limiting, we can be confi dent in assuming that
the more of these traits possessed by someone,
the more likely it is to fi nd them trying entre-
preneurship at some point in their careers. 12
• Internal locus of control: Entrepreneurs be-
lieve that they are in control of their own des-
tiny; they are self-directing and like autonomy.
• High energy level: Entrepreneurs are persis-
tent, hardworking, and willing to exert ex-
traordinary eff orts to succeed.
• High need for achievement: Entrepreneurs are
motivated to accomplish challenging goals;
they thrive on performance feedback.
• Tolerance for ambiguity: Entrepreneurs are risk takers; they tolerate situations
with high degrees of uncertainty.
• Self-confi dence: Entrepreneurs feel competent, believe in themselves, and are
willing to make decisions.
• Passion and action orientation: Entrepreneurs try to act ahead of problems; they
want to get things done and not waste valuable time.
• Self-reliance and desire for independence: Entrepreneurs want independence;
they are self-reliant; they want to be their own bosses, not work for others.
• Flexibility: Entrepreneurs are willing to admit problems and errors, and willing
to change a course of action when plans aren’t working.
||| Women and minority entrepreneurs are growing in numbers.
Although background and personality help set the stage, it sometimes takes an
outside stimulus or a special set of circumstances to awaken one’s entrepreneurial
tendencies. When economists speak about entrepreneurs, they diff erentiate be-
tween those who are driven by the desire for new opportunities and those who are
driven by absolute need. Th ose in the latter group pursue necessity-based entre- preneurship. Th ey start new ventures because they see no other employment options or they fi nd career doors closed, perhaps due to hitting glass ceilings.
For women and minorities, entrepreneurship sometimes becomes a way to
strike out on their own and gain economic independence. Anita Roddick, featured
Necessity-based entrepreneurship occurs when people start new ventures because they have few or no other employment options.
Flexibility Self-confidence
Passion and action orientation
High energy level
High need for achievement
Tolerance for ambiguity
Internal locus of control
Self-reliance and desire for
independence
WHO ARE THE
ENTREPRENEURS?
WHO ARE THE
ENTREPRENEURS?
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Entrepreneurship and Small Business ■ Chapter 18 429
earlier, once said that she started the fi rst Body Shop store because she needed “to
create a livelihood for myself and my two daughters, while my husband, Gordon,
was trekking across the Americas.” 13
Women already own close to 8 million businesses in the United States, and
their fi rms are expected to create one-third of all new jobs by 2018. Many women
business owners say they started their fi rms after realizing they could do for
themselves what they were already doing for other employers. 14
One survey of women leaving private-sector employment to pursue entre-
preneurship reports 33% believing they were not being taken seriously by their
prior employer and 29% having experienced “glass ceiling” issues. A report en-
titled Women Business Owners of Color: Challenges and Accomplishments, dis-
cusses the motivations of women of color to pursue entrepreneurship because
of glass ceiling problems. Th ese include not being recognized or valued by
their prior employers, not being taken seriously, and seeing others promoted
ahead of them. 15
About 5.8 million business in America are owned by minority entrepreneurs
and these fi rms are signifi cant sources of job creation for the economy. In one
fi ve-year period their growth rate was 46% versus 18% for all fi rms, and the num-
ber of employees for minority-owned fi rms rose by 27% versus less than 1% for all
fi rms. Yet even with this record of accomplishment the obstacles to minority en-
trepreneurship are real and shouldn’t be underestimated, just as is the case for
female entrepreneurs. An example is the critical area of start-up fi nancing. Less
than 1% of the available venture capital in the U.S. goes to minority entrepre-
neurs. Th e Minority Business Development Agency of the Department of Com-
merce is well aware of this and other problems. As part of its mission to support
the development of minority-owned small and medium-sized fi rms, the MBDA
has set up a nationwide network of 40 business development centers with the
goal of helping them grow in “size, scale, and capacity.” 16
Minority entrepreneurship is one of the fastest-growing sectors of our economy. Consider these facts and trends: • There are close to 6 million minority-owned fi rms in America
(29% of all business) and they contribute $1 trillion annually to the economy.
• Minority-owned fi rms employ some 6 million workers, with the largest employers Asian-owned (2.9 million jobs), His- panic owned (1.9 million jobs), and African-American owned (921,000 jobs).
• In the last census of small businesses, those owned by African Americans had grown by 45%, by Hispanics 31%, and by Asians 24%.
• If minority business ownership was proportionate to their share of the U. S. population, they would number more than 8 million fi rms and provide more than 17 million jobs.
• Minority businesses export to 41 countries on six continents, and generate twice the export activity of non-minority fi rms.
YOUR THOUGHTS?
How can we explain the growth of minority-owned businesses? Is minority entrepreneurship a way to fi ght economic disparities in society? What special obstacles do minorities and women face on their pathways toward entrepreneurship? What can be done about it?
■ MINORITY ENTREPRENEURS ARE ON THE MOVE
Facts to Consider MINORITY ENTREPRENEURS PROVIDE 6 MILLION JOBS
BUT ATTRACT LESS THAN 1% OF VENTURE CAPITAL. {
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EXPLORING MANAGEMENT430
||| Social entrepreneurs seek novel solutions to pressing social problems.
In an earlier discussion in Chapter 3 on ethics and social responsibility we
identifi ed social entrepreneurs as persons whose entrepreneurial ventures in- volve novel ways to help solve pressing social problems.
17 You can think of these
problems as the likes of poverty, illiteracy, poor health, and even social oppres-
sion. Social entrepreneurs share many characteristics with other entrepreneurs,
including backgrounds and personalities. But there is one big diff erence. Instead
of the profi t motive, they are driven by a social mission. 18
Th ey want to start and
run organizations that improve society and help make lives better for people who
are disadvantaged.
Th ere’s probably quite a bit of social entrepreneurship taking place in your
community. Sadly, it often gets little notice. Most attention often goes to business
entrepreneurs making lots of money—or trying to do so. Yet there are many ex-
amples you can fi nd of people who have made the commitment to social entre-
preneurship. Deborah Sardone, for example, owns a housekeeping service in
Texas. After noticing that her clients with cancer really struggled with everyday
household chores, she started Cleaning for a Reason. It’s a nonprofi t that net-
works with cleaning fi rms around the country that are willing to off er free home
cleaning to cancer patients. 19
Fast Company magazine says social entrepreneurs run enterprises with “in-
novative thinking that can transform lives and change the world.” It celebrates
them with its prestigious Honor Roll of Social Enterprises of the Year. Here are
some recent winners. 20
A social entrepreneur takes risks to fi nd new ways to solve pressing social problems.
THE ALL-AMERICAN BURGER NEVER GOES OUT OF STYLE In 1948, Harry and Esther Snyder opened a small hamburger stand beside a busy road in Los Angeles, California. They were eager to make ends meet and, after years
of sacrifi ce during the depression and war, people were in the mood to get about and enjoy life. Driving cars to roadside stands was a novel idea. Their restaurant, In-N-Out Burger, is now a successful family-owned chain of 250 drive-through stores.
In the book In-N-Out Burger (2009, HarperCollins), author Stacy Perman profi les the Snyder’s values and the investment they put into every In-N-Out burger, employee, and customer. She claims their dedication to quality, reinvestment in em- ployees, and joy in delighting customers has generated an
“uncopyable” competitive advantage. In-N-Out stores meet McDonald’s stores revenues but do so without advertising, franchising, fi nancing debt, paying minimum wage, or sacrifi c- ing quality for volume, speed, and price.
Part of the In-N-Out difference is a focus on quality—right from the beef to the service. Another part is genuine interest in employees: Called associates, they are paid well above minimum wage and train at In-N-Out University. New stores open only after managers have been groomed. Perman says In-N-Out has unrivaled loyal customers and a “cult like” following.
REFLECT AND REACT
Do you agree with Perman that In-N-Out Burger is doing things in ways that create an “uncopyable” advantage in its industry? Are these things that could be copied by entrepre- neurs setting out to gain success in other industries?
■ IN-N-OUT BURGER BY STACY PERMAN
Manager’s Library
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Entrepreneurship and Small Business ■ Chapter 18 431
• Chip Ransler and Manoj Sinha tackled the lack of power faced by many of
India’s poor villagers. As University of Virginia business students, they realized
that 350 million of the people without reliable electricity lived in the country’s
rice-growing regions. And in those regions, tons of rice husks were being
discarded with every harvest. Ransler and Sinha sought a way to create biogas
from the husks and use the gas to fuel small power plants. Th ey succeeded, and
Husk Power Systems is a reality. But with more than 125,000 villages suff ering a
lack of power, Ransler says “there’s a lot of work to be done.”
• Rose Donna and Joel Selanikio were concerned about public health prob-
lems in sub- Saharan Africa. After noting that developing nations are often
bogged down in the paperwork of public health, they created software to
make the process quicker and more effi cient. Th e UN, the World Health Or-
ganization, and the Vodafone Foundation are now helping their fi rm, Data-
Dyne, move the program into 22 more African nations.
What drives people like those in the prior examples to pursue entrepreneur-
ship for social gains instead of money? Can you think of ideas that could turn
social entrepreneurship by yourself and others into positive impact on your
local community?
Would you buy shoes just because their maker is pledged to philanthropy? Blake Mycoskie wants you to. Back in 2002, he was participating with his sister in the reality TV show The Amazing Race. It whetted his appetite for travel, and he visited Argentina in 2006. There he came face-to-face with lots of young children without shoes, and he had a revelation: He would return home and start a sustainable business that would help address the problem.
Mycoskie launched TOMS (short, he says, for “better tomor- row”) to sell shoes made in a classic Argentinean style. But there’s a twist—for each pair of shoes it sells, the fi rm donates a pair to needy children. Blake calls this One for One, a “move- ment” that involves “people making everyday choices that improve the lives of children.” After giving away its one-millionth pair of shoes, Mycoskie renamed the company One for One.
One for One’s business model can be described as caring capitalism or profi ts with principles. Two other names associated with this approach are Ben & Jerry’s Ice Cream and Tom’s of Maine. But each of these fi rms was sold to a global enterprise—
Unilever for Ben & Jerry’s and Colgate-Palmolive for Tom’s of Maine. The expectation was that the corporate buyers wouldn’t compromise on the founders’ core values and social goals. Who knows what the future holds if One for One grows to the point where corporate buyers loom.
The state of Maryland recently passed a law creating the “benefi t corporation” as a new legal entity. It is designed to protect fi rms like One for One whose charters spell out special values. It also requires them to report their social benefi t activi- ties and impact.
YOU DECIDE
What about it? Is Blake’s business model one that others should adopt? Is it ethical to link personal philanthropic goals with the products that your business sells? And if an entrepre- neurial fi rm is founded on a caring capitalism model, is it ethical for a future corporate buyer to reduce or limit the emphasis on social benefi ts? Is Maryland’s benefi t corporation approach the way we should be heading?
■ ENTREPRENEURSHIP AND PHILANTHROPY
Ethics Check CAN SMALL BUSINESSES BUILT ON CARING
CAPITALISM SURVIVE BIG BUSINESS BUYOUTS? {
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EXPLORING MANAGEMENT432
Takeaway 18.1 What Is Entrepreneurship and
Who Are Entrepreneurs?
Rapid Review • Entrepreneurship is original thinking that creates value for people, organizations,
and society.
• Entrepreneurs take risks to pursue opportunities others may fail to recognize.
• Entrepreneurs tend to be creative people who are self-confi dent, determined,
resilient, adaptable, and driven to excel; they like to be masters of their own
destinies.
• Women and minorities are well represented among entrepreneurs, with some of
their motivation driven by necessity or the lack of alternative career options.
• Social entrepreneurs apply their energies to create innovations that help to solve
important problems in society.
Questions for Discussion 1. Does an entrepreneur always need to have fi rst-mover advantage in order to
succeed?
2. Are there any items on the list of entrepreneurial characteristics that are “must-
haves” for someone to succeed in any career, not just entrepreneurship?
3. Could growth of necessity-driven entrepreneurship be an indicator of some
deeper problems in our society?
Be Sure You Can • explain the concept of entrepreneurship
• explain the concept of fi rst-mover advantage
• explain why people such as Caterina Fake and Earl Graves might become
entrepreneurs
• list personal characteristics often associated with entrepreneurs
• explain trends in entrepreneurship by women and minorities
• explain what makes social entrepreneurs unique
What Would You Do? After reading the examples in this chapter, you’re struck by the potential for you to
try entrepreneurship. Indeed, you’re thinking now that it would be very nice to be
your own boss, do your own thing, and make a decent living in the process. But how
do you get started? One possibility is to start with ideas passed around among your
friends and family. Or perhaps there’s something that has been on your mind as a
great possible business idea. So, tell us about it. What ideas do you have? What
would you like to pursue and why?
STUDY GUIDE
Terms to Defi ne
Entrepreneur
Entrepreneurship
First-mover advantage
Intrapreneur
Necessity-based
entrepreneurship
Social entrepreneur
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Entrepreneurship and Small Business ■ Chapter 18 433
The U.S. Small Business Administration (SBA) defines a small business as one that is independently owned and operated and that does not dominate
its industry. 21
It also has 500 or fewer employees, with the number varying a
bit by industry. Almost 99% of U.S. businesses meet this defi nition. Some 87%
employ fewer than 20 persons. And interestingly enough, recent data show that
business owners rank highest among 10 other occupations in terms of
contentment. Th is includes things like physical and mental health, job
satisfaction, and quality of life overall. 22
As to what it’s like to be a small business
owner, “I’m still excited to get up and go to work every day,” says Roger Peugot,
who owns a 14-employee plumbing fi rm. He adds: “Even when things get tough,
I’m still in control.” 23
||| Small businesses are mainstays of the economy.
Most nations rely on their small business sector. Why? Among other things, small
businesses off er major economic advantages. In the United States, for example,
small businesses employ some 52% of private workers, provide 51% of private-
sector output, receive 35% of federal government contract dollars, and provide
as many as 7 out of every 10 new jobs in the economy. 24
Smaller businesses are
especially prevalent in the service and retailing sectors of the economy. Higher
costs of entry make them less common in other industries such as manufacturing
and transportation.
And then there’s the Internet. Have you looked at the action on eBay recently?
Can you imagine how many people might now be running small trading busi-
nesses from their homes? If you’re one of them, you’re certainly not alone. Th e
SBA believes that some 85% of small fi rms are already conducting business over
the Internet. 25
Even established “bricks-and-mortar” small retailers are fi nding
the Internet ripe with opportunities. Th at’s what happened to Rod Spencer and
A small business has fewer than 500 employees, is independently owned and operated, and does not dominate its industry.
Takeaway 18.2 What Should We Know About Small
Businesses and How to Start One?
ANSWERS TO COME
■ Small businesses are mainstays of the economy.
■ Small businesses must master three life-cycle stages.
■ Family-owned businesses can face unique challenges.
■ Most small businesses fail within fi ve years.
■ Assistance is available to help small businesses get started.
■ A small business should start with a sound business plan.
■ Th ere are diff erent forms of small business ownership.
■ Th ere are diff erent ways of fi nancing a small business.
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EXPLORING MANAGEMENT434
his S&S Sports Cards store in Worthington, Ohio. In fact, he closed the store not
because business was bad but because it was really good. When his Internet
sales greatly exceeded in-store sales, Spencer decided to follow the world of
e-commerce. He now works from home, saving the cost of renting retail space
and hiring store employees. “I can do less business overall,” Rod says, “and make
a higher profi t.” 26
||| Small businesses must master three life-cycle stages.
Th e typical small business moves through recognizable life-cycle stages. 27
Th e
new fi rm begins with the birth stage, where the entrepreneur struggles to get the
new venture established and survive long enough to really test the marketplace.
Th e fi rm then passes into the breakthrough stage, where the business model begins
to work well, growth takes place, and the complexity of the business expands
signifi cantly. Next is the maturity stage, where the entrepreneur experiences
When she was named as a recipient of the Ohio Department of Development’s Keys to Success Award, Michelle Greenfi eld said, “It’s exciting. It’s kind of nice to be recognized as a good business owner. The goal is not to have the award, the goal is to have a good business and do well.” She and her husband Geoff certainly do have a good business; it’s called Third Sun Solar Wind and Power, Ltd.
Although the company’s products are certainly timely to- day, they were a bit ahead of the market in the beginning. The Greenfi elds began by building a rural home that used no elec- tricity in rural Athens County, Ohio. Solar power was the re- placement, and they have yet to pay an electric utility bill.
As friends became interested, they helped others get into solar power and the business kept growing from there. It has been ranked by Inc. magazine as the 32nd-fastest-growing en- ergy business in the United States. Third Sun is the largest pro- vider of solar energy systems in the Midwest and has experi- enced a 390% growth in three years. Quite a story for an idea that began with a sustainable home!
Soon after its birth, Third Sun moved into the Ohio Univer- sity Innovation Center, a business incubator dedicated to help- ing local fi rms grow and prosper. Michelle says that they lived
very frugally in their rural home and this helped them start the business on a low budget; they have also benefi ted from tap- ping the local workforce in a university town and from having MBA students work with their fi rm in consulting capacities. As the company grew, Geoff focused on technical issues while Michelle spent most of her time on the business and managerial ones. She’s now the CEO and, although primarily concerned with strategic issues as the fi rm grows, still keeps involved by helping the fi rm’s 21 employees with other aspects of the busi- ness. “I do a lot of marketing,” she says, “I do speaking en- gagements . . . I serve on the Board of Directors of Green Energy Ohio.”
WHAT’S THE LESSON HERE?
Michelle is especially proud of her accomplishments and says: “I think it’s nice to be able to point out that there are women in the fi eld that also have enough brains to be successful.” She also points out that the name “Third Sun” was chosen to rep- resent a “third son” for the couple, one requiring lots of nur- turing in order to help it grow big and strong. Michelle seems to have mastered the test of entrepreneurship and is helping to save our planet as well. Could more people follow her path?
■ MICHELLE GREENFIELD MAKES POWER FROM THE SUN
Role Models A SUSTAINABLE HOME AND RURAL LIFE HELPED LAUNCH
A FAST GROWING ALTERNATIVE ENERGY FIRM. {
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Entrepreneurship and Small Business ■ Chapter 18 435
market success and fi nancial stability but also has to face competitive challenges
in a dynamic environment.
As shown in Figure 18.1, small business owners often face somewhat diff erent management dilemmas as their fi rms move through these life-cycle stages. When
they experience growth, including possible diversifi cation or global expansion,
they can encounter problems making the transition from entrepreneurial leader-
ship to professional strategic leadership. Th e entrepreneur brings the venture
into being and sees it through the early stages of life; the professional manages
and leads the venture into maturity as an ever-evolving and perhaps still-growing
corporate enterprise. If the entrepreneur is incapable of meeting or unwilling to
meet the fi rm’s leadership needs in later life-cycle stages, continued business sur-
vival and success may well depend on the business being sold or management
control being passed to professionals.
||| Family-owned businesses can face unique challenges.
Among the reasons given for getting started in small businesses, you’ll fi nd the
owners saying they were motivated to be their own bosses, be in control of
their own futures, fulfi ll dreams, and become part of a family-owned busi-
ness. 28
Indeed, family businesses, those owned and fi nancially controlled by family members, represent the largest percentage of businesses operating
worldwide. Th e Family Firm Institute reports that family businesses account
for 78% of new jobs created in the United States and provide 60% of the nation’s
employment. 29
Family businesses must master the same challenges as other small or large
businesses, such as devising strategy, achieving competitive advantage, and en-
suring operational excellence. When everything goes right, the family fi rm can
be an ideal situation. Everyone works together, sharing values and a common
goal: doing well to support the family. But things don’t always turn out this way
or stay this way. Changes and complications often test the family bonds, especially
as a business changes hands over successive generations.
Family businesses are owned and fi nancially controlled by family members.
• Refining the strategy • Continuing growth • Managing for success
MATURITY STAGE
Investing wisely and staying flexible
• Working on finances • Becoming profitable • Growing
BREAKTHROUGH STAGE
Coping with growth and takeoff
• Establishing the firm • Getting customers • Finding the money
BIRTH STAGE
Fighting for existence and survival
FIGURE 18.1 What Are the Stages in the Life Cycle of an Entrepreneurial Firm? It is typical for small businesses to move through three life-cycle stages. During the birth stage, the
entrepreneur focuses on getting things started—bringing a product to market, fi nding initial
customers, and earning enough money to survive. Breakthrough is a time of rapid growth when
the business model really starts working well. Growth often slows in the maturity stage, where
fi nancial success is realized but also where the entrepreneur often needs to make adjustments to
stay successful in a dynamic marketplace.
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EXPLORING MANAGEMENT436
“Okay, Dad, so he’s your brother. But does that mean we have to put up with
inferior work and an erratic schedule that we would never tolerate from anyone
else in the business?” 30
Welcome to the family business feud, a problem that can lead to small business failure. Th e feud can be about jobs and who does what, business strategy, operating approaches, fi nances, or other matters. It
can be between spouses, among siblings, between parents and children. It re-
ally doesn’t matter. Unless family business feuds are resolved satisfactorily, the
fi rm may not survive.
A survey of small and midsized family businesses indicated that 66% planned
on keeping the business within the family. 31
Th e management question is: Upon
leaving, how will the current head of the company distribute assets and deter-
mine who will run the business? Th is introduces the succession problem, how to handle the transfer of leadership from one generation to the next. Th e data on
succession are eye-opening. About 30% of family fi rms survive to the second
generation; 12% survive to the third generation; only 3% are expected to survive
beyond that. 32
If you were the owner of a successful family business, what would you do?
Wouldn’t you want to have a succession plan that clearly spells out how leader- ship transition and related matters, including fi nancial ones, are to be handled
when the time for changeover occurs?
||| Most small businesses fail within fi ve years.
Does the prospect of starting your own small business sound good? It should, but
a word of caution is called for as well. What the last fi gure on life-cycle stages
didn’t show is a very common event—small business failure.
Small businesses have a scary high failure rate. Th e SBA reports that as
many as 60% to 80% of new businesses fail in their fi rst fi ve years of operation. 33
Part of this might be explained as a “counting” issue. Th e government counts
as a “failure” any business that closes, whether it is due to the death or
retirement of an owner, the sale to someone else, or the inability to earn a
profi t. Nevertheless, the fact remains: A lot of small business start-ups just
don’t make it.
Th e recent economic downturn was especially hard on small fi rms. 34
Reports
are that over 4 million closed in one three-month period, with most facing major
sales revenue and credit problems. Beth Wood, a family business expert with
MassMutual, says: “Th ey’ve seen reductions in top line revenue that they just
can’t react fast enough to.” And refl ecting on problems with her family restau-
rant, former owner Georgia Roussos said: “You had to discount so heavily to get
someone in the door that it just wasn’t profi table anymore.” When the restau-
rant fi nally closed, her family suff ered emotionally not just for themselves but
for their former employees as well; 55 people, some serving as long as 35 years,
lost their jobs.
Look at the next fi gure and consider the many possible causes of small business
failures. 35
Most of the failures result from poor judgment and management
mistakes made by entrepreneurs and owners. So if you decide to launch your
own venture someday, you’ll need to learn from these mistakes. Th is is just as
important as studying success stories.
A family business feud can lead to small business failure.
Th e succession problem is the issue of who will run the business when the current head leaves.
A succession plan describes how the leadership transition and related fi nancial matters will be handled.
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Entrepreneurship and Small Business ■ Chapter 18 437
SMALL
BUSINESS
FAILURES
SMALL
BUSINESS
FAILURES
Poor financial control
Lack of experience
Lack of strategy
Growing too fast Ethical failure
Lack of strategic leadership
Lack of commitment
Lack of expertise
||| Assistance is available to help small businesses get started.
Individuals who start small businesses face a variety of challenges. And even
though the prospect of being part of a new venture is exciting, the realities of
working through complex problems during setup and the early life of the busi-
ness can be especially daunting. Fortunately, there is often some assistance
available to help entrepreneurs and owners of small businesses get started.
One way that start-up diffi culties can be managed is through participation in
a business incubator. Th ese are special facilities that off er space, shared admin- istrative services, and management advice at reduced costs with the goal of help-
ing new businesses get successfully established. Some incubators are focused on
specifi c business areas such as technology, light manufacturing, or professional
services; some are located in rural areas, while others are urban based; some
focus only on socially responsible businesses.
Regardless of their focus or location, business incubators share the common goal
of increasing the survival rates for new business start-ups. Th ey want to help build
new businesses that will create new jobs and expand economic opportunities in their
local communities. In the incubators, small businesses are nurtured and assisted so
that they can grow quickly and become healthy enough to survive on their own.
A business incubator is a facility that off ers services to help new businesses get established.
Y Combinator is a business incubator located in Mountain View,
California. It was founded by Paul Graham with a focus on Web start-
ups. Graham says his premise is “to apply mass-production techniques
to founding of a start-up.” In the Y Combinator, which supports about
10 start-ups at any given time, entrepreneurs get offi ces, regular
meetings with Graham and other business experts, and access to
potential investors. They also receive $15,000 grants in exchange for the
incubator taking a 6% ownership stake; Y Combinator hopes to capture a
signifi cant return on such investments as the new businesses succeed.36
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EXPLORING MANAGEMENT438
Another source of assistance for small business development is the U. S. Small
Business Administration. Because small businesses play such signifi cant roles in
the economy, the SBA works with state and local agencies as well as the private
sector to support a network of over 1,100 Small Business Development Centers nationwide.
37 Th ese SBDCs off er guidance to entrepreneurs and small business
owners, actual and prospective, on how to set up and manage business opera-
tions. Th ey are often associated with colleges and universities, and they give stu-
dents a chance to work as consultants with small businesses at the same time
that they pursue their academic programs. If you are inclined toward small busi-
ness, why not check out your local SBDC?
||| A small business should start with a sound business plan.
When people start new businesses or even start new units within existing ones,
they can greatly benefi t from another type of plan—a sound business plan. Th is plan describes the goals of the business and the way it intends to operate, ideally
in ways that can help obtain any needed start-up fi nancing. 38
Although there is no
single template for a successful business plan, most would agree on the general
framework presented in Tips to Remember. 39
Banks and other fi nanciers want to see a business plan before they loan money
or invest in a new venture. Senior managers want to see a business plan before
they allocate scarce organizational resources to support a new entrepreneurial
project. You should also want a small business plan. Th e detailed and disciplined
thinking helps sort out your ideas, map strategies, and pin down your business
model. Says Ed Federkeil, who founded a small business called California Custom
Sport Trucks: “It gives you direction instead of haphazardly sticking your key in
the door every day and saying—‘What are we going to do?’” 40
Small Business Development Centers off er guidance to entrepreneurs and small business owners on how to set up and manage business operations.
A business plan describes the direction for a new business and the fi nancing needed to operate it.
• Executive summary—business purpose, highlights of plan • Industry analysis—nature of industry, economic trends, legal
or regulatory issues, risks • Company description—mission, owners, legal form • Products and services—major goods or services, uniqueness
vis-à-vis competition • Market description—size, competitor strengths and weak-
nesses, fi ve-year sales goals • Marketing strategy—product characteristics, distribution,
promotion, pricing
• Operations description—manufacturing or service methods, suppliers, controls
• Staffi ng—management and worker skills needed and avail- able, compensation, human resource systems
• Financial projection—cash fl ow projections 1–5 years, break- even points
• Capital needs—amount needed, amount available, amount being requested
• Milestones—timetable for completing key stages of new venture
■ WHAT TO INCLUDE IN A BUSINESS PLAN
{
Tips to Remember THE DISCIPLINE OF WRITING A BUSINESS PLAN CAN
INCREASE THE LIKELIHOOD OF SUCCESS.
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Entrepreneurship and Small Business ■ Chapter 18 439
||| Th ere are diff erent forms of small business ownership.
One of the important choices when starting a new venture is the legal form of
ownership. Th ere are a number of alternatives and each has its own advantages
and disadvantages.
A sole proprietorship is simply an individual or a married couple that pur- sues business for a profit. The business often operates under a personal name,
such as “Tiaña Lopez Designs.” Because a sole proprietorship is simple to
start, run, and terminate, it is the most common form of U.S. small business
ownership. If you choose this form, however, you have to remember—any
owner of a sole proprietorship is personally liable for all business debts and
claims.
A partnership is formed when two or more people contribute resources to start and operate a business together. Most are set up with legal and written
agreements that document what each party contributes as well as how profi ts
and losses are to be shared. You would be ill advised to enter into a serious part-
nership without such an agreement. But once the choice is made to go the part-
nership route, there are two alternatives.
In a general partnership, the simplest and most common form, the owners share day-to-day management and responsibilities for debts and losses. Th is
diff ers from a limited partnership, consisting of a general partner and one or more “limited” partners. Th e general partner runs the business; the limited
partners do not participate in day-to-day management. All partners share in
profi ts, but their losses are limited to the amounts of their investments. Th is
limit to one’s liabilities is a major advantage. You’ll notice that many professionals,
such as accountants and attorneys, work in limited liability partnerships—
designated as LLP—because they limit the liability of one partner in case of
negligence by any others.
A corporation, commonly identifi ed by the “Inc.” designation in a name, is a legal entity that exists separately from its owners. Corporations are legally char-
tered by the states in which they are registered, and they can be for-profi t, such
as Microsoft Inc., or not-for-profi t, such as Catalyst Inc. Th ere are two major
advantages in choosing to incorporate: (1) it grants the organization certain
legal rights—for example, to engage in contracts, and (2) the corporation is
responsible for its own liabilities. Th is gives the fi rm a life of its own and sepa-
rates the owners from personal liability. Th e major disadvantages are the legal
costs of setting up the corporation and the complex documentation required to
operate as one.
Recently, the limited liability corporation (LLC) has gained popularity. It combines the advantages of sole proprietorship, partnership, and corporation. It
functions as a corporation for liability purposes and protects the assets of owners
against claims made against the company. For tax purposes, it functions as a
partnership in the case of multiple owners and as a sole proprietorship in the
case of a single owner.
A sole proprietorship is an individual pursuing business for a profi t.
A partnership is when two or more people agree to contribute resources to start and operate a business together.
In a general partnership, owners share management and responsibility for debts and losses.
In a limited partnership owners shares profi ts but responsibility for losses is limited to original investments.
A corporation is a legal entity that exists separately from its owners.
A limited liability corporation (LLC) combines the advantages of the sole proprietorship, partnership, and corporation.
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EXPLORING MANAGEMENT440
||| Th ere are diff erent ways of fi nancing a small business.
Starting a new venture takes money. Unless you possess personal wealth that you
are willing to risk, that money has to be raised. Th e two most common ways to
raise it are debt fi nancing and equity fi nancing.
Debt fi nancing involves borrowing money from another person, a bank, or a fi nancial institution. Th is is a loan that must be paid back over time with interest.
A loan also requires collateral that pledges business assets or personal assets,
such as a home, as security in case of default. You borrow money with a promise
to repay both the loan amount and interest. If you can’t pay, the security is lost up
to the amount of the outstanding loan.
Equity fi nancing gives ownership shares to outsiders in return for their fi nancial investments. In contrast to debt fi nancing, this money does not need to
be paid back. Instead, the investor assumes the risk of potential gains and losses
based on the performance of the business. But in return for taking that risk, the
equity investor gains something—part of your original ownership. Th e amount of
ownership and control given up is represented in the number and proportion of
ownership shares transferred to the equity investors.
When businesses need equity financing in fairly large amounts, from the
tens of thousands to the millions of dollars, they often turn to venture capi- talists. These are individuals and companies that pool capital to invest in new ventures. The hope is that their equity stakes rise in value and can be
sold for a profit when the business becomes successful. Venture capitalists
can sometimes be quite aggressive in wanting active management roles to
make sure the business grows in value as soon as possible. This value is often
tapped by an initial public offering (IPO). This is when shares in the busi- ness are sold to the public at large, most likely beginning to trade on a major
stock exchange.
When an IPO is successful, the market bids up the share price, thus in-
creasing the value of the original shares held by the venture capitalist and the
entrepreneur. Google’s IPO went public at $85 per share. Check out the cur-
rent price for a GOOG share on the NASDAQ today and you’ ll find it worth
considerably more. Wouldn’t it have been nice to be in on that original IPO?
And how about Facebook or Zynga? They’re the hotly anticipated IPOs of the
moment. Check out their valuations and follow them from IPO to the daily
stock reports.
When venture capital isn’t available or isn’t yet interested, entrepreneurs may
try to fi nd an angel investor. Th is is a wealthy individual who invests in return for equity in a new venture. Angel investors are especially helpful in the late birth
and early breakthrough stages of a new venture. Once they jump in, it can raise
the confi dence and interests of the venture capitalists, thus making it easier to
attract even more funding. When Liz Cobb wanted to start her sales compensa-
tion fi rm, Incentive Systems, for example, she contacted 15 to 20 venture capital
fi rms. Only 10 interviewed her, and all of those turned her down. However, after
she located $250,000 from two angel investors, the venture capital fi rms renewed
their interest, allowing her to obtain her fi rst $2 million in fi nancing. Her fi rm
grew to employ over 70 workers. 41
Th is isn’t quite a Google story, but it’s still a
good one.
Debt fi nancing involves borrowing money from another person, a bank, or a fi nancial institution.
Equity fi nancing gives ownership shares to outsiders in return for their fi nancial investments.
Venture capitalists make large investments in new ventures in return for an equity stake in the business.
An initial public off ering (IPO) is an initial selling of shares of stock to the public at large.
An angel investor is a wealthy individual willing to invest in return for equity in a new venture.
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Entrepreneurship and Small Business ■ Chapter 18 441
Takeaway 18.2 What Should We Know About Small
Businesses and How to Start One?
Rapid Review • Small businesses constitute the vast majority of businesses in the United States
and create 7 out of every 10 new jobs in the economy.
• Small businesses have a high failure rate; as many as 60% to 80% of new busi-
nesses fail in their fi rst fi ve years of operation.
• Small businesses owned by family members can suff er from the succession
problem of transferring leadership from one generation to the next.
• A business plan describes the intended nature of a proposed new business, how it
will operate, and how it will obtain fi nancing.
• Proprietorships, partnerships, and corporations are diff erent forms of business
ownership, with each off ering advantages and disadvantages.
• New ventures can be fi nanced through debt fi nancing in the form of loans and
through equity fi nancing, which involves the exchange of ownership shares in
return for outside investment.
• Venture capitalists and angel investors invest in new ventures in return for an
equity stake in the business.
Questions for Discussion 1. Given the economic importance of small businesses, what could local, state, and
federal governments do to make it easier for them to prosper?
2. If you were asked to join a small company, what would you look for as potential
success indicators in its business plan?
3. Why might the owner of a small but growing business want to be careful when
accepting big investments from venture capitalists?
Be Sure You Can • state the SBA defi nition of small business
• list the life-cycle stages of a small business
• list several reasons why many small businesses fail
• discuss the succession problem in family-owned businesses
• list the major elements in a business plan
• diff erentiate the common forms of small business ownership
• diff erentiate debt fi nancing and equity fi nancing
• explain the roles of venture capitalists and angel investors in new venture fi nancing
What Would You Do? At this point, your start-up textbook-rating Web site is attracting potential inves-
tors. One angel investor is willing to put up $150,000 to help move things to the next
level. But presently you and your two co-founders haven’t done anything to legally
structure the business. You’ve operated on personal resources and a “handshake”
agreement among friends. What’s the best course of action to legally set up the
company? What’s your best option for getting the fi nancing needed for future
growth while still protecting your ownership?
STUDY GUIDE
Terms to Defi ne
Angel investor
Business incubator
Business plan
Corporation
Debt fi nancing
Equity fi nancing
Family business
Family business feud
General partnership
Initial public off ering
(IPO)
Limited liability
corporation (LLC)
Limited partnership
Partnership
Small business
Small business
development centers
Sole proprietorship
Succession plan
Succession problem
Venture capitalists
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EXPLORING MANAGEMENT442
1. An entrepreneur who thrives on uncertainty
displays .
(a) high tolerance for ambiguity
(b) internal locus of control
(c) need for achievement
(d) action orientation
2. is a personality characteristic common
among entrepreneurs.
(a) External locus of control
(b) Infl exibility
(c) Self-confi dence
(d) Low self-reliance
3. When a new business is quick to capture a market
niche before competitors, this is .
(a) intrapreneurship
(b) an initial public off ering
(c) succession planning
(d) fi rst-mover advantage
4. Almost % of U.S. businesses meet the
defi nition of “small business.”
(a) 40 (b) 99
(c) 75 (d) 81
5. A small business owner who wants to pass the
business to other family members after retirement or
death should prepare a plan.
(a) retirement (b) succession
(c) partnership (d) liquidation
6. A common reason new small businesses often fail
is .
(a) the owner lacks experience and business skills
(b) there is too much government regulation
(c) the owner tightly controls money and fi nances
(d) the business grows too slowly
7. A pressing problem faced by a small business in the
birth or start-up stage is .
(a) gaining acceptance in the marketplace
(b) fi nding partners for expansion
(c) preparing the initial public off ering
(d) getting management professional skills
8. A venture capitalist that receives an
ownership share in return for investing in
a new business is providing
fi nancing.
(a) debt (b) equity
(c) limited (d) corporate
9. In fi nancing, the business owner
borrows money as a loan that must be repaid.
(a) debt (b) equity
(c) partnership (d) limited
10. If you start a small business and want to avoid
losing any more than the original investment,
what form of ownership is best?
(a) sole proprietorship
(b) general partnership
(c) limited partnership
(d) corporation
11. Th e fi rst element in a good business plan is
.
(a) an industry analysis
(b) a marketing strategy
(c) an executive summary
(d) a set of performance milestones
12. Trends in U.S. small businesses show
.
(a) a growing number owned by minorities
(b) fewer small businesses using the Internet
(c) large businesses creating more jobs
(d) fewer small businesses family owned
13. A protects small business owners
from personal liabilities for losses.
(a) sole proprietorship
(b) franchise
(c) limited partnership
(d) corporation
C H
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TP
Multiple-Choice Questions
TestPrep 18
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Entrepreneurship and Small Business ■ Chapter 18 443
14. take ownership shares in a new
venture in return for start-up funds.
(a) Business incubators
(b) Angel investors
(c) SBDCs
(d) Intrapreneurs
15. makes social entrepreneurship
unique.
(a) Lack of other career options
(b) Focus on international markets
(c) Refusal to fi nance by loans
(d) Commitment to solving social problems
Short-Response Questions
16. What is the relationship between diversity and entrepreneurship?
17. What major challenges are faced at each life cycle stage of an entrepreneurial fi rm?
18. What are the advantages of a limited partnership form of ownership?
19. What is the diff erence, if any, between a venture capitalist and an angel investor?
Integration and Application Question
20. You have a great idea for an Internet-based start-up business. A friend advises you to clearly link your business
idea to potential customers and then describe it well in a business plan. “ You won’t succeed without customers,
she says, and you’ll never get a chance if you can’t attract fi nancial backers with a good business plan.”
Questions: What questions will you ask and answer to ensure that you are customer-focused in this business? What are the major areas that you would address in your initial business plan?
Don’t Miss These Selections from the Skill-Building Portfolio
■ SELF-ASSESSMENT 18: Entrepreneurship ■ TEAM PROJECT 18: Community Entrepreneurs Orientation
■ CLASS EXERCISE 18: Entrepreneurs Among Us
C H
A
PTER 1 8
SFL StepsforFurtherLearning
Many learning resources are found at the end of the book and online within WileyPLUS.
Don’t Miss This Selection from Cases for Critical Thinking
Snapshot At face value, In-N-Out Burger seems like a modest enterprise—only four food items on the menu,
little to no advertising. For more than sixty years, In-N-
Out has focused on providing customers the basics—
fresh, well-cooked food served quickly in a sparkling
clean environment—and has made consistency and
quality their hallmarks.
In addition to making the best burgers around, In-N-
Out’s other primary successful trait is its insistence on
playing by its own rules.
A fi erce entrepreneurial
streak ran through the Snyders, In-N-Out’s founding
family, and from the sock-hop décor to the secret menu
to its treatment of employees as long-term partners
instead of disposable resources, the chain prefers to
focus on its formula for success instead of conventional
defi nitions like shareholder return or IPOs.
■ CHAPTER 18 CASE In-N-Out Burger: Building a Better Burger
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SB-1
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P o r t f o l i o Self-Assessments
Self-Assessment 1: Personal Career Readiness 1
Instructions Use this scale to rate yourself on the following list of personal characteristics.
S � Strong, I am very confi dent with this one. G � Good, but I still have room to grow. W � Weak, I really need work on this one. U � Unsure, I just don’t know.
_____ 1. Resistance to stress: Th e ability to get work done even under stressful conditions
_____ 2. Tolerance for uncertainty: Th e ability to get work done even under ambiguous and uncertain conditions
_____ 3. Social objectivity: Th e ability to act free of racial, ethnic, gender, and other prejudices or biases
_____ 4. Inner work standards: Th e ability to personally set and work to high performance standards
_____ 5. Stamina: Th e ability to sustain long work hours
_____ 6. Adaptability: Th e ability to be fl exible and adapt to changes
_____ 7. Self-confi dence: Th e ability to be consistently decisive and display one’s personal presence
_____ 8. Self-objectivity: Th e ability to evaluate personal strengths and weaknesses and to understand one’s motives and skills relative to
a job
_____ 9. Introspection: Th e ability to learn from experience, awareness, and self-study
_____10. Entrepreneurism: Th e ability to address problems and take advantage of opportunities for constructive change
Scoring Give yourself 1 point for each S, and 1/2 point for each G. Do not give yourself points for W and U responses. Total your points and enter
the result here: _______.
Interpretation Th is assessment off ers a self-described profi le of your management foundations. Are you a perfect 10 or something less? Th ere shouldn’t
be too many 10s around. Also ask someone else to assess you on this instrument. You may be surprised at the results, but the insights
are well worth thinking about. Th e items on the list are skills and personal characteristics that should be nurtured now and through-
out your career.
Self-Assessment 2: Managerial Assumptions
Instructions Use the space in the left margin to write “Yes” if you agree with the statement or “No” if you disagree with it. Force yourself to take a “yes” or “no”
position for every statement.
1. Are good pay and a secure job enough to satisfy most workers?
2. Should a manager help and coach subordinates in their work?
3. Do most people like real responsibility in their jobs?
4. Are most people afraid to learn new things in their jobs?
5. Should managers let subordinates control the quality of their work?
6. Do most people dislike work?
7. Are most people creative?
8. Should a manager closely supervise and direct the work of subordinates?
9. Do most people tend to resist change?
10. Do most people work only as hard as they have to?
11. Should workers be allowed to set their own job goals?
12. Are most people happiest off the job?
13. Do most workers really care about the organization they work for?
14. Should a manager help subordinates advance and grow in their jobs?
Scoring Count the number of “yes” responses to items 1, 4, 6, 8, 9, 10, 12; write that number here as [X � _____________].
Count the number of “yes” responses to items 2, 3, 5, 7, 11, 13, 14; write that score here as [Y � _____________].
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Interpretation Th is assessment examines your orientation toward Douglas McGregor’s Th eory X (your “X” score) and Th eory Y (your “Y ” score) assump-
tions. Consider how your X/Y assumptions might infl uence how you behave toward other people at work. What self-fulfi lling prophecies
are you likely to create?
Self-Assessment 3: Terminal Values Survey 2
Instructions 1. Read the following list of things people value. Th ink about each value in terms of its importance as a guiding principle in your life.
A comfortable life An exciting life A sense of accomplishment
A world at peace A world of beauty Equality
Family security Freedom Happiness
Inner harmony Mature love National security
Pleasure Salvation Self-respect
Social recognition True friendship Wisdom
2. “Circle” six of these 18 values to indicate that they are most important to you. If you can, rank order these most important values by
writing a number above them—with “1” � the most important value in my life, and so on through “6.”
3. “Underline” the six of these 18 values that are least important to you.
Interpretation Terminal values refl ect a person’s preferences concerning the ends to be achieved. Th ey are the goals individuals would like to achieve in
their lifetimes. As you look at the items you have selected as most and least important, what major diff erences exist among the items in
the two sets? Th ink about this and then answer the following questions.
A) What does your selection of most and least important values say about you as a person?
B) What does your selection of most and least important values suggest about the type of work and career that might be best for you?
C) Which values among your most and least important selections might cause problems for you in the future—at work and/or in
your personal life? What problems might they cause and why? How might you prepare now to best deal with these problems in
the future?
D) How might your choices of most and least important values turn out to be major strengths or assets for you—at work and/or in your per-
sonal life, and why?
Self-Assessment 4: Intuitive Ability 3
Instructions Answer each of the following questions.
1. Do you prefer to: (a) be given a problem and left free to do it? (b) get clear instructions on how to solve a problem before starting?
2. Do you prefer to work with colleagues who are: (a) realistic? (b) imaginative?
3. Do you most admire: (a) creative people? (b) careful people?
4. Do your friends tend to be: (a) serious and hardworking? (b) exciting and emotional?
5. When you ask for advice on a problem, do you: (a) seldom or never get upset if your basic assumptions are questioned? (b) often
get upset with such questions?
6. When you start your day, do you: (a) seldom make or follow a specifi c plan? (b) usually make and follow a plan?
7. When working with numbers, do you make factual errors: (a) seldom or never? (b) often?
8. Do you: (a) seldom daydream and really not enjoy it? (b) often daydream and enjoy it?
9. When working on a problem, do you: (a) prefer to follow instructions or rules? (b) often enjoy bypassing instructions or rules?
10. When trying to put something together, do you prefer: (a) step-by-step assembly instructions? (b) a picture of the assembled item?
11. Do you fi nd that people who irritate you most appear to be: (a) disorganized? (b) organized?
12. When an unexpected crisis comes up, do you: (a) feel anxious? (b) feel excited by the challenge?
Scoring Total the a responses for 1, 3, 5, 6, 11; [A � ___________].
Total the b responses for 2, 4, 7, 8, 9, 10, 12; [B � ___________].
Your intuitive score is A � B. Th e highest score is 12.
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Self-Assessment 5: Time Management Profi le 4
Instructions Indicate Y (yes) or N (no) for each item. Be frank; let your responses describe an accurate picture of how you tend to respond to these
kinds of situations.
1. When confronted with several items of similar urgency and importance, I tend to do the easiest one fi rst.
2. I do the most important things during that part of the day when I know I perform best.
3. Most of the time I don’t do things someone else can do; I delegate this type of work to others.
4. Even though meetings without a clear and useful purpose upset me, I put up with them.
5. I skim documents before reading them and don’t complete any that off er a low return on my time investment.
6. I don’t worry much if I don’t accomplish at least one signifi cant task each day.
7. I save the most trivial tasks for that time of day when my creative energy is lowest.
8. My workspace is neat and organized.
9. My offi ce door is always “open”; I never work in complete privacy.
10. I schedule my time completely from start to fi nish every workday.
11. I don’t like “to-do” lists, preferring to respond to daily events as they occur.
12. I “block” a certain amount of time each day or week to be dedicated to high-priority activities.
Scoring and Interpretation Count the number of Y responses to items 2, 3, 5, 7, 8, 12. [Enter that score here ___________.] Count the number of N responses to
items 1, 4, 6, 9, 10, 11. [Enter that score here ___________.] Add together the two scores.
Th e higher the total score, the closer your behavior matches recommended time management guidelines. Reread those items where your
response did not match the desired one. Why don’t they match? Are there reasons for your action tendencies? Th ink about what you can
do to be more consistent with time management guidelines.
Self-Assessment 6: Internal/External Control 5
Instructions Circle either a or b to indicate the item you most agree with in each pair of the following statements.
1. (a) Promotions are earned through hard work and persistence.
(b) Making a lot of money is largely a matter of breaks.
2. (a) Many times the reactions of teachers seem haphazard to me.
(b) In my experience I have noticed that there is usually a direct connection between how hard I study and the grades I get.
3. (a) Th e number of divorces indicates that more and more people are not trying to make their marriages work.
(b) Marriage is largely a gamble.
4. (a) It is silly to think that one can really change another person’s basic attitudes.
(b) When I am right, I can convince others.
5. (a) Getting promoted is really a matter of being a little luckier than the next guy.
(b) In our society, an individual’s future earning power is dependent on his or her ability.
6. (a) If one knows how to deal with people, they are really quite easily led.
(b) I have little infl uence over the way other people behave.
7. (a) In my case, the grades I make are the results of my own eff orts; luck has little or nothing to do with it.
(b) Sometimes I feel that I have little to do with the grades I get.
8. (a) People such as I can change the course of world aff airs if we make ourselves heard.
(b) It is only wishful thinking to believe that one can really infl uence what happens in society at large.
9. (a) Much of what happens to me is probably a matter of chance.
(b) I am the master of my fate.
10. (a) Getting along with people is a skill that must be practiced.
(b) It is almost impossible to fi gure out how to please some people.
Scoring Give yourself 1 point for 1b, 2a, 3a, 4b, 5b, 6a, 7a, 8a, 9b, 10a. Total scores of: 8–10 � high internal locus of control, 6–7 � moderate internal locus of control, 5 � mixed locus of control, 3–4 � moderate external locus of control, 0–2 � high external locus of control.
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Interpretation Th is instrument off ers an impression of your tendency toward an internal locus of control or external locus of control. Persons with a high
internal locus of control tend to believe they have control over their own destinies. Th ey may be most responsive to opportunities for greater
self-control in the workplace. Persons with a high external locus of control tend to believe that what happens to them is largely in the hands
of external people or forces. Th ey may be less comfortable with self-control and more responsive to external controls in the workplace.
Self-Assessment 7: Handling Facts and Inferences 6
Instructions 1. Read the following report.
A well-liked college instructor had just completed making up the fi nal examination and had turned off the lights in the offi ce.
Just then a tall, broad fi gure with dark glasses appeared and demanded the examination. Th e professor opened the drawer.
Everything in the drawer was picked up, and the individual ran down the corridor. Th e president was notifi ed immediately.
2. Indicate whether you think the following observations are true (T), false (F), or doubtful in that it may be either true or false (?).
Judge each observation in order. Do not reread the observations after you have indicated your judgment, and do not change any of
your answers.
1. Th e thief was tall, broad, and wore dark glasses.
2. Th e professor turned off the lights.
3. A tall fi gure demanded the examination.
4. Th e examination was picked up by someone.
5. Th e examination was picked up by the professor.
6. A tall, broad fi gure appeared after the professor turned off the lights in the offi ce.
7. Th e man who opened the drawer was the professor.
8. Th e professor ran down the corridor.
9. Th e drawer was never actually opened.
10. Th ree persons are referred to in this report.
Scoring Th e correct answers in reverse order (starting with 10) are: ?, F, ?, ?, T, ?, ?, T, T, ?.
Interpretation To begin, ask yourself if there was a diff erence between your answers and the correct ones. If so, why? Why do you think people, indi-
vidually or in groups, may answer these questions incorrectly? Good planning depends on good decision making by the people doing
the planning. Being able to distinguish “facts” and understand one’s “inferences” are important steps toward improving the planning
process. Involving others to help do the same can frequently assist in this process.
Self-Assessment 8: Empowering Others 7
Instructions Th ink of times when you have been in charge of a group—this could be a full-time or part-time work situation, a student work group, or
whatever. Complete the following questionnaire by recording how you feel about each statement according to this scale.
1 � Strongly disagree 2 � Disagree 3 � Neutral 4 � Agree 5 � Strongly agree
When in charge of a team, I fi nd that
1. Most of the time other people are too inexperienced to do things, so I prefer to do them myself.
2. It often takes more time to explain things to others than to just do them myself.
3. Mistakes made by others are costly, so I don’t assign much work to them.
4. Some things simply should not be delegated to others.
5. I often get quicker action by doing a job myself.
6. Many people are good only at very specifi c tasks, so they can’t be assigned additional responsibilities.
7. Many people are too busy to take on additional work.
8. Most people just aren’t ready to handle additional responsibilities.
9. In my position, I should be entitled to make my own decisions.
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Scoring Total your responses and enter the score here [___________].
Interpretation Th is instrument gives an impression of your willingness to delegate. Possible scores range from 9 to 45. Th e lower your score, the more
willing you appear to be to delegate to others. Willingness to delegate is an important managerial characteristic: It is how you—as
a manager—can empower others and give them opportunities to assume responsibility and exercise self-control in their work. With
the growing importance of horizontal organizations and empowerment in the new workplace, your willingness to delegate is worth
thinking about seriously.
Self-Assessment 9: Tolerance for Ambiguity 8
Instructions Rate each of the following items on this seven-point scale.
strongly agree 1 2 3 4 5 6 7 strongly disagree
_______ 1. An expert who doesn’t come up with a defi nite answer probably doesn’t know too much.
_______ 2. Th ere is really no such thing as a problem that can’t be solved.
_______ 3. I would like to live in a foreign country for a while.
_______ 4. People who fi t their lives to a schedule probably miss the joy of living.
_______ 5. A good job is one where what is to be done and how it is to be done are always clear.
_______ 6. In the long run it is possible to get more done by tackling small, simple problems rather than large, complicated ones.
_______ 7. It is more fun to tackle a complicated problem than it is to solve a simple one.
_______ 8. Often the most interesting and stimulating people are those who don’t mind being diff erent and original.
_______ 9. What we are used to is always preferable to what is unfamiliar.
_______ 10. A person who leads an even, regular life in which few surprises or unexpected happenings arise really has a lot to be grateful for.
_______ 11. People who insist upon a yes or no answer just don’t know how complicated things really are.
_______ 12. Many of our most important decisions are based on insuffi cient information.
_______ 13. I like parties where I know most of the people more than ones where most of the people are complete strangers.
_______ 14. Th e sooner we all acquire ideals, the better.
_______ 15. Teachers or supervisors who hand out vague assignments give a chance for one to show initiative and originality.
_______ 16. A good teacher is one who makes you wonder about your way of looking at things.
Scoring To obtain a score, fi rst reverse your scores for items 3, 4, 7, 8, 11, 12, 15, and 16 (i.e., a rating of 1 � 7, 2 � 6, 3 � 5, etc.).
Next add up your scores for all 16 items. Th e higher your total, the higher your indicated tolerance for ambiguity.
Self-Assessment 10: Performance Appraisal Assumptions 9
Instructions In each of the following pairs of statements, check the one that best refl ects your assumptions about performance evaluation.
1. (a) a formal process that is done annually
(b) an informal process done continuously
2. (a) a process that is planned for subordinates
(b) a process that is planned with subordinates
3. (a) a required organizational procedure
(b) a process done regardless of requirements
4. (a) a time to evaluate subordinates’ performance
(b) a time for subordinates to evaluate their manager
5. (a) a time to clarify standards
(b) a time to clarify the subordinate’s career needs
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6. (a) a time to confront poor performance
(b) a time to express appreciation
7. (a) an opportunity to clarify issues and provide direction and control
(b) an opportunity to increase enthusiasm and commitment
8. (a) only as good as the organization’s forms
(b) only as good as the manager’s coaching skills
Interpretation In general, the a responses show more emphasis on the evaluation function of performance appraisal. Th is largely puts the supervisor
in the role of documenting a subordinate’s performance for control and administrative purposes. Th e b responses show a stronger
emphasis on the counseling or development function. Here, the supervisor is concerned with helping the subordinate do better and
with learning from the subordinate what he or she needs to be able to do better.
Self-Assessment 11: Least Preferred Co-Worker Scale 10
Instructions Th ink of all the diff erent people with whom you have ever worked—in jobs, in social clubs, in student projects, or whatever. Next,
think of the one person with whom you could work least well—that is, the person with whom you had the most diffi culty getting a
job done. Th is is the one person—a peer, boss, or subordinate—with whom you would least want to work. Describe this person by
circling numbers at the appropriate points on each of the following pairs of bipolar adjectives. Work rapidly. Th ere is no right or
wrong answer.
Pleasant 8 7 6 5 4 3 2 1 Unpleasant
Friendly 8 7 6 5 4 3 2 1 Unfriendly
Rejecting 1 2 3 4 5 6 7 8 Accepting
Tense 1 2 3 4 5 6 7 8 Relaxed
Distant 1 2 3 4 5 6 7 8 Close
Cold 1 2 3 4 5 6 7 8 Warm
Supportive 8 7 6 5 4 3 2 1 Hostile
Boring 1 2 3 4 5 6 7 8 Interesting
Quarrelsome 1 2 3 4 5 6 7 8 Harmonious
Gloomy 1 2 3 4 5 6 7 8 Cheerful
Open 8 7 6 5 4 3 2 1 Guarded
Backbiting 1 2 3 4 5 6 7 8 Loyal
Untrustworthy 1 2 3 4 5 6 7 8 Trustworthy
Considerate 8 7 6 5 4 3 2 1 Inconsiderate
Nasty 1 2 3 4 5 6 7 8 Nice
Agreeable 8 7 6 5 4 3 2 1 Disagreeable
Insincere 1 2 3 4 5 6 7 8 Sincere
Kind 8 7 6 5 4 3 2 1 Unkind
Scoring Th is is called the “least-preferred co-worker scale” (LPC). Compute your LPC score by totaling all the numbers you circled; enter that score here
[LPC � ___________].
Interpretation Th e LPC scale is used by Fred Fiedler to identify a person’s dominant leadership style. Fiedler believes that this style is a relatively fi xed
part of one’s personality and is therefore diffi cult to change. Th is leads Fiedler to his contingency views, which suggest that the key to
leadership success is fi nding (or creating) good “matches” between style and situation.
If your score is 73 or above on the LPC scale, Fiedler considers you a “relationship-motivated” leader ; if it is 64 or below on the
scale, he considers you a “task-motivated” leader. If your score is between 65 and 72, Fiedler leaves it up to you to determine which
leadership style is most accurate.
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Self-Assessment 12: Stress Test 11
Instructions Complete the following questionnaire. Circle the number that best represents your tendency to behave on each bipolar dimension.
Am casual about appointments 1 2 3 4 5 6 7 8 Am never late for appointments
Am not competitive 1 2 3 4 5 6 7 8 Am very competitive
Never feel rushed 1 2 3 4 5 6 7 8 Always feel rushed
Take things one at a time 1 2 3 4 5 6 7 8 Try to do many things at once
Do things slowly 1 2 3 4 5 6 7 8 Do things fast
Express feelings 1 2 3 4 5 6 7 8 “Sit on” feelings
Have many interests 1 2 3 4 5 6 7 8 Have few interests but work
Scoring Total the numbers circled for all items, and multiply this by 3; enter the result here [___________].
Points Personality Type
120� A�
106�119 A
100�105 A�
90�99 B�
below 90 B
Self-Assessment 13: Two-Factor Profi le
Instructions On each of the following dimensions, distribute a total of 10 points between the two options. For example:
Summer weather (7) (3) Winter weather
1. Very responsible job (__) (__) Job security
2. Recognition for work accomplishments (__) (__) Good relations with co-workers
3. Advancement opportunities at work (__) (__) A boss who knows his/her job well
4. Opportunities to grow and learn on the job (__) (__) Good working conditions
5. A job that I can do well (__) (__) Supportive rules, policies of employer
6. A prestigious or high-status job (__) (__) A high base wage or salary
Scoring Summarize your total score for all items in the left-hand column and write it here. MF � ___________ Summarize your total score for all items in the right-hand column and write it here. HF � ___________
Interpretation Th e MF score indicates the relative importance that you place on the motivating, or satisfi er, factors in Herzberg’s two-factor theory. Th is
shows how important job content is to you. Th e HF score indicates the relative importance that you place on hygiene, or dissatisfi er, fac-
tors in Herzberg’s two-factor theory. Th is shows how important job context is to you.
Self-Assessment 14: Team Leader Skills 12
Instructions Consider your experiences in groups and work teams. Ask: “What skills do I bring to team leadership situations?” Th en complete the following
inventory by rating yourself on each item using this scale.
1 � Almost never 2 � Seldom 3 � Sometimes 4 � Usually 5 � Almost always
_______ 1. I facilitate communications with and among team members between team meetings.
_______ 2. I provide feedback/coaching to individual team members on their performance.
_______ 3. I encourage creative and out-of-the-box thinking.
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_______ 4. I continue to clarify stakeholder needs/expectations.
_______ 5. I keep team members’ responsibilities and activities focused within the team’s objectives and goals.
_______ 6. I organize and run eff ective and productive team meetings.
_______ 7. I demonstrate integrity and personal commitment.
_______ 8. I have excellent persuasive and infl uence skills.
_______ 9. I respect and leverage the team’s cross-functional diversity.
_______10. I recognize and reward individual contributions to team performance.
_______11. I use the appropriate decision-making style for specifi c issues.
_______12. I facilitate and encourage border management with the team’s key stakeholders.
_______13. I ensure that the team meets its team commitments.
_______14. I bring team issues and problems to the team’s attention and focus on constructive problem solving.
_______15. I provide a clear vision and direction for the team.
Scoring and Interpretation Add your scores for the items listed next to each dimension below to get an indication of your potential strengths and weaknesses on
seven dimensions of team leadership. Th e higher the score, the more confi dent you are on the particular skill and leadership capability.
When considering the score, ask yourself if others would rate you the same way.
1, 9 Building the team
2, 10 Developing people
3, 11 Team problem solving/decision making
4, 12 Stakeholder relations
5, 13 Team performance
6, 14 Team process
7, 8, 15 Providing personal leadership
Self-Assessment 15: Feedback and Assertiveness 13
Instructions For each statement below, decide which of the following answers best fi ts you.
1 � Never true 2 � Sometimes true 3 � Often true 4 � Always true
_______ 1. I respond with more modesty than I really feel when my work is complimented.
_______ 2. If people are rude, I will be rude right back.
_______ 3. Other people fi nd me interesting.
_______ 4. I fi nd it diffi cult to speak up in a group of strangers.
_______ 5. I don’t mind using sarcasm if it helps me make a point.
_______ 6. I ask for a raise when I feel I really deserve it.
_______ 7. If others interrupt me when I am talking, I suff er in silence.
_______ 8. If people criticize my work, I fi nd a way to make them back down.
_______ 9. I can express pride in my accomplishments without being boastful.
_______10. People take advantage of me.
_______11. I tell people what they want to hear if it helps me get what I want.
_______12. I fi nd it easy to ask for help.
_______13. I lend things to others even when I don’t really want to.
_______14. I win arguments by dominating the discussion.
_______15. I can express my true feelings to someone I really care for.
_______16. When I feel angry with other people, I bottle it up rather than express it.
_______17. When I criticize someone else’s work, they get mad.
_______18. I feel confi dent in my ability to stand up for my rights.
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Scoring and Interpretation Aggressiveness tendency score—Add items 2, 5, 8, 11, 14, and 17.
Passiveness tendency score—Add items 1, 4, 7, 10, 13, and 16.
Assertiveness tendency score—Add items 3, 6, 9, 12, 15, and 18.
Th e maximum score in any single area is 24. Th e minimum score is 6. Try to fi nd someone who knows you well. Have this person com-
plete the instrument also as it relates to you. Compare his or her impression of you with your own score. What is this telling you about
your behavior tendencies in social situations?
Self-Assessment 16: Diversity Awareness
Instructions Indicate O for often, S for sometimes, and N for never in response to each of the following questions as they pertain to where you work or go to school.
1. How often have you heard jokes or remarks about other people that you consider off ensive?
2. How often do you hear men “talk down” to women in an attempt to keep them in an inferior status?
3. How often have you felt personal discomfort as the object of sexual harassment?
4. How often do you work or study with persons of diff erent ethnic or national cultures?
5. How often have you felt disadvantaged because members of ethnic groups other than yours were given special treatment?
6. How often have you seen a woman put in an uncomfortable situation because of unwelcome advances by a man?
7. How often does it seem that African Americans, Hispanics, Caucasians, women, men, and members of other minority demographic
groups seem to “stick together” during work breaks or other leisure situations?
8. How often do you feel uncomfortable about something you did and/or said to someone of the opposite sex or a member of an ethnic
or racial group other than yours?
9. How often do you feel eff orts are made in this setting to raise the level of cross-cultural understanding among people who work and/or
study together?
10. How often do you step in to communicate concerns to others when you feel actions and/or words are used to the disadvantage of
minorities?
Interpretation Th ere are no correct answers for the Diversity Awareness Checklist. Th e key issue is the extent to which you are sensitive to diversity is-
sues in the workplace or university. Are you comfortable with your responses? How do you think others in your class responded? Why not
share your responses with others and examine diff erent viewpoints on this important issue?
Self-Assessment 17: Global Intelligence 14
Instructions Use the following scale to rate yourself on these 10 items.
1 � Very poor 2 � Poor 3 � Acceptable 4 � Good 5 � Very good
1. I understand my own culture in terms of its expectations, values, and infl uence on communication and relationships.
2. When someone presents me with a diff erent point of view, I try to understand it rather than attack it.
3. I am comfortable dealing with situations where the available information is incomplete and the outcomes unpredictable.
4. I am open to new situations and am always looking for new information and learning opportunities.
5. I have a good understanding of the attitudes and perceptions toward my culture as they are held by people from other cultures.
6. I am always gathering information about other countries and cultures and trying to learn from them.
7. I am well informed regarding the major diff erences in the government, political, and economic systems around the world.
8. I work hard to increase my understanding of people from other cultures.
9. I am able to adjust my communication style to work eff ectively with people from diff erent cultures.
10. I can recognize when cultural diff erences are infl uencing working relationships, and I adjust my attitudes and behavior accordingly.
Interpretation To be successful in the global economy, you must be comfortable with the cultural diversity that it holds. Th is requires a global mindset
that is receptive to and respectful of cultural diff erences, global knowledge that includes the continuing quest to know and learn more
about other nations and cultures, and global work skills that allow you to work eff ectively across cultures.
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Scoring Th e goal is to score as close to a perfect 5 as possible on each of the three dimensions of global intelligence. Develop your scores as follows:
• Items (1 � 2 � 3 � 4)/4 � ____________ Global Mindset Score—Th e extent to which you are receptive to and respectful of cultural diff erences.
• Items (5 � 6 � 7)/3 � Global Knowledge Score—Your openness to know and learn more about other nations and cultures.
• Items (8 � 9 � 10)/3 � Global Work Skills Score—Your capacity to work eff ectively across cultures.
Self-Assessment 18: Entrepreneurship Orientation 15
Instructions Answer each of the following questions.
1. What portion of your college expenses did you earn (or are you earning)?
(a) 50% or more (b) less than 50% (c) none
2. In college, your academic performance was/is
(a) above average. (b) average. (c) below average.
3. What is your basic reason for considering opening a business?
(a) I want to make money. (b) I want to control my own destiny. (c) I hate the frustration of working for someone else.
4. Which phrase best describes your attitude toward work?
(a) I can keep going as long as I need to; I don’t mind working for something I want. (b) I can work hard for a while, but when I’ve
had enough, I quit. (c) Hard work really doesn’t get you anywhere.
5. How would you rate your organizing skills?
(a) superorganized (b) above average (c) average (d) I do well to fi nd half the things I look for.
6. You are primarily a(n)
(a) optimist. (b) pessimist. (c) neither.
7. You are faced with a challenging problem. As you work, you realize you are stuck. You will most likely
(a) give up. (b) ask for help. (c) keep plugging; you’ll fi gure it out.
8. You are playing a game with a group of friends. You are most interested in
(a) winning. (b) playing well. (c) making sure that everyone has a good time. (d) cheating as much as possible.
9. How would you describe your feelings toward failure?
(a) Fear of failure paralyzes me. (b) Failure can be a good learning experience. (c) Knowing that I might fail motivates me to work
even harder. (d) “Damn the torpedoes! Full speed ahead.”
10. Which phrase best describes you?
(a) I need constant encouragement to get anything done. (b) If someone gets me started, I can keep going. (c) I am energetic and
hardworking—a self-starter.
11. Which bet would you most likely accept?
(a) a wager on a dog race (b) a wager on a racquetball game in which you play an opponent (c) Neither. I never make wagers.
12. At the Kentucky Derby, you would bet on
(a) the 100-to-1 long shot. (b) the odds-on favorite. (c) the 3-to-1 shot. (d) none of the above.
Scoring Give yourself 10 points each for answers 1a, 2a, 3c, 4a, 5a, 6a, 7c, 8a, 9c, 10c, 11b, 12c; total the scores and enter the result here [I � ___________].
Give yourself 8 points each for answers 3b, 8b, 9b; enter total here [II � ___________].
Give yourself 6 points each for answers 2b, 5b; enter total here [III � ___________].
Give yourself 5 points for answer 1b; enter result here [IV � ___________].
Give yourself 4 points for answer 5c; enter result here [V � ___________].
Give yourself 2 points each for answers 2c, 3a, 4b, 6c, 9d, 10b, 11a, 12b; enter total here [VI � ___________].
Th e other answers are worth 0 points.
Total your summary scores for I � II � III � IV � V � VI and enter the result here: My Entrepreneurship Potential Score is ___________.
Interpretation Th is assessment off ers an impression of your entrepreneurial profi le (EP). It compares your characteristics with those of typical en-
trepreneurs, according to this profi le: 100� � Entrepreneur extraordinaire; 80–99 � Entrepreneur ; 60–79 � Potential entrepreneur ; 0–59 � Entrepreneur in the rough.
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P o r t f o l i o Class Exercises
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Class Exercise 1: My Best Manager 1
Preparation Working alone, make a list of the behavioral attributes that describe the “best” manager you have ever had. Th is could be someone you
worked for in a full-time or part-time job, summer job, volunteer job, student organization, or elsewhere. If you have trouble identifying an
actual manager, make a list of behavioral attributes of the manager you would most like to work for in your next job.
Instructions Form into teams as assigned by your instructor, or work with a nearby classmate. Share your list of attributes and listen to the lists of
others. Be sure to ask questions and make comments on items of special interest. Work together in your team to create a master list that
combines the unique attributes of the “best” managers experienced by members of your group. Have a spokesperson share that list with
the rest of the class for further discussion.
Class Exercise 2: Evidence-Based Management Quiz 2
Instructions 1. For each of the following questions, answer T (true) if you believe the statement is backed by solid research evidence or F ( false) if
you do not believe it is an evidence-based statement.
1. Intelligence is a better predictor of job performance than having a conscientious personality.
2. Screening job candidates for values results in higher job performance than screening for intelligence.
3. A highly intelligent person will have a hard time performing well in a low-skill job.
4. “Integrity tests” are good predictors of whether employees will steal, be absent, or take advantage of their employers
in other ways.
5. Goal setting is more likely to result in improved performance than is participation in decision making.
6. Errors in performance appraisals can be reduced through proper training.
7. People behave in ways that show pay is more important to them than what they indicate on surveys.
2. Share your answers with others in your assigned group. Discuss the reasons members chose the answers they did; arrive at a fi nal
answer to each question for the group as a whole.
3. Compare your results with these answers “from the evidence.”
4. Engage in a class discussion of how “commonsense” answers can sometimes diff er from answers provided by “evidence.” Ask: What
are the implications of this discussion for management practice?
Class Exercise 3: Confronting Ethical Dilemmas
Preparation Read and indicate your response to each of the situations below.
1. Ron Jones, vice president of a large construction fi rm, receives in the mail a large envelope marked “personal.” It contains a competi-
tor’s cost data for a project that both fi rms will be bidding on shortly. Th e data are accompanied by a note from one of Ron’s
subordinates saying: “Th is is the real thing!” Ron knows that the data could be a major advantage to his fi rm in preparing a bid that
can win the contract. What should he do?
2. Kay Smith is one of your top-performing subordinates. She has shared with you her desire to apply for promotion to a new position
just announced in a diff erent division of the company. Th is will be tough on you since recent budget cuts mean you will be unable to
replace anyone who leaves, at least for quite some time. Kay knows this and, in all fairness, has asked your permission before she
submits an application. It is rumored that the son of a good friend of your boss is going to apply for the job. Although his credentials
are less impressive than Kay’s, the likelihood is that he will get the job if she doesn’t apply. What will you do?
3. Marty Jose got caught in a bind. She was pleased to represent her fi rm as head of the local community development committee. In
fact, her supervisor’s boss once held this position and told her in a hallway conversation, “Do your best and give them every support
possible.” Going along with this, Marty agreed to pick up the bill (several hundred dollars) for a dinner meeting with local civic and
business leaders. Shortly thereafter, her supervisor informed everyone that the entertainment budget was being eliminated in a
cost-saving eff ort. Marty, not wanting to renege on supporting the community development committee, was able to charge the dinner
bill to an advertising budget. Eventually, an internal auditor discovered the charge and reported it to you, the personnel director.
Marty is scheduled to meet with you in a few minutes. What will you do?
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P o r t f o l i o Class Exercises
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Instructions Working alone, make the requested decisions in each of these incidents. Th ink carefully about your justifi cation for the decision. Meet in
a group assigned by your instructor. Share your decisions and justifi cations in each case with other group members. Listen to theirs. Try
to reach a group consensus on what to do in each situation and why. Be prepared to share the group decisions, and any dissenting views,
in general class discussion.
Class Exercise 4: Lost at Sea 3
Consider This Situation You are adrift on a private yacht in the South Pacifi c when a fi re of unknown origin destroys the yacht and most of its contents. You and a
small group of survivors are now in a large raft with oars. Your location is unclear, but you estimate that you are about 1,000 miles south-
southwest of the nearest land. One person has just found in her pockets fi ve $1 bills and a packet of matches. Everyone else’s pockets are
empty. Th e items below are available to you on the raft.
Individual ranking Team ranking Expert ranking
Sextant
Shaving mirror
5 gallons water
Mosquito netting
1 survival meal
Maps of Pacifi c Ocean
Floatable seat cushion
2 gallons oil-gas mix
Small transistor radio
Shark repellent
20 square feet black plastic
1 quart 20-proof rum
15 feet nylon rope
24 chocolate bars
Fishing kit
Instructions 1. Working alone, rank the 15 items in order of their importance to your survival (1 is most important and 15 is least important).
2. Working in an assigned group, arrive at a “team” ranking of the 15 items. Appoint one person as team spokesperson to report your
team ranking to the class.
3. Do not write in column 3 until your instructor provides the “expert” ranking.
Class Exercise 5: Th e Future Workplace
Instructions Form groups as assigned by the instructor. Brainstorm to develop a master list of the major characteristics you expect to fi nd in the
workplace in the year 2020. Use this list as background for completing the following tasks:
1. Write a one-paragraph description of what the typical “Workplace 2020” manager’s workday will be like.
2. Draw a “picture” representing what the “Workplace 2020” organization will look like.
3. Summarize in list form what you consider to be the major planning implications of your future workplace scenario for management
students today. Th at is, explain what this means in terms of using academic and extracurricular activities to best prepare for success
in this future scenario.
4. Choose a spokesperson to share your results with the class as a whole and explain their implications for the class members.
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S K I L L - B U I L D I N G
P o r t f o l i o Class Exercises
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Class Exercise 6: Stakeholder Maps
Preparation Review the discussion of organizational stakeholders in the textbook. (1) Make a list of the stakeholders that would apply to all
organizations—for example, local communities, employees, and customers. What others would you add to this starter listing? (2) Choose
one organization that you are familiar with from each list below. (3) Draw a map of key stakeholders for each organization. (4) For each
stakeholder indicate its major interest in the organization. (5) For each organization make a list of possible confl icts among stakeholders
that the top manager should recognize.
Nonprofi t Government Business
Elementary school Local mayor’s offi ce Convenience store
Community hospital State police Movie theater
Church U.S. Senator National retailer
University Internal Revenue Service Local pizza shop
United Way Homeland Security agency Urgent care medical clinic
Instructions In groups assigned by your instructor, choose one organization from each list. Create “master” stakeholder maps for each organization,
along with statements of stakeholder interests and lists of potential stakeholder confl icts. Assume the position of top manager for each
organization. Prepare a “stakeholder management plan” that represents the high-priority issues the manager should be addressing with
respect to the stakeholders. Make a presentation to the class for each of your organizations and engage in discussion about the impor-
tance and complexity of stakeholder analysis.
Class Exercise 7: Strategic Scenarios 4
Preparation In today’s turbulent economic climate, it is no longer safe to assume that an organization that was highly successful yesterday will
continue to be so tomorrow—or that it will even be in existence. Changing times exact the best from strategic planners. Th ink about the
situations currently facing the following well-known organizations. Th ink, too, about the futures they may face.
McDonald’s Ford Sony
Apple Computer Nordstrom Electronic Arts
Yahoo.com National Public Radio AT&T
Ann Taylor Th e New York Times Federal Express
Instructions Form into groups as assigned by your instructor. Choose one or more organizations from the prior list (or as assigned) and answer the
following questions for the organization:
1. What in the future might seriously threaten the success, perhaps the very existence, of this organization? As a group, develop at least
three such future scenarios.
2. Estimate the probability (0 to 100%) of each future scenario occurring.
3. Develop a strategy for each scenario that will enable the organization to successfully deal with it.
4. Th oroughly discuss these questions within the group and arrive at your best possible consensus answers. Be prepared to share and
defend your answers in general class discussion.
Class Exercise 8: Organizational Metaphors
Instructions 1. Start by answering the following questions using this scale:
5 � strongly agree 4 � agree somewhat 3 � undecided 2 � disagree somewhat 1 � strongly disagree
I prefer to work in an organization where:
1. Goals are defi ned by those in higher levels.
2. Work methods and procedures are specifi ed.
3. Top management makes important decisions.
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4. My loyalty counts as much as my ability to do the job.
5. Clear lines of authority and responsibility are established.
6. Top management is decisive and fi rm.
7. My career is pretty well planned out for me.
8. I can specialize.
9. My length of service is almost as important as my level of performance.
10. Management is able to provide the information I need to do my job well.
11. A chain of command is well established.
12. Rules and procedures are adhered to equally by everyone.
13. People accept the authority of a leader’s position.
14. People are loyal to their boss.
15. People do as they have been instructed.
16. People clear things with their boss before going over his or her head.
2. Total your scores for all questions. Enter the score here [__________].
3. Interpretation. Th is assessment measures your preference for working in an organization designed along “organic” or “mechanistic”
lines. Th e higher your score (above 64), the more comfortable you are with a mechanistic design; the lower your score (below 48), the
more comfortable you are with an organic design. Scores between 48 and 64 can go either way.
4. Form into groups and compare scores and organizational design preferences. Discuss areas of similarity and diff erence. Prepare a
report to the class that summarizes the organizational design preferences within your group and also highlights arguments for and
against organic and mechanistic organizations as places to work.
Class Exercise 9: Force-Field Analysis
Instructions 1. Form into your class discussion groups and review this model of force-fi eld
analysis—the consideration of forces driving in support of a planned change
and forces resisting the change.
2. Use force-fi eld analysis and make lists of driving and resisting forces for
one of the following situations:
(a) Because of rapid advances in Web-based computer technologies, the
possibility exists that the course you are presently taking could be, in
part, off ered online. Th is would mean a reduction in the number of required class sessions but an increase in students’ responsi-
bility for completing learning activities and assignments through computer mediation. Th e dean wants all faculty to put at least
part of their courses online.
(b) A new owner has just taken over a small walk-in-and-buy-by-the-slice pizza shop in a college town. Th ere are presently eight
employees, three of whom are full-time and fi ve of whom are part-time. Th e shop is open seven days a week from 10:30 a.m. to
midnight. Th e new owner believes there is a market niche available for late-night pizza and would like to stay open each night
until 4 a.m. She wants to make the change as soon as possible.
(c) A situation assigned by the instructor.
3. Choose the three driving forces that are most signifi cant for the proposed change. For each force, develop ideas on how it could be
further increased or mobilized in support of the change.
4. Choose the three resisting forces that are most signifi cant for the proposed change. For each force, develop ideas on how it could be
reduced or turned into a driving force.
5. Be prepared to participate in a class discussion led by your instructor.
Class Exercise 10: Upward Appraisal 5
Instructions Form into work groups as assigned by the instructor. Th e instructor will then leave the room. As a group, complete the following tasks:
1. Within each group create a master list of comments, problems, issues, and concerns about the course experience to date that
members would like to communicate to the instructor.
Current state
Desired future state
Resisting forcesDriving forces
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P o r t f o l i o Class Exercises
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2. Select one person from the group to act as a spokesperson who will give your feedback to the instructor when he or she returns to
the classroom.
3. Before the instructor returns, the spokespersons from each group should meet to decide how the room should be physically
arranged (placement of tables, chairs, etc.) for the feedback session. Th is arrangement should allow the spokespersons and instruc-
tor to communicate while they are being observed by other class members.
4. While the spokespersons are meeting, members remaining in the groups should discuss what they expect to observe during the
feedback session.
5. Th e classroom should be rearranged. Th e instructor should be invited in.
6. Spokespersons should deliver feedback to the instructor while observers make notes.
7. After the feedback session is complete, the instructor will call on observers for comments, ask the spokespersons for their reactions,
and engage the class in general discussion about the exercise and its implications.
Class Exercise 11: Leading by Participation 6
Preparation Read each of the following vignettes. Write in the margin whether you think the leader should handle the situation with:
I � an individual or authority decision C � a consultative decision G � a group decision
Vignette I You are the leader of a large team laying an oil pipeline. It is now necessary to estimate your expected rate of progress in order to
schedule material deliveries to the next fi eld site. You know the nature of the terrain you will be traveling and have the historical data
needed to compute the mean and variance in the rate of speed over the type of terrain. Given these two variables, it is a simple matter
to calculate the earliest and latest times at which materials and support facilities will be needed at the next site. It is important that
your estimate be reasonably accurate; underestimates result in idle teams, and overestimates result in materials being tied up for a
period of time before they are to be used. Progress has been good, and your team stands to receive substantial bonuses if the project is
completed ahead of schedule.
Vignette II You are supervising the work of 12 engineers. Th eir formal training and work experience are very similar, permitting you to use them
interchangeably on projects. Yesterday, your manager informed you that a request had been received from an overseas affi liate for four
engineers to go abroad on extended loan for a period of six to eight months. He argued and you agreed that for a number of reasons this
request should be fi lled from your group. All your engineers are capable of handling this assignment, and from the standpoint of present
and future projects, there is no particular reason that any one should be retained over any other. Th e problem is complicated by the fact
that the overseas assignment is in what is generally regarded in the company as an undesirable location.
Vignette III You are the head of a staff unit reporting to the vice president of finance. She has asked you to provide a report on the firm’s cur-
rent portfolio, including recommendations for changes in the selection criteria. Doubts have been raised about the efficiency of
the existing system in the current market conditions, and there is dissatisfaction with rates of return. Your own specialty is the
bond market, and it is clear to you that a detailed knowledge of the equity market, which you lack, would greatly enhance the value
of the report. Four members of your staff are specialists in different segments of the equity market and possess a vast amount of
knowledge about the intricacies of investment. However, they seldom agree on the best way to achieve anything when it comes to
the stock market. Although conscientious as well as knowledgeable, they have major differences when it comes to investment phi-
losophy and strategy. The report is due in six weeks. You have already begun to familiarize yourself with the firm’s current portfolio
and have been provided by management with a specific set of constraints that any portfolio must satisfy. Your immediate problem
is to come up with some alternatives to the firm’s present practices and select the most promising ones for detailed analysis in
your report.
Instructions Form groups as assigned by the instructor. Share your choices with other group members and try to achieve a consensus on how the
leader should best handle each situation. Refer back to the Vroom–Jago “leader-participation” theory presented in this chapter. Analyze
each vignette according to their ideas. Do you come to any diff erent conclusions? If so, why? Nominate a spokesperson to share your
results in general class discussion.
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S K I L L - B U I L D I N G
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In days of old, a wandering youth happened upon a group of men working in a quarry. Stopping by the fi rst
man, he said: “What are you doing?” The worker grimaced and groaned as he replied: “I am trying to shape this
stone, and it is backbreaking work.” Moving to the next man, the youth repeated the question. This man showed
little emotion as he answered: “I am shaping a stone for a building.” Moving to the third man, our traveler heard
him singing as he worked. “What are you doing?” asked the youth. “I am helping to build a cathedral,” the man
proudly replied.
Class Exercise 12: Job Satisfaction Preferences 7
Preparation Rank the following items from 1 � least important to 9 � most important to your future job satisfaction.
My job will be satisfying when:
1. It is respected by other people.
2. It encourages continued development of knowledge and skills.
3. It provides job security.
4. It provides a feeling of accomplishment.
5. It provides the opportunity to earn a high income.
6. It is intellectually stimulating.
7. It rewards good performance with recognition.
8. It provides comfortable working conditions.
9. It permits advancement to high administrative responsibility.
Instructions Form into groups as designated by your instructor. Within each group, the men should develop a consensus ranking of the items as they
think women ranked them. Th e reasons for the rankings should be shared and discussed so they are clear to everyone. Th e women in the
group should not participate in this ranking task. Th ey should listen to the discussion and be prepared to comment later in class discus-
sions. A spokesperson for the men in the group should share the group’s rankings with the class.
Optional Instructions Form into groups consisting entirely of men or women. Each group should meet and decide which of the work values members of the
opposite sex will rank fi rst. Do this again for the work value ranked last. Th e reasons should be discussed, along with the reasons why
each of the other values probably was not ranked fi rst—or last. A spokesperson for each group should share group results with the
rest of the class.
Class Exercise 13: Why We Work 8
Preparation Read this “ancient story.”
Instructions In groups assigned by your instructor, discuss this short story. (1) Ask and answer the question: “What are the motivation and job
design lessons of this ancient story?” (2) Have members of the group role-play each of the stonecutters as they are answering this
additional question: “Why are you working?” Have someone in the group be prepared to report and share the group’s responses with
the class as a whole.
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S K I L L - B U I L D I N G
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Class Exercise 14: Understanding Team Dynamics 9
Preparation Th ink about your course work team, a team you are involved with in another campus activity, or any other team situation suggested by
your instructor. Use this scale to indicate how often each of the following statements accurately refl ects your experience in the group.
1 � always 2 � frequently 3 � sometimes 4 � never
1. My ideas get a fair hearing.
2. I am encouraged to off er innovative ideas and take risks.
3. Diverse opinions within the group are encouraged.
4. I have all the responsibility I want.
5. Th ere is a lot of favoritism shown in the group.
6. Members trust one another to do their assigned work.
7. Th e group sets high standards of performance excellence.
8. People share and change jobs a lot in the group.
9. You can make mistakes and learn from them in this group.
10. Th is group has good operating rules.
Instructions Form groups as assigned by your instructor. Ideally, this will be the group you have just rated. Have all group members share their ratings, and
then make one master rating for the group as a whole. Circle the items for which there are the biggest diff erences of opinion. Discuss those
items and try to fi nd out why they exist. In general, the better a group scores on this instrument, the higher its creative potential. If everyone
has rated the same group, make a list of the fi ve most important things members can do to improve its operations in the future. Nominate a
spokesperson to summarize the group discussion for the class as a whole.
Class Exercise 15: Communication and Teamwork Dilemmas 10
Instructions 1. Identify from the list below the three activities that you fi nd most uncomfortable when part of a team.
(a) Telling a friend that she or he must stop coming late to team meetings
(b) Pointing out to a team member that his or her poor performance is hurting the team
(c) Asking teammates to comment on your criticism of the consensus that seems to be emerging on a particular issue
(d) Telling a teammate who has problems working with others on the team that he or she has to do something about it
(e) Responding to a team member who has just criticized your performance
( f ) Responding to a team member who has just criticized your attitude toward the team
(g) Responding to a team member who becomes emotional and defensive when you criticize his or her performance
(h) Having a teammate challenge you to justify your contributions to a discussion
2. Form three-person teams as assigned by your instructor. Identify the three behaviors with which each person indicates the most
discomfort.
3. Have each team member practice performing these behaviors with another member, while the third member acts as an observer. Be
direct, but try to perform the behavior in an appropriate way. Listen to feedback from the observer and try the behaviors again,
perhaps with diff erent members of the group practicing each behavior.
4. When fi nished, discuss the overall exercise and be prepared to share highlights of the exercise with the rest of the class.
Class Exercise 16: Alligator River Story 11
Preparation Read this story.
There lived a woman named Abigail who was in love with a man named Gregory. Gregory lived on the shore of a river.
Abigail lived on the opposite shore of the same river. The river that separated the two lovers was teeming with danger-
ous alligators. Abigail wanted to cross the river to be with Gregory. Unfortunately, the bridge had been washed out by
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Instructions 1. After reading the story, rank the fi ve characters in the story beginning with the one you consider the most off ensive and ending with
the one you consider the least objectionable. Th at is, the character who seems to be the most reprehensible to you should be entered
fi rst in the list, then the second most reprehensible, and so on, with the least reprehensible or objectionable being entered fi fth. Of
course, you will have your own reasons as to why you rank them in the order that you do. Very briefl y note these, too.
2. Form groups as assigned by your instructor (at least four persons per group with gender mixed). Each group should:
(a) Elect a spokesperson for the group
(b) Compare how the group members have ranked the characters
(c) Examine the reasons used by each of the members for their rankings
(d) Seek consensus on a fi nal group ranking
3. After completing the prior steps, discuss in the group the outcomes and reasons for agreement or disagreement on the rankings. Pay
particular attention to any patterns that emerge.
4. Have a spokesperson be prepared to discuss the results of the exercise and the discussion within your group with the rest of the class.
Class Exercise 17: American Football
Instructions Form into groups as assigned by the instructor. In the group, do the following:
1. Discuss American football—the rules, the way the game is played, the way players and coaches behave, and the roles of owners and fans.
2. Use American football as a metaphor to explain the way U.S. corporations run and how they tend to behave in terms of strategies and goals.
3. Prepare a class presentation for a group of visiting Japanese business executives. In this presentation, use the metaphor of
American football to (1) explain American business strategies and practices to the Japanese and (2) critique the potential
strengths and weaknesses of the American business approach in terms of success in the global marketplace.
Class Exercise 18: Entrepreneurs Among Us 12
Michael Gerber, author and entrepreneur, says: “Th e entrepreneur in us sees opportunities everywhere we look, but many people see only
problems everywhere they look.”
Instructions 1. Th ink about the people you know and deal with. Who among them is the best example of a successful entrepreneur? Write down
their name and also a brief justifi cation for your choice.
2. Th ink about your personal experiences, interests, and ideas that might be sources of personal entrepreneurship. Jot down a few notes
that set forth some tentative plans for turning at least one into an actual accomplishment.
3. Form teams as assigned by the instructor. Within the team share both (a) your example of a successful entrepreneur and (b) your
personal entrepreneurship plan.
4. Choose one as your team’s “exemplar” entrepreneurs to share with the class at large. Focus on the entrepreneur as a person, the
entrepreneur’s business or nonprofi t venture, what factors account for success and/or failure in this case, and what the entrepreneur
contributes to the local community.
5. Choose one of the entrepreneurship plans from among your teammates and be prepared to share and explain it as well with the class
at large.
a heavy fl ood the previous week. So she went to ask Sinbad, a riverboat captain, to take her across. He said he would
be glad to if she would consent to go to bed with him prior to the voyage. She promptly refused and went to a friend
named Ivan to explain her plight. Ivan did not want to get involved at all in the situation. Abigail felt her only alternative
was to accept Sinbad’s terms. Sinbad fulfi lled his promise to Abigail and delivered her into the arms of Gregory. When
Abigail told Gregory about her amorous escapade in order to cross the river, Gregory cast her aside with disdain. Heart-
sick and rejected, Abigail turned to Slug with her tale of woe. Slug, feeling compassion for Abigail, sought out Gregory
and beat him brutally. Abigail was overjoyed at the sight of Gregory getting his due. As the sun set on the horizon,
people heard Abigail laughing at Gregory.
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Team Project 1: Managing Millennials
Question What should Baby Boomers know about members of the Millennial generation to best manage them in the workplace?
Instructions • Gather insights regarding the work and career preferences, values, and expectations of members of these diff erent generational subcul-
tures—specifi cally, Baby Boomers, Generation Xers, and Millennials.
• Analyze the points of potential diff erence between Baby Boomers and Millennials. What advice can you give to a Baby Boomer manag-
er on how to best deal with a Millennial worker? What advice can you give the Millennial on how to best deal with a Baby Boomer boss?
• Analyze the points of potential diff erence between Baby Boomers and Generation Xers. What advice can you give to a Baby Boomer
manager on how to best deal with a Generation X worker? What advice can you give the Generation Xer on how to best deal with a Baby
Boomer boss?
• Analyze the points of potential diff erence between Millennials and Generation Xers. What advice can you give to a Generation X manager
on how to best deal with a Millennial worker? What advice can you give the Millennial on how to best deal with a Generation X boss?
Team Project 2: Management in Popular Culture
You’ll notice that the chapter openers in this book bring in movies and television shows from our popular culture. Lots of them have
situations and themes that deal with things like leadership, team dynamics, attitudes, personalities—all the major topics of this textbook.
Th e point is: Management learning is everywhere; we just have to look for it.
Question What management insights are available in various elements of our popular culture and refl ected in our everyday living?
Instructions • Listen to music. Pick out themes that refl ect important management concepts and theories. Put them together in a multimedia report that
presents your music choices and describes their messages about management and working today.
• Watch television. Look again for the management themes. In a report, describe what popular television programs have to say about
management and working. Also consider TV advertisements. How do they use and present workplace themes to help communicate
their messages?
• Read the comics looking for management themes. Compare and contrast management and working in two or three popular comic strips.
• Read a best-selling novel. Find examples of management and work themes in the novel. Report on what the author’s characters and
their experiences say about people at work.
Team Project 3: Organizational Commitment to Sustainability
Instructions In your assigned work teams do the following.
1. Agree on a defi nition of “sustainability” that should fi t the operations of any organization.
2. Brainstorm audit criteria that can be used to create a Commitment to Sustainability Scorecard (CSS) that can be used to assess the
sustainability practices of an organization.
3. Formalize your list of criteria and then create a formal CSS worksheet that can be used to conduct an actual audit. Be sure that
an organization being audited would not only receive scores on individual dimensions or categories of sustainability perfor-
mance but also receive a total overall “Sustainability Score” that can be compared with results for other organizations.
4. Present and defend your CSS to the class at large.
5. Use feedback received from the class presentation to revise your CSS to be used in an actual organizational sustainability audit.
6. Use your CSS to conduct a sustainability audit for a local organization.
Team Project 4: Crisis Management Realities
Question What types of crises do business leaders face and how do they deal with them?
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Instructions • Identify three crisis events from the recent local, national, and international business news.
• Read at least three diff erent news reports on each crisis, trying to learn as much as possible about its specifi cs, how it was dealt with,
what the results were, and the aftermath of the crisis.
• For each crisis, use a balance sheet approach to list sources or causes of the conflict and management responses to it. Analyze
the lists to see if there are any differences based on the nature of the crisis faced in each situation. Also look for any patterns in
the responses to them by the business executives.
• Score each crisis ( from 1 � low to 5 � high) in terms of how successfully it was handled. Be sure to identify the criteria that you use to describe “success” in handling a crisis situation. Make a master list of “Done Rights” and “Done Wrongs” in crisis management.
• Summarize the results of your study into a report on “Realities of Crisis Management.”
Team Project 5: Personal Career Planning 1
Instructions 1. Complete the following activities and bring the results to class. Your work should be in a written form suitable for grading.
Activity 1: Strengths and Weaknesses Inventory Diff erent occupations require special talents, abilities, and skills. Each of us, you
included, has a repertoire of existing strengths and weaknesses that are “raw materials” we presently off er a potential employer.
Actions can (and should!) be taken over time to further develop current strengths and to turn weaknesses into strengths. Make a list
identifying your most important strengths and weaknesses in relation to the career direction you are likely to pursue upon gradua-
tion. Place a * next to each item you consider most important to focus on for continued personal development.
Activity 2: Five-Year Career Objectives Make a list of three career objectives that you hope to accomplish within five years of
graduation. Be sure they are appropriate given your list of personal strengths and weaknesses.
Activity 3: Five-Year Career Action Plans Write a specifi c action plan for accomplishing each of the fi ve objectives. State exactly
what you will do, and by when, in order to meet each objective. If you will need special support or assistance, identify what it is
and state how you will obtain it. An outside observer should be able to read your action plan for each objective and end up feeling
confi dent that he or she knows exactly what you are going to do and why.
2. In class, form into groups as assigned by the instructor. Share your career-planning analysis with the group and listen to those of
others. Participate in a discussion that examines any common patterns and major diff erences among group members. Take
advantage of any opportunities to gather feedback and advice from others. Have one group member be prepared to summarize the
group discussion for the class as a whole.
Team Project 6: After Meeting/Project Review 2
Instructions 1. Complete the following assessment after participating in a meeting or a group project.
1. How satisfi ed are you with the outcome of the meeting project?
Not at all satisfi ed 1 2 3 4 5 6 7 Totally satisfi ed
2. How do you think other members of the meeting/project group would rate you in terms of your infl uence on what took place?
No infl uence 1 2 3 4 5 6 7 Very high infl uence
3. In your opinion, how ethical was any decision that was reached?
Highly unethical 1 2 3 4 5 6 7 Highly ethical
4. To what extent did you feel “pushed into” going along with the decision?
Not pushed into it at all 1 2 3 4 5 6 7 Very pushed into it
5. How committed are you to the agreements reached?
Not at all committed 1 2 3 4 5 6 7 Highly committed
6. Did you understand what was expected of you as a member of the meeting or project group?
Not at all clear 1 2 3 4 5 6 7 Perfectly clear
7. Were participants in the meeting/project group discussion listening to each other?
Never 1 2 3 4 5 6 7 Always
8. Were participants in the meeting/project group discussion honest and open in communicating with one another?
Never 1 2 3 4 5 6 7 Always
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9. Was the meeting/project completed effi ciently?
Not at all 1 2 3 4 5 6 7 Very much
10. Was the outcome of the meeting/project something that you felt proud to be a part of ?
Not at all 1 2 3 4 5 6 7 Very much
2. Make sure that everyone in your group completed this assessment for the same team project.
3. Each person in the group should then take the “mirror test.” Th ey should ask: (a) What are my thoughts about my team and my
contributions to the team, now that the project is fi nished? (b) What could I do in future situations to end up with a “perfect” score
after a meeting or after a project review?
4. Share results of both the assessment and mirror test with one another. Discuss their implications: (a) for the future success of the
group on another project and (b) for the members as they go forward to work with other groups on other projects in the future.
5. Be prepared to share your team project results with the class as a whole.
Team Project 7: Contrasting Strategies
Starbucks is the dominant name among coff ee kiosks—how does Dunkin Donuts compete? Google has become the world’s search
engine of choice—can Bing ever catch up? Does it make a diff erence to you whether you shop for books at Amazon or Barnes & Noble, or
buy gasoline from BP, Shell, or the local convenience store?
Question How do organizations in the same industry fare when they pursue somewhat or very diff erent strategies?
Instructions 1. Look up recent news reports and analyst summaries for each of the following organizations:
Coach and Kate Spade . . . Southwest Airlines and Delta Airlines . . . New York Times and USA Today . . . Electronic Arts and Take 2
Interactive . . . National Public Radio and Sirius . . . Coca-Cola and PepsiCo
2. Use this information to write a short description of the strategies that each seems to be following in the quest for performance success.
3. Compare the strategies for each organizational pair, with the goal of identifying whether or not one organization has a strategic advantage
in the industry.
4. Try to identify other pairs of organizations and do similar strategic comparisons for them.
5. Prepare a summary report highlighting (a) the strategy comparisons and (b) those organizations whose strategies seem best
positioned for competitive advantage.
Team Project 8: Network “U”
Instructions Form into groups as assigned by the instructor. In the group do the following:
1. Discuss the concept of the network organization structure as described in the textbook.
2. Create a network organization structure for your college or university. Identify the “core staffi ng” and what will be outsourced.
Identify how outsourcing will be managed.
3. Draw a diagram depicting the various elements in your Network “U.”
4. Identify why Network “U” will be able to meet two major goals: (a) create high levels of student learning and (b) operate with cost effi ciency.
5. Present and justify your design for Network “U” to the class.
Team Project 9: Organizational Culture Walk
Question What organizational cultures do we encounter and deal with every day, and what are their implications for employees, customers,
and organizational performance?
Instructions 1. In your team make two lists. List A should identify the things that represent the core cultures of organizations. List B should identify
the things that represent the observable cultures of organizations. For each item on the two lists, identify one or more indicators that
you might use to describe this aspect of the culture for an actual organization.
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2. Take an organizational culture walk through a major shopping area of your local community. Choose at least three business establish-
ments. Visit each as customers. As you approach, put your “organizational culture senses” to work. Start gathering data on your Lists
A and B. Keep gathering it while you are at the business and right through your departure. Take good notes and gather your thoughts
together after leaving. Do this for each of the three organizations you choose.
3. Analyze and compare your data to identify the major cultural attributes of the three organizations and how they infl uence customers
and organizational performance.
4. Use your results to make some general observations and report on the relationship between organizational cultures and perfor-
mance as well as among organizational cultures, employee motivation, and customer satisfaction.
Team Project 10: Th e Future of Labor Unions
Question What is the future for labor unions in America?
Instructions 1. Perform library research to identify trends in labor union membership in the United States.
2. Analyze the trends to identify where unions are gaining and losing strength; develop possible explanations.
3. Consider talking with members of labor unions in your community to gather their viewpoints.
4. Consider examining data on labor union trends in other countries.
5. Prepare a report that uses the results of your research to answer the project question.
Team Project 11: Leadership Believe-It-Or-Not
You would think leaders would spend lots of time talking with the people who make products and deliver services, trying to understand
problems and asking for advice. But Business Week reports a survey that shows quite the opposite. Persons with a high school education
or less are asked for advice by only 24% of their bosses; for those with a college degree, the number jumps to 54%.
Question What stories do your friends, acquaintances, family members, and you tell about their bosses that are truly hard to believe?
Instructions 1. Listen to others and ask others to talk about the leaders they have had or presently do have. What strange-but-true stories are they
telling?
2. Create a journal that can be shared with class members that summarizes, role-plays, or otherwise communicates the real-life
experiences of people whose bosses sometimes behave in ways that are hard to believe.
3. For each of the situations in your report, try to explain the boss’s behaviors.
4. Also for each of the situations, assume that you observed or heard about it as the boss’s supervisor. Describe how you would “coach”
or “counsel” the boss in order to turn the situation into a “learning moment” for positive leadership development.
Team Project 12: Diffi cult Personalities
Question What personalities cause the most problems when people work together in teams, and what can be done to best deal with them?
Instructions 1. Do a survey of friends, family, co-workers, and even the public-at-large to get answers to these questions:
1. When you work in a team, what personalities do you have the most diffi culty dealing with?
2. How do these personalities aff ect you, and how do they aff ect the team as a whole?
3. In your experience and for each of the “diffi cult personalities” that you have described, what have you found to be the best way of dealing
with them?
4. How would you describe your personality, and are there any circumstances or situations in which you believe others could con-
sider your personality “diffi cult” to deal with?
5. Do you engage in any self-management when it comes to your personality and how it fi ts when you are part of a team?
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2. Gather the results of your survey, organize them for analysis, and then analyze them to see what patterns and insights your study has
uncovered.
3. Prepare a report to share your study with the rest of your class.
Team Project 13: CEO Pay
Question What is happening in the area of executive compensation and what do you think about it?
Instructions 1. Check the latest reports on CEO pay. Get the facts and prepare a brief report as if you were writing a short, informative article for Fortune
magazine. Th e title of your article should be “Status Report: Where We Stand Today on CEO Pay.”
2. Address the equity issue: Are CEOs paid too much, especially relative to the pay of average workers?
3. Address the pay-for-performance issue: Do corporate CEOs get paid for performance or for something else? What do the researchers
say? What do the business periodicals say? Find some examples to explain and defend your answers to these questions.
4. Address the social responsibility issue: Should CEOs accept pay that is many times the amounts that workers receive?
5. Take a position: Should a limit be set on CEO pay? If not, why not? If yes, what type of limit should be set? Who, if anyone, should set
these limits—the government, company boards of directors, or someone else?
Team Project 14: Superstars on the Team
During a period of refl ection following a down cycle for his teams, Sasho Cirovski, head coach of the University of Maryland’s men’s soc-
cer, came to a realization. “I was recruiting talent,” he said, “I wasn’t doing a very good job of recruiting leaders.” With a change of strategy,
his teams moved back to top-ranked national competition.
Question What do you do with a “superstar” on your team?
Instructions 1. Everywhere you look—in entertainment, in sports, and in business—a lot of attention these days goes to the superstars. What is the
record of teams and groups with superstars? Do they really outperform the rest?
2. What is the real impact of a superstar’s presence on a team or in the workplace? What do they add? What do they cost? Consider
the potential cost of having a superstar on a team in the equation Benefi ts � Cost � Value. What is the bottom line of having a superstar on the team?
3. Interview the athletic coaches on your campus. Ask them the previous questions about superstars. Compare and contrast their
answers. Interview players from various teams. Ask them the same questions.
4. Develop a set of guidelines for creating team eff ectiveness in a situation where a superstar is present. Be thorough and practical.
Team Project 15: How Words Count
Question What words do people use in organizations that carry meanings that create unintended consequences for the speaker?
Research Directions 1. Brainstorm with others to make a list of words that you have used or heard used by people and that cause other persons to react or
respond negatively and even with anger toward the person speaking them?
2. For each word on the list write its “positive” meaning and “negative” meaning.
3. Choose two or three of the words that seem especially signifi cant. Write role-plays that display speakers using each word in the positive
sense in conversations and in which the words are interpreted positively by the receivers.
4. For these same words, write role-plays that display speakers using each word conversationally with positive intentions but in which
they are interpreted negatively by the receiver.
5. Explain the things that make a diff erence in how the same words are interpreted by receivers.
6. Draft a report that explains how people in organizations can avoid getting trapped unintentionally in problems caused by poor
choice and/or use of words in their conversations.
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Team Project 16: Job Satisfaction Around the World
Question Does job satisfaction vary around the world, and does it refl ect diff erences in national cultures?
Instructions 1. Gather together recent reports on job satisfaction among workers in the United States.
2. Gather similar data on workers in other countries—for example, Canada, the United Kingdom, Germany, Brazil, Mexico, Japan,
India.
3. Compare the job satisfaction data across countries to answer the project question.
4. Consider pursuing your results further by researching how the various countries compare on working conditions, labor laws, and
related matters. Use this information to add context to your fi ndings.
5. Prepare a report to share your study with the rest of your class.
Team Project 17: Globalization Pros and Cons
In his book Th e World Is Flat, Th omas L. Friedman says: “. . . the more your culture easily absorbs foreign ideas and best practices and
melds those with its local traditions—the greater advantages you will have in a fl at world.” 3 Friedman is talking about a world in which
the forces of globalization have ushered in a completely new world that nations, companies, and people must both understand and learn
how to best deal with.
Question “Globalization” is frequently in the news. You can easily read or listen to both advocates and opponents. What is the bottom line? Is
globalization good or bad, and for whom?
Instructions 1. What does the term “globalization” mean? Review various defi nitions and fi nd the common ground.
2. Read and study the scholarly arguments about globalization. Summarize what the scholars say about the forces and consequences
of globalization in the past, present, and future.
3. Examine current events relating to globalization. Summarize the issues and arguments. What is the positive side of globalization?
What are the negatives that some might call its “dark” side?
4. Consider globalization from the perspective of your local community or one of its major employers. From their perspectives, is
globalization a threat or an opportunity, and why?
5. Take a position on globalization. State what you believe to be the best course for government and business leaders to take. Justify
your position.
Team Project 18: Community Entrepreneurs
Entrepreneurs are everywhere. Some might live next door, many own and operate the small businesses of your community, and you
might even be one.
Question Who are the entrepreneurs in your community and what are they accomplishing?
Instructions 1. Read the local news, talk to your friends and other locals, and think about where you shop. Make a list of the businesses and other
organizations that have an entrepreneurial character. Be as complete as possible—look at both businesses and nonprofi ts.
2. For each of the organizations, do further research to identify the persons who are the entrepreneurs responsible for them.
3. Contact as many of the entrepreneurs as possible and interview them. Try to learn how they got started, why, what they encountered
as obstacles or problems, and what they learned about entrepreneurship that could be passed along to others. Add to these ques-
tions a list of your own: What do you want to know about entrepreneurship?
4. Analyze your results for class presentation and discussion. Look for patterns and diff erences in terms of entrepreneurs as persons,
the entrepreneurial experience, and potential insights into business versus social entrepreneurship.
5. Consider writing short cases that summarize the “founding stories” of the entrepreneurs you fi nd especially interesting.
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Th e average Trader Joe’s stocks only a small
percentage of the products of local super-
markets in a space little larger than a corner
store. How did this neighborhood market
grow to earnings of $8.5 billion, garner supe-
rior ratings, and become a model of manage-
ment? Take a walk down the aisles of Trader
Joe’s and learn how sharp attention to the
fundamentals of retail management made
this chain more than the average Joe.
From Corner Store to Foodie Mecca In more than 344 stores across the United
States, hundreds of thousands of custom-
ers are treasure hunting. Driven by gourmet
tastes but hungering for deals, they are led
by cheerful guides in Hawaiian shirts who
point them to culinary discoveries such as
ahi jerky, ginger granola, and baked jala-
peño cheese crunchies.
It’s just an average day at Trader Joe’s,
the gourmet, specialty, and natural-foods
store that off ers staples such as milk and
eggs along with curious, one-of-a-kind
foods at below-average prices in almost
thirty states. Foodies, hipsters, and reces-
sionistas alike are attracted to the chain’s
charming blend of low prices, tasty treats,
and laid-back but enthusiastic customer
service. Shopping at Trader Joe’s is less a
chore than it is immersion into another
culture. In keeping with its whimsi-
cal faux-nautical theme, crew members
and managers wear loud tropical-print
shirts. Chalkboards around every corner
unabashedly announce slogans such as,
“You don’t have to join a club, carry a card,
or clip coupons to get a good deal.”
“When you look at food retailers,” says
Richard George, professor of food market-
ing at St. Joseph’s University, “there is the
low end, the big middle, and then there
is the cool edge—that’s Trader Joe’s.” But
how does Trader Joe’s compare with other
stores with an edge, such as Whole Foods?
Both obtain products locally and from all
over the world. Each values employees
and strives to off er the highest quality.
However, there’s no mistaking that Trader
Joe’s is cozy and intimate, whereas Whole
Foods’ spacious stores off er an abundance
of choices. By limiting its stock and sell-
ing quality products at low prices, Trader
Joe’s sells twice as much per square foot
than other supermarkets. Most retail
mega-markets, such as Whole Foods,
carry between 25,000 and 45,000 products;
Trader Joe’s stores carry only around 4,000.
But this scarcity benefi ts both Trader Joe’s
and its customers. According to Swarth-
more professor Barry Schwartz, author of
Th e Paradox of Choice: Why Less Is More,
“Giving people too much choice can result
in paralysis. . . . [R]esearch shows that the
more options you off er, the less likely peo-
ple are to choose any.”
Trader Joe’s didn’t always stand for brie
and baguettes at peanut butter and jelly
prices. In 1958, the company began life in
Los Angeles as a chain of 7-Eleven–style cor-
ner stores. Striving to diff erentiate his stores
from those of his competitors in order to
survive in a crowded marketplace, founder
“Trader” Joe Coulombe, vacationing in the
Caribbean, reasoned that consumers are
more likely to try new things while on vaca-
tion. He transformed his stores into oases
of value by replacing humdrum sundries
with exotic, one-of-a-kind foods priced
persuasively below those of any reasonable
competitor. In 1979, he sold his chain to the
Albrecht family, German billionaires and
owners of an estimated 8,400 Aldi markets
in the United States and Europe.
Th e Albrechts shared Coulombe’s relent-
less pursuit of value, a trait inseparable from
Trader Joe’s success. Recent annual sales are
estimated at $8.5 billion, landing Trader Joe’s
in the top third of Supermarket News’s Top
75 Retailers. Because it’s not easy competing
with such giants as Whole Foods and Dean
& DeLuca, the company applies its pursuit
of value to every facet of management. By
keeping stores comparatively small—they
average about 10,000 square feet—and shy-
ing away from prime locations, Trader Joe’s
keeps real estate costs down. Th e chain
prides itself on its thriftiness and cost-saving
measures, proclaiming, “Every penny we
save is a penny you save” and “Our CEO
doesn’t even have a secretary.”
Trader Giotto, Trader José, Trader Ming, and Trader Darwin Trader Joe’s strongest weapon in the fi ght
to keep costs low may also be its greatest
appeal to customers: its stock. Th e com-
pany follows a deliciously simple approach
to stocking stores: (1) search out tasty,
unusual foods from all around the world;
(2) contract directly with manufacturers;
(3) label each product under one of several
catchy house brands; and (4) maintain a
small stock, making each product fi ght for
its place on the shelf. Th is common-sense,
low-overhead approach to retail serves
Trader Joe’s well, embodying its commit-
ment to aggressive cost-cutting.
Most Trader Joe’s products are sold under
a variant of their house brand—dried pasta
Case 1: Trader Joe’s: Keeping a Cool Edge
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under the “Trader Giotto’s” moniker, frozen
enchiladas under the “Trader Jose’s” label,
vitamins under “Trader Darwin’s,” and so
on. But these store brands don’t sacrifi ce
quality—readers of Consumer Reports
awarded Trader Joe’s house brands top
marks. Th e house brand success is no acci-
dent. According to Trader Joe’s President
Doug Rauch, the company pursued the strat-
egy to “put our destiny in our own hands.”
But playing a role in this destiny is
no easy feat. Ten to fi fteen new products
debut each week at Trader Joe’s—and the
company maintains a strict “one in, one
out” policy. Items that sell poorly or whose
costs rise get the heave-ho in favor of new
blood, something the company calls the
“gangway factor.” If the company hears
that customers don’t like something about
a product, out it goes. In just such a move,
Trader Joe’s phased out single-ingredient
products (such as spinach and garlic) from
China. “Our customers have voiced their
concerns about products from this region
and we have listened,” the company said
in a statement, noting that items would
be replaced with “products from other
regions until our customers feel as confi -
dent as we do about the quality and safety
of Chinese products.”
Conversely, discontinued items may
be brought back if customers are vocal
enough, making Trader Joe’s the model of
an open system. “We feel really close to
our customers,” says Audrey Dumper, vice
president of marketing for Trader Joe’s
East. “When we want to know what’s on
their minds, we don’t need to put them in
a sterile room with a swinging bulb. We
like to think of Trader Joe’s as an economic
food democracy.” In return, customers keep
talking, and they recruit new converts.
Word-of-mouth advertising has lowered
the corporation’s advertising budget to
approximately 0.2% of sales, a fraction of
the 4% spent by supermarkets.
Trader Joe’s connects with its cus-
tomers because of the culture of product
knowledge and customer involvement
that its management cultivates among
store employees. Most shoppers recall
instances when helpful crew members
took the time to locate or recommend
particular items. Despite the lighthearted
tone suggested by marketing materi-
als and in-store ads, Trader Joe’s aggres-
sively courts friendly, customer-oriented
employees by writing job descriptions
highlighting desired soft skills (“ambi-
tious and adventurous, enjoy smiling and
have a strong sense of values”) as much as
actual retail experience.
Th ose who work for Trader Joe’s earn
more than their counterparts at other chain
grocers. In California, Trader Joe’s employ-
ees can earn almost 20% more than coun-
terparts at supermarket giants Albertsons
or Safeway. Starting benefi ts include medi-
cal, dental, and vision insurance; company-
paid retirement; paid vacation; and a 10%
employee discount. Assistant store manag-
ers earn a compensation package averaging
$94,000 a year, and store managers’ pack-
ages average $122–132,000. One analyst
estimates that a Wal-Mart store manager
earning that much would need to run an
outlet grossing six or seven times that of an
average Trader Joe’s.
Outlet managers are highly compen-
sated, partly because they know the Trader
Joe’s system inside and out (managers are
hired only from within the company). Future
leaders enroll in training programs such as
Trader Joe’s University that foster in them
the loyalty necessary to run stores accord-
ing to both company and customer expec-
tations, teaching managers to imbue their
part-timers with the customer-focused
attitude shoppers have come to expect.
If Trader Joe’s has any puzzling trait, it’s
that the company is more than a bit media-
shy. Executives have granted no interviews
since the Aldi Group took over. Company
statements and spokespersons have been
known to be terse—the company’s leases
even stipulate that no store opening may be
formally announced until a month before
the outlet opens!
Th e future looks bright for Trader Joe’s.
More outlets are planned up and down
the East Coast and in the Midwest, and
the company continues to break into mar-
kets hungry for reasonably priced gourmet
goodies. But will Trader Joe’s struggle to
sustain its international fl avor in the face of
shrinking discretionary income, or will the
allure of cosmopolitan food at provincial
prices continue to tempt consumers?
Discussion Questions 1. Of the six “must have” managerial skills
listed in Chapter 1, which do you think is
the most important for a store manager
of Trader Joe’s? Why?
2. Th is is a German company operating in
America and sourcing products from
around the world. What are the biggest
risks that international ownership and
global events pose for Trader Joe’s per-
formance eff ectiveness and performance
effi ciency?
3. In a casual and nontraditional work
environment such as the one at Trader
Joe’s, what are the keys to a team leader
or supervisor becoming an eff ective
manager?
4. FURTHER RESEARCH Study news
reports to fi nd more information on
Trader Joe’s management and organi-
zation practices. Look for comparisons
with its competitors and try to iden-
tify whether or not Trader Joe’s has the
right management approach and busi-
ness model for continued success. Are
there any internal weaknesses or exter-
nal competitors or industry forces that
might cause future problems?
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Case 2: Zara International: Fashion at the Speed of Light
Spotted! Kate Middleton wears a cream
Reiss dress for her engagement photo with
Prince William. Within a few days, hundreds
of European women were searching out the
same look. Welcome to fast fashion, a trend
that sees clothing retailers frequently pur-
chasing small quantities of merchandise
to stay on top of emerging trends. In this
world of “hot today, gauche tomorrow,” no
company does fast fashion better than Zara
International. Shoppers in 77 countries are
fans of Zara’s knack for bringing the latest
styles from sketchbook to clothing rack at
lightning speed—and reasonable prices.
In Fast Fashion, Moments Matter Because style-savvy customers expect
shorter and shorter delays from runway to
store, Zara International employs a creative
team of 200 professionals to help it keep up
with the latest fashions. It takes just two
weeks for the company to update existing
garments and get them into its stores; new
pieces hit the market twice a week.
Defying the recession with its cheap-
and-chic Zara clothing chain, Zara’s parent
company Inditex posted strong sales gains.
Low prices and a rapid response to fashion
trends are enabling it to challenge Gap Inc.
for top ranking among global clothing ven-
dors. Th e improved results highlight how
Zara’s formula continues to work even in
the economic downturn. Th e chain special-
izes in lightning-quick turnarounds of the
latest designer trends at prices tailored to
the young—about $27 an item. Louis Vuit-
ton fashion director Daniel Piette described
Zara as “possibly the most innovative and
devastating retailer in the world.”
Inditex Group shortens the time from
order to arrival by a complex system of just-in-
time production and inventory reporting that
keeps Zara ahead. Th eir distribution centers
can have items in European stores within 24
hours of receiving an order, and in American
and Asian stores in under 48 hours. “Th ey’re a
fantastic case study in terms of how they man-
age to get product to their stores so quick,” said
Stacey Cartwright, CFO of Burberry Group
PLC. “We are mindful of their techniques.”
Inditex’s history in fabrics manufacturing
made it good business sense to internalize as
many points in the supply chain as possible.
Design, production, distribution, and retail
sales are all controlled by Inditex to optimize
the fl ow of goods, without having to share
profi ts with wholesalers or intermediary
partners. Customers win by having access
to new fashions while they’re still fresh off
the runway. During a Madonna concert tour
in Spain, Zara’s quick turnaround let young
fans at the last show wear Madonna’s outfi t
from the fi rst one.
Twice a week Zara’s fi nished garments
are shipped to logistical centers that all
simultaneously distribute product to stores
worldwide. Th ese small production batches
help the company avoid the risk of oversup-
ply. Because batches always contain new
products, Zara’s stores perpetually energize
their inventories. Most clothing lines are
not replenished. Instead they are replaced
with new designs to create scarcity value—
shoppers cannot be sure that designs in
stores one day will be available the next.
Store managers track sales data with
handheld computers. Th ey can reorder hot
items in less than an hour. Th is lets Zara
know what’s selling and what’s not; when
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a look doesn’t pan out, designers promptly
put together new products. According to
Dilip Patel, U.K. commercial director for
Inditex, new arrivals are rushed to store
sales fl oors still on the black plastic hangers
used in shipping. Shoppers who are in the
know recognize these designs as the newest
of the new; soon after, any items left over are
rotated to Zara’s standard wood hangers.
Inside and out, Zara’s stores are specially
dressed to strengthen the brand. Inditex con-
siders this to be of the greatest importance—
because that is where shoppers ultimately
decide which fashions make the cut. In a
faux shopping street in the basement of the
company’s headquarters, stylists craft and
photograph eye-catching layouts that are
e-mailed every two weeks to store managers
for replication.
Zara stores sit on some of the world’s
glitziest shopping streets—including New
York’s Fifth Avenue, near the fl agship stores
of leading international fashion brands—
which make its reasonable prices stand out.
“Inditex gives people the most up-to-date
fashion at accessible prices, so it is a real
alternative to high-end fashion lines,” said
Luca Solca, senior research analyst with
Sanford C. Bernstein in London. Th at is
good news for Zara as many shoppers trade
down from higher-priced chains.
Catfi ghts on the Catwalk Zara is not the only player in fast fashion.
Competition is fi erce, but Zara’s overwhelm-
ing success (recent quarterly net profi ts
were up 63%) has the competition in its
rear-view mirror: Inditex recently surpassed
Gap as the world’s leading clothing retailer
by sales. Only time will tell if super-chic
Topshop’s entry into the American market
causes a wrinkle in Zara’s success.
Some fashion analysts are referring to
all of this as the democratization of fashion:
bringing high(er) fashion to low(er) income
shoppers. According to James Hurley, a
senior research analyst with New York-based
Telsey Advisory Group LLC, big-box dis-
count stores such as Target and Walmart are
emulating Zara’s ability to study emerging
fashions and knock out look-a-likes in a mat-
ter of weeks. “In general,” Hurley said, “the
fashion cycle is becoming sharper and more
immediately accessible.”
A Single Fashion Culture With a network of over 1,500 stores around
the world, Zara International is Inditex’s
largest and most profi table brand, bring-
ing home 72% of international sales and
nearly 67% of revenues. Th e fi rst Zara out-
let opened shop in 1975 in La Coruña. It
remained solely a Spanish chain until open-
ing a store in Oporto, Portugal, in 1988. Th e
brand reached the United States and France
in 1989 and 1990 with outlets in New York
and Paris, respectively. Zara went into main-
land China in 2001, expanded into India in
2009, and began online sales one year later.
Essential to Zara’s growth and success are
Inditex’s 100-plus textile design, manufactur-
ing, and distribution companies that employ
more than 92,000 workers. Th e Inditex group
began in 1963 when Amancio Ortega Gaona,
chairman and founder of Inditex, got his
start in textile manufacturing. After a period
of growth, he assimilated Zara into a new
holding company, Industria de Diseño Tex-
til. Inditex has a tried-and-true strategy for
entering new markets: start with a handful
of stores and gain a critical mass of custom-
ers. Generally, Zara is the fi rst Inditex chain
to break ground in new countries, paving the
way for the group’s other brands, including
Pull and Bear, Massimo Dutti, and Bershka.
Inditex farms out much of its garment pro-
duction to specialist companies, located on
the Iberian Peninsula, which it often supplies
with its own fabrics. Although some pieces
and fabrics are purchased in Asia—many
undyed or only partly fi nished—the company
manufactures about half of its clothing in its
hometown of La Coruña, Spain.
H&M, one of Zara’s top competitors,
uses a slightly diff erent strategy. Around
one quarter of its stock is made up of fast-
fashion items that are designed in-house
and farmed out to independent factories. As
at Zara, these items move quickly through
the stores and are replaced often by fresh
designs. But H&M also keeps a large inven-
tory of basic, everyday items sourced from
inexpensive Asian factories.
Inditex CEO Pablo Isla believes in cut-
ting expenses wherever and whenever pos-
sible. Zara spends just 0.3% of sales on ads,
making the 3–4% typically spent by rivals
seem excessive in comparison. Isla disdains
markdowns and sales, as well.
Few can criticize the results of Isla’s fru-
gality. Inditex recently opened 343 stores in a
single year and was named Retailer of the Year
during the World Retailer Congress meeting,
after raking in net profi ts of almost $2 billion.
Perhaps most important in an industry based
on image, Inditex secured bragging rights as
Europe’s largest fashion retailer by overtaking
H&M. According to José Castellano, Inditex’s
deputy chairman, the group plans to double
in size in the coming years while making sales
of more than $15 billion. He envisions most
of this growth taking place in Europe—espe-
cially in trend-savvy Italy.
Fashion of the Moment Although Inditex’s dominance of fast fashion
seems virtually complete, it isn’t without its
challenges. For instance, keeping production
so close to home becomes diffi cult when an
increasing number of Zara stores are far-fl ung
across the globe. “Th e effi ciency of the supply
chain is coming under more pressure the far-
ther abroad they go,” notes Nirmalya Kumar, a
professor at London Business School.
Analysts worry that Inditex’s rapid
expansion may pressure its business. Th e
rising number of overseas stores, they warn,
adds cost and complexity and is straining
its operations. Inditex may no longer be
able to manage everything from Spain. But
Inditex isn’t worried. By closely managing
costs, Inditex says its current logistics sys-
tem can handle its growth until 2012.
José Luis Nueno of IESE, a business
school in Barcelona, agrees that Zara is
here to stay. Consumers have become more
demanding and more arbitrary, he says—
and fast fashion is better suited to these
changes. But does Zara International have
what it takes to succeed in the hypercom-
petitive world of fast fashion? Or is the com-
pany trying to expand too quickly?
Discussion Question 1. In what ways are elements of the classi-
cal management approaches evident at
Zara International?
2. How do you see operations management
in practice at Zara?
3. How can systems concepts and the notion
of contingency thinking explain the suc-
cess of some of Zara’s distinctive practices?
4. FURTHER RESEARCH Gather the
latest information on competitive
trends in the apparel industry, and the
latest actions and innovations of Zara.
Is the fi rm continuing to do well? Is it
adapting in ways needed to stay abreast
of both its major competition and the
pressures of a changing global econ-
omy? Is Inditex still providing worthy
management benchmarks for other
fi rms to follow?
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Case 3: Patagonia: Leading a Green Revolution
How has Patagonia managed to stay both
green and profi table at a time when the
economy is down, consumers are tight for
cash, and “doing the profi table thing” is
not necessarily doing the right thing? How
has Patagonia achieved its success without
compromising their ideals?
Twelve hundred Walmart buyers, a
group legendary for their tough-as-nails
negotiating tactics, sit in rapt attention
in the company’s Bentonville, AR, head-
quarters. Th ey’re listening to a small man
in mustard yellow corduroy sportcoat lec-
ture them on the environmental impact of
Walmart’s purchasing choices.
He’s not criticizing the company, per
se—he’s criticizing them. Yet when he fi n-
ishes speaking, the buyers leap to their feat
and applaud enthusiastically.
Such is the authenticity of Yvon Choui-
nard. Since founding Patagonia in 1972,
he’s built it into one of the most successful
outdoor clothing companies, and one that
is steadfastly committed to environmental
sustainability.
It’s hard to discuss Patagonia without
constantly referencing Chouinard, because
for all practical purposes, the two are one.
Where Chouinard ends, Patagonia begins.
Chouinard breathes life into the company,
espousing the outdoorsy athleticism of
Patagonia’s customers. In turn, Patago-
nia’s business practices refl ect Chouinard’s
insistence on minimizing environmental
impact, even at the expense of the bottom
line.
Taking Risks to Succeed For decades, Patagonia has been at the fore-
front of a cozy niche: high-quality, perfor-
mance-oriented outdoor clothes and gear
sold at top price points. Derided as Prada-
gonia or Patagucci by critics, the brand is
aligned with top-shelf labels like North Face
and Royal Robbins. Patagonia clothes are
designed for fl y fi shermen, rock climbers,
and surfers. Th ey are durable, comfortable,
and sustainably produced. And they are not
cheap.
It seems counterintuitive, almost dan-
gerous, to market a $400 raincoat in a down
economy. But the fi rst thing you learn
about Yvon Chouinard is that he’s a risk
taker. Th e second thing you learn is that
he’s usually right. “Corporations are real
weenies,” he says. “Th ey are scared to death
of everything. My company exists, basically,
to take those risks and prove that it’s a good
business.”
And it is a good business. With recent
annual revenues of $314.5 million, Patago-
nia succeeds by staying true to Chouinard’s
vision. “Th ey’ve become the Rolls-Royce
of their product category,” says Marshal
Cohen, chief industry analyst with market
research fi rm NPD Group. “When people
were stepping back, and the industry
became copycat, Chouinard didn’t sell out,
lower prices, and dilute the brand. Some-
times, the less you do, the more provoca-
tive and true of a leader you are.”
Chouinard concurs. “I think the key to
surviving a conservative economy is qual-
ity,” he says. “Th e number one reason is that
in a recession, consumers stop being silly.
Instead of buying fashion, they’ll pay more
for a multifunctional product that will last
a long time.”
Ideal Corporate Behavior Chouinard is not shy about espousing the
environmentalist ideals intertwined with
Patagonia’s business model. “It’s good
business to make a great product, and do
it with the least amount of damage to the
planet,” he says. “If Patagonia wasn’t profi t-
able or successful, we’d be an environmen-
tal organization.”
In many ways, Patagonia is an environ-
mental organization. Th e company has a
library of working documents, published
online for the world to see, that guides
employees in making sustainable decisions
in even the most mundane offi ce scenarios.
Its mission statement: “Build the best prod-
uct, cause no unnecessary harm, use busi-
ness to inspire and implement solutions to
the environmental crisis.”
Patagonia’s solutions extend well
beyond the lip service typically given by
profi table corporations. Th e company itself
holds an annual environmental campaign;
last year’s was Our Common Waters.
Chouinard has cofounded a number
of external environmental organizations,
including 1% For the Planet, which secures
pledges from companies to donate 1% of
annual sales to a worldwide network of
nearly 2,400 environmental causes. To date,
more than 1,350 companies participate,
raising more than $20 million in 2010.
Th e name comes from Patagonia’s
thirty-year practice of contributing 10% of
pre-tax profi ts or 1% of sales—whichever
is greater—to environmental groups each
year. Whatever you do, don’t call it a hand-
out. “It’s not a charity,” Chouinard fl atly
states. “It’s a cost of doing business. We use
it to support civil democracy.”
Another core value at Patagonia is pro-
viding opportunities for motivated volun-
teers to devote themselves to sustainable
causes. Employees can leave their jobs for
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up to two months to volunteer full-time for
the environmental cause of their choice,
while continuing to receive full pay and
benefi ts from Patagonia. And every eighteen
months, the company hosts the Tools for
Grassroots Activists Conference, where it
invites a handful of participants to engage
in leadership training, much of it derived
from the advocacy experiences of Patagonia
management.
Growing Green Patagonia has demonstrated a remarkable
ability to thrive even despite the unplanned
obsolescence of several of its key products.
What makes this even more notable is that
Chouinard is often the force driving his own
best sellers out of the marketplace.
Chouinard Equipment, Ltd., Patago-
nia’s precursor, was a successful vendor in
America’s nascent rock climbing commu-
nity. Chouinard himself was well known
on the circuit, having made the fi rst suc-
cessful climbs of several previously uncon-
quered Californian peaks. For more than
a decade, Chouinard had been hand forg-
ing his own steel pitons (pegs driven into
rock or ice to support climbers) that were
far more durable than the soft iron pitons
coming from Europe. Because his pitons
could be used again and again, climbing
was suddenly more aff ordable and less of
a fringe activity.
But during a 1970 ascent of El Capitan,
Chouinard saw that the very invention
that brought his company success was
also irreparably damaging the wilderness
he so loved. Th ough Chouinard Equip-
ment’s pitons brought more climbers into
the sport, the climbers tended to follow the
same routes. And the constant hammering
and removal of steel pitons was scarring the
delicate rock face of these peaks.
Ignoring the fact that pitons were a
mainstay of their success, Chouinard and
partner Tom Frost decided to phase them-
selves out of the piton business. Two years
later, the company coupled a new product—
aluminum chocks that could be inserted or
removed by hand—with a fourteen-page
essay in their catalog on the virtues of clean
climbing. A few months later, demand for
pitons had withered and orders for chocks
outstripped supplies.
Fast forward nearly twenty years. Choui-
nard Equipment spinoff Patagonia is a
booming manufacturer of outdoor cloth-
ing. And though they’d seen success with
products woven with synthetic threads, the
majority of their items were still spun with
natural fi bers like cotton and wool. Patagonia
commissioned an external audit of the envi-
ronmental impact of their four major fi bers,
anticipating bad news about petroleum-
derived nylon and polyester.
Instead, they were shocked to learn that
the production of cotton, a mainstay of the
American textile market for hundreds of
years, had a more negative impact on the
environment than any of their other fi bers.
Th e evidence was clear: destructive soil and
water pollution, unproven but apparent
health consequences for fi eldworkers, and
the astounding statistic that 25% of all toxic
pesticides used in agriculture are spent in
the cultivation of cotton.
To Chouinard and Patagonia, the appro-
priate response was equally clear: Source
organic fi bers for all sixty-six of their cotton
clothing products. Th ey gave themselves until
1996 to complete the transition, which was a
manageable lead time of eighteen months.
But due to the advance nature of fashion
production, they had only four months to
lock in fabric suppliers. Worse, at the time,
there wasn’t enough organic cotton being
commercially produced to fi ll their antici-
pated fabric needs.
Taking a page from their own teaching on
grassroots advocacy, Patagonia representa-
tives went directly to organic cotton farmers,
ginners, and spinners, seeking pledges from
them to increase production, dust off dor-
mant processing equipment, and do what-
ever it would take to line up enough raw
materials to fulfi ll the company’s promise
to its customers and the environment.
Not surprisingly, Patagonia met its goal,
and every cotton garment made since 1996
has been spun from organic cotton.
Sustaining Momentum At 72, Chouinard can’t helm Patagonia for-
ever. But that’s not to say he isn’t continu-
ing to fi nd better ways for Patagonia to do
business. “I think entrepreneurs are like
juvenile delinquents who say, ‘Th is sucks.
I’ll do it my own way,’” he says. “I’m an inno-
vator because I see things and think I can
make it better. So I try it. Th at’s what entre-
preneurs do.”
Patagonia’s next major project is their
Common Th reads initiative. To demon-
strate that it’s possible to minimize the
number of Patagonia clothes that wind up
in landfi lls, the company is committing to
making clothes built to last, fi xing wear-
and-tear items for consumers that can
be repaired, and collecting and recycling
worn-out fashions as effi ciently and respon-
sibly as possible.
“It’ll be in the front of the catalog—our
promise that none of our stuff ever ends up
in a landfi ll,” Chouinard says. “We’ll make
sure of it with a liberal repair policy and by
accepting old clothing for recycling. People
will talk about it, and we’ll gain business
like crazy.”
It’s doubtful that Chouinard will ever
stop thinking about how Patagonia can
responsibly innovate and improve. “Right
now, we’re trying to convince zipper com-
panies to make teeth out of polyester or
nylon synths, which can be recycled infi -
nitely,” he says. “Th en we can take a jacket
and melt the whole thing down back to its
original polymer to make more jackets.”
Despite his boundless enthusiasm for all
things green, he admits that no process is
truly sustainable. “I avoid using that word
as much as I can,” he says.
He pauses for a moment. “I keep at it,
because it’s the right thing to do.”
Discussion Questions 1. While Patagonia has a history of putting
sustainability ahead of profi ts, it cannot
do so at the expense of operating capital.
Based on what you learned about Pata-
gonia’s ideals, how do you think the com-
pany determines what possible ventures
will be both practical and environmen-
tally friendly?
2. What could Patagonia do today to con-
fi rm that Yvon Chouinard’s ideals become
a permanent part of the company’s cul-
ture after he leaves the company?
3. Imagine you were asked by Yvon Choui-
nard to propose a new sustainability ini-
tiative for Patagonia. What would you
choose, and why?
4. FURTHER RESEARCH Business deci-
sions can often be a compromise between
ethics and profi tability, even for a com-
pany with the idealism of Patagonia.
Research Patagonia’s and see if you can
fi nd a business decision that appeared to
put profi ts ahead of the company’s pub-
licly stated environmental goals. Explain
why you think that company made this
decision and the competing factors you
believe were involved.
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Case 4: Amazon: One E-Store to Rule Them All
Amazon.com has soared ahead of other
online merchants. What the fi rm can’t
carry in its 29 worldwide warehouses, affi li-
ated retailers distribute for it. Not content
to rest on past laurels, CEO Jeff Bezos has
introduced a number of Amazon prod-
ucts, including a set-top box and several
versions of the Kindle. But will the invest-
ments pay off ?
The Rocket Takes Off Like a rocket propelled by jet fuel, Internet
commerce has shot off the launch pad. No
matter what the product is that may set
a shopper’s heart afl utter, some up-and-
coming marketer has likely already set up
a specialty e-store selling it. But one online
vendor has grander aspirations: why stop
at selling one line of products—or two, or
twenty—when customers can instead be
off ered the equivalent of an online Mall of
America?
From its modest beginning in Jeff Bezos’s
garage in 1995, Amazon.com has quickly
sprouted into the most megalithic online
retailer. Once Bezos saw that Amazon
could outgrow its role as an immense book
retailer, he began to sell CDs and DVDs.
Even its logo was updated to symbolize that
Amazon.com sells almost anything you can
think of, from A to Z.
And that only takes into account Ama-
zon’s U.S. presence. At latest count, custom-
ers in seven other countries, including China,
Japan, and France, can access Amazon sister
sites built especially for them. Amazon’s
31 “fulfi llment centers” around the world
enclose more than 9 million square feet of
operating space.
So what’s next? Growth. Bezos contin-
ues to diversify Amazon’s product off erings
and broaden its brand by partnering with
existing retailers to add new product lines.
It’s a win-win proposition for a multitude of
companies—including Target, Toys ‘R’ Us,
and Wine.com. Th e companies profi t from
the additional exposure and sales (without
undercutting their existing business), and
Amazon’s brand thrives from the opportu-
nity to keep customers who might other-
wise shop elsewhere.
Traditional Content, Layers of Value Beyond simply fi nding more and more prod-
ucts to sell, Bezos realized that to prevent his
brand from becoming stagnant, he would
have to innovate, creating new levels of ser-
vice to complement existing products. “We
have to say, ‘What kind of innovation can we
layer on top of that that will be meaningful
for our customers?’ ” Bezos said. So far, much of this innovation has come
from the depth of the free content available
to Amazon customers. Far from being a loss
leader, Amazon’s free content spurs sales
and reinforces customers’ perception of
Amazon’s commitment to customer service.
As David Meerman Scott put it in eCon-
tent, “Here is the fl ip side of free in action—a
smart content company fi guring out how to
get people to contribute compelling content
for free and then building a for-profi t busi-
ness model around it. Amazon.com has built
a huge content site by having all of the content
provided to it for no cost. Of course, Amazon.
com makes money by selling products based
on the contributed content on the site—
another example of the fl ip side of free.”
Tete a Tete with Cupertino In recent years, Amazon has found itself
squaring off against Apple in all realms of
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digital entertainment. First, by launching
its Amazon MP3 music downloading service
and, in a move of digital one-upmanship,
off ering all of its tracks from the Big 4 record
labels without proprietary digital rights
management (DRM) software, allowing the
fi les to be played on any MP3 player. Ama-
zon also bought top-shelf audio book ven-
dor Audible.com for $300 million, adding
more than 85,000 audio titles to its arsenal;
it later added shoe and clothing merchant
Zappos.com for $928 million.
Th e company introduced the Amazon
Unbox, which allows customers to pur-
chase or rent thousands of movies and
television shows from most major net-
works. In another snub to Apple, Unbox
fi les initially could only be played on
Windows-compatible devices, putting
Apple computers and the Apple TV out
of the action. Amazon touts the content
as roughly that of DVD quality, though
occupying only half as much space. Using
a cable broadband connection, Unbox
subscribers can expect to begin to watch
it after fi ve minutes or so of downloading.
Although Amazon still sells a consid-
erable number of Apple’s iPods, in 2007 it
unveiled a new device that existed com-
pletely outside Apple’s catalog—the Ama-
zon Kindle. Part e-book reader, part tablet,
the Kindle can download and store e-books,
RSS feeds, Microsoft Word documents, and
digital pictures in most major formats. Bezos
sees this as a natural evolution of technology.
“Books are the last bastion of analog,” he said
to Newsweek. “Music and video have been digi-
tal for a long time, and short-form reading has
been digitized, beginning with the early Web.
But long-form reading really hasn’t.” He must
be right, because Amazon now sells more Kin-
dle books than paperback books.
Not wanting to exclude Apple fans
entirely, Amazon’s free Kindle app lets users
read Kindle titles on their iOS devices. Th ree
years after the fi rst Kindle hit the market,
Apple debuted the iPad and sucked most of
the oxygen out of the e-reader market. To stay
in the fi ght, Amazon was forced to slash the
Kindle’s price. And while Kindle fans abound,
some critics say that price is the only point on
which Kindle truly competes with the iPad.
But Amazon customers are nothing if not
loyal. And over the years, Amazon has made
a tidy profi t selling its customers magazine
subscriptions. Given the magazine indus-
try’s sudden interest in digital publishing,
Apple recently revised its publishing rules to
make it easier for magazines to off er read-
ers in-app subscription renewals . . . so long
as Apple keeps 30% of the profi ts. Coupled
with new rules that prohibit iOS publishers
from taking customers to external sites (and
thus out of Apple’s iBook store) to purchase
e-books, Merrill Lynch analysts suggest that
unless Amazon fi nds a workaround, the
changes could cost $80–160 million in lost
revenue.
Looking Ahead It seems hard to catch Bezos not being
upbeat. Even as Amazon’s stock values
fl uctuate, he still believes that customer
service, not the stock ticker, defi nes the
Amazon experience. “I think one of the
things people don’t understand is we can
build more shareholder value by lowering
product prices than we can by trying to
raise margins,” he says. “It’s a more patient
approach, but we think it leads to a stron-
ger, healthier company. It also serves cus-
tomers much, much better.”
In just over a decade, Amazon.com has
grown from a one-man operation into a
global giant of commerce. By forging alli-
ances to ensure that he has what custom-
ers want and making astute purchases, Jeff
Bezos has made Amazon the go-to brand
for online shopping. But with its signifi cant
investments in new media and services, does
the company risk spreading itself too thin?
Will customers continue to fl ock to Amazon,
the go-to company for their every need?
Discussion Questions 1. In what ways does Bezos’s decision to
develop and deliver the Kindle show sys-
tematic and intuitive thinking?
2. Would you describe Amazon’s position
in the digital entertainment market as
certain, risky, or uncertain? Why?
3. Which decision errors and traps are the
greatest threats to the success of Bezos’s
decision making as Amazon’s CEO, and
why?
4. FURTHER RESEARCH What are the
latest initiatives coming out of Ama-
zon? How do they stack up in relation
to actual or potential competition? How
has the Zappos acquisition turned out?
Is Bezos making the right decisions as
he guides the fi rm through today’s many
business and management challenges?
Seeing the electronic writing on the wall,
Barnes and Noble recently named Wil-
liam Lynch, the executive behind many of
its recent e-publishing successes, as
CEO. In less than two years with B&N,
Lynch acquired top e-book retailer Fic-
tionwise, launched B&N’s e-bookstore,
and debuted the Nook, the company’s
answer to Amazon’s Kindle.
“We’re morphing into the future,”
says B&N chairman Leonard Riggio. “We
need someone who has a vision of the
new space, somebody who can recruit
great people in technology. We have to
be more than a retail bookseller.”
Like many brick-and-mortar busi-
nesses, B&N is increasingly relying on
online traffi c to make up for declining year-
on-year retail sales. Lynch currently helms
America’s biggest physical bookseller, but
he faces tooth-and-nail competition from
Amazon for print and e-book market share.
And with the meteoric success of the iPad,
B&N must also contend with Apple’s comfy
30% cut on every e-book sale.
Given Apple’s “take it or leave it” negoti-
ating tactics, it’s no surprise that Lynch has
admirers in the publishing world.
“It’s important that our largest retailer
has someone at the helm who has a lot of
digital experience,” says Brian Murray, CEO
of HarperCollins Publishers, “because this
business is transforming quickly.”
Barnes & Noble: Adapting to an Uncertain Future
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Case 5: Nordstrom: Planning a Better Inventory
When profit margins are low, how has
Nordstrom managed to stay profi table
heads and tails above the competition? It
brought time-honored retail practices—
keep customers happy and manage your
inventory tightly—into a new era.
Th ere aren’t many bridesmaid dresses for
6�2� women. Julie learned that when she was asked to be the sole bridesmaid in her best
friend’s wedding. Her friend found the perfect
dress. Julie ordered it, and when it arrived it
didn’t fi t. Th at is, it really didn’t fi t. Th e bride
took it well. “I don’t care what you choose,”
she said. “Just fi nd the exact same dress.”
Weeks before the wedding, Julie des-
perately scoured shopping web sites only
to fi nd few tall sizes and no similar styles.
Out of choices and nearly out of hope, she
checked Nordstrom’s web site. Using their
online tools to fi lter dresses by size, color,
and even occasion, she found a near match
for Th e Dress. “So now,” Julie says with a
smile, “whenever I need a party dress, that’s
the fi rst place I look.”
Th at’s just the kind of customer loyalty
Nordstrom hoped to inspire with its recent
$150� million investment in an ultramod- ern inventory management system. Th e
upgrade, spearheaded by the fourth genera-
tion of Nordstrom family members in corpo-
rate leadership, accomplished two key goals:
correlate purchasing with demand to keep
inventory as lean as possible, and present
both customers and sales associates with a
comprehensive view of Nordstrom’s entire
inventory, including every store and ware-
house.
Keep It Profi table, Keep It Lean Items don’t stay in stock very long at Nord-
strom stores these days, and that’s the point.
In stock items should fl uctuate with demand,
but the chain is currently turning inventory
about twice as fast as its competitors, thanks
to strong help from web sales. Nordstrom
keeps items in its inventory for an average of
62 days, compared to competitors Macy’s for
119 days and Saks for 140 days.
Not only does the company turn existing
stock over quickly, but they plan purchas-
ing for future seasons to align tightly with
anticipated demand. To counteract the
“hopeful” nature of buyers and merchandis-
ers, says Pete Nordstrom, president of mer-
chandising, a departmental buyer would be
limited from ordering 10% more of a prod-
uct if sales slumped 5% in the previous two
months, for instance.
Instead of relying on one-day sales,
coupon blitzes, or marking down entire
lines of product like Macy’s, Nordstrom
prefers to discount only certain items.
A few years ago, the company installed
“markdown optimization” software to
assist planning more profitable and pro-
ductive sale prices. According to retail
analyst Patricia Edwards, this helps Nord-
strom calculate what will sell better at a
25% discount instead of a profit-gouging
35% discount, and forecast which single
items should be marked down.
And if a style gets stale, the company
can ship it off to its Nordstrom Rack out-
let stores. Th is kind of demand planning is
part of Nordstrom’s long-term investment
in effi ciency. “If we can identify what is not
performing and move it out to bring in fresh
merchandise,” says Pete Nordstrom, “that’s
a decision we want to make.”
Total inventory should slide according
to overall demand, and by recent accounts,
Nordstrom has this mastered. It shrank its
recent year-end inventory per square foot
12%, nearly lockstep with a 12.5% decline in
fourth-quarter sales.
Perpetual Inventory It’s an axiom of sales: When a customer
wants to spend money with you, make it as
easy as possible. Nordstrom associates had
this down to a science for in-stock items.
But until recently, if the customer wanted
another color, size, or model, employees
didn’t have the tools to see what choices
were available at neighboring stores.
A customer who fell in love with a pair
of candy red Prada pumps one day might
return twenty-four hours later to fi nd her
Nordstrom store out of her size. While
inventory naturally fl uctuates, Nordstrom
associates couldn’t easily locate a pair in
another store or verify when they’d return
to stock. And in an era of booming online
sales, Nordstrom realized they were likely to
lose such a customer faster than you could
say, “I’ll just Google that.”
Th at changed in 2009, when Nordstrom
integrated the inventory of each of its stores
into its website. After an immense overhaul
of the chain’s inventory management pro-
cesses, customers at their laptops and asso-
ciates behind sales counters see the same
thing—the entire inventory of Nordstrom’s
115 stores presented as one selection, which
the company refers to as perpetual inventory.
Th e upgrade was an immediate hit. As
of launch day, Nordstrom found that the
percentage of customers who purchased
products after searching the website for an
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item doubled. It also learned that multi-
channel customers—those who shop from
Nordstrom in more than one way—spend on
average of four times more than one-source
customers. Th is profi t more than off sets the
cost of hiring additional shipping employees
to wrap and mail items from each store.
So now Nordstrom doesn’t have to turn
away the customer who spied that pair
of candy red Pradas; she can order them
online or in her local store, and they’ll be
shipped to her door directly from a store
that has them in stock, even if it’s located
across the country.
“Customer service is not just a friendly,
helpful, knowledgeable salesperson helping
you buy something,” says Robert Spector,
retail expert and author of Th e Nordstrom
Way. “Part of customer service is having the
right item at the right size at the right price
at the right time. And that’s something per-
petual inventory will help with.”
Better yet, Nordstrom’s fi nding that
after integrating store inventory into its
website, inventory is selling faster, and
more profi tably, than before. “If we’re out
of something on the website, it’s probably
late in the season and the stores are try-
ing to clear it out,” says Jaime Nordstrom,
president of Nordstrom Direct. “By pulling
merchandise from the store, you’ve now
dramatically lessened the likelihood that
you’ll take a markdown.”
One Step Ahead of the Competition Fast-turning inventories are a sign a retailer
is well managed, making it more attractive to
investors, especially in an uncertain economy.
“If Nordstrom were a car,” says retail analyst
Patricia Edwards, “it would be a hybrid Cadil-
lac Escalade that gets twenty miles per gallon
instead of the normal twelve.”
But success has been hard fought. Since
its inception in 1901, the Nordstrom name
has been synonymous with customer ser-
vice par excellence. And for decades, having
top-notch salespeople, carrying the right
brands, and developing lasting relation-
ships with customers did the trick.
“Th e old, classic Nordstrom way is that
if you sell more stuff , that compensates
for any defi ciency you may have in terms
of technology,” says Robert Spector. “Th ey
didn’t want to replace the high touch with
the high-tech,” and they faced striking “that
balance between having up-to-date systems
and giving that personal service.”
“Traditional retailers have traditional
ways of doing things,” echoes Adrianne
Shapira, Goldman Sachs retail analyst, “and
sometimes those barriers are hard to break
down.”
But Nordstrom’s investments in inven-
tory planning and tracking have paid
handsome dividends. Its operating mar-
gin—operating income as a percentage
of sales—measured nearly 9% last year,
Bloomberg reports, as compared with Macy’s
5.6% and Saks’ negative return.
“If I am going to put my money behind
a retailer in this rocky economic environ-
ment, I want it to be one of the best-run
companies out there,” Patricia Edwards
says. “Nordstrom is one of those.”
Discussion Questions 1. How does Nordstrom use demand fore-
casting to minimize leftover inventory?
2. What benchmarks could Nordstrom use
to assess the success of its web-based
inventory integration?
3. How might Nordstrom apply the con-
cept of participatory planning to prod-
uct purchasing? What groups should be
involved?
4. FURTHER RESEARCH Imagine you
have been asked to develop a long-range
plan to extend Nordstrom’s inventory
management overhaul into the future.
What changes, revisions, or updates
would you plan for the company? What
stretch goals come to mind?
Th e brain child of Tony Hsieh, Zappos.com
launched in 1999, selling only shoes. By 2001,
gross sales had reached $8.6 million. Th at
number nearly quadrupled to $32 million
in 2002 and continues to earn more than
$1 billion annually since 2008. By that time,
Zappos carried more than 1,300 brands and
2 million total products, including shoes,
handbags, clothes, housewares, electronics,
and jewelry.
And it had also caught the eye of Ama-
zon’s Jeff Bezos. He liked what he was see-
ing and spent $928 million to buy the fi rm
for Amazon’s business stable in 2009. Today,
the company is one of Fortune’s 15 Best
Companies to Work For.
The blog search engine Land calls
Zappos “the poster child for how to connect
with customers online.” Online resources
such as Facebook and Twitter help the com-
pany connect with their customers, distrib-
utors, employees, and other businesses.
Th e company’s relentless pursuit of the
ultimate customer experience is the stuff of
legend. Zappos off ers extremely fast ship-
ping at no cost and will cover the return
shipping if you are dissatisfi ed for any rea-
son at any time.
Hsieh feels employees have to be free to
be themselves. Th at means no-call times
or scripts for customer service representa-
tives, regular costume parties, and parades
and decorations in each department. Cus-
tomer service reps are given a lot of leeway
to make sure every customer is an enthusi-
astic customer.
Zappos’ past success comes down to
the company’s culture and the unusual
amount of openness Hsieh encourages
among employees, vendors, and other busi-
nesses. “If we get the culture right,” he says,
“most of the other stuff , like the brand and
the customer service will just happen. With
most companies, as they grow, the culture
goes downhill. We want the culture to grow
stronger and stronger as we grow.”
Now that Zappos is part of Amazon, will
it still prosper and grow? Will the company
continue to put customers fi rst?
Zappos: How Zappos Did It
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Electronic Arts is one of the largest and
most profi table third-party video game
makers. Exclusive contracts with profes-
sional sports teams have enabled it to
dominate the sports gaming market. But
as gaming has shifted from consoles to lap-
tops, phones, and tablets, it is struggling to
stay relevant. Can EA regain the pole posi-
tion in a crowded and contentious market?
Founded in 1982 by William “Trip”
Hawkins, an early director of strategy and
marketing for Apple Computer, EA gained
quick distinction for its detail-oriented
sports titles compatible with the Nintendo
and Sega platforms. Although EA has also
received good reviews for its strategy and
fi ghting games, it left its heart on the grid-
iron, diamond, court, or any other playing
fi eld long ago. Says EA Sports marketing
chief Jeff rey Karp, “We want to be a sports
company that makes games.”
Ad Revenue In, Ad Revenue Out Word of mouth may still be the most
trusted form of advertising, and EA has
always depended on fans to spread its
gaming gospel. But in a highly competitive—
and lucrative—gaming market, EA knows
better than to skimp on brand building: it
spends two to three times as much mar-
keting and advertising a title as it does
developing it. EA knows its audience, and
it promotes as heavily to Game Informer
readers as it does to subscribers of ESPN’s
Th e Magazine.
Th e realism of EA’s graphics set it apart
from competitors long ago, but the energy
and talent used to depict that realism might
be wasted if EA games didn’t include the
one element fans most want to see: their
favorite players. However, top athletes
aren’t cheap, and neither are their virtual
depictions. Players such as Tiger Woods,
Donovan McNabb, and Carmelo Anthony
expect a tidy sum to promote any product,
including video games that use their like-
nesses. EA spends $100 million annually—
three times its ad budget—to license athletes,
players’ associations, and teams. It’s a com-
plex dance: the FIFA Soccer game requires
350 diff erent licenses from a total of 18 club
leagues, 40 national teams, and 11,000 play-
ers. Cheap? Anything but. EA knows that,
simply put, players got game.
Paying to Be Seen Even the most dedicated Madden fans may
wonder whether the sports video gaming
market has enough muscle to shoulder EA’s
gargantuan costs. Enter the promotional
alliance. Just as EA pays to license the use
of NFL logos in its games, big-name sports
companies such as Nike and Reebok pay to
the tune of $3.5 million a year to get their
logos on digital players. One game, NBA Live,
off ers players the opportunity to switch up
the color and style of players’ logo-friendly
footwear. Th e shoe styles may be virtual, but
the value of brand recognition is very real for
companies that pony up for sponsorship.
Such brand reinforcement isn’t limited
to sports games either. EA’s Need for Speed
Underground 2, a fast-paced racing game,
takes endorsement beyond the omnipres-
ent billboard ads and vehicle logos found
in typical driving simulators. Here players
receive “text messages” on the screen sug-
gesting game hints, each bearing the AT&T
logo. Th e signifi cance may be lost on adults,
but for a younger generation raised on
instant messaging, the placement makes
perfect sense.
It makes fi nancial sense, too. A recent
poll by Nielsen Entertainment and Activi-
sion indicates that this kind of placement
may result in notable improvements in both
brand recall and favorable brand percep-
tion. “I think truly that no other media type
can deliver the persuasion that in-game
ads can if executed properly,” said Michael
Dowling, general manager at Nielsen Enter-
tainment, Los Angeles.
Losing Ground in a Crowded Market Until recently, EA’s devotion to sports games
was a winning asset—it dominated the mar-
ket as the world’s largest video-game pub-
lisher. But a funny thing happened on the
way to the bank—over the course of a few
short years, the gaming market radically
changed. Now EA fi nds itself in third place
behind two strong competitors whose suc-
cesses represent areas in which EA needs to
double down to stay in the game.
Blame the Wii. Or blame Guitar Hero.
Both led popular interest in gaming away
from complex sports games played with
standard controllers to new types of games,
and new ways of interacting with consoles.
Nintendo’s Wii has been tremendously
popular, and although EA has several suc-
cessful titles for the platform, many of the
top games—like Wii Sports Resort and Super
Mario Galaxy 2—are published by Nintendo
itself. Th e nontraditional controller lends
itself to movement-based games, not EA’s
button-mashing bread and butter.
Emerging nearly parallel with the Wii
was the popularity of Guitar Hero and Rock
Band. It didn’t take long for casual gamers
to take up cheap plastic guitars and drum
sets, leaving their traditional controllers to
gather dust in the corner. Small gaming shop
Harmonix pulled double duty in this market,
Case 6: Electronic Arts: Inside Fantasy Sports
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Approximately two million farmers in the
U.S. engage in backbreaking labor from
before sunrise until well after sunset—
plowing land, harvesting crops, raising live-
stock. Another 30 million farmers do the
same without ever getting dirty or climb-
ing onto a tractor.
Welcome to FarmVille, the massively
popular Facebook and iOS app by Zynga.
While FarmVille earns Zynga most of
its press, the company still packs an
impressive roster of online games: Mafi a
Wars, Café World, and Zynga Poker, to
name a few.
In just over three years, Zynga’s earned
some impressive stats—including more
than 50 million daily users and nearly
$500 million in investment funding—and
is undoubtedly the most successful devel-
oper for the Facebook platform.
“Games are no longer just for geeks,”
says Brian Reynolds, Zynga’s chief game
designer, noting that the social focus
of their games keep users in touch with
everyone from “people [they] care about”
to “those they wouldn’t normally have con-
versations with.”
And it’s working. While other online
gaming shops have struggled to commod-
itize their products, Zynga recently earned
a cool $850 million, mostly from vending
virtual goods like cows, bushes, and power-
ups. In the meantime, they’re developing
secondary revenue streams from sponsor-
ships and licensed accessories.
Will Zynga’s bubble burst, or will they
continue to rule Facebook while expanding
into iOS and other mobile platforms? Log
on and see!
Zynga: Building an Army of Social Gamers
fi rst publishing Guitar Hero, then selling it to
EA adversary Activision, only to follow up
with the arguably better Rock Band series. EA
came to the party late; sensing the market
for rock-along music games was suffi ciently
saturated, it resorted to striking a deal with
Harmonix to help distribute Rock Band.
While the Wii’s popularity seems to
have peaked for the time being and plastic
instruments are on their way out (parent
company Viacom recently sold Harmonix
for the bargain-basement price of $50),
these emerging trends ultimately diluted
EA’s chokehold on the popular gaming mar-
ket. Meanwhile, Activision found a comfort-
able home with the Wii, scoring big hits
with several Guitar Hero titles and hitting
the bullseye by porting their massively suc-
cessful Call of Duty franchise.
And then there’s Apple. When Steve Jobs
launched the iPhone/iPod Touch App Store in
the summer of 2008, he decreed that one-third
of the fi rst 500 apps would be games. Before
long, specs improved in iOS devices to make
them serious portable gaming machines. Th e
iPad improved iOS gaming with a large, high-
resolution screen, and the App Store suddenly
became a self-suffi cient gaming platform
faster than you can say Angry Birds.
At the same time, Facebook was com-
ing into its own as a singular destination
for simple but time-swallowing games.
Together, these platforms heralded a new
way of acquiring and playing games in
which EA had little to no experience: digital
distribution. Quick on the draw, however,
was Zynga, an upstart publisher who quickly
dominated Facebook games with FarmVille
and FrontierVille, among others. Games on
iOS and Facebook are portable, easy, and
you can step away from them as long as you
like and pick up just where you left off . Th at
kind of gaming is worlds away from EA’s tra-
ditions, and it’s forced the company to do
some serious reckoning on its future.
As of today, EA is the third-place publisher
behind Activision and Zynga, and while things
are starting to look up, it’s a long, hard road
back to the top. CEO John Riccitiello even
admitted recently, “What we’ve described as
a two-year comeback is clearly taking longer.”
EA knows that the road to riches is paved
with recurring sales. And though it’s annu-
alized releases of many of popular sports
titles for some time, they haven’t done so for
the growing market of massive multiplayer
online games (MMOG), which Activision
has been lucratively exploiting for years with
Call of Duty and World of Warcraft. EA hopes
to catch up with the release of Star Wars: Th e
Old Republic.
And the company is showing signs that
it’s shifting gears to compete successfully
in the new gaming landscape. It spent
$300 million last year to snatch up social
gaming developer Playfi sh, and news is
out that it’s planning to bring Madden to
Facebook. EA’s digital distribution business,
which it’s been quietly building, recently
soared 30 percent in one quarter. And
though this lead might not hold, EA is the
leading publisher for iPhone, iPad, and Win-
dows Phone.
Playing for Keeps Despite its wild success in the video game
market, Electronic Arts faces substantial
challenges to its power by competing game
companies, the cost of doing business, and
even dissatisfi ed gamers. Can EA overcome
these threats and continue producing the
sports franchises that brought the company
considerable success?
Discussion Questions 1. How can feedforward, concurrent, and
feedback controls help Electronic Arts
meet its quality goals for video games?
2. What output standards and input stan-
dards would be appropriate for the con-
trol process as applied to video game
production?
3. Can you see the principle of management
by exception at play in any of EA’s recent
business decisions? Why or why not?
4. FURTHER RESEARCH What is the
latest in Electronic Arts’ quest to regain
its former glory as the top gaming pub-
lisher? How well is EA positioned for
future competitive advantage? Overall,
is EA’s executive team still on “top of its
game?”
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Once a niche company operating in the
northeast, Dunkin’ Donuts is opening hun-
dreds of stores and entering new markets.
At the same time, the java giant is broadly
expanding both its food and its coff ee
menus to ride the wave of fresh trends,
appealing to a new generation of customers.
But is the rest of America ready for Dunkin’
Donuts? Can the company keep up with its
own rapid growth? With Starbucks rethink-
ing its positioning strategy and McDonald’s
off ering a great tasting coff ee at a reason-
able price, Dunkin’ Donuts is hoping they
“Kin Do It.”
Serving the Caffeinated Masses Th ere’s a lot more to a coff ee shop than just
change in the tip jar. Some 500 billion cups
of coff ee are consumed every year, making
it the most popular beverage globally. Esti-
mates indicate that more than 107 million
Americans drink a total of 400 million cups
of coff ee a day. And with Starbucks driving
tastes for upscale coff ee, some customers
may wonder whether any coff ee vendors
remember the days when drip coff ee came
in only two varieties—regular and decaf.
But Dunkin’ Donuts does, and it’s betting
dollars to donuts that consumers nation-
wide will embrace its reputation for value,
simplicity, and a superior Boston Kreme
donut.
Winning New Customers Most of America has had an occasional
relationship with the Dunkin’ Donuts brand
through its almost 6,600 domestic outlets,
which have their densest cluster in the
northeast and a growing presence in the
rest of the country. But the brand has also
managed to carve out an international
niche, not only in expected markets such as
Canada and Brazil, but also in some unex-
pected ones, including Qatar, South Korea,
Pakistan, and the Philippines.
If the company has its way, in the future
you won’t have to go very far to pick up a box
of donuts. “We’re only represented large-scale
in the northeastern market,” said Jayne Fitz-
patrick, strategy offi cer for Dunkin’ Brands,
mentioning plans to expand “as aggressively”
as possible. “We’re able to do that because
we’re a franchise system, so access to opera-
tors and capital is easier.” How aggressively?
According to John Fassak, vice president
of business development, the company
expanded into 29 new markets last year
alone. Sample cities in the Midwest reveal
heavy investment: 36 new stores recently
opened in Milwaukee, with more than 100
planned in St. Louis and 30 in central Ohio.
What Would Consumers Think? None of Dunkin’ Donuts’ moves makes
much diff erence unless consumers buy into
the notion that the company has the culi-
nary imperative to sell more than its name
suggests. If plans prove successful, more
customers than ever may fl ock to indulge
in the company’s breakfast-to-go menu. If
they don’t, the only thing potentially worse
for Dunkin’ Donuts than diluted coff ee
could be a diluted brand image. After 60
years, the company has a reputation for
doing two things simply and successfully—
coff ee and donuts. Even when consumers
see the line of products expand into what
was once solely the realm of the company’s
competitors, they may be unconvinced
that Dunkin’ Donuts is the shop to go to for
breakfast.
For most of its existence, Dunkin’
Donuts’ main product focus has been
implicit in its name: donuts, and coff ee in
which to dip them. First-time customers
acquainted with this simple reputation were
often overwhelmed by the wide varieties of
donuts stacked end-to-end in neat, mouth-
watering rows. Playing catch-up to the rest
of the morning market, Dunkin’ Donuts has
only recently joined the breakfast sandwich
game.
According to spokesperson Andrew
Mastroangelo, Dunkin’ Donuts sells
approximately one billion cups of coff ee
a year, for 63% of the company’s annual
store revenue. Considering that coff ee is
the most profi table product on the menu,
it’s a good bet that those margins give the
company room to experiment with its food
off erings.
Changing Course to Follow Demand Faced with the challenge of maintaining a
relevant brand image in the face of fi erce
and innovative competition, Dunkin’
Donuts pursued a time-honored busi-
ness tradition—following the leader. Th e
company now off ers a competitive variety
of espresso-based drinks complemented
with a broad number of sugar-free fl a-
vorings, including caramel, vanilla, and
Mocha Swirl. Ever-increasing competi-
tion in the morning meal market made an
update to Dunkin’ Donuts’ food selection
inevitable. Th e company currently focuses
on bagel and croissant-based breakfast
sandwiches, as well as its Oven-Toasted
line, including fl atbread sandwiches and
personal pizzas.
Case 7: Dunkin’ Donuts: Betting Dollars on Donuts
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On Every Corner Starbucks is known for its aggressive domi-
nance of the coff ee marketplace. When
competitors opened a new store in town,
Starbucks didn’t worry. It just opened a new
store across the street, in a vigorous one-
upmanship that conquered new ground and
deterred competitors. But many who have
struggled to compete with Starbucks have
had to do so with limited resources or only a
few franchises. Not so with Dunkin’ Donuts,
whose parent brand, Dunkin’ Brands, also
owns Baskin-Robbins. Starbucks, which
faced slow sales and weak earnings growth
as customers cut back on spending, shut
down more than 600 U.S. locations as part
of a broader plan to revive the company.
Simple Food for Simple People Dunkin Donuts’ history of off ering simple
and straightforward morning snacks has
given it the competitive advantage of dis-
tinction as the anti-Starbucks—earnest and
without pretense. Like Craftsman tools and
Levi’s jeans, the company appeals to simple,
modest, and cost-conscious customers.
The Sweet Spot Has a Jelly Center Dunkin’ Donuts is trying to grow in all direc-
tions, reaching more customers in more
places with more products. According to
Fassak, achieving proper retail placement
can be a delicate balance. Although Dunkin’
Donuts often partners with a select group
of grocery retailers—such as Stop & Shop
and Walmart—to create a store-within-a-
store concept, the company won’t set up
shop in just any grocery store. “We want to
be situated in supermarkets that provide a
superior overall customer experience,” he
said. “Of course, we also want to ensure that
the supermarket is large enough to allow
us to provide the full expression of our
brand . . . which includes hot and iced cof-
fee, our line of high-quality espresso bever-
ages, donuts, bagels, muffi ns, and even our
breakfast sandwiches.” Furthermore, the
outlet’s location within the supermarket is
critical for a successful relationship. “We
want to be accessible and visible to custom-
ers, because we feel that gives us the best
chance to increase incremental traffi c and
help the supermarket to enhance their over-
all performance,” Fassak said.
But why stop at grocery stores? Tak-
ing this philosophy a step further, Dunkin’
Donuts has also entered the lodging mar-
ket with their fi rst hotel restaurant at
the Great Wolf Lodge in Concord, North
Carolina—one of North America’s largest
indoor water parks. Dunkin’ Donuts off ers
a variety of store models to suit any lodg-
ing property, including full retail shops,
kiosks, and self-serve hot coff ee stations
perfect for gift shops and general stores,
snack bars, and convention registration
areas. Who knows where they’ll pop up
next?
Th e launch into the lodging market
coincides with Dunkin’ Donuts’ worldwide
expansion program. Steadily and strategi-
cally expanding, Dunkin’ Donuts unveiled
the brand’s fi rst-ever theme park restaurant
at Hershey Park, new coff ee kiosks at sport-
ing venues such as Fenway Park and the
TD Banknorth (Boston) Garden, and new
stores at airports including Boston, Dallas-
Fort Worth, and New York City.
Th e company is banking on these
mutually benefi cial partnerships to help it
achieve widespread marketplace promi-
nence. Dunkin’ Donuts is a nationally
known brand with a long reputation for
quality, giving the company the benefi t of
not having to work hard to earn many cus-
tomers’ trust. And if Dunkin’ Donuts can
fi nd the sweet spot by being within most
consumers’ reach while falling just short
of a Big Brother-like omnipresence, the
company’s strategy of expansion may well
reward it very handsomely.
But this strategy is not without its risks.
In the quest to appeal to new customers,
off ering too many original products and
placements could dilute the essential brand
appeal and alienate long-time customers
who respect simplicity and authenticity. On
the other hand, new customers previously
unexposed to Dunkin’ Donuts might see it
as “yesterday’s brand.”
If Dunkin’ Donuts’ executives focus too
narrowly on franchising new stores, they
might not be aware of issues developing in
long-standing or even recently established
stores. Some older franchises seem long
overdue for a makeover, especially when
compared to the Starbucks down the block.
In order to keep up with the latest health
concerns, it has reformulated its food and
beverages according to its DDSMART cri-
teria so that they meet at least one of these
criteria: 25% fewer calories, or 25% less sugar,
fat, saturated fat, or sodium than compara-
ble fare. Th e company has even begun shift-
ing its donut production from individual
stores into centralized production facilities
designed to serve up to 100 stores apiece.
For the time being, Dunkin’ Donuts
seems determined in its quest for domina-
tion of the coff ee and breakfast market. Will
Dunkin’ Donuts strike the right balance of
products and placement needed to mount a
formidable challenge against competitors?
Discussion Questions 1. What does a Porter’s Five Forces analy-
sis reveal about the industry in which
Dunkin’ Donuts and Starbuck’s compete,
and what are its strategic implications
for Dunkin’ Donuts?
2. In what ways is Dunkin’ Donuts presently
using strategic alliances, and how could
cooperative strategies further assist with
its master plan for growth?
3. Do you see evidence of strategic leader-
ship in Dunkin’s U.S. expansion plans? If
so, how?
4. FURTHER RESEARCH Gather infor-
mation on industry trends, as well as cur-
rent developments with Dunkin’ Donuts
and its competitors. Use this information
to build an up-to-date SWOT analysis for
Dunkin’ Donuts. If you were the CEO of
the fi rm, what would you consider to be
the strategic management implications
of this analysis, and why?
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Case 8: Nike: Spreading Out to Stay Together
Nike is indisputably a giant in the athletics
industry. But the Portland, Oregon, com-
pany has grown large precisely because it
knows how to stay small. By focusing on
its core competencies—and outsourcing
all others—Nike has managed to become a
sharply focused industry leader. But can it
stay in front?
What Do You Call a Company of Thinkers? It’s not a joke or a Buddhist riddle. Rather,
it’s a conundrum about one of the most suc-
cessful companies in the United States—a
company known worldwide for its prod-
ucts, none of which it actually makes. Th is
begs two questions: If you don’t make any-
thing, what do you actually do? If you out-
source everything, what’s left?
A whole lot of brand recognition, for
starters. Nike, famous for its trademark
Swoosh, is still among the most recognized
brands in the world and is an industry leader
in the $122 billion U.S.
sports footwear and
apparel market. And
its 35% market share
dominates the global
athletic shoe market.
Since captivat-
ing the shoe-buying
public in the early
1980s with legendary
spokesperson Michael
Jordan, Nike contin-
ues to outpace the
athletic shoe competi-
tion while spreading its
brand through an ever-
widening universe
of sports equipment,
apparel, and parapher-
nalia. Th e ever-present
Swoosh graces every-
thing from bumper
stickers to sunglasses
to high school sports
uniforms.
Not long after
Nike’s introduction of
Air Jordans, the fi rst
strains of the “Just
Do It” ad campaign
sealed the compa-
ny’s reputation as a
megabrand. When
Nike made the strategic image shift from
simply selling products to embodying a
love of sport, discipline, ambition, practice,
and all other desirable traits of athleticism,
it became among the fi rst in a long line of
brands to represent itself as aiding custom-
ers in their self-expression as part of its
marketing strategy.
Advertising has played a large part in
Nike’s continued success. Nike recently spent
$2.3 billion annually on advertising, and
since 2004 has annually invested 11–13% of
revenue in marketing. Portland ad agency
Wieden � Kennedy has been instrumental in creating and perpetuating Nike’s image—
so much so that the agency has a large
division in-house at Nike headquarters.
Th is intimate relationship between the two
companies allows the agency’s creative
designers to focus solely on Nike work and
gives them unparalleled access to execu-
tives, researchers, and anyone else who
might provide advertisers with their next
inspiration for marketing greatness.
What’s Left, Then? Although Nike has cleverly kept its ad
agency nestled close to home, it has relied
on outsourcing many nonexecutive respon-
sibilities in order to reduce overhead. It can
be argued that Nike, recognizing that its
core competency lies in the design—not
the manufacturing—of shoes, was wise to
transfer production overseas.
But Nike has taken outsourcing to a
new level, barely producing any of its prod-
ucts in its own factories. All of its shoes,
for instance, are made by subcontractors.
Nike claims that this allocation of produc-
tion hasn’t hurt the quality of the shoes but
it has challenged Nike’s reputation among
fair-trade critics.
After initial allegations of sweatshop
labor surfaced at Nike-sponsored factories,
the company reached out and tried to rea-
son with its more moderate critics. But this
approach failed, and Nike found itself in the
unenviable position of trying to defend its
outsourcing practices while withholding
the location of its favored production shops
from the competition.
Boldly, in a move designed to turn crit-
ics into converts, Nike posted information
on its website detailing every one of the
more than 700 factories it uses to make
shoes, apparel, and other sporting goods.
It released the data in conjunction with a
comprehensive new corporate responsibil-
ity report summarizing the environmental
and labor situations of its contract factories.
“Th is is a signifi cant step that will blow
away the myth that companies can’t release
their factory names because it’s proprietary
information,” said Charles Kernaghan, exec-
utive director of the National Labor Com-
mittee, a New York-based anti-sweatshop
group that has been no friend to Nike over
the years. “If Nike can do it, so can WalMart
and all the rest.”
Jordan Isn’t Forever Knowing that shoe sales alone wouldn’t be
enough to sustain continued growth, Nike
decided, in a lateral move, to learn more
about its customers’ interests and involve-
ment in sports, identifying what needs it
might be able to fi ll. Nike’s success in the
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running category, for example, was largely
driven by the Apple iPod-linked Nike Plus,
which now ranks as the world’s largest run-
ning club. Th e technology not only moti-
vates runners with music and tracking
their pace, but it also uploads their times
and distances into a global community of
runners online, creating a social-networking
innovation that lets runners race in diff er-
ent countries.
Banking on the star power of its Swoosh,
Nike has successfully branded apparel,
sporting goods, sunglasses, and even an
MP3 player made by Philips. Like many
large companies who have found them-
selves at odds with the possible limitations
of their brands, Nike realized that it would
have to master the one-two punch: identi-
fying new needs and supplying creative and
desirable products to fi ll those needs.
In fi tting with the times, Nike’s head
designer, John R. Hoke III, is encouraging
his designers to develop environmentally
sustainable designs. Th is may come as a sur-
prise to anyone who has ever thought about
how much foam and plastic goes into the
average Nike sneaker, but a corporate-wide
mission called “Considered” has designers
rethinking the materials used to put the
spring in millions of steps. Nike built a soft-
ware program—the Environmental Apparel
Design Tool—to help its designers make
environmentally friendly design and mate-
rial choices, and it recently released the pro-
gram for the use of other design companies.
Nike even launched a line of environmen-
tally sustainable products under the same
name, all of them built under the principle
established in the Considered program. “I’m
very passionate about this idea,” Hoke said.
“We are going to challenge ourselves to think
a little bit diff erently about the way we create
products.” Th e jerseys it recently provided for
World Cup teams, for instance, were partly
made from recycled plastic bottles.
Nipping at Nike’s Heels Despite Nike’s success and retention of its
market share, things haven’t been a bed of
roses in the past few years. When CEO Phil
Knight decided to step down, he handed the
reins to Bill Perez, former CEO of S.C. John-
son and Sons, who became the fi rst outsider
recruited for the executive tier since Nike’s
founding in 1968. But after barely a year
with Perez on the job, Knight, who remained
in the inner circle in his position as chair-
man of the board, decided Perez couldn’t
“get his arms around the company.” Knight
accepted Perez’s resignation and promoted
Mark Parker, a 27-year veteran who was
then co-president of the Nike brand, as a
replacement.
And pressures are mounting from out-
side its Beaverton, Oregon, headquarters.
German rival adidas drew a few strides
closer to Nike when it purchased Reebok
for approximately $3.8 billion. Joining
forces will help the brands negotiate shelf
space and other sales issues in American
stores and will aid the adidas group in its
price discussions with Asian manufactur-
ers. With recent combined global sales of
nearly $15 billion, the new supergroup of
shoes isn’t far off from Nike’s $19 billion.
According to Jon Hickey, senior vice
president of sports and entertainment mar-
keting for the ad agency Mullen, Nike has
its “fi rst real, legitimate threat since the
’80s. Th ere’s no way either one would even
approach Nike, much less overtake them,
on their own.” But now, adds Hickey, “Nike
has to respond. Th is new, combined entity
has a chance to make a run. Now, it’s game
on.”
But when faced with a challenge, Nike
simply knocks its bat against its cleats
and steps up to the plate. “Our focus is
on growing our own business,” said Nike
spokesman Alan Marks. “Of course we’re in
a competitive business, but we win by stay-
ing focused on our strategies and our con-
sumers. And from that perspective nothing
has changed.”
Putting It All Together Nike has balanced its immense size and tre-
mendous pressures to remain successful by
leveraging a decentralized corporate struc-
ture. Individual business centers—such as
research, production, and marketing—are
free to focus on their core competencies
without worrying about the eff ects of cor-
porate bloat.
A recent organizational change is part of
a wider Nike restructuring that may result in
an overall reduction of up to 5% of the com-
pany’s workforce. “Th is new model sharp-
ens our consumer focus and will allow us to
make faster decisions, with fewer manage-
ment layers,” said Charlie Denson, President
of the Nike Brand.
Nike has found continued marketplace
success by positioning itself not simply as a
sneaker company but as a brand that fulfi lls
the evolving needs of today’s athletes. Will
Nike continue to profi t from its increas-
ingly decentralized business model, or will
it spread itself so thin that its competition
will overtake it?
Discussion Questions 1. When Nike CEO Phil Knight stepped
down and handed the top job to Bill
Perez, he stayed on as chairman of the
board. In what ways could Knight’s
continued presence on the board have
created an informal structure that pre-
vented Perez from achieving full and
complete leadership of Nike?
2. How can Nike utilize both traditional
and newer organization structures to
support the fi rm’s heavy strategic com-
mitment to outsourcing?
3. Does Nike’s in-house collaboration with
ad agency Wieden + Kennedy qualify as
a strategic alliance or an outsourcing
alliance? Explain your reasoning.
4. FURTHER RESEARCH Gather infor-
mation on Nike’s recent moves and
accomplishments, and those of its rival,
adidas. Are both fi rms following the
same strategies and using the same
structures to support them? Or is one
doing something quite diff erent from the
other? Based on what you learn, what do
you predict for the future? Can Nike stay
on top, or is adidas destined to be the
next industry leader?
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Case 9: Apple: People and Design Create the Future
Over a span of more than 30 years, Apple
Computer—now simply known as Apple,
Inc.—paradoxically existed both as one of
America’s greatest business successes and as
a company that sometimes failed to realize
its potential. Apple, Inc. ignited the personal
computer industry in the 1970s, bringing
such behemoths as IBM and Digital Equip-
ment almost to their knees; stagnated when
a series of CEOs lost opportunities; and
rebounded tremendously since the return of
its co-founder and former CEO, Steve Jobs.
Th e fi rm represents a fascinating microcosm
of American business as it continues to lever-
age its strengths while reinventing itself.
Corporate History Th e history of Apple Inc. is a history of pas-
sion, whether on the part of its founders, its
employees, or its loyal users. It was begun
by a pair of Stevens who, from an early
age, had an interest in electronics. Steven
Wozniak and Steven Jobs initially put their
skills to work at Hewlett Packard and Atari,
respectively. But then Wozniak constructed
his fi rst personal computer—the Apple I—
and, along with Jobs, created Apple Com-
puter on April 1, 1976.
Right from the start, Apple exhibited an
extreme emphasis on new and innovative
styling in its computer off erings. Jobs took a
personal interest in the development of new
products, including the Lisa and the fi rst,
now legendary, Macintosh, or “Mac.”
Th e passion that Apple is so famous for
was clearly evident in the design of the Mac.
Project teams worked around the clock to
develop the machine and its operating sys-
tem, Mac OS. Th e use of graphical icons to
create simplifi ed user commands was an
immensely popular alternative to the com-
mand-line structure of DOS found on IBM’s
fi rst PCs.
When Apple and IBM began to clash
head-on in the personal computer market,
Jobs recognized the threat and realized that
it was time for Apple to “grow up” and be
run in a more businesslike fashion. In early
1983, he persuaded John Sculley, at that
time president of Pepsi-Cola, to join Apple
as president. Th e two men clashed almost
from the start, with Sculley eventually oust-
ing Jobs from the company.
Th e launch of the Mac reinvigorated
Apple’s sales. However, by the 1990s, IBM
PCs and clones were saturating the personal
computer market. Furthermore, Microsoft
launched Windows 3.0, a greatly improved
version of the Wintel operating system, for
use on IBM PCs and clones.
In 1991 Apple had contemplated licens-
ing its Mac operating system to other
computer manufacturers, making it run
on Intel-based machines, but the idea
was nixed by then chief operating offi cer
Michael Spindler in a move that would ulti-
mately give Windows the nod to dominate
the market.
Innovative Design to the Rescue Apple continued to rely on innovative design
to remain competitive in the 1990s. It intro-
duced the popular PowerBook notebook
computer line, as well as the unsuccessful
Newton personal digital assistant. Sculley
was forced out and replaced by Michael
Spindler. He oversaw a number of innova-
tions, including the PowerMac family—the
fi rst Macs based on the PowerPC chip, an
extremely fast processor co-developed
with IBM and Motorola. In addition, Apple
fi nally licensed its operating system to a
number of Mac-cloners, although never in
signifi cant numbers.
After a diffi cult time in the mid-1990s,
Spindler was replaced with Gil Amelio, the
former president of National Semiconduc-
tor. Th is set the stage for one of the most
famous returns in corporate history.
Jobs’s Return After leaving Apple, Steven Jobs started
NeXT computer, which produced an
advanced personal computer with a sleek,
innovative design. Th e computer entered
the market late in the game, required pro-
prietary software and never gained a large
following. Jobs then cofounded the Pixar
computer-animation studio which copro-
duced a number of movies with Walt Disney
Studios, including the popular Toy Story.
In late 1996, Apple purchased NeXT,
and Jobs returned to Apple in an unoffi -
cial capacity as advisor to the president.
When Amelio resigned, Jobs accepted the
role of “interim CEO” of Apple Computer
and wasted no time in making his return
felt. One of the fi rst things he did was to
announce an alliance with Apple’s former
rival, Microsoft. In exchange for $150 mil-
lion in Apple stock, Microsoft and Apple
would share a fi ve-year patent cross-license
for their graphical interface operating sys-
tems. He revoked licenses allowing the pro-
duction of Mac clones and started selling
Macs over the Web through the Apple Store.
Beginning with the iMac and the iBook,
its laptop cousin, Jobs has continually intro-
duced a series of increasingly popular prod-
ucts that have captured the buying public’s
imagination. Upon their release, the iPod,
MacBook, Apple TV, and iPhone instantly
spawned imitators that mimicked the look
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of these products, but they couldn’t dupli-
cate Apple’s acute ability to integrate design
with usability. Once again, Apple became an
industry innovator by introducing certifi -
ably attractive—and powerful—consumer
electronics products. And though Macs only
account for 4.6% of the global computer mar-
ket, Apple took home nearly 30% of all dollars
spent on computers in the U.S. last year. It
also tends to earn more revenue per com-
puter sold than its value-priced competitors.
What Does the Future Hold? When Verizon debuted a CDMA (Code
Division Multiple Access)-compatible
iPhone in early 2011, U.S. customers hot
for the #1 smartphone suddenly gained a
choice among two competing carriers. But
iPhone’s CDMA compatibility has bigger
implications for the world market—now
that iPhone is available on the two major
mobile phone technologies, there’s nary
a network in the world on which iPhone
won’t run. Th ough it’s already available in
ninety-three countries, CDMA spells good
news for iPhone’s global domination.
Drawing on the intuitive touch inter-
face of iPhone, iPad captured the pent-up
demand of consumers seeking the ideal
tablet. Apple is selling an estimated 4.5
million iPads each quarter, and it’s quickly
become the fastest-selling electronic device
ever. Not only that, but Apple’s left few
crumbs on the table for new tablet compet-
itors Motorola, Blackberry, and Samsung:
According to PC World, iPad accounts for
93% of all tablets sold. Analysts and blog-
gers closely watch for blurry mobile phone
photos surreptitiously taken by Apple parts
suppliers for a glimpse of features the next
model might sport; on the eve of the iPad
2 announcement, journalists were already
speculating what the third iPad model
might look like.
Given the rapid success of Apple’s iOS
devices, it’s natural to wonder if there’s a
future for Mac desktops and laptops. For
the time being, the answer seems to be,
“Of course!” Mac sales outpaced PC sales
three to one last year, jumping 28.5% in
one quarter, with business sales improving
66.3%.
But reviews of the newest version of
the Mac operating system, OS X Lion,
indicate what’s in store for Apple’s com-
puters. During rare public comments,
Apple reps have been clear that iOS is
the future of Apple, and OS X Lion has a
number of features taken directly from
the iOS playbook, including a redesigned
Mail program that mimics iPad’s screen
apps, and new multi-touch gestures for
trackpads.
Apple has also introduced its iCloud
wireless data Sync service. iCloud stores
music, photos, apps, calendars, docu-
ments, and more. And it wirelessly and
automatically pushes them to all of the
user’s devices.
Inevitable Changes in Leadership Casting an ominous shadow on the com-
pany are Steve Jobs’s multiple medical
leaves of absence. Jobs is inextricably linked
to Apple’s initial success, revitalization, and
chief creative innovations. Analysts and
investors alike wildly speculate on Apple’s
ability to stay on its creative course without
Jobs at the helm.
Chief Operating Offi cer Tim Cook has
handled Apple’s day-to-day operations on
and off for the last four years. Some analysts
think that, health willing, Jobs may transi-
tion into an advisory role, focusing on prod-
ucts and strategy and Cook would formally
become CEO.
Although able to quietly work mira-
cles, Cook has not been credited with the
long-term vision or showmanship of Steve
Jobs. Instead he is known as a capable and
hard-working executive who has been
at the top ranks of Apple for years and
understands the company and its prod-
ucts inside and out.
Steve Jobs’s leaves of absences remind us
that no leader, no matter how innovative or
charismatic, will be with a company forever.
Do you think Steve Jobs is really the key to
Apple’s success, or can the fi rm continue
to succeed without him? And, what should
Jobs himself be doing now to help prepare
the fi rm for this eventuality?
Discussion Questions 1. What examples can you fi nd that illus-
trate Apple’s core culture and observable
culture elements: stories, heroes, sym-
bols, rites and rituals?
2. Should Apple’s board of directors be
expecting Jobs to push transformational
change or incremental change, or both, at
this point in time? Why?
3. How could organization development
be used to help the iPhone develop-
ment teams make sure that they are
always working together in the best
ways as they pursue the next genera-
tions of iPhones and innovative prod-
uct extensions?
4. FURTHER RESEARCH Review what
the analysts are presently saying about
Apple. Make a list of all of the praises
and criticisms, organize them by
themes, and then put them in the pri-
ority order you would tackle if taking
over from Steve Jobs as Apple’s new
CEO. In what ways can the praises and
criticisms be used to create a leadership
agenda for positive change and continu-
ous improvement?
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How can the most successful video-delivery
company beat its already unbelievable
one-day turnaround time? By making a
growing portion of its immense catalog
available for instant download. Netfl ix
leverages emerging technologies, superior
customer service, and an ever-growing sub-
scriber base to transform the traditional
video-rental model into a 21st-century on-
demand concept.
The Open Secret of Success What’s the most exciting piece of mail you’ve
received lately? Ask more than twenty mil-
lion customers in the United States and
Canada, and they’ll probably reply that it’s
a little red-and-white envelope from Netfl ix.
More than 1.5 million DVDs are in transit
on any given day, requiring the company to
stock more than 55 million DVDs to keep up
with customer demand.
What accounts for Netflix’s success?
CEO Reed Hastings believes the key to
the sustained growth of the Los Gatos,
California, company is no secret at all—it
thrives because of its renowned customer
service. Though Netflix took second
place this year, it’s annually beat out such
heavies as Amazon, Apple, and Target in
eight straight e-commerce customer sat-
isfaction surveys conducted by ForeSee
Results.
According to Netfl ix spokesman Steve
Swasey, the company keeps its top place by
continuously improving operations—both
title selection and customer convenience.
Th ese qualities make Netfl ix absolutely
magnetic to new subscribers—the com-
pany added more customers its most recent
quarter than the entire prior year.
Netfl ix customers have posted more
than three billion movie reviews on its
Web site to date; an average customer
has posted about two hundred. In return,
Netfl ix recommends movies to customers
based on their renting habits. About 60% of
its members choose new rentals based on
these recommendations. To improve the
tool used to generate these recommenda-
tions, Netfl ix organized a contest to gather
its members’ ideas. Th e prize: one million
dollars.
Netfl ix claims that its members rent
twice as many movies as they did before
joining the service. Given their recent sales
fi gures, it comes as little surprise. At the end
of the most recent fi scal year, Netfl ix earned
$2.1 billion in revenue despite spending 1/3
less on marketing than the prior year.
Netfl ix’s Instant Viewing, which streams
any of 17,000 movies and television shows
to customers’ computers, is widely thought
to represent the company’s future. Within
thirty seconds of beginning a download,
customers can roll the opening credits.
Unlike in Apple’s iTunes Store, Netfl ix cus-
tomers can wait as long as they want before
fi nishing a streamed movie. Since opening
up the service, Netfl ix has quadrupled its
inventory of streaming content.
And it’s not just Netfl ix’s inventory
that’s constantly growing. To date, U.S.
customers can choose from more than 200
Netfl ix-compatible devices, including TVs,
gaming consoles, Blu-Ray players, and set-
top boxes. It’s a logical move, according to
David Cohen, executive vice president and
U.S. director of digital communications at
Interpublic Group’s Universal McCann. “Th e
ability to have thousands, if not millions, of
content options delivered to your box is cer-
tainly the way of the future,” he said.
Some customers even help Netfl ix
expand into markets it has overlooked. A
few small libraries are quietly using Netfl ix
to expand their interlibrary loan capabili-
ties. Video stores have caught on, too. One
Case 10: Netfl ix: Making Movie Magic
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What was built on burgers, purchased with
coins, and expanded to be in more than
26,000 places at once? One hint: it’s bright
red and eats dollar bills.
Redbox, the company behind the
DVD- and Blu-Ray-renting kiosks found in
grocery stores, restaurants, and even the
Empire State Building, came to light as a
project funded by McDonald Ventures (a
collection of brands outside the Golden
Arches’ core interests). Coinstar bought
nearly half the company in 2005, fi nishing
the purchase almost four years later.
Its business model—renting cus-
tomers the most popular new releases
without absorbing the overhead of retail
stores—was custom tailored for the
“watch it in the theater today, rent it tomor-
row” release schedule movie studios prefer.
But studios want their share of DVD sales,
too. So Universal, 20 th
Century Fox, and
Warner Bros. cut Redbox and other outlets
off from renting hot releases until they’ve
been out 28 days, long enough for fi lm buff s
to make the bulk of their DVD purchases.
It was a crushing blow to Redbox, as part
of their revenue comes from selling new
releases to customers who’d rather keep
their rented copy of, say, The Social Net-
work. Redbox responded by cultivating new
deals with Sony, Paramount, and Lionsgate.
“We are an engine for growth,” insists Red-
box president Mitch Lowe. “As an important
customer of the studios, we provide a sig-
nifi cant revenue stream for their businesses.
Simply put, our growth can lead to theirs.”
Redbox: Will Customers Wait for New Releases?
discreet Massachusetts store owner claims
to rent ten to fi fteen Netfl ix discs a month,
which saves him more than $2,000 in yearly
inventory expenses. “It’s nice to be able to
off er the latest foreign title that no one has
heard of,” he said.
Slaying the Dragons Giving customers what they want, Netfl ix
has beaten back competition from some
of the biggest names in media. By allowing
customers to keep DVDs as long as they
like, Netfl ix undermined the concept of late
fees, which had represented a major source
of profi ts for traditional rental companies.
And as instant viewing continues to grow
in popularity among Netfl ix customers, the
concept is not catching on everywhere—
Walmart closed the curtains on its own
movie download service.
Netfl ix recently hiked the price of sub-
scription plans that include DVDs and
streaming, highlighting the company’s shift
from discs to online video but leaving many
customers angry. “It is expected and unfor-
tunate that our DVD subscribers who also
use streaming don’t like our price change,
which can be as much as a 60% increase,”
Netfl ix said in its earning release. Th e com-
pany acknowledged that “some subscribers
will cancel Netfl ix or downgrade their Netfl ix
plan, [but] we expect most to stay with us.”
Putting People Up Front So, what does the future hold for Netf-
lix? CEO Reed Hastings makes no bones
about the business model: “If one thinks
about Netfl ix as a DVD rental business,”
he says, “one is right to be scared; if one
thinks of Netfl ix as an online movie ser-
vice with multiple diff erent delivery mod-
els, then one’s a lot less scared. We’re only
now beginning to deliver the proof points
behind that second vision.” To “deliver” on
this promise, Hastings is now betting as
much on people as on his business vision
and high technology.
Perks, compensation, and freedom are
mainstays of Netfl ix’s commitment to hiring
and retaining the best people in the indus-
try. When dealing with competitors such as
Apple, Blockbuster, and Amazon, a lot is on
the line in the wars for talent. As to salaries,
Hastings says: “We’re unafraid to pay high.”
And interestingly, pay isn’t linked with per-
formance in the sense of “merit.”
Salaries are pegged to job markets to
ensure that Netfl ix pay is always the best
around. If you’re top talent, you get top sal-
ary and are given the freedom to put your
talents to work making Netfl ix’s strategy
succeed. But if you’re something less than a
top performer, say, just “average,” there isn’t
room at the company. “At most companies,”
says Hastings, “average performers get an
average raise. At Netfl ix they get a generous
severance package.”
Netfl ix not only hires carefully and
well, it off ers a unique and highly produc-
tive work environment rich in features
that appeal to today’s high-tech and high-
talent workers. Its human resource plan
is as creative as its business model: pay
higher-than-average salaries; let employ-
ees choose how much of their compen-
sation is paid in cash and how much in
stock options; encourage each employee
to recruit three others they would “love”
to work with; let employees take as much
time off and vacation as they think they
need; limit work rules, maximize work
freedom, and make everyone responsible
for the choices he or she makes.
Hastings has a lot riding on his human
resource strategy. Does Netfl ix have the right
vision for the future?
Discussion Questions 1. What performance appraisal method
would you recommend to make sure
that only the “best” are kept on the Net-
fl ix team?
2. What are the limitations and risks of
Hastings’ human resource management
practices?
3. How does Netfl ix’s compensation poli-
cies encourage high performance?
4. FURTHER RESEARCH Check up on
Hastings and Netfl ix. How is the fi rm
doing right now? How has it changed
since the case information was pre-
pared? Are the human resource man-
agement practices described here still
active at the fi rm? What else is Netfl ix
doing to create human capital for sus-
tained competitive advantage?
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Leadership isn’t just about style and cha-
risma. Key players need to make sense of
massive amounts of information and suc-
cessfully predict how and where their orga-
nization should go next. Learn how SAS, the
most popular business analytics software,
helps leaders do just that.
Dr. Bruce Bedford is a learned man. He
spent years pursuing collegiate and post-
graduate education. After leaving school,
he joined Oberweis Dairy and is currently
its vice president of marketing analytics and
consumer insight. He uses complex diagnos-
tic tools to study the intricacies of Oberweis’s
business and suggest micro-adjustments
that could have million-dollar outcomes.
Recently, he was tasked with a career-defi n-
ing challenge: Stop milk bottle fraud.
It echoes an episode of Seinfeld where
Kramer and Newman hatched a scheme
to take thousands of recyclable bottles to
Michigan to redeem them for a nickel more
than in New York. But bottle fraud cuts into
dairy companies’ profi ts, and Dr. Bedford
is investigating it using high-tech software
that combines predictive modeling, data
mining, and state-of-the-art visualization
tools. Sounds like CSI ? It’s more like SAS.
Powerful Tools, Rapid Responses Short for Statistical Analysis System, SAS
(pronounced sass) is a set of integrated
software tools that help decision makers
cope with unwieldy amounts of unrelated
data. “It is a very powerful tool,” says Mu Hu,
director of customer relationship manage-
ment for Golfsmith. “I can pretty much do
anything with SAS.”
At its core is Base SAS—a set of analyz-
ing, reporting, and data output tools that
compile and present information stored in
tables or databases. Base SAS can interpret
data from almost any source—like spread-
sheets, sales records, or annual reports—so
that non-programmers can make business
decisions based on that information.
Companies can couple Base SAS with
more than two hundred specialized soft-
ware tools intended for specifi c applica-
tions or industries. Examples include tools
for supply chain analysis, K–12 teacher eval-
uation, and anti-money laundering.
SAS is the primary product of the SAS
Institute, the self-described “leader in busi-
ness analytics software.” While SAS is its
primary product, the company has devel-
oped a peripheral business around support-
ing and training SAS users. Anthony J. Barr
wrote the fi rst version of SAS in 1966, incor-
porating the SAS Institute in 1976 with co-
contributors James Goodnight, John Sall,
and Jane T. Helwig. Since then, with Good-
night at the helm, it’s gained an impressive
roster of clients: 92 of the top 100 Fortune
Global 500 companies, more than 45,000
businesses, universities, and government
agencies, with customers in 121 diff erent
countries.
A New Way of Making Old Decisions To understand the success of SAS, you must
fi rst grasp the concept of business analytics.
According to Michael J. Beller and Alan Bar-
nett, business analytics is the “continuous
iterative exploration and investigation of
past business performance to gain insight
and drive business planning.” It chiefl y
focuses on “developing new insights and
understanding of business performance
based on data and statistical methods.”
Business analytics help an organiza-
tion’s leaders and researchers understand
why something is happening, what might
happen next, what will happen if trends
continue, and what the optimum result or
decision might be.
Th is focused measurement of business
data has been employed since the late 19 th
century. But since the widespread imple-
mentation of business computing systems
that began in the late 1960s, organizations
have been collecting exponentially more
data and have sought to analyze it to more
eff ectively model business possibilities. Th is
lead to the advent of computer-based deci-
sion support systems like SAS, as well as
other tools like enterprise resource plan-
ning (ERP) systems and data warehouses.
For Every Problem, a Solution SAS brings an organization’s decision mak-
ers the data they need to solve a problem in
the absence of suffi cient expertise or infor-
mation. For example, Mu Hu and Golfsmith
used SAS to shrink data merging costs by
50% and reduce time spent preparing mar-
keting campaign results by 70%. Using other
data gleaned from SAS, they increased their
direct mail response rates from 10% to 60%.
Business leaders often need to interpret
separate sets of information to eff ectively
forecast market conditions or gain greater
organizational insight. “We had a lot of
islands of data without any sort of enterprise
information view of the college,” says Dr. Jim
Riha, director of enterprise business intelli-
gence for Oklahoma City Community College
(OCCC), noting his desire for “a more consis-
tent and improved view of the organization.”
Using SAS, Riha can “bring additional insight
to the right people at the right time, while
changing the focus from arguing about data
Case 11: SAS: Business Decisions at the Speed of Information
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Risk. Th e word summarizes a variety of
uncomfortable situations a manager must
grapple with. How likely is this to happen,
and what would be the cost if it did?
SaaS (software as a service) provider
Sungard wants to help leaders and decision-
makers accurately analyze and manage
the risks inherent in any organization’s
day-to-day and long-term operation.
Like competitor SAS, Sungard
produces a family of specialized soft-
ware products that help organizations
collect, organize, and make sense of
large amounts of data in order to bet-
ter understand the factors that affect
their business. Though Sungard offers
software solutions for a variety of busi-
ness needs—such as process man-
agement, wealth management, and data
administration—its risk management
programs are especially valued by orga-
nizations that operate in complex regula-
tory environments.
And as the sources of risk grow, so do
Sungard’s solutions: Th e company recently
partnered with SiteQuest Technologies to
release Protogent Social Media Surveil-
lance, a program that scans social media
sites like Twitter, Facebook, and LinkedIn
for employee-posted content, verifying that
it meets regulatory requirements and inter-
nal social media policies.
“We don’t want to have to review every
post about a weekend, local sporting events
or weather,” says James Cella, SiteQuest’s
president. “Social network updates are per-
sonal in nature, but at the same time, com-
pliance departments have a responsibility
to review business content.”
Sungard: Risky Business
to having a better understanding of the issues
and making more informed decisions.”
And too often, leaders don’t get to
choose when they must make a key busi-
ness decision, and they need the right data
in order to act quickly. “We need to main-
tain rapid access to our global data to make
informed decisions, and it has to be done
cost-eff ectively,” says John Wise, senior
director of Informatics at drug developer
Daiichi Sankyo. “We want to spend money
on drug development, not IT.”
Stu Harvey, executive director of plan-
ning and research at OCCC, concurs. “Th e
real value comes when you are empowering
people with data to make effi cient, eff ective
decisions earlier.”
Making the Complex Simple(r) While leadership may come naturally to
some managers, predictive analytics and
data mining often do not. And though the
SAS Institute takes great pains to make its
tools user-friendly for non-programmers,
it recognizes that SAS administrators and
end-users alike need help from time to time.
Beyond the knowledge base and docu-
mentation you expect to fi nd behind any
major program, SAS Institute goes to great
lengths to provide a constant stream of sup-
port for its users. Employees write more
than 30 SAS blogs, many focused on tips,
tricks, and shortcuts. Th e SAS web site is
chock full of useful sample queries, webi-
nars, and articles with titles like, “Jedi SAS
tricks” and “Th e Bayes theorem, explained
to an above-average squirrel”.
Inspiring Loyalty Th ough competitors like Cognos, Oracle, and
SAP are trying to catch up to SAS by rapidly
gobbling up smaller business intelligence
companies, SAS still leads the pack. And
most of its success derives from its extremely
dedicated staff . Th e company attracts and
keeps brainpower through such perks as
private offi ces for every employee and a
35-hour work week. Th e company snatches
up thousands of undeveloped acres near its
North Carolina headquarters, which it sells
to employees at a steep discount so they’ll
establish roots nearby. And the corporate
campus is a small town unto itself—it boasts
a state-of-the art nursery school, health cen-
ter, and even private junior and senior high
schools.
Mark Moorman, SAS program manager
for business intelligence, summarizes the
strategy as, “We’re willing to take care of you
if you’re willing to take care of us.” It must
be working: Employee turnover is less than
4% per year, compared with 15% turnover at
typical U.S. software houses.
Customers are equally enamored with
the company. In fact, 95% of companies
renew their annual lease of SAS software.
Th at’s likely because CEO Jim Goodnight
lets customers tell him where the com-
pany should go next. Users rave about SAS’s
technical support representatives, who are
required to record every product improve-
ment users suggest. Th ese suggestions are
sorted, ranked, and sent to customers via
the annual SASware Ballot. Th e results are
analyzed (doubtlessly using SAS), and the
top ten results are nearly always put into
action. “It’s an amazingly eff ective business
practice, listening to your customers,” says
Goodnight.
At the end of the day, customers like
OCCC’s Stu Harvey stick with SAS because
it enables them to make key conclusions
independently. “We want people using this
and making decisions on their own,” he says.
“People will be using data and feedback
from these wonderful automated systems to
change the way they do things.”
Discussion Questions 1. Explain why House’s path-goal theory
might aff ect an organization’s decision to
adopt a business analytics tool like SAS.
2. How could access to SAS data aff ect an
employee’s high- or low-LMX relationship
with their leader?
3. A leader with which leadership style
would be most likely to seek out analyti-
cal results from SAS? Why?
4. FURTHER RESEARCH Th e success of
a leader can be infl uenced as much by
her access to correct, pertinent informa-
tion as her leadership style. Describe a
situation in which a leader would serve
her organization best by utilizing analyt-
ical information provided by SAS, even
if the choice to do so goes against her
personal leadership style. Th en describe
a situation in which an organization
would benefi t more from a leader’s per-
sonal style than her interpretation of
analytical data.
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Social networking web sites are a dime a
dozen these days, so how does Facebook
stay at the top? By expanding its user base
and working with developers and advertis-
ers to create fresh content that keeps users
at the site for hours on end. But can Face-
book keep up the growth while defl ecting
concerns about its leadership?
The Perception Counts Mark Zuckerberg wants you to think diff er-
ently about Facebook. Unlike most other
young Silicon Valley CEOs, he’s got experience
in managing the kind of changes in perception
he hopes to bring about. In 2006 he opened
Facebook with plans to convince advertis-
ers—and developers—that social networking
was more than kids’ stuff . Zuckerberg hopes
to persuade these same two groups that Face-
book is fi rmly seated at the top and success-
fully expanding into global markets.
Th ough Zuckerberg and Facebook have
generated their share of controversy in
recent years, there’s no denying that Face-
book has been a runaway success. It is the
third most traffi cked site on the Web, falling
behind only Google and Microsoft. It is by
far the most popular social networking site.
Currently, more than two-thirds of Face-
book users are outside college.
Applications for Every User Regardless of age or profession, what keeps
users coming back to Facebook? Th e site
relies on a host of internally and exter-
nally developed applications that integrate
directly into the site to keep visitors’ eyes
glued to Facebook for hours on end. Video
is an extremely popular recent addition: the
site ranks sixth for online video watching,
and it directs more users to videos than the
second biggest search provider.
Facebook sees the bleak economy as rea-
son to press ahead with its plans for aggres-
sive growth. Th e company is gearing up for
more acquisitions, hiring rapidly, and roll-
ing out new advertising programs. Moving
beyond traditional online ads—the text and
pictorial banners that show up on most Web
sites—they believe that they can stand out
among the crowd. Facebook began rolling
out “engagement ads” encouraging users to
respond to the pitches by commenting, shar-
ing virtual gifts, or becoming fans of the ads
themselves. By serving approximately one bil-
lion display ads, Facebook’s online advertising
earned it $1.86 billion last year; $740 million of
that came from major household brands like
Coca-Cola and Procter & Gamble.
As much as advertisers need Facebook
users’ page views, Facebook wants to keep
those advertisers as loyal customers. Face-
book ads accounted for approximately
5% of all online ad buys last year and is
expected to climb to 8% this year. Facebook
ads can sell as inexpensively as two cents
per 1,000 impressions—less than a similar
buy at Yahoo! Th e pressure is on Facebook
to continue to diff erentiate itself from other
social networking sites, according to Jeff
Ratner, a managing partner at WPP’s Mind-
Share Interaction. If not, “Facebook doesn’t
look that diff erent,” he said. “It just becomes
another buy, and there are cheaper, more
effi cient ways to reach eyes.”
But the best potential for amassing
page views and click-throughs lies in Face-
book’s integrated applications. Th e site’s
photo viewing app, for example—the num-
ber one photo sharing application on the
Web—receives more than two billion pho-
tos uploaded to the site each month, with
750 million uploaded last New Year’s Eve
weekend. Some 6,600,000 developers and
entrepreneurs are involved in developing
what the company is calling the Facebook
Platform. More than 95% of its members
have used at least one application built on
the Facebook Platform, and advertisers are
betting that they can improve that statistic.
Facebook notes that users install more
than 25 million apps each day, and the vast
number of them are games. While Zynga is
the clear leader in Facebook gaming, users
can choose among thousands of adventure,
racing, word, and—yes—zombie games.
Changing Perceptions On several occasions during his reign at Face-
book, the youthful Zuckerberg has fought the
common Silicon Valley stereotype of young
CEOs who are brash and unripe to lead. His
fl at rejection of Yahoo!’s $1 billion bid to
buy Facebook was criticized by some as a
lost opportunity, so he’s working to create a
professional impression for his company by
hiring some experienced Web personalities.
Zuckerberg persuaded Sheryl Sandberg to
leave Google, where she had developed cash
Case 12: Facebook: Social Networking Is Big Business
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According to LinkedIn CEO Jeff Weiner, the
case for his company as a preferred social
networking tool to Facebook comes down
to two words: Keg stands.
“While many of us in college probably
were at parties having a good time, doing
things like keg stands,” Weiner says,
“I don’t know that many of us would
look forward to having a prospective
employer have access to pictures of
those events.”
LinkedIn was specifi cally created to
help users foster professional relation-
ships, and in many ways it seems like
the older, more mature sibling to Face-
book. Whereas Facebook emphasizes
the sheer number of friends you acquire,
LinkedIn emphasizes relationships, clas-
sifying your connections by whether
you know someone directly or if they know
someone you know (a second-degree con-
nection). Presenting users with a hierarchi-
cal network of possible contacts off ers them
the chance to get in touch with someone
desirable—a hiring manager or possible
mentor—through a trusted mutual source.
Even its monetizing strategy seems
more grown up than Facebook’s: Instead
of generating income via ad impressions
(measured by the total time a user spends
in Facebook), LinkedIn earns income from
providing networking and hiring services to
its individual and corporate members.
Forbes writer Bruno Aziza lauds how
LinkedIn mines its own data for users’
benefi t instead of just for its own: “Using
clever algorithms, members can be pre-
sented with insights [to] connect with
others more effi ciently. Th ey allow you to
visualize a possible future and prompt you
to act on it.”
LinkedIn: Social Networking’s All Grown Up
cows Adwords and Adsense, to join Facebook
as chief operating offi cer. Fourteen years
older than her boss, Sandberg is charged with
bringing a mature personality to the laid-
back, collegiate work environment. To do
this, she is integrating performance reviews,
refi ning the recruiting model, and develop-
ing a mature, sustainable advertising pro-
gram that will support Facebook as it evolves.
“I’m hopeful that we play a signifi cant role in
pushing the envelope [with] awareness build-
ing,” Sandberg said. “How we get there, I don’t
think we know yet.”
Noting that visitors to the site tripled
after Facebook unveiled its international
presence, the company is continuing its
international growth. Facebook translated
its content into seventy diff erent languages,
with more to come soon. Th is is critical,
because about 70% of Facebook’s 500 mil-
lion active users live outside the United
States. Whereas MySpace specializes in
locally themed subsites, Facebook has opted
to simply translate its entire site for non-
English speakers. “Th rough the translations
we are seeing mass adoption in those mar-
kets,” said Javier Olivan, an international
manager at Facebook, adding that because
the site is by its nature a tool for commu-
nication, Facebook doesn’t need to spend
much energy localizing it. “Th e translation
approach allows us to support literally every
language in the world,” Olivan said.
And to head off the eff orts of other
social networking sites, Facebook makes
data available to users from outside of the
site with its Facebook Connect program.
Facebook Connect allows users to import
their Facebook profi les into other Web sites
and synchronize their friend lists. Changes
appear in real time as users modify their
Facebook profi les, and users have “total
control” of website permissions to access
Facebook data, according to the company.
But some users fear that Facebook con-
siders “total control” to be a relative term.
Facebook’s settings default to a state where
all users’ comments and content are open
to the entire Web—even Web searches.
Many users complained about having to
dig through a myriad of confusing menus
in order to change their privacy settings to
what they actually considered “private.”
Late last year, the Wall Street Journal
reported that many of the most popular
Facebook apps were transmitting personal
information—users’ names and sometimes
even their friends’ names—to dozens of
advertising and Internet tracking compa-
nies. Tens of millions of users’ accounts
were compromised, including those who
had set their privacy options at the strict-
est possible settings. In this case, it was the
app developers who were sending users’
data, but earlier last year, Facebook was
also caught transmitting similar identifying
information itself. Th ough Facebook halted
these practices when major media outlets
brought the leaks to worldwide attention,
privacy advocates are concerned that Face-
book would knowingly or unknowingly per-
mit such breaches in the fi rst place.
What Do You Think? Despite all of its successes, the management
team of Facebook knows that they have seri-
ous work ahead in order to change the per-
ception of advertisers, developers, and even
some users regarding their ability to lead
Facebook successfully and profi tably into the
future of social networking. Will adding expe-
rienced management alter advertisers’ stereo-
types about youthful Silicon Valley CEOs? Can
Facebook overcome the bad impression being
communicated about its privacy gaff es?
Discussion Questions 1. Can eff ective communication be achieved
among users of social networking sites
such as Facebook?
2. Do you believe that Facebook has had
problems managing users’ privacy, or is
this an instance of the selective percep-
tion of a few upset users? What infl u-
enced your answer?
3. Sheryl Sandberg is under pressure to bring
a mature edge to Facebook. What are the
most signifi cant challenges that she most
likely faces when communicating with her
younger peers at the fi rm, and how would
you advise her to best deal with them?
4. FURTHER RESEARCH Find as much
information as you can about Mark Zuck-
erberg. Does he have what it takes to lead
Facebook at this stage in its life? Is he
making the right choices in terms of “com-
municating” himself and his fi rm to the
world? What constructive feedback would
you give him as an executive coach?
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Panera Bread is in the business of satisfy-
ing customers. With fresh-baked breads,
gourmet soups, and effi cient service, the
franchise has surpassed all expectations for
success. But how did a startup food company
get so big, so fast? By watching and carefully
timing market trends.
French Roots, American Tastes What’s so exciting about bread and soup?
For some people, it conjures up images of
bland food that soothes an upset stomach.
Others think of the kind of simple gruel
off ered to jailed prisoners in movies. But
for Panera Bread, a company able to suc-
cessfully spot long-term trends in the food
industry, artisan-style bread served with
deli sandwiches and soups is a combination
proven to please the hungry masses.
Despite its abundance of restaurants,
Panera Bread is a relatively new company,
known by that name only since 1997. Its roots
go back to 1981, when Louis Kane and Ron
Shaich founded Au Bon Pain Company Inc.,
which merged Kane’s three existing Au Bon
Pain stores with Shaich’s Cookie Jar store.
Th e chain of French-style bakeries off ered
baguettes, coff ee, and sandwiches served on
either French bread or croissants. It soon
became the dominant operator in the bakery-
café category on the East Coast. To expand its
domestic presence, Au Bon Pain purchased
the Saint Louis Bread Company, a Missouri-
based chain of about 20 bakery-cafés, in 1993.
It renovated the Saint Louis Bread Company
stores, renamed them Panera Bread, and
their sales skyrocketed.
Executives at Au Bon Pain invested heav-
ily toward building the new brand. In 1999,
Panera Bread was spun off as a separate
company. Since then, the fi rm has sought to
distinguish itself in the soup-and-sandwich
restaurant category. Its off erings have grown
to include not only a variety of soups and
sandwiches, but also souffl és, salads, panini,
breakfast sandwiches, and a variety of pas-
tries and sweets. Most of the menu off erings
somehow pay homage to the company name
and heritage—bread. Panera takes great
pride in noting that its loaves are handmade
and baked fresh daily. To conserve valu-
able real estate in the retail outlets, as well
as to reduce the necessary training for new
employees, many bread doughs are manu-
factured off -site at one of the company’s 17
manufacturing plants. Th e dough is then
delivered daily by trucks—driving as many
as 9.7 million miles per year—to the stores
for shaping and baking. At this point, there
are more than 1,450 Panera Bread bakery-
cafés in 40 states and Canada. Franchise
stores outnumber company-owned outlets
by approximately one-third.
Modern Tastes, Modern Trends Panera’s success has come partly from its
ability to predict long-term trends and ori-
ent the company toward innovation to ful-
fi ll consumers’ desires. Its self-perception
as a purveyor of artisan bread well predated
the current national trend (now rebounded
from the brief low-carb craze) for fresh
bread and the explosion of artisan bakeries
throughout metropolitan America.
Consumers’ desire for organic and all-
natural foods, once thought to be a mar-
ginal market force, has become the norm.
Keenly positioning itself at the forefront of
retail outlets supporting this trend, Panera
recently introduced a children’s menu
called Panera Kids. Kids can choose from
items such as peanut butter and jelly, grilled
cheese, and yogurt, and the all-natural and
organic foods will please choosy parents.
In addition, Panera proactively responded
to unease in the marketplace about the nega-
tive impact of trans fats on a healthy diet
by voluntarily removing trans fats from its
menu. “Panera recognized that trans fat was
a growing concern to our customers and the
medical community; therefore we made it a
priority to eliminate it from our menu,” said
Tom Gumpel, director of bakery develop-
ment for Panera Bread. Th ough reformulat-
ing the menu incurred unexpected costs, all
Panera menu items are now free from trans
fats, except for some small amounts that
occur naturally in dairy and meat products,
as well as in some condiments.
Case 13: Panera Bread Company: Staying Ahead of Long-Term Trends
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While traveling through Argentina in 2006,
Blake Mycoskie saw fi rsthand that shoeless
children were suff ering from cuts, sores, and
infections from soil-transmitted diseases.
Worse, if their school required shoes as part
of the offi cial uniform, these children
were denied from attending classes.
“I was so overwhelmed by the spirit
of the South American people, especially
those who had so little,” Mycoskie says.
“And I was instantly struck with the
desire—the responsibility—to do more.”
Infl uenced by the simple but eff ec-
tive design of Argentina’s traditional
alpargata, Blake returned to the U.S.
and founded TOMS Shoes. Its commit-
ment: Provide shoes to needy children
around the world. Th rough its One for
One program, the company donates a
pair of TOMS shoes for each pair purchased.
TOMS sold 10,000 pairs its fi rst year, and has
donated more than one million pairs to date
through NGOs, charities, and non-profi ts.
“When someone asks customers about
[the shoes], they’ll tell the whole story of
the company,” Mycoskie says. “Th ey feel
good that a child somewhere is wearing
shoes because they bought some.”
In 2011, Blake announced the next
chapter of his One for One Company—
saving people’s sight worldwide. Accord-
ing to Mycoskie, most cases of blindness
and visual impairment can be prevented
or treated. He notes that of the nearly 284
million visually impaired people, about
90% live in developing countries. Th rough
the sale of sunglasses, Blake hopes TOMS
will improve as many lives as possible. For
each pair of glasses sold, TOMS will pro-
vide one person with the eye care he or she
needs.
TOMS: Get One, Give One
According to Ron Shaich, former CEO
and now executive chairman of the board of
Panera, “Real success never comes by sim-
ply responding to the day-to-day pressures;
in fact, most of that is simply noise. Th e key
to leading an organization is understanding
the long-term trends at play and getting the
organization ready to respond to it.”
And let’s not forget, we are a coff ee
nation. For customers who just want to
come in, grab a quick cup, and get out,
Panera has just the thing. In many stores,
coff ee customers can avoid the normal
line and head straight for the cash register,
where they can pick up a cup, drop a small
fee into a nearby can, and go directly to the
java station. Caff eine-crazed customers can
avoid the maddening line during a morning
rush and cut the wait for that fi rst steam-
ing sip.
What Makes a Customer Stay? Panera learned from mega-competitor Star-
bucks that off ering wireless Internet access
can make customers linger after their initial
purchase, thus increasing the likelihood of a
secondary purchase.
Now most of its stores off er customers
free Wi-Fi access. According to spokesper-
son Julie Somers, the decision to off er Wi-Fi
began as a way to separate Panera from the
competition and to exemplify the company’s
welcoming atmosphere. “We are the kind of
environment where all customers are wel-
come to hang out,” Somers said. “Th ey can
get a quick bite or a cup of coff ee, read the
paper or use a computer, and stay as long as
they like. And in the course of staying, peo-
ple may have a cappuccino and a pastry or a
soup.” She went on to note that the chief cor-
porate benefi t to off ering Wi-Fi is that wire-
less customers tend to help fi ll out the slow
time between main meal segments. Execu-
tive Vice President Neal Yanofsky concurred.
“We just think it’s one more reason to come
visit our cafés,” he said. And wireless users’
tendency to linger is just fi ne with him. “It
leads to food purchases,” he concluded. And
he’s right—the average Panera store has an
annualized unit volume of $2 million.
Profi ts Rise Along with the Dough All of Panera’s attention to the monitoring of
trends has paid off handsomely. Since Panera
went public, the company’s stock has grown
thirteenfold, creating more than $1 billion in
shareholder value. BusinessWeek recognized
Panera as one of its “100 Hot Growth Com-
panies.” And even more recently, the Wall
Street Journal recognized the company as the
top performer in the Restaurants and Bars
category for one-year returns (63% return),
fi ve-year returns (42% return), and ten-year
returns (32% return) to shareholders. In
addition, a Sandleman & Associates survey
of customer satisfaction ranked Panera at
the top of the list for eight years in a row,
beating out 120 other competitors.
Sticking It Out Th rough wise fi nancial management, Panera
Bread found itself in the enviable position of
having no debt and $150 million in the bank.
Taking advantage of a weak U.S. real estate
market, the company opened nearly 80 new
stores last year. With a debt-free balance
sheet, the company plans to better position
itself for the end of the fi nancial crisis.
Panera Bread has demonstrated that
sticking to company ideals while successfully
forecasting, and then leading the response to
long-term industry trends will please cus-
tomers time and time again. Th e low-carb
craze didn’t faze Panera, but can this com-
pany continue to navigate the changing
dietary trends in today’s unstable market?
Discussion Questions 1. How might consumers’ perception of
Panera’s menu and atmosphere aff ect
their dining experience and tendencies
to return as customers?
2. Describe how stereotypes about the fast
food industry might positively and nega-
tively impact Panera.
3. What are Panera’s competitive advan-
tages? Can any of them be deemed
“sustainable”?
4. FURTHER RESEARCH Find data
reporting on how Panera’s sales were
aff ected by the recent economic down-
turn in the U.S. economy. See if the
eff ects were diff erent in various regions
of the country. Does Panera have special
strengths that help it deal better than
others with challenges such as those
posed by a declining economy?
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Pixar has delivered a series of wildly suc-
cessful animated movies featuring plucky
characters and intensely lifelike anima-
tion. Yet some of the most memorable
ones—Toy Story, Finding Nemo, and Th e
Incredibles—were almost never made. Find
out how Apple guru Steve Jobs, whose com-
pany struggled to stay alive during its early
years, took these upstarts of animation to
success.
“The Illusion of Life” Th ough the story is far from over, it might
seem like a fairytale ending of sorts for John
Lasseter, Pixar’s creative head, who went
from being fi red from his position as a Dis-
ney animator in the early 80s to running
Disney’s animation wing with Pixar cohead
Edwin Catmull. Lasseter provided the cre-
ative direction for Pixar as it grew from an
off shoot of Lucasfi lm production company
into the world’s most successful computer
animation company.
Pixar’s movies—including the Toy Story
movies, Th e Incredibles, Cars, Ratatouille, and
Up—have succeeded largely because of Las-
seter’s focus on employing computer graph-
ics (CG) technology to make the characters,
scenery, and minute details as realistic as
possible. “Character animation isn’t the fact
that an object looks like a character or has
a face and hands,” Lasseter said. “Character
animation is when an object moves like it is
alive, when it moves like it is thinking and all
of its movements are generated by its own
thought processes. . . . It is the thinking that
gives the illusion of life.”
Th is “illusion of life” is a direct result of
the synergy between Pixar’s creative teams,
who develop the story and characters, and
its technical teams who program—and fre-
quently develop—the animation software
used to breathe life into each movie. Each
forces the other to innovate, and together
they successfully balance the latest technol-
ogy with a back-to-basics focus on interest-
ing characters in compelling stories. “Pixar
has such a thoughtful approach, both from
a storyline and business perspective,” said
Ralph Schackart, analyst with William Blair
& Co LLC, “I don’t think anyone has quite
fi gured out how to do it like them.”
In an industry abounding with delight
in others’ misfortune, some might be sur-
prised that Pixar’s old-fashioned approach
to moviemaking has succeeded. But Disney
CEO Bob Iger believes the opposite. “Th ere
is not an ounce of cynicism in Pixar’s fi lms,”
Iger told Fortune. “And in a world that is
more cynical than it should be, that’s pretty
refreshing. I think it’s a critical ingredient to
the success of Pixar’s fi lms.”
Another unique quality of Pixar is that—
unlike competitor DreamWorks Animation
SKG—it does not limit its creative products
to the animated movies it releases. Th e
studio shares its technical advances with
the greater CG community through white
papers and technology partnerships, such
as its RenderMan software and hardware.
Perhaps Pixar’s closest competitor is
DreamWorks, headed by former Disney
impresario Jeff rey Katzenberg and backed
by media luminaries Steven Spielberg and
David Geff en. Other smaller American ani-
mation companies such as Orphanage, Wild
Brain Inc., and CritterPix Inc. face challeng-
ing budgets, limited technology, and tighter
deadlines. And in the event these upstarts
do manage a theatrical release, they’ve got a
hard act to follow—Pixar grosses a domes-
tic average of $258 million per movie.
An Uphill Battle Pixar came to life in the early 1980s within
a computer graphics division of Lucasfi lm,
George Lucas’s production company. Th e
Star Wars director hired the brightest com-
puter programmers he could fi nd to fi ll the
small but growing need in Hollywood for CG
graphics. Two of Lucas’s programmers, Ed
Catmull and Alvy Ray Smith, had developed a
number of impressive CG technologies. Enter
John Lasseter, just let go by Disney because
his intense interest in computer animation
wasn’t shared by management. At an anima-
tion conference, Catmull and Smith tapped
Lasseter to work with them on a number of
digital animation shorts. One, Th e Adventures
of André & Wally B., was the very fi rst charac-
ter-animation cartoon done with a computer.
Th en came Steve Jobs, who had just left
Apple Computer and was looking for a new
technology venture. He purchased the divi-
sion, which he named Pixar, for $5 million,
investing another $5 million to make it fi nan-
cially soluble. During Jobs’s tenure, Pixar cre-
ated about one short fi lm a year and slowly
broke into producing television commercials.
Jobs sought to capitalize on Pixar’s inventive
sprit by licensing its RenderMan software
and selling its Pixar Image Computer. But at
$130,000 each, the rendering computers were
a diffi cult sell, even in Hollywood. RenderMan
sold only slightly better, earning it a reputa-
tion as niche software—especially because
the program’s primary customer was Disney.
Case 14: Pixar: Animated Geniuses
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DreamWorks Animation SKG began as an
ambitious attempt by media moguls Steven
Spielberg, Jeff rey Katzenberg, and David
Geff en ( forming the SKG present on the
bottom of the DreamWorks logo) to create
a new Hollywood studio. Th e company was
founded after Katzenberg was fi red from—
you guessed it—the Walt Disney Company.
Th e DreamWorks studio was offi cially
founded on October 12, 1994, with fi nan-
cial backing of $33 million from each of the
three main partners and $500 million
from Microsoft co-founder Paul Allen.
DreamWorks Animated SKG is
devoted to producing high-quality family
entertainment through the use of com-
puter-generated, or CG, animation. With
world-class creative talent and techno-
logical capabilities, DreamWorks was the
fi rst to release two CG animated feature
fi lms a year. With each fi lm they strive to
tell great stories with a level of sophistication
that appeal to both children and adults.
In keeping with the importance of coop-
eration and teamwork, the open spaces and
unique amenities at DreamWorks enhance
the collaborative nature of the studio. In
fact, the lagoon is a favorite gathering spot
for informal meetings. When the fountains
are turned off , it doubles as an amphitheater
which can hold all employees. To showcase
their talents, employees can contribute to
on-campus art shows and craft fairs, allow-
ing all to appreciate their fellow employees’
abilities.
Its team eff orts have paid off . Starting
with its fi rst full-length animated feature,
Antz, DreamWorks has produced more
than ten fi lms with box-offi ce grosses
totaling more than $100 million each. Its
endearing fi lms have included Bee Movie,
Monsters vs. Aliens, and How to Train Your
Dragon. To date, its most successful release
is Shrek 2, the third highest grossing fi lm of
all time.
Never one to rely on past success,
DreamWorks created a new division,
MoonBoy Animation, with plans to pro-
duce television content. Can DreamWorks
make a successful transition to the small
screen?
DreamWorks: DreamWorks Delights
Although Jobs aggressively sought to build
Pixar’s reputation in the animation industry,
it was still an uphill battle. He invested more
than $50 million in keeping the company
afl oat, refusing to concede defeat and even
releasing Alvy Smith after repeated personal-
ity confl icts. Slowly, Hollywood began to take
notice of Pixar. Disney expressed interest in
having Pixar develop a feature-length ani-
mated movie, and Pixar agreed to animate
and produce Toy Story.
Tired of pouring money into keep-
ing it afl oat, Steve Jobs toyed with selling
the company. He entertained off ers from
Oracle, Microsoft, and, curiously enough,
the greeting-card company Hallmark. But
Jobs held out. “We should have failed,” says
Smith, “Steve just would not suff er a defeat.”
Th e release of Toy Story proved his instincts
right—the groundbreaking movie earned
$362 million worldwide, shattering records
for box-offi ce earnings by animated movies.
A Bug’s Life followed, and although the movie
did well, especially for an animated feature,
it’s worth noting that every Pixar release
since has done even better.
Acutely aware of a string of failures for
its own animated movies, Disney entered
into talks to buy Pixar. Lasseter and Cat-
mull were pleasantly surprised when Disney
not only purchased Pixar, but also placed
the Pixar honchos at the top of Disney’s
stagnant animation department. Th e duo
moved to dump the top-down development
process they say was in place at the studio,
favoring instead the collaborative approach
at Pixar that famously empowers the cre-
ative talent as much as the studio executives.
Transplanting some of Pixar’s successful
processes meant opening up spaces in the
mazes of the Disney animation building
to allow more chance encounters between
employees, and to give animators and other
creative types more input in the overall story
ideas and the direction of projects.
Th e sale went through for $7.4 billion,
and suddenly Steve Jobs became Disney’s
single largest shareholder.
Th ings are bright for Pixar. Th e company
brought home two Oscars for Toy Story 3,
one for—you guessed it—Best Animated
Feature. (Pixar fi lms have won this Oscar
four years in a row, and six of the last ten
years.) Never one to rest on its laurels, the
company continues to actively invest in
software and technology, the tools that
have made possible the lifelike rendering
that is the hallmark of Pixar movies. But
Pixar will have to stay sharp to stave off
competition from the junior animation
fi rms that are quickly forging alliances with
major production companies to put out fea-
ture-length fi lms of their own. Wild Brain,
for instance, inked a fi ve-picture deal with
Dimension Films, a unit of Miramax (owned
by, of all companies, Disney).
But a good part of Pixar’s success stems
from its ability to generate intriguing stories
that warm the hearts of audiences. And
according to Ralph Schackart, analyst with
William Blair & Co LLC, that’s where Pixar
has it made: “It all starts with the story.
You or I can go buy off -the-shelf software
and make an animated fi lm. Th e barrier to
entry for this industry is the story.”
Discussion Questions 1. How do you think the changes that John
Lasseter and Edwin Catmull made to
Disney’s animation department aff ected
that team’s eff ectiveness?
2. Pixar relies heavily on creative people
who are motivated to do their best under
production schedules that can some-
times be stressful. How does this create
challenges in maintaining eff ective team
performance?
3. Pixar struggled in its early days. Steve
Jobs was tempted to sell it when it was
necessary to invest more money to keep
it afl oat. How did his action and the
events that contributed to Pixar’s suc-
cess increase team cohesiveness?
4. FURTHER RESEARCH Some predict
that Pixar’s best days are over and that
it will be hard for it to stay creative as a
Disney business. What are the facts? In
what ways is its current performance
consistent with or diff erent from the pre-
dictions, and why?
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Whether or not you tweet, there’s no deny-
ing that Twitter’s having a profound eff ect
on the way we communicate with each
other and the outside world. Is the popular
microblogging service reinventing commu-
nication or just abbreviating it? Do tweets
contribute to the conversation or dumb it
down? Let’s take a look in more than 140
characters.
Tweets, RTs, and DMs were conceived
on a playground slide during a burrito-
fueled brainstorming session by employees
of podcasting company Odeo. Jack Dorsey
(@jack), now Twitter’s chairman, suggested
the idea of using short, SMS-like messages
to connect with a small group.
“[W]e came across the word twitter, and
it was just perfect,” Dorsey says. “Th e defi -
nition was ‘a short burst of inconsequential
information’ and ‘chirps from birds’. And
that’s exactly what the product was.”
Dorsey developed a working proto-
type, initially used internally by Odeo
employees, and refi ned the concept before
releasing the fi rst public version on July
15, 2006. Th ree months later, sensing the
magnitude of Dorsey’s invention, Dorsey
and other members of Odeo, including
current product strategist Evan Williams
(@ev) and creative director Biz Stone (@
biz), formed Obvious Corporation and
neatly acquired Odeo and all of its assets,
including Twitter.com, from Odeo’s share-
holders and investors.
Who Uses It? Demographically speaking, there’s a better
chance that your mom’s on Twitter than
you. Unlike other social media tools, Twit-
ter use skews unusually toward older users
who might not have previously dipped their
toes into social networking. According to
industry analyst Jeremiah Owyang, “Adults
are just catching up to what teens have been
doing for years.” Web analysis site comScore
points out that only 11% of Twitter’s users
are between 12–17.
Like any popular social media tool,
Twitter’s also become a vehicle for com-
municating (sometimes) carefully crafted
messages of self-promotion, attracting the
usual suspects like corporations (@star-
bucks), politicians (@BarackObama), social
organizations (@amnesty), and musicians
(@ladygaga). And don’t forget astronauts:
@Astro_TJ sent the fi rst off -Earth tweet on
January 22, 2010, from the International
Space Station. By late November, ISS pas-
sengers sent an average of a dozen tweets
each day from their communal account, @
NASA_Astronauts.
A Growing Chorus of Tweets In Twitter’s fi rst full year on the web, its rela-
tively small user base sent around 400,000
tweets per quarter. After a buoyant recep-
tion by attendees of the 2007 SXSW Festi-
val, during which the daily tweet average
jumped from 20,000 to 60,000, the service
leapfrogged to post 100 million tweets per
quarter the next year.
At a recent count, Twitter boasted 175
million registered users sending 95 million
tweets per day. Th is compares closely to the
estimated one billion messages sent daily
through Facebook Chat. Th e topics that rule
water cooler chatter—sports, gossip, and
politics—also drive tweet counts through
the roof.
At times during Twitter’s dramatic initial
spurts of growth, the company struggled to
maintain uptime. Users have been quick to
curse the Fail Whale, an image of a blissful
cetacean being carried out of the ocean by
birds that Twitter displays when service
interruptions arise. “Too many tweets!”
the image reads, and though the site has a
recent uptime average of 99.7%, downtimes
are particularly noticeable (but not tweet-
able) during tech industry gatherings like
San Francisco’s Macworld.
To Tweet, or Not to Tweet? Twitter’s 140-character limit keeps tweets
terse and to the point. But there’s no guar-
antee they’ll be pertinent. “Using Twit-
ter for literate communication is about as
likely as fi ring up a CB radio and hearing
some guy recite the Iliad,” gripes tech writer
Bruce Sterling.
Market research fi rm Pear Analytics
captured 2,000 U.S. and British tweets sent
during daytime hours (11 AM–5 PM CST)
over two weeks and assigned each message
one of six labels according to its content.
Th e two largest categories, pointless babble
(small talk) and conversation, comprised
78% of all tweets.
“For many people, the idea of describing
your blow-by-blow activities in such detail
is absurd,” concurs writer Clive Th ompson.
“Why would you subject your friends to
your daily minutiae?”
But avid Twitter users argue that while
not all tweets are gems, the service has
its place in digital culture. Social network
researcher Danah Boyd (@zephoria) criti-
cized Pear Analytics’s results, pointing
out that pointless babble could be better
characterized as social grooming, where
tweeters “want to know what the people
around them are thinking and doing and
feeling.”
Case 15: Twitter: Redefi ning Communication
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Like Twitter, microblogging tool Yammer
was originally developed for internal use in
a Silicon Valley startup—in this case, gene-
alogy company Geni. And like the develop-
ers at Odeo, Geni founder David Sacks liked
Yammer so much he spun it off into its own
company.
But the comparisons end there.
Whereas Twitter lets users blast bite-
sized comments about their daily foi-
bles openly across the Internet, Yammer
users can only see posts by coworkers
within their own company. Added fea-
tures include uploading directory infor-
mation, creating groups to help teams
communicate privately, and uploading fi les
and links to share one-on-one.
In many ways, Yammer sounds like it was
dreamt up by a corporate compliance offi -
cer—it’s secure, private, and data is stored
off site. So it’s no surprise that Yammer cli-
ents include more than 100,000 businesses,
including 80% of the Fortune 500. And it’s
not just for corporations: Departments
within the U.S., U.K., and Australian govern-
ments are also reaping the benefi ts.
“Companies that use Yammer have
employees that feel more engaged,” says
David Sacks. “Th ey feel more connected to
their coworkers, they feel more connected
to the company’s mission.”
Yammer: Microblogging Goes Corporate
Twitter’s low overhead translates into
instantaneous communication, and for
some users, that’s part of the appeal to
“Twitter lets me hear from a lot of people in
a very short period of time,” says tech evan-
gelist Robert Scoble (@Scobleizer).
During recent confl icts in Iran, Tunisia,
Egypt, and Syria residents tweeted instan-
taneous reports of fast-moving situations.
And because international users can tweet
over SMS, residents could sent short mes-
sages and photos at times when Internet
bandwidth was slow to nonexistent. After
Egypt forced local Internet providers to
temporarily cease service, Google and Twit-
ter teamed up to create a voice-to-tweet
service; by calling one of three Egyptian
phone numbers, callers could leave a voice-
mail message, which Arabic-speaking vol-
unteers would translate and post to Twitter
with the hashtag #egypt.
“It adds a layer of information and con-
nection to people’s lives that wasn’t there
before,” Evan Williams says. “It has the
potential to be a really substantial part of
how people keep in touch with each other.”
Changing Interpersonal Communication Many social media researchers, sociolo-
gists, and corporate marketing experts are
asking themselves the same question: Does
Twitter enable eff ective communication, or
is it a distraction?
Soren Gordhamer notes fi ve ways in
which Twitter is changing interpersonal
communication. Th ese include making
communication transparent (messages
are broadcast on the Web for all to see),
codifying stages of communication (quick
thoughts warrant a tweet; if you need to
communicate more, send a DM or, if it’s
a really long message, an email), and the
relationship between a growing network
of communication partners and the subse-
quent brevity of messages (the more people
you keep in touch with, each message will
be shorter on the average).
While the immediacy of tweets makes
group and one-on-one Twitter conversa-
tions less personal in some ways, Twitter’s
use of hashtags helps users gain an inti-
mate understanding of a particular topic
by grouping similar tweets. Whether they’re
discussing Memorial Day plans or civil
unrest, hashtags provide an aggregation of
live, up-to-the-minute microreports. Crit-
ics of the “Twitter as layman’s journalism”
movement note that tweets prioritize speed
over accuracy—just because something
was tweeted doesn’t make it true.
Corporate Tweeters, Start Your Engines In a recent survey, 81% of businesses que-
ried responded that social media market-
ing generated exposure for their business.
While only 35% surveyed indicated that
social media helped them close business
deals, it’s clear that social tools like Twitter
are good for business . . . when used prop-
erly. Dell’s Twitter promotions helped sell
$6.5 million in tech gear. And New Orleans-
based Naked Pizza brought in 15% of its
April business from an exclusive-to-Twitter
promotion.
Th e immediacy of tweeting can lend
itself to impulsive communication, and
organizations must be watchful that corpo-
rate tweets don’t cross any lines. Companies
are advised to register their name, affi li-
ated brands, and even executives’ names
down to C-level team members with Twit-
ter simply to protect themselves from
name spoofi ng.
Many social media strategists con-
fi rm that eff ective Twitter communication
comes down to one very human element:
trust. “Trust is the currency of social media,”
says consultant Joel Postman. “Without it,
social media is worthless as a tool with
which to engage customers.”
Discussion Questions 1. Do you think Twitter’s 140-character
limit for tweets is a barrier to eff ective
communication? Why or why not?
2. For what kinds of messages would
Twitter be an appropriate communica-
tion channel?
3. How could Twitter improve communi-
cation within an organization?
4. FURTHER RESEARCH Imagine you
have been tasked with analyzing the
“offi cial” tweets of a competing com-
pany in order to discern their social
media strategy. Choose a company with
a Twitter presence and select fi fty con-
secutive tweets to analyze. What is the
company attempting to communicate
with its tweets? Do they tend to be pub-
lic or intended for individuals? What
proportion of their tweets are retweets?
Do they tweet Twitter-only deals or spe-
cials? Based on this analysis, how would
you defi ne this company’s social media
strategy?
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By borrowing the best ideas from American
brands and innovating the rest itself, Toyota
has become a paragon of auto manufac-
turing effi ciency. Its vehicles are widely
known for their quality and longevity—and
Toyota’s sales numbers are the envy of the
American Big Th ree. Here is how Toyota
became so effi cient at producing high-
quality automobiles.
Buy “American”? “Buy American” used to be a well-known slo-
gan encouraging U.S. car buyers to purchase
domestic models assembled in America.
Th ose who still tout the motto have likely
done a good bit of head-scratching over
how to classify Toyota—a Japanese com-
pany sited in rural America that employs
American workers to use American-made
parts to produce vehicles sold in the United
States. What to think when this Japanese
brand achieves a product quality far supe-
rior to long-known American brands? And
Toyota has surged ahead of General Motors
to rank number one in global auto sales for
three years in a row.
Quality by Design Toyota’s success and growth in
the American auto market is
no accident. Th e company has
used strategies honed since the
1950s to earn and retain cus-
tomer satisfaction by producing
superior vehicles within a highly
effi cient production environ-
ment. From the home offi ce to
factories to showrooms, two
core philosophies guide Toyota’s
business: (1) creating fair, bal-
anced, mutually benefi cial rela-
tionships with both suppliers
and employees, and (2) strictly
adhering to a just-in-time ( JIT)
manufacturing principle.
Collaboration over Competition Over the decades, American
auto manufacturers developed
relationships with their sup-
pliers that emphasized tense
competition, price-cutting,
and the modifi cation of sup-
pliers’ production capacities
with the changing needs of
the domestic market. Year after year, parts
suppliers had to bid to renew contracts in a
process that valued year-to-year price sav-
ings over long-term relationships.
Domestic manufacturers, notorious for
changing production demands mid-season
to comply with late-breaking market dynam-
ics or customer feedback, forced suppliers to
turn to double or triple shifts to keep up with
capacity and thus can’t avoid the problems—
quality slips, recalls, line shutdowns, lay-
off s—that ultimately slow the fi nal assembly
of vehicles. When a carmaker doesn’t know
what it wants, suppliers have little chance of
keeping up. Th is system of industry dynam-
ics proved susceptible to new approaches
from Japanese competitors.
Toyota’s model of supply-chain manage-
ment displays an exclusive commitment to
parts suppliers, well-forecast parts orders
that are not subject to sways in the mar-
ket, and genuine concern for the success of
suppliers. In the Financial Times, M. Reza
Vaghefi noted that supply-chain relation-
ships among Asian manufacturers are based
on a complex system of cooperation and
equity interests. “Asian values, more so than
in [W]estern cultures, traditionally empha-
size the collective good over the goals of the
individual,” he said. “Th is attitude clearly
supports the synergistic approach of sup-
ply chain management and has encouraged
concern for quality and productivity.”
Visiting American auto plants and seeing
months’ worth of excess parts waiting to be
installed taught Toyota the benefi t of hav-
ing only enough supplies on hand to fulfi ll
a given production batch. Toyota plans its
production schedules months in advance,
dictating regularly scheduled parts ship-
ments from its suppliers. Suppliers benefi t
by being able to predict long-range demand
for products, scheduling production accord-
ingly. Th is builds mutual loyalty between
suppliers and the carmaker—almost as if
suppliers are a part of Toyota. Th e fi t and fi n-
ish in Toyota vehicles is precise because its
suppliers can aff ord to focus on the quality
of their parts. And consumers notice: Toyota
vehicles consistently earn high marks for
customer satisfaction and retain their resale
value better than almost any others.
Keep It Lean Early Toyota presidents Toyoda Kiichiro
and Ohno Taiichi are considered the fathers
of the Toyota Production System (TPS),
known widely by the JIT moniker as “lean
production.” Emphasizing quality and
effi ciency at all levels, it drives nearly all
aspects of decision making at Toyota.
Simply put, TPS is “all about producing
only what’s needed and transferring only
what’s needed,” said Teruyuki Minoura, senior
managing director at Toyota. He likened it
to a “pull” system—in which workers fetch
only that which is immediately needed—
as opposed to a traditional “push” system.
“Producing what’s needed means producing
the right quantity of what’s needed,” he con-
tinued. “Th e answer is a fl exible system that
allows the line to produce what’s necessary
when it’s necessary. If it takes six people to
make a certain quantity of an item and there
is a drop in the quantity required, then your
system should let one or two of them drop
out and get on with something else.”
To achieve maximum effi ciency, work-
ers at Toyota plants must be exceptionally
Case 16: Toyota: Looking Far into the Future
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It’s a big world. But as far as Ford is con-
cerned, it just got a little smaller.
Since taking over as CEO of Ford Motor
Company, one of Alan Mulally’s chief pur-
suits has been to produce a truly global
car—one that is built using nearly iden-
tical parts in a nearly identical style,
and marketed to global audiences using
nearly identical marketing campaigns.
To many auto executives, includ-
ing some top brass at Ford, the idea
seemed sheer folly. But Mulally holds
that automakers have gone to expen-
sive and unnecessary lengths in the
past to reconfi gure cars for individual
world regions.
“Why are we doing it this way?” asks
Mulally. “Because we believe the customer
requirements are going to be more the same
around the world than they are diff erent.”
Mulally chose the Focus as the fi rst
global platform, largely because of the
worldwide desire for compact cars. Design-
ers settled a middle ground of design and
features that should please everyone from
style-driven Americans to conservative Chi-
nese buyers. Mulally and Ford heir William
C. Ford, Jr. even recently unveiled a battery-
powered hatchback model that will directly
compete with the Chevy Volt and Nissan
Leaf.
“If we [are] going to be world-class, we
need to pull together and leverage and use
our global assets around the world to create
a powerhouse ‘One Ford,’ ” says Mulally. “It’s
exactly why we are here.”
Ford: The Assembly Line Goes Global
knowledgeable about all facets of a vehicle’s
production, able to change responsibilities
as needed. “An environment where people
have to think brings with it wisdom, and this
wisdom brings with it kaizen [the notion of
continuous improvement],” noted Minoura.
“If asked to produce only one unit at a time,
to produce according to the fl ow, a typical
line worker is likely to be fl ummoxed. It’s a
basic characteristic of human beings that
they develop wisdom from being put under
pressure.”
Keeping Up with the Times No vehicle represents Toyota’s innovation
better than the Prius. Now in its tenth year
in North America, the Prius has been wildly
successful in the U.S. and has come to rep-
resent a new generation of fuel-sipping cars
and the environmentally-conscious con-
sumers who clamor for them. Worldwide,
Prius sales recently topped two million, and
the car sells in over 70 countries and regions.
Th e devastating earthquake and tsunami
in Japan have aff ected the production of the
Prius, however. Factories were damaged, and
the Prius’s plants located in the region of the
country hit hardest by ongoing power outages
may continue to cause production delays.
On the other hand, no other Toyota vehi-
cle has come to represent the challenges of
adapting to a changing sales landscape as
its Tundra pickup truck has. Hoping to make
gains over the sales of domestic pickups,
Toyota built a Tundra plant in Texas to prove
that its trucks were as All-American as those
made by the Big Th ree. But bad became worse
when—already 60% over budget—truck
sales began to decline as the price of oil rose.
Contractors and builders, prime candidates
for pickups, began to think twice about new
pickup purchases; the San Antonio plant
began to run well under capacity.
Despite its best eff orts, Toyota suff ered
some of the same ills as General Motors, Ford,
and Chrysler. Instead of sending its workers
home, as Detroit’s Big Th ree car makers often
do, Toyota kept them at the plants. Employ-
ees spent their days in training sessions
designed to sharpen their job skills and fi nd
better ways to assemble vehicles.
For several years, Toyota faced “a signifi -
cant lack of production work for a signifi cant
number of workers,” said Sean McAlinden, an
economist for Automotive Research. He esti-
mated the wage cost of idling the assembly
lines at Toyota’s two plants at $35 million a
month. Toyota pledged to never lay off any of
its full-time, nonunion employees. Jim Lentz,
president of Toyota U.S. sales unit, said that
the company believes keeping employees on
the payroll and using the time to improve
their capabilities is the best move in the
long run. Norm Bafunno, president of Toy-
ota Motor Manufacturing Indiana, reports
that plant leadership used the downtime to
sharpen fundamental skills and implement
hundreds of improvements, resulting in an
ultimate cost savings of $7 million.
Gaining the Lead, One Vehicle at a Time By substituting discipline and effi ciency
for fanfare, Toyota has quietly earned a
long-standing reputation for the reliability
and quality of all of its models. Although
the company’s domestic competitors have
taken notice and now use many of Toyota’s
proven methods, their fi nancial diffi culties
make it hard to keep up the fi ght. In such a
fi erce market, can Toyota maintain the self-
control to stay on top?
Discussion Questions 1. How might a cell phone manufacturer,
an elementary school, and the local post
offi ce each benefi t from using Toyota’s
concept of kaizen?
2. Do you believe that a U.S. automaker
would keep auto assembly employees on
the payroll when the line is stopped? Use
Hofstede’s fi ve dimensions of value dif-
ferences to explain your answer.
3. Does Toyota value its human resources
more than do its U.S. rivals? Is this man-
agement approach to people a result of
Toyota’s business philosophy or its cul-
tural values?
4. FURTHER RESEARCH Toyota isn’t
alone as a major Asian competitor to the
U.S. automakers. Do some investigation;
who else is in the picture and what coun-
tries are they from? Are the other Asian
automakers using operations tech-
niques and values similar to those found
at Toyota, or are they bringing new ones
into play?
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Harley-Davidson celebrated a century in
business with a year-long International
Road Tour. Th e party culminated in the
company’s hometown, Milwaukee. Harley
is a true American success story. Once
near death in the face of global competi-
tion, Harley reestablished itself as the
dominant maker of big bikes in the United
States. However, success breeds imita-
tion and Harley once again faces a mix-
ture of domestic and foreign competitors
encroaching on its market. Can it meet the
challenge?
Harley’s Roots When Harley-Davidson was founded in 1903,
it was one of more than 100 fi rms producing
motorcycles in the United States. Th e U.S.
government became an important customer
for the company’s high-powered, reliable
bikes, using them in both world wars.
By the 1950s, Harley-Davidson was the
only remaining American manufacturer.
But by then British competitors were enter-
ing the market with faster, lighter-weight
bikes. And Honda Motor Company of Japan
began marketing lightweight bikes in the
United States, moving into middleweight
vehicles in the 1960s. Harley initially tried
to compete by manufacturing smaller bikes,
but had diffi culty making them profi tably.
Th e company even purchased an Italian
motorcycle fi rm, Aermacchi, but many of
its dealers were reluctant to sell the small
Aermacchi Harleys.
Consolidation and Renewal American Machine and Foundry Co. (AMF)
took over Harley in 1969, expanding its
portfolio of recreational products. AMF
increased production from 14,000 to 50,000
bikes per year. Th is rapid expansion led
to signifi cant problems with quality, and
better-built Japanese motorcycles began
to take over the market. Harley’s share of
its major U.S. market—heavyweight motor-
cycles—was only 23%.
A group of 13 managers bought Harley-
Davidson back from AMF in 1981 and began
to turn the company around with the rally-
ing cry “Th e Eagle Soars Alone.” As Richard
Teerlink, former CEO of Harley, explained,
“Th e solution was to get back to detail. Th e
key was to know the business, know the cus-
tomer, and pay attention to detail.” Th e key
elements in this process were increasing
quality and improving service to customers
and dealers. Management kept the classic
Harley style and focused on the company’s
traditional strength—heavyweight and
super heavyweight bikes.
In 1983, the Harley Owners Group
(H.O.G.) was formed; H.O.G. membership
now exceeds one million members and
1,400 chapters worldwide. Also in 1983,
Harley-Davidson asked the International
Trade Commission (ITC) for tariff relief
on the basis that Japanese manufacturers
were stockpiling inventory in the United
States and providing unfair competition.
Th e request was granted and a tariff relief
for fi ve years was placed on all imported
Japanese motorcycles that were 700 cc
or larger. By 1987 Harley was confi dent
enough to petition the ITC to have the tariff
lifted because the company had improved
its ability to compete with foreign imports.
Once Harley’s image had been restored,
the company began to increase production.
Th e fi rm opened new facilities in Franklin,
Milwaukee, and Menomonee Falls, Wiscon-
sin; Kansas City, Missouri; and York, Penn-
sylvania; and opened a new assembly plant
in Manaus, Brazil.
In the 1980s, the average Harley pur-
chaser was in his late thirties, with an
average household income of over $40,000.
Teerlink didn’t like the description of his
customers as “aging” baby boomers: “Our
customers want the sense of adventure
that they get on our bikes. . . . Harley-
Davidson doesn’t sell transportation, we
sell transformation. We sell excitement, a
way of life.”
However, the average age and income
of Harley riders has continued to increase.
Recently, the median age of a Harley rider
was 47, and the median income exceeded
$80,000. Th e company also created a line
of Harley accessories available through
dealers or by catalog, all adorned with the
Harley-Davidson logo. Th ese jackets, caps,
T-shirts, and other items became popular
with nonbikers as well. In fact, the clothing
and accessories had a higher profi t margin
than the motorcycles; nonbike products
made up as much as half of sales at some
dealerships.
International Efforts Although the company had been export-
ing motorcycles ever since it was founded,
it was not until the late 1980s that Harley-
Davidson management began to think
seriously about international markets.
Traditionally, the company’s ads had been
translated word for word into foreign lan-
guages. New ads were developed specifi -
cally for diff erent markets, and rallies were
adapted to fi t local customs.
Case 17: Harley-Davidson: Style and Strategy Have Global Reach
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Th e company also began to actively
recruit and develop dealers in Europe and
Japan. It purchased a Japanese distribution
company and built a large parts warehouse
in Germany. And Harley learned from its
international activities. Recognizing, for
example, that German motorcyclists rode at
high speeds—often more than 100 mph—the
company began studying ways to give Har-
leys a smoother ride and emphasizing acces-
sories that would give riders more protection.
Harley continues to make inroads in
overseas markets. Although the worldwide
economic slowdown has attenuated Harley
sales somewhat, and export sales are down
about 10%, the company has made unex-
pected inroads in European markets. Euro-
pean buyers haven’t had it as rough as their
American counterparts, and they’re turning
their tastes away from Japanese motorcycles
and toward premium American labels. Harley
is currently the number one motorcycle brand
in fi ve European countries, and number two
in four countries. Th is sustained buying has
earned Harley four consecutive quarters of
sales and market share growth in Europe.
Given that interest in sport bikes is
waning, Harley motorcycles are among
America’s fastest-growing exports to Japan.
Harley’s Japanese subsidiary adapted the
company’s marketing approach to Japa-
nese tastes, even producing shinier and
more complete tool kits than those avail-
able in the United States. Harley bikes have
long been considered symbols of prestige
in Japan; many Japanese enthusiasts see
themselves as rebels on wheels.
Th e company has also made inroads
into the previously elusive Chinese mar-
ket, with the fi rst offi cial Chinese Harley-
Davidson dealership opening its doors just
outside downtown Beijing. To break into
this emerging market, Harley partnered
with China’s Zongshen Motorcycle Group,
which makes more than one million small-
engine motorcycles each year. Like other
Harley stores, the Chinese outlet stocks
bikes, parts and accessories, and branded
merchandise, and off ers post-sales service.
Despite China’s growing disposable income,
the new store has several hurdles ahead of
it, including riding restrictions imposed by
the government in urban areas.
Harley’s even announced a major pro-
duction expansion into India, where it’s
chosen to build its second-ever assembly
plant outside the U.S. While most parts
will still be fabricated in the U.S. by domes-
tic workers, they’ll be shipped to the north
Indian state of Haryana for assembly for the
rapidly growing Indian market.
Harley seeks to grow its brand interna-
tionally from 30% to 40% by 2014, and it sees
the Indian and Pakistani markets as key to
achieving this goal. Despite the obvious cost
of shipping parts halfway around the globe,
it’s still a win for Harley: Indian consumers
pay nearly twice the normal international cost
for fully assembled vehicles because India’s
import duties are so high. Anoop Prakesh,
managing director for Harley-Davidson India,
estimates that building the bikes nearby could
cut import duty tariff s by around 80%.
The Future Although its international sales have
grown, the domestic market still repre-
sents more than 60% of Harley’s sales.
Given the climbing price of gas, Harley is
uniquely positioned to take advantage of
this economic factor. Many riders report
in-town fuel consumption rates in excess
of 40 miles per gallon. Analyst Todd Sul-
livan notes, “I know plenty of F-150, Sub-
urban, and Silverado drivers who ride
Harleys. Th ey are doubling or even tripling
their gas mileage and savings by making
the switch.”
Executives attribute Harley’s success to
loyal customers and the Harley-Davidson
name. “It is a unique brand that is built on per-
sonal relationship and deep connections with
customers, unmatched riding experiences,
and proud history,” says Jim Ziemer, Harley’s
outgoing president and chief executive.
However, Harley-Davidson has been in a
fi ght not just with the recession and a sharp
consumer spending slowdown, but also
the aging of its customer base, and a credit
crisis that has made it diffi cult for both the
motorcycle maker and its loyal riders to
get fi nancing. With 17 consecutive years of
increased production, marked with record
revenues and earnings, will the future for
Harley be bright?
Discussion Questions 1. If you were CEO of Harley-Davidson,
how would you compare the advantages
and disadvantages of using exports, joint
ventures, and wholly owned subsidiar-
ies as ways of expanding international
sales?
2. Given Harley’s legacy of quality and
craftsmanship, what complications
might the Chinese business environ-
ment pose for the fi rm to manufacture
there?
3. Now that more Harley bikes are being
built outside the U.S. than ever before,
what qualities of global managers should
the company seek for its assembly plant
management?
4. FURTHER RESEARCH Is it accurate
to say that Harley is “still on top” of its
game? How is the company doing today
in both domestic and global markets?
Who are its top competitors in other
parts of the world, and how is Harley far-
ing against them?
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At face value, In-N-Out Burger seems like a
modest enterprise—only four food items on
the menu, little to no advertising. So how
has this West Coast chain achieved near-
cult status among regular joes and foodies
alike? For more than sixty years, In-N-Out
has focused on providing customers the
basics—fresh, well-cooked food served
quickly in a sparkling clean environment—
and has made consistency and quality their
hallmarks.
Or So In-N-Out Would Have You Think Walk into any of the 258 In-N-Out Burger
locations, and you’ll only fi nd four food
items on the menu: Hamburger, Cheese-
burger, Double-Double and French Fries.
You can wash those down with a Coke or a
milkshake.
But stand next to the ordering counter
long enough, and you’ll hear customers
recite a litany of curious requests. None are
on the menu, but sure enough, the cashier
rings each one up with a smile: Animal Style
(a mustard-cooked patty with extra pickles,
cheese, spread, and grilled onions), Flying
Dutchman (two patties, two slices of cheese,
no bun or garnish), Protein Style (heavy on
the fi xings, wrapped in lettuce instead of
a bun), or any permutation of patties and
cheese slices up to a 4 � 4 ( four patties and four slices of cheese barely contained in one
bun). Th e open secret of the secret menu is
only part of what keeps customers coming
back for more.
A Simple Formula for Success In-N-Out’s motto is straightforward: “Give
customers the freshest, highest quality
foods you can buy and provide them with
friendly service in a sparkling clean envi-
ronment.” And so is the chain’s formula
for success—it only makes a few food
items, it consistently makes them well,
and it earns the trust of its customers by
not deviating from this premise.
Robert LePlae, head of creative giant
McCann Erickson, commends In-N-Out’s
ability to consistently execute their simple-
but-eff ective concept of fast food done right.
“Th ey don’t abuse the privilege that they
have built up with their customers,” he says.
“Th ey haven’t commercialized the ‘secret
menu’. Th ere is a powerful trust between
the company and the customers that is
deeply ingrained.”
In-N-Out’s former CFO, Steve Tanner,
agrees that honesty is the best policy: “If
you have to tell somebody you’re some-
thing, you’re probably not.”
In addition to making the best burg-
ers around, In-N-Out’s other primary suc-
cessful trait is its insistence on playing
by its own rules. A fi erce entrepreneurial
streak ran through the Snyders, In-N-Out’s
founding family, and from the sock-hop
décor to the secret menu to its treat-
ment of employees as long-term partners
instead of disposable resources, the chain
prefers to focus on its formula for success
instead of conventional defi nitions like
shareholder return or IPOs.
Th e funny thing is, it works. Unwilling to
grow at a speed that would sacrifi ce quality
or consistency of the customer experience,
In-N-Out has resisted going public or fran-
chising. Yet—or maybe, because of this—
they best rivals Burger King and McDonald’s
in per-store sales.
All in the Family Harry Snyder and his wife Esther opened
the fi rst In-N-Out Burger in Baldwin Park,
CA, in 1948. Unlike other carhop-oriented
fast food restaurants of the era, Harry
installed a two-way speaker through which
drivers could order without leaving their
car, thus creating California’s fi rst drive-
thru hamburger stand. Harry brought sons
Rich and Guy to work at an early age, where
the boys learned their father’s insistence
on complementing fresh, promptly-cooked
food with great customer service.
Th e Snyder’s second restaurant opened
three years later, and franchising continued
slowly until 1976, when Rich took over after
his father’s death. At that time, In-N-Out
managed eighteen locations throughout
California.
Th ough he was only twenty-four when he
became CEO, Rich Snyder had big plans for
In-N-Out. Th e next seventeen years would
see Rich expand In-N-Out into new cities
but still maintain exacting control over the
quality of both ingredients and employees.
Harry and Rich understood that you
can’t truthfully attest to the quality of
your ingredients unless you’ve inspected
them yourself. So with the help of younger
brother Guy, one of Rich’s fi rst projects was
to build a commissary in Baldwin Park,
CA, where all In-N-Out’s ingredients are
inspected for quality and prepared for dis-
tribution to their stores. Th e commissary
location in part explains why In-N-Out
restaurants are clustered in the American
Southwest: establishing locations longer
than one day’s drive from the commissary
is “not even negotiable,” executive Carl
Van Fleet told the Orange County Register
Case 18: In-N-Out Burger: Building a Better Burger
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Candace Nelson’s big break came cour-
tesy of two of the world’s most famous
women, 300 cupcakes, and a sleepless
red-eye fl ight. It started when Barbra
Streisand bought a dozen cupcakes from
Nelson’s new bakery, Sprinkles, for her
friend Oprah Winfrey. Soon after, Nelson
received a 2 PM call from one of Win-
frey’s producers with a last-minute
order : bring 300 cupcakes to Chicago
for an appearance the next morning on
Breakfast with Oprah.
“You can’t say no to Oprah,” Nelson
jokes. Th e investment-banker-turned-
baker arrived at Oprah’s studios with
shopping bags full of her gourmet cup-
cakes—coconut, red velvet, and Mada-
gascar vanilla, topped with Sprinkles’
requisite half-inch-thick sheet of but-
tercream frosting. Like many before her,
Nelson soon benefi ted from Oprah’s magic
touch—cupcake sales at the Beverly Hills
bakery jumped 50% to 1,500 per day. And
at $3.50 per cupcake, it was sweet news for
Nelson and her husband, Charles, who co-
owns the Sprinkles chain.
At Sprinkles, the line stretches out the
door and around the block. Tourists and
locals alike often wait well over a half-
hour—longer than a cupcake takes to
bake and cool—for a taste of one of Sprin-
kles’ 23 custom fl avors, only 13 of which
are off ered each day. Favorites such as
dark chocolate and red velvet are available
every day, but specialty fl avors such as
chai latte, carrot cake, and peanut butter
chocolate appear sporadically throughout
the week.
With seventeen Sprinkles outlets sched-
uled to open in fi ve countries, Nelson has a
lot to smile about. “Th at’s why I went into
the cupcake business,” she says. “I’m in this
little cupcake bubble where everyone is
smiling ear to ear.”
Sprinkles: Leading a Sweet Trend
in 2006, as doing so would require longer
delivery runs or additional processing
hubs, both of which could reduce quality
control. (Yet a few years later, In-N-Out
caved to consumer demand and built a
second patty plant in Dallas, TX, to sup-
port their inevitable expansion into the
Lone Star state.)
Unlike Harry, who hoped employees
would transfer skills learned at In-N-Out
to a “better” job, Rich thought differently :
“ Why let good people move on when
you can use them to help your company
grow?” Knowing that his expansion plans
would require a pool of talented and loyal
store managers, Rich opened In-N-Out
University in 1984. Store associates had
to please hungry diners, show initiative,
and exhibit strong decision-making skills
for at least one year before being invited
to attend the management training pro-
gram. Reasoning that the same high-tech
tools for performance analysis employed
by pro sports teams could also improve
his team, Rich videotaped trainees to
analyze their performance and produced
training films.
The Best Advertising Is Free Whether by preference or accident, In-N-
Out’s infrequent forays into paid advertis-
ing are oblique at best—with radio ads that
simply tout, “In-N-Out, In-N-Out. Th at’s
what a hamburger’s all about,” and holiday
ads that explain the meaning of the holi-
days instead of the weekly specials.
You’re more likely to see a simple visual
ad for In-N-Out. Like other stores in the
early days of roadside diners, the company
placed locations along interstate off ramps,
relying on their yellow boomerang logo and
plain billboards reading, “In-N-Out Burger
2.5 Miles Ahead” to draw customers.
For years they gave customers free bum-
per stickers with the company’s name,
thousands of which were modifi ed by rabid
fans to say, “In-N-Out urge.” Stores have also
sold clothing bearing the company logo.
“Th eir marketing is really brilliant,” con-
cedes Robert LePlae. “Th e best marketing is
word of mouth, and they have that. You can’t
get that through traditional media.”
Because the company has long been
press and advertising shy, and because their
burgers aren’t available in most of the U.S.,
In-N-Out has cultivated a considerable mys-
tique around ultimately simple products.
William Martin, who composed In-N-
Out University’s training regimen, says that
during his time with the company, the Sny-
ders and other top brass were defi nitely con-
scious of the magic surrounding their brand.
“Th ey were all aware of it, and they loved it,”
he says. “But they had no explanation for it.”
Discussion Questions 1. Rich Snyder was twenty-four years old
when he assumed leadership of In-N-Out
after his father passed away. Do you think
his young age was an asset or a liability
for his leadership? Or did it matter in the
fi rst place?
2. In an era of jalapeno poppers and
extreme fajitas, do you view In-N-Out’s
long-term strategy of off ering only four,
simple food items as risky? Why or why
not?
3. Do you think an entrepreneur could walk
into a bank today and expect to receive
fi nancing for a business plan based on
In-N-Out’s extremely simple menu? Why
or why not?
4. FURTHER RESEARCH Imagine you
were asked by In-N-Out Burger to mod-
ernize its advertising mix while main-
taining the modesty and simplicity that’s
characterized its brand for over sixty
years. With a partner, craft an advertis-
ing concept that speaks to In-N-Out’s
core values: quality, consistency, friend-
liness, and cleanliness. How would
you illustrate this concept to consum-
ers? Explain why you would choose to
include or exclude TV, print, radio, or
online advertising based on your prem-
ise. How would you pitch this concept
to In-N-Out’s marketing department in
a way that would emphasize In-N-Out’s
core values?
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Test Prep 1
Multiple Choice 1. d. 2. c. 3. b. 4. b. 5. b. 6. d. 7. a. 8. d. 9. c. 10. a. 11. c. 12. a. 13. c.
14. c. 15. a.
Short Response 16. Prejudice involves holding a negative stereotype or irrational attitude toward a person who is diff erent from one’s self. Discrimina-
tion occurs when such prejudice leads to decisions that adversely aff ect the other person in his or her job or in advancement
opportunities at work or in his or her personal life.
17. Th e “free agent economy” is one where there is a lot of job-hopping and people work for several diff erent employers over a career,
rather than just one. Th is relates not only to the preferences of the individuals but also the nature of organizational employment
practices. As more organizations reduce the hiring of full-time workers in favor of more part-timers and independent contractors,
this creates fewer long-term job opportunities for potential employees. Th us they become “free agents” who sell their services to
diff erent employers on a part-time and contract basis.
18. You will typically fi nd that top managers are more oriented toward the external environment than the fi rst-level or lower-level
managers. Th is means that top managers must be alert to trends, problems, and opportunities that can aff ect the performance of the
organization as a whole. Th e fi rst-line or lower manager is most concerned with the performance of his or her immediate work unit,
and managing the people and resources of the unit on an operational day-to-day basis. Top management is likely to be more
strategic and long term in orientation.
19. Planning sets the objectives or targets that one hopes to accomplish. Controlling measures actual results against the planning
objectives or targets, and makes any corrections necessary to better accomplish them. Th us, planning and controlling work together
in the management process, with planning setting the stage for controlling.
Integration & Application 20. I consider myself “eff ective” as a manager if I can help my work unit achieve high performance and the persons in it to achieve job
satisfaction. In terms of skills and personal development, the framework of essential management skills off ered by Katz is a useful
starting point. At the fi rst level of management, technical skills are important and I would feel capable in this respect. However, I
would expect to learn and refi ne these skills even more through my work experiences. Human skills, the ability to work well with
other people, will also be very important. Given the diversity anticipated for this team, I will need good human skills and I will have
to keep improving my capabilities in this area. One area of consideration here is emotional intelligence, or my ability to understand
how the emotions of myself and others infl uence work relationships. I will also have a leadership responsibility to help others on the
team develop and utilize these skills so that the team itself can function eff ectively. Finally, I would expect opportunities to develop
my conceptual or analytical skills in anticipation of higher-level appointments. In terms of personal development I should recognize
that the conceptual skills will increase in importance relative to the technical skills as I move upward in management responsibility,
while the human skills are consistently important.
Test Prep 2
Multiple Choice 1. a. 2. b. 3. c. 4. a. 5. c. 6. b. 7. d. 8. b. 9. a. 10. a. 11. c. 12. a. 13. c.
14. b. 15. b.
Short Response 16. You can see scientifi c management principles operating everywhere, from UPS delivery, to fast-food restaurants, to order-fulfi llment
centers. In each case the workers are trained to perform highly specifi ed job tasks that are carefully engineered to be the most
effi cient. Th eir supervisors try to keep the process and workers well supported. In some cases the workers may be paid on the basis
of how much work they accomplish in a time period, such as a day or week. Th e basic principles are to study the job, identify the
most effi cient job tasks and train the workers, and then support and reward the workers for doing them well.
17. According to the defi cit principle, a satisfi ed need is not a motivator of behavior. Th e social need, for example, will motivate only if it is
deprived or in defi cit. According to the progression principle, people move step by step up Maslow’s hierarchy as they strive to satisfy
their needs. For example, esteem need becomes activated only after the social need is satisfi ed. Maslow also suggests, however, that
the progression principle stops operating at the level of self-actualization; the more this need is satisfi ed, the stronger it gets.
18. Th e Hawthorne eff ect occurs when people singled out for special attention tend to perform as expected. An example would be giving
a student a lot of personal attention in class with the result that he or she ends up studying harder and performing better. Th is is
really the same thing as McGregor’s notion of the self-fulfi lling prophesy with the exception that he identifi ed how it works to both
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the positive and the negative. When managers, for example, have positive assumptions about people, they tend to treat them well and
the people respond in ways that reinforce the original positive thinking. Th is is a form of the Hawthorne eff ect. McGregor also pointed
out that negative self-fulfi lling prophesies result when managers hold negative assumptions about people and behave accordingly.
19. Contingency thinking takes an “if–then” approach to situations. It seeks to modify or adapt management approaches to fi t the needs
of each situation. An example would be to give more customer contact responsibility to workers who want to satisfy social needs at
work, while giving more supervisory responsibilities to those who want to satisfy their esteem or ego needs.
Integration & Application 20. A bureaucracy operates with a strict hierarchy of authority, promotion based on competency and performance, formal rules and
procedures, and written documentation. Enrique can do all of these things in his store. However, he must be careful to meet the needs of
the workers and not to make the mistake identifi ed by Argyris—failing to treat them as mature adults. While remaining well organized,
the store manager has room to help workers meet higher order esteem and self-fulfi llment needs, as well as to exercise autonomy under
Th eory Y assumptions. Enrique must also be alert to the dysfunctions of bureaucracy that appear when changes are needed or when
unique problems are posed or when customers want to be treated personally. Th e demands of these situations are diffi cult for traditional
bureaucracies to handle, due to the fact that they are set up to handle routine work effi ciently and impersonally, with an emphasis on
rules, procedures, and authority.
Test Prep 3
Multiple Choice 1. a. 2. c. 3. d. 4. a. 5. c. 6. b. 7. c. 8. b. 9. a. 10. a. 11. b. 12. b. 13. d.
14. c. 15. d.
Short Response 16. Distributive justice means that everyone is treated the same, that there is no discrimination based on things like age, gender, and sexual
orientation. An example would be a man and a woman who both apply for the same job. A manager violates distributive justice if he
interviews only the man and not the woman as well, or vice versa. Procedural justice means that rules and procedures are fairly followed.
For example, a manager violates distributive justice if he or she punishes one person for coming to work late while ignoring late behavior
by another person with whom he or she regularly plays golf.
17. Th e “spotlight questions” for double-checking the ethics of a decision are: “How would I feel if my family fi nds out?” “How would I
feel if this were published in the local newspaper or on the Internet?” “What would the person you know or know of who has the
strongest character and best ethical judgment do in this situation?”
18. Th e rationalizations include believing that (1) the behavior is not really illegal, (2) the behavior is really in everyone’s best interests,
(3) no one will fi nd out, and (4) the organization will protect you.
19. Th e ”virtuous circle” concept of social responsibility holds that social responsibility practices do not hurt the bottom line and often help it;
when socially responsible actions result in improved fi nancial performance, this encourages more of the same actions in the future—a
virtuous circle being created.
Integration & Application 20. If the manager adopts a position of cultural relativism, there will be no perceived problem in working with the Tanzanian fi rm. Th e
justifi cation would be that as long as it is operating legally in Tanzania, that makes everything okay. Th e absolutist position would
hold that the contract should not be taken because the factory conditions are unacceptable at home and therefore are unacceptable
anywhere. Th e cultural relativism position can be criticized because it makes it easy to do business in places where people are not
treated well; the absolutist position can be criticized as trying to impose one’s values on people in a diff erent cultural context.
Test Prep 4
Multiple Choice 1. b. 2. c. 3. a. 4. c. 5. d. 6. a. 7. b. 8. c. 9. c. 10. c. 11. a. 12. a. 13. b.
14. d. 15. b.
Short Response 16. An optimizing decision represents the absolute “best” choice of alternatives. It is selected from a set of all known alternatives. A
satisfi cing decision selects the fi rst alternative that off ers a “satisfactory” choice, not necessarily the absolute best choice. It is
selected from a limited or incomplete set of alternatives.
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17. A risk environment is one in which things are not known for sure—all of the possible decision alternatives, all of the possible consequences
for each alternative—but they can be estimated as probabilities. For example, if I take a new job with a new employer, I can’t know for
certain that it will turn out as I expect, but I could be 80% sure that I’d like the new responsibilities, or only 60% sure that I might get
promoted within a year. In an uncertain environment, things are so speculative that it is hard to even assign such probabilities.
18. A manager using systematic thinking is going to approach problem solving in a logical and rational fashion. Th e tendency will be
to proceed in a linear step-by-step manner, handling one issue at a time. A manager using intuitive thinking will be more
spontaneous and open in problem solving. He or she may jump from one stage in the process to the other and deal with many
diff erent things at once.
19. Escalating commitment is the tendency of people to keep investing in a previously chosen course of action, continuing to pursue it,
even though it is not working. Th is is a human tendency to try and make things work by trying harder, investing more time, eff ort,
resources, etc. In other words, I have decided in the past to pursue this major in college; I can’t be wrong, can I? Th e feedback from
my grades and course satisfaction suggests it isn’t working, but I’m doing it now so I just need to make it work, right? I’ll just stick
with it and see if things eventually turn out okay. In this example, I am making a decision to continue with the major that is most
likely an example of escalating commitment.
Integration & Application 20. Th is is what I would say. On the question of whether a group decision is best or an individual decision is best, the appropriate answer
is probably: It all depends on the situation. Sometimes one is preferable to the other; each has its potential advantages and disadvan-
tages. If you are in a situation where the problem being addressed is unclear, the information needed to solve it is uncertain, and you
don’t have a lot of personal expertise, the group approach to decision making is probably best. Group decisions off er advantages like
bringing more information and ideas to bear on a problem; they often allow for more creativity; and they tend to build commitments
among participants to work hard to implement any decisions reached. On the other hand, groups can be dominated by one or more
members, and they can take a lot of time making decisions. Th us, when time is short, the individual decision is sometimes a better
choice. However, it is important that you, as this individual, are confi dent that you have the information needed to solve the problem
or can get it before making your decision.
Test Prep 5
Multiple Choice 1. d. 2. a. 3. b. 4. b. 5. d. 6. c. 7. a. 8. d. 9. b. 10. a. 11. c. 12. b. 13. d.
14. b. 15. c.
Short Response 16. Th e fi ve steps in the formal planning process are (1) defi ne your objectives, (2) determine where you stand relative to objectives, (3)
develop premises about future conditions, (4) identify and choose among action alternatives to accomplish objectives, and (5)
implement action plans and evaluate results.
17. Planning facilitates controlling because the planning process sets the objectives and standards that become the basis for the control
process. If you don’t have objectives and standards, you have nothing to compare actual performance with; consequently, control lacks
purpose and specifi city.
18. Contingency planning essentially makes available optional plans that can be quickly implemented if things go wrong with the
original plan. Scenario planning is a longer-term form of contingency planning that tries to project several future scenarios that
might develop over time and to associate each scenario with plans for best dealing with it.
19. Participation is good for the planning process, in part because it brings to the process a lot more information, diverse viewpoints,
and potential alternatives than would otherwise be available if just one person or a select group of top managers are doing the
planning. Furthermore and very importantly, through participation in the planning process, people develop an understanding of the
fi nal plans and the logic used to arrive at them, and they develop personal commitments to trying to follow through and work hard
to make implementation of the plans successful.
Integration & Application 20. Benchmarking is the use of external standards to help evaluate one’s own situation and develop ideas and directions for improve-
ment. Curt and Rich are both right to a certain extent about its potential value for them. Rich is right in suggesting that there is
much to learn by looking at what other bookstores are doing really well. Th e bookstore owner/manager might visit other bookstores
in other towns that are known for their success. By observing and studying the operations of those stores and then comparing his
store to them, the owner/manager can develop plans for future action. Curt is also right in suggesting that there is much to be
learned potentially from looking outside the bookstore business. Th ey should look at things like inventory management, customer
service, and facilities in other settings—not just bookstores; they should also look outside their town as well as within it.
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Test Prep 6
Multiple Choice 1. a. 2. a. 3. d. 4. b. 5. b. 6. c. 7. c. 8. d. 9. a. 10. b. 11. c. 12. a. 13. b.
14. a. 15. c.
Short Response 16. Th e Army’s “after-action review” takes place after an action or activity has been completed. Th is makes it a form of “feedback”
control. Th e primary purpose is to critique the action/activity and try to learn from it so that similar things in the future can be done
better and so that the people involved can be best trained.
17. One way to use clan control in a TQM context would be to set up small teams or task forces called “Quality Circles” that bring
together persons from various parts of the work place with a common commitment to quality improvements. You can ask these
teams or QCs to meet regularly to discuss quality results and options, and to try and maintain a continuous improvement momen-
tum in their work areas. Th e members should ideally get special quality training. Th ey should also be expected to actively serve as
quality champions in their own work areas to implement continuous quality improvements and come up with ideas for new ones.
18. Th e just-in-time inventory approach reduces the carrying costs of inventories. It does this by trying to have materials arrive at a work
station just in time to be used. When this concept works perfectly, there are no inventory carrying costs. However, even if it is
imperfect and some inventory ends up being stockpiled, it should still be less than that which would otherwise be the case. But as
the recent tsunami and nuclear disaster in Japan showed, fi rms that are too reliant on JIT in their supply chains must prepare for the
risk of disruptions when crises and natural disasters occur.
19. Th e four questions to ask when developing a balanced scorecard are: (1) Financial Performance—To improve fi nancially, how
should we appear to our shareholders? (2) Customer Satisfaction—To achieve our vision, how should we appear to our customers?
(3) Internal Process Improvement—To satisfy our customers and shareholders, at what internal business processes should we excel?
(4) Innovation and Learning—To achieve our vision, how will we sustain our ability to change and improve?
Integration & Application 20. I would begin the speech by describing MBO as an integrated planning and control approach. I would also clarify that the key
elements in MBO are objectives and participation. Any objectives should be clear, measurable, and time defi ned. In addition, these
objectives should be set with the full involvement and participation of the employees; they should not be set by the manager and then
told to the employees. Given this, I would describe how each business manager should jointly set objectives with each of his or her
employees and jointly review progress toward their accomplishment. I would suggest that the employees should work on the required
activities while staying in communication with their managers. Th e managers, in turn, should provide any needed support or
assistance to their employees. Th is whole process could be formally recycled at least twice per year.
Test Prep 7
Multiple Choice 1. a. 2. b. 3. b. 4. c. 5. a. 6. b. 7. c. 8. a. 9. c. 10. d. 11. d. 12. c. 13. a.
14. b. 15. b.
Short Response 16. A corporate strategy sets long-term direction for an enterprise as a whole. Functional strategies set directions so that business
functions such as marketing and manufacturing support the overall corporate strategy. A corporate strategy sets long-term direction
for an enterprise as a whole. Functional strategies set directions so that business functions such as marketing and manufacturing
support the overall corporate strategy.
17. If you want to sell at lower prices than competitors and still make a profi t, you have to have lower operating costs (profi t � revenues � costs). Also, you have to be able to operate at lower costs in ways that are hard for your competitors to copy. Th is is the point of a cost leadership strategy—always seeking ways to lower costs and operate with greater effi ciency than anyone else.
18. A question mark in the BCG matrix has a low market share in a high growth industry. Th is means that there is a lot of upside
potential, but for now it is uncertain whether or not you will be able to capitalize on it. Th us, hard thinking is required. If you are
confi dent, the recommended strategy is growth; if you aren’t, it would be retrenchment, to allow resources to be deployed into more
promising opportunities.
19. Strategic leadership is the ability to enthuse people to participate in continuous change, performance enhancement, and the
implementation of organizational strategies. Th e special qualities of the successful strategic leader include the ability to make
tradeoff s, create a sense of urgency, communicate the strategy, and engage others in continuous learning about the strategy and its
performance responsibilities.
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Integration & Application 20. A SWOT analysis is useful during strategic planning. It involves the analysis of organizational strengths and weaknesses, and of
environmental opportunities and threats. Such a SWOT analysis in this case would help frame Kim’s thinking about the current and
future positioning of her store, particularly in respect to possible core competencies and competitive opportunities and threats. Th en
she can use Porter’s competitive strategy model for further strategic refi nements. Th is involves the possible use of three alternative
strategies: diff erentiation, cost leadership, and focus. In this situation, the larger department store seems better positioned to follow
the cost leadership strategy. Th is means that Kim may want to consider the other two alternatives. A diff erentiation strategy would
involve trying to distinguish Kim’s products from those of the larger store. Th is might involve a “made in America” theme or an
emphasis on leather or canvas or some other type of clothing material. A focus strategy might specifi cally target college students and
try to respond to their tastes and needs rather than those of the larger community population. Th is might involve special orders and
other types of individualized service for the college student market.
Test Prep 8
Multiple Choice 1. b. 2. c. 3. b. 4. a. 5. b. 6. c. 7. b. 8. a. 9. c. 10. b. 11. c. 12. b. 13. c.
14. b. 15. c.
Short Response 16. An organization chart depicts the formal structure of the organization. Th is is the offi cial picture of the way things are supposed
to be. However, the likelihood is that an organization chart quickly becomes out of date in today’s dynamic environments. So one
issue is whether or not the chart one is viewing actually depicts the current offi cial structure. Second, there is a lot more to the
way things work in organizations than what is shown in the organization chart. People are involved in a variety of informal
networks that create an informal structure. It operates as a shadow lying above or behind the formal structure and also infl uences
operations. Both the formal structure and informal structure must be understood; at best, an organization chart helps with
understanding the formal one.
17. Th ere are two major ways that informal structures can be good for organizations. First, they can help get work done effi ciently and
well. When people know one another in informal relationships, they can and often do use these relationships as part of their jobs.
Sometimes an informal contact makes it a lot easier to get something done or learn how to do something than the formal linkages
displayed on an organization chart. Second, being part of informal groups is an important source of potential need satisfaction.
Being in an informal network or group can satisfy needs in ways that one’s job can’t sometimes and can add considerably to the
potential satisfactions of the work experience.
18. Th e matrix structure is organized in a traditional functional fashion in the vertical dimension. For example, a business might
have marketing, human resources, fi nance, and manufacturing functions. On the horizontal dimension, however, it is organized
divisionally in a product or project fashion, with a manager heading up each special product or project. Members from the
functional departments are assigned to permanent cross-functional teams for each product or project. Th ey report vertically to
their functional bosses and horizontally to their product/project bosses. Th is two-boss system is the heart of the matrix
organization.
19. An organic design tends to be quicker and more fl exible because it is very strong in lateral communication and empowerment.
People at all levels are talking to one another and interacting as they gather and process information and solve problems. Th ey
don’t wait for the vertical structure and “bosses” to do these things for them. Th is means that as the environment changes they are
more likely to be on top of things quickly. It also means that when problems are complex and diffi cult to solve, they will work with
multiple people in various parts of the organization to best deal with them.
Integration & Application 20. A network structure often involves one organization “contracting out” aspects of its operations to other organizations that specialize
in them. Th e example used in the text was of a company that contracted out its mailroom services. Th rough the formation of
networks of contracts, the organization is reduced to a core of essential employees whose expertise is concentrated in the primary
business areas. Th e contracts are monitored and maintained in the network to allow the overall operations of the organization to
continue even though they are not directly accomplished by full-time employees. Th ere are many possibilities for doing something
similar in a university. In one model, the core staff would be the faculty. Th ey would be supported by a few administrators who
managed contracts with outsourcing fi rms for things such as facilities maintenance, mail, technology support, lawns maintenance,
food services, housing services, and even things like development, registrar, and student aff airs. Another model would have the
administrators forming a small core staff who contract out for the above and, in addition, for faculty who would be hired “as needed”
and on contracts for specifi c assignments.
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Test Prep 9
Multiple Choice 1. a. 2. c. 3. d. 4. b. 5. b. 6. c. 7. a. 8. c. 9. c. 10. b. 11. d. 12. c. 13. c.
14. b. 15. b.
Short Response 16. Th e core values that might be found in high-performance organizational cultures include such things as emphasize performance
excellence, innovation, social responsibility, integrity, worker involvement, customer service, and teamwork.
17. First, process innovations result in better ways of doing things. Second, product innovations result in the creation of new or
improved goods and services. Th ird, business model innovations result in new ways of making money for the fi rm.
18. Lewin’s three phases of planned change are unfreezing, changing, and refreezing. In terms of the change leadership challenges, the
major diff erences in attention would be as follows: unfreezing—preparing a system for change; changing—moving or creating
change in a system; and refreezing—stabilizing and reinforcing change once it has occurred.
19. In general, managers can expect that others will be more committed and loyal to changes that are brought about through shared
power strategies. Rational persuasion strategies can also create enduring eff ects if they are accepted. Force-coercion strategies tend
to have temporary eff ects only.
Integration & Application 20. In any change situation, it is important to remember that successful planned change occurs only when all three phases of change—
unfreezing, changing, and refreezing—have been taken care of. Th us, I would not rush into the changing phase. Rather, I would work
with the people involved to develop a felt need for change based on their ideas and inputs as well as mine. Th en I would proceed by
supporting the changes and helping to stabilize them into everyday routines. I would also be sensitive to any resistance and respect
that resistance as a signal that something important is being threatened. By listening to resistance, I would be in a position to better
modify the change to achieve a better fi t with the people and the situation. Finally, I would want to take maximum advantage of the
shared power strategy, supported by rational persuasion, and with limited use of force-coercion (if it is used at all). By doing all of
this, I would like my staff to feel empowered and committed to constructive improvement through planned change. Th roughout all
of this I would strive to perform to the best of my ability and gain trust and credibility with everyone else; in this way I would be a
positive role model for change.
Test Prep 10
Multiple Choice 1. a. 2. b. 3. c. 4. b. 5. b. 6. b. 7. a. 8. d. 9. b. 10. a. 11. d. 12. d. 13. a.
14. a. 15. b.
Short Response 16. Orientation activities introduce a new employee to the organization and the work environment. Th is is a time when the individ-
ual may develop key attitudes and when performance expectations will also be established. Good orientation communicates
positive attitudes and expectations and reinforces the desired organizational culture. It formally introduces the individual to
important policies and procedures that everyone is expected to follow.
17. Mentoring is when a senior and experienced individual adopts a newcomer or more junior person with the goal of helping him or
her develop into a successful worker. Th e mentor may or may not be the individual’s immediate supervisor. Th e mentor meets with
the individual and discusses problems, shares advice, and generally supports the individual’s attempts to grow and perform. Mentors
are considered very useful for persons newly appointed to management positions.
18. Any performance assessment approach should be both valid and reliable. To be valid it must measure accurately what it claims to
measure—whether that is some aspect of job performance or personal behavior. To be reliable it must deliver the same results
consistently—whether applied by diff erent raters to the same person or when measuring the same person over time. Valid and
reliable assessments are free from bias and as objective as possible.
19. Th e graphic rating scale simply asks a supervisor to rate an employee on an established set of criteria, such as quantity of work or
attitude toward work. Th is leaves much room for subjectivity and debate. Th e behaviorally anchored rating scale asks the supervisor
to rate the employee on specifi c behaviors that had been identifi ed as positively or negatively aff ecting performance in a given job.
Th is is a more specifi c appraisal approach and leaves less room for debate and disagreement.
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Integration & Application 20. As Sy’s supervisor, you face a diffi cult but perhaps expected human resource management problem. Not only is Sy infl uential as an
informal leader, he also has considerable experience on the job and in the company. Even though he is experiencing performance
problems using the new computer system, there is no indication that he doesn’t want to work hard and continue to perform for the
company. Although retirement is an option, Sy may also be transferred, promoted, or simply terminated. Th e latter response seems
unjustifi ed and may cause legal problems. Transferring Sy, with his agreement, to another position could be a positive move;
promoting Sy to a supervisory position in which his experience and networks would be useful is another possibility. Th e key in this
situation seems to be moving Sy out so that a computer-literate person can take over the job, while continuing to utilize Sy in a job
that better fi ts his talents. Transfer and/or promotion should be actively considered both in his and in the company’s best interests.
Test Prep 11
Multiple Choice 1. b. 2. b. 3. a. 4. d. 5. a. 6. c. 7. c. 8. a. 9. a. 10. b. 11. d. 12. d. 13. a.
14. d. 15. a.
Short Response 16. Position power is based on reward, coercion or punishment, and legitimacy or formal authority. Managers, however, need to have
more power than that made available to them by the position alone. Th us, they have to develop personal power through expertise
and reference. Th is personal power is essential in helping managers get things done beyond the scope of their position power alone.
17. Leadership situations are described by Fiedler according to: Position power—how much power the leader has in terms of rewards,
punishments, and legitimacy; leader-member relations—the quality of relationships between the leader and followers; task structure—
the degree to which the task is clear and well defi ned, or open ended and more ambiguous. Highly favorable situations are high in
position power, have good leader-member relations, and have structured tasks; highly unfavorable situations are low in position power,
have poor leader-member relations, and have unstructured tasks.
18. According to House’s path-goal theory, the following combinations are consistent with successful leadership. Participative
leadership works well, for example, when performance incentives are low and people need to fi nd other sources of need satisfac-
tion. Th rough participation the leader gains knowledge that can help identify important needs and possible ways of satisfying
them other than through the available performance incentives. Directive leadership works well, for example, when people aren’t
clear about their jobs or goals. In these cases the leader can step in and provide direction that channels their eff orts toward
desired activities and outcomes.
19. Servant leadership is basically other-centered and not self-centered. A servant leader is concerned with helping others to perform well so
that the organization or group can ultimately do good things for society. Th e person who accepts the responsibilities of servant leadership
is good at empowering others so that they can use their talents while acting independently to do their jobs in the best possible ways.
Integration & Application 20. In his new position, Marcel must understand that the transactional aspects of leadership are not suffi cient enough to guarantee him
long-term leadership eff ectiveness. He must move beyond the eff ective use of task-oriented and people-oriented behaviors—the
“transactional” side of leadership, and demonstrate through his behavior and personal qualities the capacity to inspire others and
lead with moral integrity—the “transformational” side. A transformational leader develops a unique relationship with followers in
which they become enthusiastic, highly loyal, and high achievers. Marcel needs to work very hard to develop positive relationships
with the team members. But he must add to this a moral and ethical dimension. He must emphasize in those relationships high
aspirations for performance accomplishments, enthusiasm, ethical behavior, integrity and honesty in all dealings, and a clear vision
of the future. By working hard with this agenda and by allowing his personality to positively express itself in the team setting, Marcel
should make continuous progress as an eff ective and moral leader.
Test Prep 12
Multiple Choice 1. c. 2. d. 3. b. 4. a. 5. d. 6. a. 7. b. 8. a. 9. b. 10. a. 11. b. 12. d. 13. d.
14. d. 15. c.
Short Response 16. All of the Big Five personality traits are relevant to the workplace. To give some basic examples, consider the following. Extroversion
suggests whether or not a person will reach out to relate and work well with others. Agreeableness suggests whether or not a person is
open to the ideas of others and willing to go along with group decisions. Conscientiousness suggests whether someone can be depended
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on to meet commitments and perform agreed-upon tasks. Emotional stability suggests whether or not someone will be relaxed and
secure, or uptight and tense, in work situations. Openness suggests whether someone will be open to new ideas or resistant to change.
17. Th e Type A personality is characteristic of people who bring stress on themselves by virtue of personal characteristics. Th ese tend to
be compulsive individuals who are uncomfortable waiting for things to happen, who try to do many things at once, and who generally
move fast and have diffi culty slowing down. Type A personalities can be stressful for both the individuals and the people around them.
Managers must be aware of Type A personality tendencies in their own behavior and among others with whom they work. Ideally, this
awareness will help the manager take precautionary steps to best manage the stress caused by this personality type.
18. Th e halo eff ect occurs when a single attribute of a person, such as the way he or she dresses, is used to evaluate or form an overall
impression of the person. Selective perception occurs when someone focuses in a situation on those aspects that reinforce or are
most consistent with his or her existing values, beliefs, or experiences.
19. Job satisfaction is an attitude that refl ects how people feel about their jobs, work settings, and the people with whom they work. A
typical job satisfaction survey might ask people to respond to questions about their pay, co-worker relationships, quality of supervi-
sor, nature of the work setting, and the type of work they are asked to do. Th ese questions might be framed with a scale ranging from
“very satisfi ed” to “not satisfi ed at all” for each question or job satisfaction dimension.
Integration & Application 20. Scott needs to be careful. Although there is modest research support for the relationship between job satisfaction and performance,
there is no guarantee that simply doing things to make people happier at work will cause them to be higher performers. Scott needs to
take a broader perspective on this issue and his responsibilities as a manager. He should be interested in job satisfaction for his
therapists and do everything he can to help them to experience it. But he should also be performance oriented and understand that
performance is achieved through a combination of skills, support, and motivation. He should be helping the therapists to achieve and
maintain high levels of job competency. He should also work with them to fi nd out what obstacles they are facing and what support
they need—things that perhaps he can deal with in their behalf. All of this relates as well to research indications that performance can
be a source of job satisfaction. And fi nally, Scott should make sure that the therapists believe they are being properly rewarded for
their work since rewards are shown by research to have an infl uence on both job satisfaction and job performance.
Test Prep 13
Multiple Choice 1. b. 2. c. 3. d. 4. d. 5. b. 6. a. 7. b. 8. b. 9. a. 10. d. 11. a. 12. c. 13. c.
14. a. 15. a.
Short Response 16. People high in need for achievement will prefer work settings and jobs in which they have (1) challenging but achievable goals,
(2) individual responsibility, and (3) performance feedback.
17. One way for a team leader to use goal-setting principles in working with team members is to engage them in a process of joint
goal-setting and performance review. In an earlier chapter on planning and controlling, this type of approach was described as
“management by objectives.” It is really a good application of goal-setting theory. Participation of both team leader and team
member in goal setting off ers an opportunity to choose goals to which the member will respond and which also will serve the team
and organization as a whole. Furthermore, through goal setting, the team leader and team member can identify performance
standards or targets. Progress toward these targets can be positively reinforced by the team leader. Th is type of approach harnesses
the power of goal-setting theory by putting the team leader and team member together in a process where specifi c, challenging, and
measureable goals can be set, and the team member can feel that he or she has helped set them.
18. When perceived inequity exists an individual might (1) quit the job, (2) speak with the boss to try and increase rewards to the point
where the inequity no longer exists, or (3) decide to reduce eff ort to the level that seems consistent with the rewards being received.
19. Shaping encourages the formation of desirable work behaviors by rewarding successive approximations to those behaviors. In this
sense, the behavior doesn’t have to be perfect to be rewarded—it just has to be moving in the right direction. Over time and with a
change of reinforcement scheduling from continuous to intermittent, such rewards can end up drawing forth the desired behavior.
Integration & Application 20. Th e use of Muzak would be considered improvement in a hygiene factor under Herzberg’s two-factor theory. Th us it would not be a
source of greater work motivation and performance. Herzberg suggests that job content factors are the satisfi ers or motivators.
Based in the job itself, they represent such things as responsibility, sense of achievement, and feelings of growth. Job context factors
are considered sources of dissatisfaction. Th ey are found in the job environment and include such things as base pay, technical
quality of supervision, and working conditions. Whereas improvements in job context such as introduction of Muzak make people
less dissatisfi ed, improvements in job content are considered necessary to motivate them to high-performance levels.
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Test Prep 14
Multiple Choice 1. d. 2. a. 3. b. 4. d. 5. b. 6. a. 7. c. 8. b. 9. a. 10. a. 11. a. 12. b. 13. d.
14. c. 15. d.
Short Response 16. In a task force, members are brought together to work on a specifi c assignment. Th e task force usually disbands when the assign-
ment is fi nished. In an employee involvement group, perhaps a quality circle, members are brought together to work on an issue or
task over time. Th ey meet regularly and always deal with the same issue/task. In a self-managing team, the members of a formal
work group provide self-direction. Th ey plan, organize, and evaluate their work, share tasks, and help one another develop skills;
they may even make hiring decisions. A true self-managing team does not need the traditional “boss” or supervisor, since the team
as a whole takes on the supervisory responsibilities.
17. Input factors can have a major impact on group eff ectiveness. In order to best prepare a group to perform eff ectively, a manager
should make sure that the right people are put in the group (maximize available talents and abilities), that these people are capable
of working well together (membership characteristics should promote good relationships), that the tasks are clear, and that the
group has the resources and environment needed to perform up to expectations.
18. A group’s performance can be analyzed according to the interaction between cohesiveness and performance norms. In a highly
cohesive group, members tend to conform to group norms. Th us, when the performance norm is positive and cohesion is high, we
can expect everyone to work hard to support the norm—high performance is likely. By the same token, high cohesion and a low
performance norm will act similarly—low performance is likely. With other combinations of norms and cohesion, the performance
results will be more mixed.
19. Th e book lists several symptoms of groupthink along with various strategies for avoiding groupthink. For example, a group whose
members censure themselves to refrain from contributing “contrary” or “diff erent” opinions and/or whose members keep talking
about outsiders as “weak” or the “enemy” may be suff ering from groupthink. Th is may be avoided or corrected, for example, by
asking someone to be the “devil’s advocate” for a meeting and by inviting in an outside observer to help gather diff erent viewpoints.
Integration & Application 20. Mariel is faced with a highly cohesive group whose members conform to a negative or low-performance norm. Th is is a diffi cult
situation that is ideally resolved by changing the performance norm. In order to gain the group’s commitment to a high-performance
norm, Mariel should act as a positive role model for the norm. She must communicate the norm clearly and positively to the group.
She should not assume that everyone knows what she expects of them. She may also talk to the informal leader and gain his or her
commitment to the norm. She might carefully reward high-performance behaviors within the group. She may introduce new
members with high-performance records and commitments. And she might hold group meetings in which performance standards
and expectations are discussed, with an emphasis on committing to new high-performance directions. If attempts to introduce a
high-performance norm fail, Mariel may have to take steps to reduce group cohesiveness so that individual members can pursue
higher-performance results without feeling bound by group pressures to restrict their performance.
Test Prep 15
Multiple Choice 1. a. 2. c. 3. d. 4. d. 5. a. 6. c. 7. d. 8. c. 9. b. 10. c. 11. c. 12. a. 13. b.
14. a. 15. b.
Short Response 16. Th e manager’s goal in active listening is to help the subordinate say what he or she really means. To do this, the manager should
carefully listen for the content of what someone is saying, paraphrase or refl ect back what the person appears to be saying, remain
sensitive to nonverbal cues and feelings, and not be evaluative.
17. Well-intentioned managers can make bad decisions when they base decisions on bad information. Because of the manager’s position
of authority in the organization, those below him or her may be reluctant to communicate upward information that they believe the
manager doesn’t want to hear. Th us, they may fi lter the information to make it as agreeable to the manager as possible. As a result of
this fi ltering of upward communication, the manager may end up with poor or incomplete information and subsequently make bad
decisions.
18. Th e four major errors in giving constructive feedback would be (1) being general rather than specifi c, (2) choosing a poor time, (3)
including in the message irrelevant things, and (4) overwhelming the receiver with too much information at once.
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19. Ethnocentrism is when a person views his or her own culture as superior to others. It can interfere with cross-cultural
communication when the ethnocentrism leads the person to ignore cultural signals that indicate his or her behavior is
inappropriate or offensive by local cultural standards. With the ethnocentric attitude of cultural superiority, the individual is
inclined not to change personal ways or display the sensitivity to local cultural ways that are necessary to effective
communication.
Integration & Application 20. Glenn can do a number of things to establish and maintain a system of communication with his employees and for his department
store branch. To begin, he should, as much as possible, try to establish a highly interactive style of management based upon
credibility and trust. Credibility is earned through building personal power through expertise and reference. With credibility, he
might set the tone for the department managers by using MBWA—“managing by wandering around.” Once this pattern is estab-
lished, trust will build between him and other store employees, and he should fi nd that he learns a lot from interacting directly with
them. Harold should also set up a formal communication structure, such as bimonthly store meetings, where he communicates store
goals, results, and other issues to the staff , and in which he listens to them in return. An e-mail system whereby Glenn and his staff
could send messages to one another from their workstation computers would also be benefi cial.
Test Prep 16
Multiple Choice 1. c. 2. a. 3. b. 4. b. 5. b. 6. d. 7. a. 8. a. 9. d. 10. a. 11. d. 12. d. 13. c.
14. c. 15. b.
Short Response 16. An approach of valuing diversity shows through leadership a commitment to helping people understand their diff erences, often
through education and training programs. An approach of managing diversity, according to Roosevelt Th omas, is a step beyond in
that it is where the leadership commits to changing the culture of the organization to empower everyone and create a fully inclusive
environment where human resources are respected and fully utilized.
17. Th ere are numbers of subcultures that form in organizations and can become the source of perceived diff erences as people work
with one another across subculture boundaries. Examples of common organizational subcultures include those based on age,
gender, profession, and work function. If younger workers stereotype older workers as uncreative and less ambitious, a team
consisting of an age mix of members might experience some diffi culties. Th is illustrates an example of problems among generational
subcultures.
18. Th e anthropologist Edward Hall identifi ed communication context, time, and space as silent languages of culture. High-context
cultures rely on nonverbal and situational cues as well as the spoken word to convey messages, whereas low-context cultures are
more focused on what is being said. An American business person might press an Indonesian client to sign a contract immediately,
whereas the body language of the client might say she doesn’t want to, even though she is off ering a reluctant “okay” in their conversa-
tion. Monochromic cultures deal with time in a linear fashion while polychromic cultures view it as more non-linear and dynamic.
Whereas the American schedules time, saves time, and tries to meet time deadlines (monochromic behavior), a Mexican might be less
concerned about time budgeting like this and more likely to act fl exibly in terms of time schedules and engagements. Proxemics
involves the use of space in communication. If you observe Americans in conversation there is likely to be a modest amount of distance
maintained between speakers. But in Italy the conversation is likely to take place in much closer face-to-face conditions, and this
would likely make the American a bit uncomfortable.
19. Organizations are power structures, and the way people view and respond to power diff erences in organizations can be very
signifi cant in how they operate. In a national culture where power distance is high, there would be a tendency in organizations to
respect persons of authority—perhaps defer to them, use job titles and formal greetings, and refrain from challenging their views in
public meetings. In a low or moderate power distance culture, by contrast, there might be more informality in using fi rst names
without job titles and being more casual in relationships and even in public disagreements with views expressed by senior people.
Integration & Application 20. Th e friend must recognize that the cultural diff erences between the United States and Japan may aff ect the success of group-oriented
work practices such as quality circles and work teams. Th e United States was the most individualistic culture in Hofstede’s study of
national cultures; Japan is much more collectivist. Group practices such as the quality circle and teams are natural and consistent
with the Japanese culture. When introduced into a more individualistic culture, these same practices might cause diffi culties or
require some time for workers to get used to. At the very least, the friend should proceed with caution, discuss ideas for the new
practices with the workers before making any changes, and then monitor the changes closely so that adjustments can be made to
improve them as the workers gain familiarity with them and have suggestions of their own.
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Test Prep 17
Multiple Choice 1. c. 2. d. 3. d. 4. b. 5. b. 6. a. 7. c. 8. d. 9. d. 10. b. 11. b. 12. c. 13. b.
14. c. 15. a.
Short Response 16. In a joint venture the foreign corporation and the local corporation each own a portion of the fi rm—e.g., 75% and 25%. In a wholly
owned subsidiary the foreign fi rm owns the local subsidiary in its entirety.
17. Th e relationship between an MNC and a host country should be mutually benefi cial. Sometimes, however, host countries complain
that MNCs take unfair advantage of them and do not include them in the benefi ts of their international operations. Th e complaints
against MNCs include taking excessive profi ts out of the host country, hiring the best local labor, not respecting local laws and
customs, and dominating the local economy. Engaging in corrupt practices is another important concern.
18. If a Senator says she favors “protectionism” in international trade, it basically means that she wants to make sure that domestic
American fi rms are protected against foreign competitors. In other words, she doesn’t want foreign companies coming into America
and destroying through competition the local fi rms. Th us, she wants to protect them in some ways such as imposing import tariff s
on the foreign fi rms’ products or imposing legal restrictions on them setting up businesses in America.
19. Currency risk in international business involves the rise and fall of currencies in relationship with one another. For an American
company operating in Japan, currency risk involves the value of the dollar vis-à-vis the yen. When the dollar falls relative to the yen
(requiring more of them to buy 1 yen), it means that buying products and making investments in Japan will be more costly; the “risk”
of this eventuality needs to be planned for when business relationships are entered in foreign countries. Political risk is the potential
loss in one’s investments in foreign countries due to wars or political changes that might threaten the assets. An example would be a
Socialist government coming into power and deciding to “nationalize” or take over ownership of all foreign companies.
Integration & Application 20. Th is issue of MNC vs. transnational is growing in importance. When a large global company such as Ford or IBM is strongly associ-
ated with a national identity, the fi rm might face risk in international business when foreign consumers or governments are angry at
the fi rm’s home country; they might stop buying its products or make it hard for them to operate. When the MNC has a strong
national identity, its home constituents might express anger and create problems when the fi rm makes investments in creating jobs
in other countries. Also, when the leadership of the MNC views itself as having one national home, it might have a more limited and
even ethnocentric approach to international operations. When a fi rm operates as a transnational, by contrast, it becomes a global
citizen and, theoretically at least, is freed from some potential problems identifi ed here. Because a transnational views the world as
its home, furthermore, its workforce and leadership are more likely to be globally diverse and have broad international perspectives
on the company and its opportunities.
Test Prep 18
Multiple Choice 1. a. 2. c. 3. d. 4. b. 5. b. 6. a. 7. a. 8. b. 9. a. 10. c. 11. c. 12. a. 13. d.
14. b. 15. d.
Short Response 16. Entrepreneurship is rich with diversity. It is an avenue for business entry and career success that is pursued by many women and
members of minority groups. Data show almost 40% of U.S. businesses are owned by women. Many report leaving other employment
because they had limited opportunities. For them, entrepreneurship made available the opportunities for career success that they
lacked. Minority-owned businesses are one of the fastest-growing sectors, with the growth rates highest for Hispanic-owned, Asian-
owned, and African American-owned businesses in that order.
17. Th e three stages in the life cycle of an entrepreneurial fi rm are birth, breakthrough, and maturity. In the birth stage, the leader is
challenged to get customers, establish a market, and fi nd the money needed to keep the business going. In the breakthrough stage,
the challenges shift to becoming and staying profi table and managing growth. In the maturity stage, a leader is more focused on
revising/maintaining a good business strategy and more generally managing the fi rm for continued success and possibly more future
growth.
18. Th e limited partnership form of small business ownership consists of a general partner and one or more “limited partners.” Th e
general partner(s) play an active role in managing and operating the business; the limited partners do not. All contribute resources
of some value to the partnership for the conduct of the business. Th e advantage of any partnership form is that the partners may
share in profi ts, but their potential for losses is limited by the size of their original investments.
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19. A venture capitalist is an individual or group of individuals that invests money in new start-up companies and gets a portion of
ownership in return. Th e goal is to sell their ownership stakes in the future for a profi t. An angel investor is a type of venture
capitalist, but on a smaller and individual scale. Th is is a person who invests in a new venture, taking a share of ownership, and also
hoping to gain profi t through a future sale of the ownership.
Integration & Application 20. Th e friend is right—it takes much forethought and planning to prepare the launch of a new business venture. In response to the
question of how to ensure that you are really being customer-focused in the new start-up, I would ask and answer the following
questions to frame my business model with a strong customer orientation. “Who are my potential customers? What market niche
am I shooting for? What do the customers in this market really want? How do these customers make purchase decisions? How much
will it cost to produce and distribute my product/service to these customers? How much will it cost to attract and retain custom-
ers?” Following an overall executive summary, which includes a commitment to this customer orientation, I would address the
following areas in writing up my initial business plan. Th e plan would address such areas as company description—mission, owners,
and legal form—as well as an industry analysis, product and services description, marketing description and strategy, staffi ng model,
fi nancial projections with cash fl ows, and capital needs.
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3 Ps of organizational performance Th e 3 Ps of organizational performance
are profi t, people, and planet.
360� feedback 360� feedback includes superiors, subordinates, peers, and
even customers in the appraisal process.
A accommodation Accommodation, or smoothing, plays down diff erences
and highlights similarities to reduce confl ict.
accountability Accountability is the requirement to show performance
results to a supervisor.
active listening Active listening helps the source of a message say what he
or she really means.
affi rmative action Affi rmative action is an eff ort to give preference in
employment to women and minority group members.
after-action review After-action review is a structured review of lessons
learned and results accomplished through a completed project, task force
assignment, or special operation.
age discrimination Age discrimination penalizes an employee in a job or as
a job applicant for being over the age of 40.
agenda setting Agenda setting identifi es important action priorities.
amoral manager An amoral manager fails to consider the ethics of her or
his behavior.
analytics Analytics is the systematic use and analysis of data to solve
problems and make informed decisions.
anchoring and adjustment heuristic Th e anchoring and adjustment heuristic
adjusts a previously existing value or starting point to make a decision.
angel investor An angel investor is a wealthy individual willing to invest in
return for equity in a new venture.
assessment center An assessment center examines how job candidates
handle simulated work situations.
attitude An attitude is a predisposition to act in a certain way.
attribution Attribution is the process of creating explanations for events.
authoritarianism Authoritarianism is the degree to which a person defers
to authority and accepts status diff erences.
authority decision An authority decision is made by the leader and then
communicated to the group.
autocratic leader An autocratic leader acts in unilateral command-and-
control fashion.
availability heuristic Th e availability heuristic uses readily available infor-
mation to assess a current situation.
avoidance Avoidance pretends that a confl ict doesn’t really exist.
B B2B business strategy A B2B business strategy uses IT and Web portals to
link organizations vertically in supply chains.
B2C business strategy A B2C business strategy uses IT and Web portals to
link businesses with customers.
balanced scorecard A balanced scorecard measures performance on fi nan-
cial, customer service, internal process, and innovation and learning goals.
BCG Matrix Th e BCG Matrix analyzes business opportunities according to
market growth rate and market share.
behavioral decision model Th e behavioral decision model describes deci-
sion making with limited information and bounded rationality.
behaviorally anchored rating scale (BARS) A behaviorally anchored rating
scale (BARS) uses specifi c descriptions of actual behaviors to rate various
levels of performance.
benchmarking Benchmarking uses external comparisons to gain insights
for planning.
best practices Best practices are methods that lead to superior performance.
biculturalism Biculturalism is when minority members adopt characteris-
tics of majority cultures in order to succeed.
board of directors Members of a board of directors are elected by stock-
holders to represent their ownership interests.
bona fi de occupational qualifi cations Bona fi de occupational qualifi cations
are employment criteria justifi ed by capacity to perform a job.
bonus pay Bonus pay plans provide one-time payments based on perfor-
mance accomplishments.
breakeven analysis Breakeven analysis performs what-if calculations under
diff erent revenue and cost conditions.
breakeven point Th e breakeven point occurs where revenues just equal
costs.
budget A budget is a plan that commits resources to projects or activities.
bureaucracy A bureaucracy is a rational and effi cient form of organization
founded on logic, order, and legitimate authority.
bureaucratic control Bureaucratic control infl uences behavior through
authority, policies, procedures, job descriptions, budgets, and day-to-day
supervision.
business incubator A business incubator is a facility that off ers services to
help new businesses get established.
business model innovations Business model innovations result in ways for
fi rms to make money.
business plan A business plan describes the direction for a new business
and the fi nancing needed to operate it.
business strategy A business strategy identifi es how a division or strategic
business unit will compete in its product or service domain.
C career development Career development is the process of managing how a
person grows and progresses in a career.
career planning Career planning is the process of matching career goals
and individual capabilities with opportunities for their fulfi llment.
centralization With centralization, top management keeps the power to
make most decisions.
centralized communication network In a centralized communication net-
work, communication fl ows only between individual members and a hub
or center point.
certain environment A certain environment off ers complete information
on possible action alternatives and their consequences.
change leader A change leader tries to change the behavior of another
person or social system.
changing Changing is the phase where a planned change actually takes place.
channel richness Channel richness is the capacity of a communication
channel to eff ectively carry information.
Chapter 11 bankruptcy Chapter 11 bankruptcy protects an insolvent fi rm
from creditors during a period of reorganization to restore profi tability.
charismatic leader A charismatic leader develops special leader-follower
relationships and inspires followers in extraordinary ways.
child labor Child labor is the full-time employment of children for work
otherwise done by adults.
clan control Clan control infl uences behavior through social norms and
peer expectations.
classical decision model Th e classical decision model describes decision
making with complete information.
classical view of CSR Th e classical view of CSR is that business should focus
on the pursuit of profi ts.
coaching Coaching occurs as an experienced person off ers performance
advice to a less experienced person.
code of ethics A code of ethics is a formal statement of values and ethical
standards.
coercive power Coercive power achieves infl uence by punishment.
cognitive dissonance Cognitive dissonance is discomfort felt when attitude
and behavior are inconsistent.
Glossary
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cognitive style Cognitive style is the way an individual deals with informa-
tion while making decisions.
cohesiveness Cohesiveness is the degree to which members are attracted to
and motivated to remain part of a team.
collaboration Collaboration, or problem solving, involves working through
confl ict diff erences and solving problems so everyone wins.
collective bargaining Collective bargaining is the process of negotiating,
administering, and interpreting a labor contract.
commercializing innovation Commercializing innovation is the process of
turning new ideas into salable products.
committee A committee is designated to work on a special task on a con-
tinuing basis.
communication Communication is the process of sending and receiving
symbols with meanings attached.
communication channel A communication channel is the medium used to
carry a message.
communication transparency Communication transparency involves being
honest and openly sharing accurate and complete information.
commutative justice Commutative justice focuses on the fairness of
exchanges or transactions.
competition Competition, or authoritative command, uses force, superior
skill, or domination to win a confl ict.
competitive advantage A competitive advantage is an ability to outperform
rivals.
complacency trap Th e complacency trap is being lulled into inaction by
current successes or failures.
compressed workweek A compressed workweek allows a worker to com-
plete a full-time job in less than fi ve days.
compromise Compromise occurs when each party to the confl ict gives up
something of value to the other.
concentration Growth through concentration means expansion within an
existing business area.
conceptual skill A conceptual skill is the ability to think analytically and
solve complex problems.
concurrent control Concurrent control focuses on what happens during
the work process.
confi rmation error Confi rmation error is when we attend only to informa-
tion that confi rms a decision already made.
confl ict Confl ict is a disagreement over issues of substance and/or an emo-
tional antagonism.
confl ict resolution Confl ict resolution is the removal of the substantive
and/or emotional reasons for a confl ict.
consensus Consensus is reached when all parties believe they have had their
say and been listened to, and agree to support the group’s fi nal decision.
constructive stress Constructive stress is a positive infl uence on eff ort, cre-
ativity, and diligence in work.
consultative decision A consultative decision is made by a leader after
receiving information, advice, or opinions from group members.
contingency leadership perspective Th e contingency leadership perspec-
tive suggests that what is successful as a leadership style varies according
to the situation and the people involved.
contingency planning Contingency planning identifi es alternative courses
of action to take when things go wrong.
contingency thinking Contingency thinking tries to match management
practices with situational demands.
contingency workers Contingency workers or permatemps work part-time
hours on a longer-term basis.
continuous improvement Continuous improvement involves always
searching for new ways to improve work quality and performance.
control charts Control charts are graphical ways of displaying trends so
that exceptions to quality standards can be identifi ed.
controlling Controlling is the process of measuring performance and tak-
ing action to ensure desired results.
co-opetition Co-opetition is the strategy of working with rivals on projects
of mutual benefi t.
core competency A core competency is a special strength that gives an
organization a competitive advantage.
core culture Th e core culture is found in the underlying values of the
organization.
core values Core values are beliefs and values shared by organization
members.
corporate governance Corporate governance is oversight of a company’s
management by a board of directors.
corporate social responsibility Corporate social responsibility is the
obligation of an organization to serve its own interests and those of
its stakeholders.
corporate strategy A corporate strategy sets long-term direction for the
total enterprise.
corporation A corporation is a legal entity that exists separately from its
owners.
corruption Corruption involves illegal practices to further one’s business
interests.
cost-benefi t analysis Cost-benefi t analysis involves comparing the costs
and benefi ts of each potential course of action.
cost leadership strategy A cost leadership strategy seeks to operate with
lower costs than competitors.
CPM/PERT CPM/PERT is a combination of the critical path method and
the program evaluation and review technique.
creativity Creativity is the generation of a novel idea or unique approach
that solves a problem or crafts an opportunity.
credible communication Credible communication earns trust, respect, and
integrity in the eyes of others.
crisis A crisis is an unexpected problem that can lead to disaster if not
resolved quickly and appropriately.
critical-incident technique Th e critical-incident technique keeps a log of
someone’s eff ective and ineff ective job behaviors.
critical path Th e critical path is the pathway from project start to conclu-
sion that involves activities with the longest completion times.
cross-functional team A cross-functional team operates with members who
come from diff erent functional units of an organization.
crowdsourcing Crowdsourcing is strategic use of the Internet to engage
customers and potential customers in providing opinions and sugges-
tions on products and their designs.
cultural etiquette Cultural etiquette is use of appropriate manners and
behaviors in cross-cultural situations.
cultural intelligence Cultural intelligence is the ability to adapt to new
cultures.
cultural relativism Cultural relativism suggests there is no one right way to
behave; cultural context determines ethical behavior.
culture shock Culture shock is the confusion and discomfort that a person
experiences when in an unfamiliar culture.
currency risk Currency risk is possible loss because of fl uctuating exchange
rates.
customer structure A customer structure groups together people and jobs
that serve the same customers or clients.
D debt fi nancing Debt fi nancing involves borrowing money from another
person, a bank, or a fi nancial institution.
decentralization With decentralization, top management allows lower
levels to help make many decisions.
decentralized communication network A decentralized communication
network allows all members to communicate directly with one another.
decision A decision is a choice among possible alternative courses of action.
decision making Decision making is the process of making choices among
alternative courses of action.
decision-making process Th e decision-making process begins with identifi -
cation of a problem and ends with evaluation of implemented solutions.
defi cit principle Maslow’s defi cit principle is that people act to satisfy needs
for which a satisfaction defi cit exists; a satisfi ed need doesn’t motivate
behavior.
delegation Delegation is the process of entrusting work to others.
democratic leader A democratic leader encourages participation with an
emphasis on task and people.
departmentalization Departmentalization is the process of grouping
together people and jobs into work units.
destructive stress Destructive stress is a negative influence on one’s
performance.
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diff erentiation strategy A diff erentiation strategy off ers products that are
unique and diff erent from those of the competition.
discrimination Discrimination actively denies women and minorities the
full benefi ts of organizational membership.
disruptive behaviors Disruptive behaviors are self-serving and cause prob-
lems for team eff ectiveness.
distributed leadership Distributed leadership is when any and all members
contribute helpful task and maintenance activities to the team.
distributive justice Distributive justice focuses on treating people the same
regardless of personal characteristics.
diversifi cation Growth through diversifi cation means expansion by enter-
ing related or new business areas.
diversity Diversity describes race, gender, age, and other individual
differences.
divestiture Divestiture involves selling off parts of the organization to refocus
attention on core business areas.
division of labor The division of labor means that people and groups
perform different jobs.
divisional structure A divisional structure groups together people working
on the same product, in the same area, or with similar customers.
downsizing Downsizing decreases the size of operations.
E e-business strategy An e-business strategy strategically uses the Internet to
gain competitive advantage.
ecological fallacy Th e ecological fallacy assumes that a generalized cultural
value applies equally well to all members of the culture.
economic order quantity Th e economic order quantity method places new
orders when inventory levels fall to predetermined points.
eff ective communication In eff ective communication the receiver fully
understands the intended meaning.
eff ective manager An eff ective manager successfully helps others achieve
high performance and satisfaction in their work.
eff ective team An eff ective team achieves high levels of task performance,
membership satisfaction, and future viability.
effi cient communication Effi cient communication occurs at minimum cost
to the sender.
electronic grapevine Th e electronic grapevine uses computer technologies
to transmit information around informal networks inside and outside of
organizations.
emotional confl ict Emotional confl ict results from feelings of anger, distrust,
dislike, fear, and resentment as well as from personality clashes.
emotional intelligence (EI) Emotional intelligence (EI) is the ability to
manage our emotions in leadership and social relationships.
emotions Emotions are strong feelings directed toward someone or
something.
employee assistance programs Employee assistance programs help
employees cope with personal stresses and problems.
employee engagement Employee engagement is a strong sense of belong-
ing and connection with one’s work and employer.
employee involvement team An employee involvement team meets on a
regular basis to help achieve continuous improvement.
empowerment Empowerment gives people job freedom and power to infl u-
ence aff airs in the organization.
entrepreneur An entrepreneur is willing to pursue opportunities in situa-
tions that others view as problems or threats.
entrepreneurship Entrepreneurship is risk-taking behavior in pursuit of
business success.
environmental capital or natural capital Environmental capital or natural capital is the storehouse of natural resources—atmosphere, land, water,
and minerals—that we use to sustain life and produce goods and services
for society.
equal employment opportunity (EEO) Equal employment opportunity
(EEO) is the right to employment and advancement without regard to
race, sex, religion, color, or national origin.
equity fi nancing Equity fi nancing gives ownership shares to outsiders in
return for their fi nancial investments.
escalating commitment Escalating commitment is the continuation of a
course of action even though it is not working.
ethical behavior Ethical behavior is “right” or “good” in the context of a gov-
erning moral code.
ethical dilemma An ethical dilemma is a situation that, although off ering
potential benefi t or gain, is also unethical.
ethical frameworks Ethical frameworks are well-thought-out personal
rules and strategies for ethical decision making.
ethical imperialism Ethical imperialism is an attempt to impose one’s
ethical standards on other cultures.
ethics Ethics set moral standards of what is “good” and “right” behavior in
organizations and in our personal lives.
ethics training Ethics training seeks to help people understand the ethical
aspects of decision making and to incorporate high ethical standards into
their daily behavior.
ethnic or national subcultures Ethnic or national subcultures form among
people from the same races, language groupings, regions, and nations.
ethnocentrism Ethnocentrism is the belief that one’s membership group or
subculture is superior to all others.
evidence-based management Evidence-based management involves
making decisions based on hard facts about what really works.
existence needs Existence needs are desires for physiological and material
well-being.
expectancy Expectancy is a person’s belief that working hard will result in
high task performance.
expert power Expert power achieves infl uence by special knowledge.
exporting In exporting, local products are sold abroad.
external control External control occurs through direct supervision or
administrative systems.
extinction Extinction discourages a behavior by making the removal of a
desirable consequence contingent on its occurrence.
F family business feud A family business feud can lead to small business failure.
family businesses Family businesses are owned and fi nancially controlled
by family members.
family-friendly benefi ts Family-friendly benefi ts help employees achieve
better work-life balance.
feedback Feedback is the process of telling someone else how you feel
about something that person did or said.
feedback control Feedback control takes place after completing an action.
feedforward control Feedforward control ensures clear directions and
needed resources before the work begins.
fi ltering Filtering is the intentional distortion of information to make it
more favorable to the recipient.
fi rst-line managers First-line managers supervise people who perform non-
managerial duties.
fi rst-mover advantage A fi rst-mover advantage comes from being fi rst to
exploit a niche or enter a market.
fl exible benefi ts Flexible benefi ts programs allow choice to personalize
benefi ts within a set dollar allowance.
fl exible working hours Flexible working hours give employees some choice
in daily work hours.
focused cost leadership strategy A focused cost leadership strategy seeks
the lowest costs of operations within a special market segment.
focused diff erentiation strategy A focused diff erentiation strategy off ers a
unique product to a special market segment.
force-coercion strategy A force-coercion strategy pursues change through
formal authority and/or the use of rewards or punishments.
forecasting Forecasting attempts to predict the future.
Foreign Corrupt Practices Act Th e Foreign Corrupt Practices Act makes it
illegal for U.S. fi rms and their representatives to engage in corrupt prac-
tices overseas.
foreign subsidiary A foreign subsidiary is a local operation completely
owned by a foreign fi rm.
formal structure Formal structure is the offi cial structure of the organization.
formal team A formal team is offi cially recognized and supported by the
organization.
framing error Framing error is solving a problem in the context perceived.
franchising In franchising, a fi rm pays a fee for rights to use another com-
pany’s name and operating methods.
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free-agent economy In a free-agent economy people change jobs more often,
and many work on independent contracts with a shifting mix of employers.
fringe benefi ts Fringe benefi ts are nonmonetary forms of compensation
such as health insurance and retirement plans.
functional chimneys, or functional silos, problem Th e functional chimneys, or functional silos, problem is a lack of communication and coordination across functions.
functional plan A functional plan identifi es how diff erent parts of an enter-
prise will contribute to accomplishing strategic plans.
functional strategy A functional strategy guides activities within one spe-
cifi c area of operations.
functional structure A functional structure groups together people with
similar skills who perform similar tasks.
fundamental attribution error Th e fundamental attribution error overesti-
mates internal factors and underestimates external factors as infl uences
on someone’s behavior.
G gain sharing Gain sharing allows employees to share in cost savings or pro-
ductivity gains realized by their eff orts.
Gantt chart A Gantt chart graphically displays the scheduling of tasks
required to complete a project.
gender similarities hypothesis Th e gender similarities hypothesis holds
that males and females have similar psychological makeups.
gender subcultures Gender subcultures form among people of the same
gender.
general partnership In a general partnership, owners share management
responsibilities.
generational subcultures Generational subcultures form among people in
similar age groups.
geographical structure A geographical structure brings together people
and jobs performed in the same location.
glass ceiling eff ect Th e glass ceiling eff ect is an invisible barrier limiting
career advancement of women and minorities.
glass ceiling Th e glass ceiling is a hidden barrier to the advancement of
women and minorities.
global corporation or multinational corporation (MNC) A global corpora- tion or multinational corporation (MNC) has extensive international
business dealings in many foreign countries.
global economy In the global economy, resources, markets, and competi-
tion are worldwide in scope.
global manager A global manager is culturally aware and informed on
international aff airs.
global sourcing In global sourcing, fi rms purchase materials or services
around the world for local use.
global strategic alliance In a global strategic alliance, each partner hopes to
achieve through cooperation things they couldn’t do alone.
globalization gap Th e globalization gap involves large global fi rms gaining
disproportionately from the global economy versus smaller fi rms and
many countries.
globalization Globalization is the worldwide interdependence of resource
fl ows, product markets, and business competition.
globalization strategy A globalization strategy adopts standardized
products and advertising for use worldwide.
governance Governance is oversight of top management by a board of
directors or board of trustees.
graphic rating scale A graphic rating scale uses a checklist of traits or char-
acteristics to evaluate performance.
green innovation or sustainable innovation Green innovation or sustainable innovation reduces the carbon footprint of an organization or its products.
greenfi eld venture A greenfi eld venture establishes a foreign subsidiary by
building an entirely new operation in a foreign country.
group decision A group decision is made by group members themselves.
groupthink Groupthink is a tendency for highly cohesive teams to lose their
evaluative capabilities.
growth needs Growth needs are desires for continued psychological growth
and development.
growth strategy A growth strategy involves expansion of the organization’s
current operations.
H halo eff ect A halo eff ect uses one attribute to develop an overall impression
of a person or situation.
Hawthorne eff ect Th e Hawthorne eff ect is the tendency of persons singled
out for special attention to perform as expected.
hierarchy of objectives In a hierarchy of objectives, lower-level objectives
help to accomplish higher-level ones.
high-context cultures High-context cultures rely on nonverbal and situ-
ational cues as well as spoken or written words in communication.
higher-order needs Higher-order needs are esteem and self-actualization
needs in Maslow’s hierarchy.
high-performance organization A high-performance organization consis-
tently achieves excellence while creating a high-quality work environment.
human capital Human capital is the economic value of people with job-
relevant abilities, knowledge, ideas, energies, and commitments.
human relations A human relations leader emphasizes people over tasks.
human resource management (HRM) Human resource management
(HRM) is the process of attracting, developing, and maintaining a high-
quality workforce.
human skill A human skill is the ability to work well in cooperation with
other people.
hygiene factor A hygiene factor is found in the job context, such as working
conditions, interpersonal relations, organizational policies, and salary.
I immoral manager An immoral manager chooses to behave unethically.
importing Importing is the process of acquiring products abroad and
selling them in domestic markets.
impression management Impression management tries to create desired
perceptions in the eyes of others.
improvement objectives Improvement objectives document intentions to
improve performance in a specifi c way.
inclusivity Inclusivity is how open the organization is to anyone who can
perform a job.
incremental change Incremental change bends and adjusts existing ways to
improve performance.
independent contractors Independent contractors are hired on temporary
contracts and are not part of the organization’s permanent workforce.
individualism view In the individualism view, ethical behavior advances long-term self-interests.
individualism-collectivism Individualism-collectivism is the degree to
which a society emphasizes individuals and their self-interests.
informal group An informal group is unoffi cial and emerges from relation-
ships and shared interests among members.
informal structure Th e informal structure is the set of unoffi cial relation-
ships among an organization’s members.
information competency Information competency is the ability to gather
and use information to solve problems.
initial public off ering (IPO) An initial public off ering (IPO) is an initial
selling of shares of stock to the public at large.
innovation Innovation is the process of taking a new idea and putting it into
practice.
input standard An input standard measures work eff orts that go into a per-
formance task.
insourcing Insourcing is the creation of domestic jobs by foreign employers.
instrumental values Instrumental values are preferences regarding the
means to desired ends.
instrumentality Instrumentality is a person’s belief that various outcomes
will occur as a result of task performance.
integrity Integrity in leadership is honesty, credibility, and consistency in
putting values into action.
intellectual capital Intellectual capital is the collective brainpower or
shared knowledge of a workforce.
interactional justice Interactional justice is the degree to which others are
treated with dignity and respect.
interactive leadership Interactive leadership is strong on communication,
participation, and dealing with problems by teamwork.
internal control, or self-control Internal control, or self-control, occurs as people exercise self-discipline in fulfi lling job expectations.
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international business An international business conducts commercial
transactions across national boundaries.
intrapreneurs Intrapreneurs display entrepreneurial behavior as employees
of larger fi rms.
intuitive thinking Intuitive thinking approaches problems in a fl exible and
spontaneous fashion.
inventory control Inventory control ensures that inventory is only big
enough to meet immediate needs.
ISO 14001 ISO 14001 is a global quality standard that certifies organiza-
tions that set environmental objectives and targets, account for the
environmental impact of their activities, and continuously improve
environmental performance.
J job burnout Job burnout is physical and mental exhaustion from work stress.
job design Job design is the allocation of specifi c work tasks to individuals
and groups.
job discrimination Job discrimination occurs when someone is denied a job
or job assignment for non-job-relevant reasons.
job enrichment Job enrichment increases job content by adding work
planning and evaluating duties normally performed by the supervisor.
job migration Job migration occurs when global outsourcing shifts from
one country to another.
job satisfaction Job satisfaction is the degree to which an individual feels
positive about a job and work experience.
job sharing Job sharing splits one job between two people.
joint venture A joint venture operates in a foreign country through co-
ownership with local partners.
justice view In the justice view, ethical behavior treats people impartially
and fairly.
Just-in-time scheduling ( JIT) Just-in-time scheduling ( JIT) routes materials
to workstations just in time for use.
K knowledge workers Knowledge workers add value to organizations through
their intellectual capabilities.
L labor contract A labor contract is a formal agreement between a union and
an employer about the terms of work for union members.
labor union A labor union is an organization that deals with employers on
the workers’ collective behalf.
lack-of-participation error Lack-of-participation error is failure to include
the right people in the decision-making process.
laissez-faire leader A laissez-faire leader is disengaged, showing low task
and people concerns.
law of contingent reinforcement Law of contingent reinforcement—deliver
the reward only when desired behavior occurs.
law of eff ect Th e law of eff ect states that behavior followed by pleasant
consequences is likely to be repeated; behavior followed by unpleasant
consequences is not.
law of immediate reinforcement Law of immediate reinforcement—deliver
the reward as soon as possible after the desired behavior occurs.
leadership Leadership is the process of inspiring others to work hard to
accomplish important tasks.
leadership style Leadership style is the recurring pattern of behaviors
exhibited by a leader.
leading Leading is the process of arousing enthusiasm and inspiring eff orts
to achieve goals.
legitimate power Legitimate power achieves infl uence by formal authority.
licensing In licensing, one fi rm pays a fee for rights to make or sell another
company’s products.
lifelong learning Lifelong learning is continuous learning from daily
experiences.
limited liability corporation (LLC) A limited liability corporation (LLC)
combines the advantages of the sole proprietorship, partnership, and
corporation.
limited partnership A limited partnership consists of a general partner who
manages the business and one or more limited partners.
liquidation Liquidation occurs when a business closes and sells its assets
to pay creditors.
locus of control Locus of control is the extent to which one believes what
happens is within one’s control.
long-range plans Long-range plans usually cover three years or more.
low-context cultures Low-context cultures emphasize communication via
spoken or written words.
lower-order needs Lower-order needs are physiological, safety, and social
needs in Maslow’s hierarchy.
M machiavellianism Machiavellianism is the degree to which someone uses
power manipulatively.
maintenance activity A maintenance activity is an action taken by a team
member that supports the emotional life of the group.
management by exception Management by exception focuses attention on
diff erences between actual and desired performance.
management process Th e management process is planning, organizing, lead-
ing, and controlling the use of resources to accomplish performance goals.
management science and operational research Management science and operational research apply mathematical techniques to solve manage-
ment problems.
manager A manager is a person who supports and is responsible for the
work of others.
managing by objectives Managing by objectives is a process of joint objec-
tive setting between a superior and a subordinate.
managing diversity Managing diversity is building an inclusive work envi-
ronment that allows everyone to reach his or her potential.
market control Market control is essentially the infl uence of market com-
petition on the behavior of organizations and their members.
masculinity-femininity Masculinity-femininity is the degree to which a
society values assertiveness and materialism.
matrix structure A matrix structure combines functional and divisional
approaches to emphasize project or program teams.
MBWA Managers using MBWA spend time out of their offi ces, meeting and
talking with workers at all levels.
mechanistic designs Mechanistic designs are bureaucratic, using a central-
ized and vertical structure.
membership composition Membership composition is the mix of abilities,
skills, backgrounds, and experiences among team members.
mentoring Mentoring assigns early-career employees as protégés to more
senior ones.
merit pay Merit pay awards pay increases in proportion to performance
contributions.
middle managers Middle managers oversee the work of large departments
or divisions.
mission Th e mission is the organization’s reason for existence in society.
mixed message A mixed message results when words communicate one
message while actions, body language, or appearance communicate
something else.
monochronic In monochronic cultures people tend to do one thing at a time.
mood contagion Mood contagion is the spillover of one’s positive or negative
moods onto others.
moods Moods are generalized positive and negative feelings or states of mind.
moral absolutism Moral absolutism suggests ethical standards apply
universally across all cultures.
moral leadership Moral leadership has integrity and appears to others as
“good” or “right” by ethical standards.
moral manager A moral manager makes ethical behavior a personal goal.
moral rights view In the moral rights view, ethical behavior respects and
protects fundamental rights.
most favored nation status Most favored nation status gives a trading part-
ner the most favorable treatment for imports and exports.
motion study Motion study is the science of reducing a job or task to its
basic physical motions.
motivation Motivation accounts for the level, direction, and persistence of
eff ort expended at work.
multicultural organization A multicultural organization is based on pluralism
and operates with inclusivity and respect for diversity.
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multiperson comparison A multiperson comparison compares one person’s
performance with that of others.
N necessity-based entrepreneurship Necessity-based entrepreneurship occurs
when people start new ventures because they have few or no other employ-
ment options.
need A need is a physiological or psychological defi ciency that a person
wants to satisfy.
need for achievement Need for achievement is the desire to do something
better, to solve problems, or to master complex tasks.
need for affi liation Need for affi liation is the desire to establish and main-
tain good relations with people.
need for power Need for power is the desire to control, infl uence, or be
responsible for other people.
negative reinforcement Negative reinforcement strengthens a behavior by
making the avoidance of an undesirable consequence contingent on its
occurrence.
network structure A network structure uses IT to link with networks of out-
side suppliers and service contractors.
networking Networking involves building and maintaining positive rela-
tionships with other people.
noise Noise is anything that interferes with the communication process.
nonprogrammed decision A nonprogrammed decision applies a specifi c
solution that has been crafted to address a unique problem.
nontariff barriers Nontariff barriers are nontax policies that governments
enact to discourage imports, such as quotas and import restrictions.
nonverbal communication Nonverbal communication takes place through
gestures, expressions, posture, and even use of interpersonal space.
norm A norm is a behavior, rule, or standard expected to be followed by
team members.
O objectives Objectives are specifi c results that one wishes to achieve.
observable culture Th e observable culture is what you see and hear when
walking around an organization.
occupational subcultures Occupational subcultures form among people
doing the same kinds of work.
open-book management In open-book management managers provide
employees with essential fi nancial information about their employers.
open system An open system transforms resource inputs from the environ-
ment into product outputs.
operant conditioning Operant conditioning is the control of behavior by
manipulating its consequences.
operating objectives Operating objectives are specifi c results that organi-
zations try to accomplish.
operational plan or tactical plan An operational plan or tactical plan sets out ways to implement a strategic plan.
operations management Operations management is the study of how orga-
nizations produce goods and services.
optimizing decision An optimizing decision chooses the alternative provid-
ing the absolute best solution to a problem.
organic designs Organic designs are adaptive, using a decentralized and
horizontal structure.
organization chart An organization chart describes the arrangement of
work positions within an organization.
organization structure Organization structure is a system of tasks, report-
ing relationships, and communication linkages.
organizational citizenship behaviors Organizational citizenship behaviors
are things people do to go the extra mile in their work.
organizational culture Organizational culture is a system of shared beliefs
and values guiding behavior.
organizational design Organizational design is the process of confi guring
organizations to meet environmental challenges.
organizational subcultures Organizational subcultures are groupings of
people based on shared demographic and job identities.
organizing Organizing is the process of assigning tasks, allocating resources,
and coordinating work activities.
orientation Orientation familiarizes new employees with jobs, co-workers,
and organizational policies and services.
output standard An output standard measures performance results in
terms of quantity, quality, cost, or time.
outsourcing Outsourcing shifts local jobs to foreign locations to take
advantage of lower-wage labor in other countries.
P participatory planning Participatory planning includes the persons who
will be aff ected by plans and/or who will be asked to implement them.
partnership A partnership is when two or more people agree to contribute
resources to start and operate a business together.
pay discrimination Pay discrimination occurs when men and women are
paid diff erently for doing equal work.
perceived negative inequity Perceived negative inequity is discomfort felt
over being harmed by unfair treatment.
perceived positive inequity Perceived positive inequity is discomfort felt
over benefi tting from unfair treatment.
perception Perception is the process through which people receive and
interpret information from the environment.
performance appraisal Performance appraisal is the process of formally
evaluating performance and providing feedback to a job holder.
performance norm Th e performance norm defi nes the eff ort and perfor-
mance contributions expected of team members.
performance opportunity A performance opportunity is a situation that
off ers the possibility of a better future if the right steps are taken.
performance threat A performance threat is a situation where something is
wrong or likely to be wrong.
personal development objectives Personal development objectives docu-
ment intentions to accomplish personal growth, such as expanded job
knowledge or skills.
personal wellness Personal wellness is the pursuit of a personal health-
promotion program.
personality Personality is the profi le of characteristics making a person
unique from others.
person-organization fi t Person-organization fi t is the match of individual
values, interests, and behavior with the organizational culture.
persuasive communication Persuasive communication presents a message
in a manner that causes others to accept and support it.
plan A plan is a statement of intended means for accomplishing objectives. planning Planning is the process of setting performance objectives and
determining how to accomplish them.
policy A policy is a standing plan that communicates broad guidelines for
decisions and action.
political risk Political risk is possible loss because of instability and political
changes in foreign countries.
political-risk analysis Political-risk analysis forecasts how political events
may impact foreign investments.
polychronic cultures In polychronic cultures people accomplish many dif-
ferent things at once.
positive reinforcement Positive reinforcement strengthens a behavior by
making a desirable consequence contingent on its occurrence.
power distance Power distance is the degree to which a society accepts
unequal distribution of power.
power Power is the ability to get someone else to do something you want
done.
pregnancy discrimination Pregnancy discrimination penalizes a woman in
a job or as a job applicant for being pregnant.
prejudice Prejudice is the display of negative, irrational attitudes toward
women or minorities.
problem solving Problem solving involves identifying and taking action to
resolve problems.
procedural justice Procedural justice focuses on the fair application of
policies and rules.
procedure A procedure or rule precisely describes actions to take in spe-
cifi c situations.
process innovations Process innovations result in better ways of doing
things.
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product innovations Product innovations result in new or improved goods
or services.
product structure A product structure groups together people and jobs
working on a single product or service.
profi t sharing Profi t sharing distributes to employees a proportion of net
profi ts earned by the organization.
programmed decision A programmed decision applies a solution from past
experience to a routine problem.
progression principle Maslow’s progression principle is that a need at any
level becomes activated only after the next-lower-level need is satisfi ed.
project management Project management makes sure that activities
required to complete a project are planned well and accomplished on time.
project team or task force A project team or task force is convened for a specifi c purpose and disbands after completing its task.
projection Projection assigns personal attributes to other individuals.
projects Projects are one-time activities with many component tasks that
must be completed in proper order and according to budget.
protectionism Protectionism is a call for tariff s and favorable treatments to
protect domestic fi rms from foreign competition.
proxemics Proxemics is the study of the way we use space.
punishment Punishment discourages a behavior by making an unpleasant
consequence contingent on its occurrence.
Q quality circle A quality circle is a team of employees who meet periodically
to discuss ways of improving work quality.
quality of work life Quality of work life is the overall quality of human expe-
riences in the workplace.
R rational persuasion strategy A rational persuasion strategy pursues change
through empirical data and rational argument.
realistic job previews Realistic job previews provide job candidates with all
pertinent information about a job and organization.
recruitment Recruitment is a set of activities designed to attract a qualifi ed
pool of job applicants.
referent power Referent power achieves infl uence by personal identifi cation.
refreezing Refreezing is the phase at which change is stabilized.
relatedness needs Relatedness needs are desires for satisfying interper-
sonal relationships.
reliability Reliability means that a selection device gives consistent results
over repeated measures.
representativeness heuristic Th e representativeness heuristic assesses the
likelihood of an occurrence using a stereotyped set of similar events.
restricted communication network Subgroups in a restricted communica-
tion network contest one anothers’ positions and restrict interactions
with one another.
restructuring Restructuring reduces the scale or mix of operations.
retrenchment strategy A retrenchment strategy changes operations to
correct weaknesses.
reverse innovation Reverse innovation recognizes the potential for valu-
able innovations to be launched from lower organizational levels and
diverse locations, including emerging markets.
reverse mentoring In reverse mentoring, younger and newly hired
employees mentor senior executives, often on the latest developments
with digital technologies.
reward power Reward power achieves infl uence by off ering something of value.
risk environment A risk environment lacks complete information but off ers
probabilities of the likely outcomes for possible action alternatives.
S satisfi cing decision A satisfi cing decision chooses the fi rst satisfactory
alternative that presents itself.
satisfi er factor A satisfi er factor is found in job content, such as a sense of
achievement, recognition, responsibility, advancement, or personal growth.
scalar chain principle Th e scalar chain principle states that organizations
should operate with clear and unbroken lines of communication top to
bottom.
scenario planning Scenario planning identifi es alternative future scenarios
and makes plans to deal with each.
scientifi c management Scientifi c management emphasizes careful selec-
tion and training of workers and supervisory support.
selection Selection is choosing whom to hire from a pool of qualifi ed job
applicants.
selective perception Selective perception focuses attention on things con-
sistent with existing beliefs, needs, actions.
self-effi cacy Self-effi cacy is a person’s belief that they are capable of per-
forming a task.
self-fulfi lling prophecy A self-fulfi lling prophecy occurs when a person acts
in ways that confi rm another’s expectations.
self-management Self-management is the ability to understand oneself,
exercise initiative, accept responsibility, and learn from experience.
self-managing team Members of a self-managing team have the authority
to make decisions about how they share and complete their work.
self-monitoring Self-monitoring is the degree to which someone is able to
adjust behavior in response to external factors.
self-serving bias Self-serving bias underestimates internal factors and over-
estimates external factors as infl uences on someone’s behavior.
servant leadership Servant leadership means serving others and helping
them use their talents to help organizations best serve society.
shamrock organization A shamrock organization operates with a core
group of full-time long-term workers supported by others who work on
contracts and part time.
shaping Shaping is positive reinforcement of successive approximations to
the desired behavior.
shared power strategy A shared power strategy pursues change by partici-
pation in assessing change needs, values, and goals.
short-range plans Short-range plans usually cover a year or less.
Six Sigma Six Sigma is a quality standard of 3.4 defects or less per million
products or service deliveries.
skunkworks Skunkworks are special creative units set free from the normal
structure for the purpose of innovation.
small business A small business has fewer than 500 employees, is indepen-
dently owned and operated, and does not dominate its industry.
Small Business Development Centers Small Business Development Centers
off er guidance to entrepreneurs and small business owners on how to set
up and manage business operations.
social business A social business is one in which the underlying business
model directly addresses a social problem.
social capital Social capital is the capacity to attract support and help from
others in order to get things done.
social entrepreneurs Social entrepreneurs take business risks to fi nd novel
ways to solve pressing social problems.
social innovation Social innovation is business innovation driven by a
social conscience.
social loafi ng Social loafi ng is the tendency of some people to avoid respon-
sibility by free-riding in groups.
social media strategy A social media strategy uses social media to better
engage with an organization’s customers, clients, and external audiences
in general.
social network analysis Social network analysis identifi es the informal
structures and their embedded social relationships that are active in an
organization.
social responsibility audit A social responsibility audit measures and
reports on an organization’s performance in various areas of corporate
social responsibility.
socialization Socialization is the process through which new members
learn the culture of an organization.
socioeconomic view of CSR Th e socioeconomic view of CSR is that business
should focus on contributions to society, not just on making profi ts.
sole proprietorship A sole proprietorship is an individual pursuing busi-
ness for a profi t.
span of control Span of control is the number of persons directly reporting
to a manager.
spotlight questions Spotlight questions highlight the risks of public disclo-
sure of one’s actions.
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Glossary G-8
stakeholders Stakeholders are people and institutions most directly
aff ected by an organization’s performance.
stereotype A stereotype assigns attributes commonly associated with a
group to an individual.
stock options Stock options give the right to purchase shares at a fi xed price
in the future.
strategic alliance In a strategic alliance, organizations join together in
partnership to pursue an area of mutual interest.
strategic control Strategic control makes sure strategies are well imple-
mented and that poor strategies are scrapped or changed.
strategic formulation Strategic formulation is the process of creating
strategies.
strategic human resource management Strategic human resource manage-
ment mobilizes human capital to implement organizational strategies.
strategic intent Strategic intent focuses organizational energies on achiev-
ing a compelling goal.
strategic leadership Strategic leadership inspires people to implement
organizational strategies.
strategic management Strategic management is the process of formulating
and implementing strategies.
strategic plan A strategic plan identifi es long-term directions for the
organization.
strategy A strategy is a comprehensive plan guiding resource allocation to
achieve long-term organization goals.
strategy implementation Strategy implementation is the process of putting
strategies into action.
stress Stress is a state of tension experienced by individuals facing extraor-
dinary demands, constraints, or opportunities.
stretch goals Stretch goals are performance targets that we have to work
extra hard and stretch to reach.
strong cultures Strong cultures are clear, well defi ned, and widely shared
among members.
substantive confl ict Substantive confl ict involves disagreements over goals,
resources, rewards, policies, procedures, and job assignments.
substitutes for leadership Substitutes for leadership are factors in the work
setting that direct work eff orts without the involvement of a leader.
subsystem A subsystem is a smaller component of a larger system.
succession plan A succession plan describes how the leadership transition
and related fi nancial matters will be handled.
succession problem Th e succession problem is the issue of who will run the
business when the current head leaves.
sustainability Sustainability is a goal that addresses the rights of present and
future generations as co-stakeholders of present day natural resources.
sustainable business Sustainable business is where fi rms operate in ways
that both meet the needs of customers and protect or advance the well-
being of our natural environment.
sustainable competitive advantage A sustainable competitive advantage is
achieved in ways that are diffi cult to imitate.
sustainable development Sustainable development is making use of natural
resources to meet today’s needs while also preserving and protecting the
environment for use by future generations.
sweatshops Sweatshops employ workers at very low wages, for long hours,
and in poor working conditions.
SWOT analysis A SWOT analysis examines organizational strengths and
weaknesses, as well as environmental opportunities and threats.
symbolic leader A symbolic leader uses language and symbols and actions
to establish and maintain a desired organizational culture.
synergy Synergy is the creation of a whole greater than the sum of its
individual parts.
systematic thinking Systematic thinking approaches problems in a rational
and analytical fashion.
T tariff s Tariff s are taxes governments levy on imports from abroad.
task activity A task activity is an action taken by a team member that
directly contributes to the group’s performance purpose.
team A team is a collection of people who regularly interact to pursue
common goals.
team building Team building involves activities to gather and analyze data
on a team and make changes to increase its eff ectiveness.
team process Team process is the way team members work together to
accomplish tasks.
team structure A team structure uses permanent and temporary cross-
functional teams to improve lateral relations.
teamwork Teamwork is the process of people actively working together to
accomplish common goals.
technical skill A technical skill is the ability to use expertise to perform a
task with profi ciency.
telecommuting Telecommuting involves using IT to work at home or out-
side the offi ce.
terminal values Terminal values are preferences about desired end states.
theory X Th eory X assumes people dislike work, lack ambition, are irre-
sponsible, and prefer to be led.
theory Y Th eory Y assumes people are willing to work, accept responsibility,
are self-directed, and are creative.
time orientation Time orientation is the degree to which a society empha-
sizes short-term or long-term goals.
top managers Top managers guide the performance of the organization as
a whole or of one of its major parts.
total quality management (TQM) Total quality management (TQM) com-
mits to quality objectives, continuous improvement, and doing things
right the fi rst time.
transactional leadership Transactional leadership directs the eff orts of
others through tasks, rewards, and structures.
transformational change Transformational change results in a major and
comprehensive redirection of the organization.
transformational leadership Transformational leadership is inspirational
and arouses extraordinary eff ort and performance.
transnational corporation A transnational corporation is an MNC that
operates worldwide on a borderless basis.
transnational fi rm A transnational fi rm tries to operate globally without
having a strong national identity.
triple bottom line Th e triple bottom line of organizational performance
includes fi nancial, social, and environmental criteria.
two-tier wage systems Two-tier wage systems pay new hires less than
workers already doing the same jobs with more seniority.
Type A personality A Type A personality is oriented toward extreme
achievement, impatience, and perfectionism.
U uncertain environment An uncertain environment lacks so much informa-
tion that it is diffi cult to assign probabilities to the likely outcomes of
alternatives.
uncertainty avoidance Uncertainty avoidance is the degree to which a
society tolerates risk and uncertainty.
unfreezing Unfreezing is the phase during which a situation is prepared for
change.
unity of command principle Th e unity of command principle states that a
worker should receive orders from only one boss.
upside-down pyramid Th e upside-down pyramid view puts customers at
the top of the organization being served by workers who are supported
by managers below them.
utilitarian view In the utilitarian view, ethical behavior delivers the greatest
good to the most people.
V valence Valence is the value a person assigns to work-related outcomes.
validity Validity means that scores on a selection device have demonstrated
links with future job performance.
value-based management Value-based management actively develops,
communicates, and enacts shared values.
values Values are broad beliefs about what is appropriate behavior.
venture capitalists Venture capitalists make large investments in new
ventures in return for an equity stake in the business.
vertical integration Growth through vertical integration occurs by acquiring
suppliers or distributors.
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virtual organization A virtual organization uses information technologies
to operate as a shifting network of alliances.
virtual team Members of a virtual team work together and solve problems
through computer-based interactions.
virtuous circle A virtuous circle exists when corporate social responsibil-
ity leads to improved fi nancial performance that leads to more social
responsibility.
vision A vision clarifi es the purpose of the organization and expresses what
it hopes to be in the future.
visionary leadership Visionary leadership brings to the situation a clear
sense of the future and an understanding of how to get there.
W whistleblowers Whistleblowers expose misconduct of organizations and
their members.
withdrawal behaviors Withdrawal behaviors include absenteeism (not
showing up for work) and turnover (quitting one’s job).
work sampling Work sampling evaluates applicants as they perform actual
work tasks.
workforce diversity Workforce diversity describes diff erences among
workers in gender, race, age, ethnicity, religion, sexual orientation, and
able-bodiedness.
work-life balance Work-life balance involves balancing career demands
with personal and family needs.
workplace privacy Workplace privacy is the right to privacy while at
work.
workplace rage Workplace rage is aggressive behavior toward co-workers
or the work setting.
workplace spirituality Workplace spirituality involves practices that create
meaning and shared community among organizational members.
World Trade Organization (WTO) Th e World Trade Organization (WTO) is
a global institution established to promote free trade and open markets
around the world.
Z zero-based budget A zero-based budget allocates resources as if each
budget was brand new.
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Feature Notes 1 Slumdog Millionaire—Information and quotes from Manohla Dargis,
“Orphan’s Lifeline Out of Hell Could Be a Game Show in Mumbai,” New York
Times (November 12, 2008): movies.nytimes.com; and James Christopher,
“Slumdog Millionaire,” Th e Times ( January 8, 2009): entertainment.timesonline.
co.uk.
Role Models—Information and quotes from William M. Bulkeley, “Xerox
Names Burns Chief as Mulcahy Retires Early,” Wall Street Journal (May 22,
2009), pp. B1, B2; and Nanette Byrnes and Roger O. Crockett, “An Historic
Succession at Xerox,” Business Week ( June 9, 2008), pp. 18–21.
Ethics Check—Based on incident reported in “FBI Nabs 3 over Coca-
Cola Secrets,” cnn.com (retrieved July 6, 2006); Betsy McKay, “Coke
Employee Faces Charges in Plot to Sell Secrets,” Wall Street Journal ( July
6, 2006), p. B1; and “Man Gets Two Years in Coke Secrets Case,” Wall Street
Journal ( June 7, 2007), p. A12. For your information, here is the rest of the
story: After receiving a similar call, Pepsi executives contacted the FBI. A
sting netted three former Coke employees. Coke’s CEO thanked his Pepsi
rivals for helping fi ght off “this attack” on its secret. Pepsi replied: “We did
what any responsible company would do. Competition can be fi erce, but it
must also be fair and legal.”
Facts to Consider—Information from “Th e View from the Kitchen Table,”
Newsweek ( January 26, 2009), p. 29; and Del Jones, “Women Slowly Gain on
Men,” USA Today ( January 2, 2009), p. 6B; Catalyst research reports at www.
Catalyst.org; “Nicking the Glass Ceiling,” Business Week ( June 9, 2009), p. 18;
Francesco Guerrera and Alan Rappeport, “Women Still to Break Th rough
‘Glass Ceiling’ in U.S. Boardroom,” Financial Times, Kindle Edition (October
19, 2010); “Women on Wall Street Fall Further Behind,” Bloomberg Business
Week (October 11–17, 2010), pp. 46–47.
Endnotes 1 1 See examples in Carol Hymowitz, “As Managers Climb, Th ey Have to
Learn How to Act the Parts,” Wall Street Journal (November 14, 2005), p. B1.
2 Information from Wall Street Journal (September 21, 2005), p. R4.
3 For a perspective on the fi rst-line manager’s job, see Leonard A. Schlesinger
and Janice A. Klein, “Th e First-Line Supervisor: Past, Present and Future,”
pp. 370–82, in Jay W. Lorsch (ed.), Handbook of Organizational Behavior
(Englewood Cliff s, NJ: Prentice-Hall, 1987). Research reported in “Remember
Us?” Economist (February 1, 1992), p. 71.
4 For a discussion, see Marcus Buckingham, “What Great Managers Do,”
Harvard Business Review (March 2005). Reprint R0503D.
5 Ellen Byron, “P&G’s Lafl ey Sees CEOs as Link to World,” Wall Street Journal
(March 23, 2009), p. B6; and Stefan Stern, “What Exactly Are Chief Executives
For?” Financial Times (May 15, 2009).
6 Ibid.
7 John A. Byrne, “Letter from the Editor,” Fast Company (April 2005), p. 14.
Note: When Bloomberg bought Business Week in 2009, Byrnes left shortly
after to start his own digital media company.
8 Stewart D. Friedman, Perry Christensen, and Jessica De Groot, “Work and
Life: Th e End of the Zero-Sum Game,” Harvard Business Review (November/
December 1998), pp. 119–29.
9 Alan M. Webber, “Danger: Toxic Company,” Fast Company (November 1998),
pp. 15–21.
10 See George Anders, “Overseeing More Employees—With Fewer Managers,”
Wall Street Journal (March 24, 2008), p. B6; and “Women Come on Board,”
Business Week ( June 15, 2009), p. 24.
11 Henry Mintzberg, Th e Nature of Managerial Work (New York: Harper &
Row, 1973, and HarperCollins, 1997), p. 60.
12 Ibid., p. 30.
13 See, for example, John R. Veiga and Kathleen Dechant, “Wired World
Woes: www.Help,” Academy of Management Executive, vol. 11 (August 1997),
pp. 73–79.
14 For a classic study, see Th omas A. Mahoney, Th omas H. Jerdee, and Stephen
J. Carroll, “Th e Job(s) of Management,” Industrial Relations, vol. 4 (February
1965), pp. 97–110.
15 Th is running example is developed from information from
“Accountants Have Lives, Too, You Know,” Business Week (February 23, 1998),
pp. 88–90; Silvia Ann Hewlett and Carolyn Buck Luce, “Off -Ramps and
On-Ramps: Keeping Talented Women on the Road to Success,” Harvard
Business Review (March 2005), reprint R0503B; and the Ernst & Young Web
site: www.Ey.com.
16 Information on women and men leaving jobs from Hewlett and Luce,
op. cit.
17 See Mintzberg, op. cit. (1973/1997); Henry Mintzberg, “Covert Lead-
ership: Th e Art of Managing Professionals,” Harvard Business Review
(November/December 1998), pp. 140–47; and Jonathan Gosling and
Henry Mintzberg, “Th e Five Minds of a Manager,” Harvard Business Review
(November 2003), pp. 1–9.
18 See Mintzberg, op. cit. (1973/1997); Mintzberg, op. cit. (1998); and
Gosling and Mintzberg, op. cit. (2003).
19 Th is incident is taken from John P. Kotter, “What Eff ective General
Managers Really Do,” Harvard Business Review (November/December 1982),
pp. 156–57.
20 Ibid.
21 Robert L. Katz, “Skills of an Eff ective Administrator,” Harvard Business
Review (September/October 1974), p. 94.
22 See Daniel Goleman’s books Emotional Intelligence (New York: Bantam,
1995) and Working with Emotional Intelligence (New York: Bantam, 1998); and
his articles “What Makes a Leader,” Harvard Business Review (November/
December 1998), pp. 93–102, and “Leadership Th at Makes a Diff erence,”
Harvard Business Review (March/April 2000), pp. 79–90, quote from p. 80.
23 Quote from “Insuring Success for the Road,” BizEd (March/April 2005),
p. 19.
24 Henry Mintzberg, “Th e Manager’s Job: Folklore and Fact,” Harvard Busi-
ness Review, vol. 53 ( July/August 1975), p. 61. See also Mintzberg, op. cit.
(1973/1997).
25 Kenichi Ohmae’s books include Th e Borderless World: Power and Strategy
in the Interlinked Economy (New York: Harper, 1989); Th e End of the Nation
State (New York: Free Press, 1996); Th e Invisible Continent: Four Strategic
Imperatives of the New Economy (New York: Harper, 1999), and Th e Next
Global Stage: Challenges and Opportunities in Our Borderless World (Upper
Saddle River, N.J.: Wharton School Publishing, 2005).
26 Th is example is from Th omas Friedman, Th e World Is Flat: A Brief History
of the 21st Century (New York: Farrar, Straus & Giroux, 2005), pp. 208–09.
27 For a discussion of globalization, see Th omas L. Friedman, Th e Lexus and
the Olive Tree: Understanding Globalization (New York: Bantam Doubleday
Dell, 2000); John Micklethwait and Adrian Woolridge, A Future Perfect: Th e
Challenges and Hidden Promise of Globalization (New York: Crown, 2000);
and Alfred E. Eckes Jr. and Th omas W. Zeiler, Globalization and the American
Century (Cambridge, UK: Cambridge University Press, 2003).
28 Christy Lilly, “Rocky Boots CEO Explains Outsourcing,” Connections
(Ohio University College of Business, 2005), p. 6.
29 An Internet search will turn up many news articles reporting the details
of the Bernie Madoff scandal.
30 Portions adapted from John W. Dienhart and Terry Th omas,
“Ethical Leadership: A Primer on Ethical Responsibility in Management,” in
John R. Schermerhorn, Jr. (ed.), Management, 7th ed. (New York: Wiley, 2002).
31 See Judith Burns, “Everything You Wanted to Know About Corporate
Governance . . . But Didn’t Know How to Ask,” Wall Street Journal (October
27, 2003), pp. R1, R7.
32 Daniel Akst, “Room at the Top for Improvement,” Wall Street Journal
(October 26, 2004), p. D8; and Herb Baum and Tammy King, Th e Transparent
Leader (New York: HarperCollins, 2005).
Endnotes
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EndnotesEN-2
33 Workforce 2000: Work and Workers for the 21st Century (Indianapolis:
Towers Perrin/Hudson Institute, 1987); Richard W. Judy and Carol D’ Amico
(eds.), Work and Workers for the 21st Century (Indianapolis: Hudson Institute,
1997). See Richard D. Bucher, Diversity Consciousness: Opening Our Minds to
People, Cultures, and Opportunities (Upper Saddle River, NJ: Prentice-Hall,
2000); R. Roosevelt Th omas, “From Affi rmative Action to Affi rming Diversity,”
Harvard Business Review (March/April 1990), pp. 107–17; and Beyond Race
and Gender: Unleashing the Power of Your Total Workforce by Managing Diver-
sity (New York: AMACOM, 1992).
34 June Kronholz, “Hispanics Gain in Census,” Wall Street Journal (May 10,
2006), p. A6; Phillip Toledano, “Demographics: Th e Population Hourglass,” Fast
Company (March, 2006), p. 56; June Kronholz, “Racial Identity’s Gray Area,”
Wall Street Journal ( June 12, 2008), p. A10; “We’re Getting Old,” Wall Street
Journal (March 26, 2009), p. D2; Les Christie, “Hispanic Population Boom
Fuels Rising U.S. Diversity,” CnnMoney: www.cnn.com; and Betsy Towner,
“Th e New Face of 501 America,” AARP Bulletin ( June 2009), p. 31; “Los U.S.A.:
Latin Population Grows Faster, Spreads Wider,” Wall Street Journal (March
25, 2011), p. A1.
35 Information from “Racism in Hiring Remains, Study Says,” Columbus
Dispatch ( January 17, 2003), p. B2.
36 For discussions of the glass ceiling eff ect, see Ann M. Morrison, Randall P.
White, and Ellen Van Velso, Breaking the Glass Ceiling (Reading, MA: Addison-
Wesley, 1987); Anne E. Weiss. Th e Glass Ceiling: A Look at Women in the Work-
force (New York: Twenty First Century, 1999); and Debra E. Meyerson and
Joyce K. Fletcher, “A Modest Manifesto for Shattering the Glass Ceiling,” Har-
vard Business Review ( January/February 2000).
37 For background, see Taylor Cox, Jr., “Th e Multicultural Organization,”
Academy of Management Executive, vol. 5 (1991), pp. 34–47; and Cultural
Diversity in Organizations: Th eory, Research and Practice (San Francisco:
Berrett-Koehler, 1993).
38 See “Women Come on Board,” Business Week ( June 15, 2009), p. 24.
39 Survey data reported in Sue Shellenbarger, “New Workplace Equalizer:
Ambition,” Wall Street Journal (March 26, 2009), p. D5.
40 Judith B. Rosener, “Women Make Good Managers, So What?” Business
Week (December 11, 2000), p. 24.
41 Th omas, op. cit.
42 Business Week (August 8, 1990), p. 50.
43 See Tom Peters, “Th e Brand Called You,” Fast Company (August/Septem-
ber 1997), p. 83.
44 Charles Handy, Th e Age of Unreason (Cambridge, MA: Harvard Business
School Press, 1990). See also Michael S. Malone, Th e Future Arrived Yester-
day: Th e Rise of the Protean Organization and What It Means for You (New
York: Crown Books, 2009).
45 See Gareille Monaghan, “Don’t Get a Job, Get a Portfolio Career,” Th e
Sunday Times (April 26, 2009), p. 15.
46 Dave Ulrich, “Intellectual Capital 5 Competency 3 Commitment,” Har-
vard Business Review (Winter, 1998), pp. 15–26.
47 Max DePree’s books include Leadership Is an Art (New York: Dell, 1990)
and Leadership Jazz (New York: Dell, 1993). See also Herman Miller’s home
page at www.Hermanmiller.com.
48 See Peter F. Drucker, Th e Changing World of the Executive (New York: T.T.
Times Books, 1982), and Th e Profession of Management (Cambridge, MA: Har-
vard Business School Press, 1997); and Francis Horibe, Managing Knowledge
Workers: New Skills and Attitudes to Unlock the Intellectual Capital in Your
Organization (New York: Wiley, 1999).
49 Daniel Pink, A Whole New Mind: Moving from the Information Age to the
Conceptual Age (New York: Riverhead Books, 2005).
50 Peters, op. cit.
Feature Notes 2 Life Is Good—Information from Leigh Buchanan, “Life Lessons, Inc.”
( June 6, 2006): www.inc.com/magazine; “A Fortune Coined from Cheerful-
ness Entrepreneurship,” Financial Times (May 20, 2009); and www.lifeisgood.
com/about.
Role Models—Information from Miguel Helft, “Yahoo’s New Chief Makes
Decisive Appearance,” New York Times ( January 16, 2009): www.nytimes.
com; and Jessica E. Vascellaro, “Yahoo CEO Set to Install Top-Down Man-
agement,” Wall Street Journal (February 23, 2009), p. B1; “A Question of
Management,” Wall Street Journal ( June 2, 2009), p. R4; and Kermit Pattison,
“Yahoo CEO Carol Bartz: ‘I’m Just a Manager’,” Fast Company (August 11,
2010): fastcompany.com.
Ethics Check—Th is situation was reported in the Columbus Dispatch
(March 8, 2006), p. D2.
Facts to Consider—Information and quotes from “Generation Gap:
On Th eir Bosses, Millennials Happier than Boomers,” Wall Street Journal
(November 15, 2010), p. B6.
Endnotes 2 1 A thorough review and critique of the history of management thought,
including management in ancient civilizations, is provided by Daniel A.
Wren, Th e Evolution of Management Th ought, 4th ed. (New York: Wiley,
1993).
2 For a timeline of 20th-century management ideas, see “75 Years of Man-
agement Ideas and Practices: 1922–1997,” Harvard Business Review, supple-
ment (September/October 1997).
3 For a sample of this work, see Henry L. Gantt, Industrial Leadership
(Easton, MD: Hive, 1921; Hive edition published in 1974); Henry C. Metcalfe
and Lyndall Urwick (eds.), Dynamic Administration: Th e Collected Papers of
Mary Parker Follett (New York: Harper & Brothers, 1940); James D. Mooney,
Th e Principles of Administration, rev. ed. (New York: Harper & Brothers,
1947); and Lyndall Urwick, Th e Elements of Administration (New York:
Harper & Brothers, 1943) and Th e Golden Book of Management (London:
N. Neame, 1956).
4 References on Taylor’s work are from Frederick W. Taylor, Th e Principles of
Scientifi c Management (New York: W. W. Norton, 1967), originally published
by Harper & Brothers in 1911. See Charles W. Wrege and Amedeo G. Perroni,
“Taylor’s Pig-Tale: A Historical Analysis of Frederick W. Taylor’s Pig Iron Exper-
iments,” Academy of Management Journal, vol. 17 (March 1974), pp. 6–27, for
a criticism; see Edwin A. Locke, “Th e Ideas of Frederick W. Taylor: An Evalua-
tion,” Academy of Management Review, vol. 7 (1982), p. 14, for an examination
of the contemporary signifi cance of Taylor’s work. See also the biography by
Robert Kanigel, Th e One Best Way (New York: Viking, 1997).
5 Frank Gilbreth, Motion Study (New York: Van Nostrand, 1911).
6 For current examples see Ben Worthen, “Do You Need to Work Faster?
Get a Bigger Computer Monitor,” Wall Street Journal (March 25, 2008), p. B8;
and “Plant Seeks Savings with Shot-Clock Approach,” Th e Messenger, Athens,
Ohio (November 15, 2009), p. A3.
7 Kanigel, op. cit.
8 Opening quote from A. M. Henderson and Talcott Parsons (eds. and
trans.), Max Weber: Th e Th eory of Social Economic Organization (New York:
Free Press, 1947), p. 337.
9 Ibid.
10 Available in the English language as Henri Fayol, General and Industrial
Administration [London: Pitman, 1949); subsequent discussion relies on
M. B. Brodie, Fayol on Administration (London: Pitman, 1949).
11 M. P. Follett, Freedom and Coordination (London: Management Publica-
tions Trust, 1949).
12 Pauline Graham, Mary Parker Follett—Prophet of Management: A Celebra-
tion of Writings from the 1920s (Boston: Harvard Business School Press, 1995).
13 Information from “Honesty Top Trait for Chair,” Columbus Dispatch
( January 15, 2003), p. G1.
14 See Peter F. Drucker, “Looking Ahead: Implications of the Present,”
Harvard Business Review (September/October, 1997), pp. 18–32.
15 Th e Hawthorne studies are described in detail in F. J. Roethlisberger
and William J. Dickson, Management and the Worker (Cambridge, MA: Har-
vard University Press, 1966); and G. Homans, Fatigue of Workers (New York:
Reinhold, 1941). For an interview with three of the participants in the relay-
assembly test-room studies, see R. G. Greenwood, A. A. Bolton, and R. A.
Greenwood, “Hawthorne a Half Century Later: ‘Relay Assembly Participants
Remember,’ ” Journal of Management, vol. 9 (1983), pp. 217–31.
16 Th e criticisms of the Hawthorne studies are detailed in Alex Carey, “Th e
Hawthorne Studies: A Radical Criticism,” American Sociological Review,
vol. 32 (1967), pp. 403–16; H. M. Parsons, “What Happened at Hawthorne?”
Science, vol. 183 (1974), pp. 922–32; and B. Rice, “Th e Hawthorne Defect:
Persistence of a Flawed Th eory,” Psychology Today, vol. 16 (1982), pp. 70–74.
See also Wren, op. cit.
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17 Th is discussion of Maslow’s theory is based on Abraham H. Maslow,
Eupsychian Management (Homewood, IL: Richard D. Irwin, 1965); and
Abraham H. Maslow, Motivation and Personality, 2nd ed. (New York: Harper
& Row, 1970).
18 Douglas McGregor, Th e Human Side of Enterprise (New York: McGraw-
Hill, 1960).
19 See Gary Heil, Deborah F. Stevens, and Warren G. Bennis, Douglas
McGregor on Management: Revisiting the Human Side of Enterprise (New
York: Wiley, 2000).
20 Chris Argyris, Personality and Organization (New York: Harper &
Row, 1957).
21 Information on attitude survey in the federal bureaucracy from David E.
Rosenbaum, “Study Ranks Homeland Security Dept. Lowest in Morale,” New
York Times (October 16, 2005), p. 17.
22 Scott Morrison, “Google Searches for Staffi ng Answers,” Wall Street Jour-
nal (May 19, 2009), p. B1.
23 Th omas H. Davenport, Jeanne G. Harris, and Robert Morison, Analytics
at Work: Smarter Decisions, Better Results (Cambridge, MA: Harvard Business
Press, 2010).
24 Th e ideas of Ludwig von Bertalanff y contributed to the emergence of
this systems perspective on organizations. See his article, “Th e History and
Status of General Systems Th eory,” Academy of Management Journal, vol. 15
(1972), pp. 407–26. Th is viewpoint is further developed by Daniel Katz and
Robert L. Kahn in their classic book, Th e Social Psychology of Organizations
(New York: Wiley, 1978). For an integrated systems view, see Lane Tracy, Th e
Living Organization (New York: Quorum Books, 1994). For an overview, see
W. Richard Scott, Organizations: Rational, Natural, and Open Systems, 4th ed.
(Upper Saddle River, NJ: Prentice Hall, 1998).
25 See discussion by Scott, op. cit., pp. 66–68.
26 For an overview, see ibid., pp. 95–97.
27 W. Edwards Deming, Quality, Productivity, and Competitive Position (Cam-
bridge, MA: MIT Press, 1982), and Rafael Aguay, Dr. Deming: Th e American
Who Taught the Japanese about Quality (New York: Free Press, 1997).
28 See Howard S. Gitlow and Shelly J. Gitlow, Th e Deming Guide to Quality
and Competitive Position (Englewood Cliff s, NJ: Prentice-Hall, 1987).
29 See Edward E. Lawler III, Susan Albers Mohrman, and Gerald E. Ledford, Jr.,
Employee Involvement and Total Quality Management: Practices and Results
in Fortune 1000 Companies (San Francisco: Jossey-Bass, 1992).
30 See William C. Bogner, “Tom Peters on the Real World of Business” and
“Robert Waterman on Being Smart and Lucky,” Academy of Management
Executive, vol. 16 (2002), pp. 40–50.
31 See Jim Collins and Jerry I. Porras, Built to Last (New York: Harper Collins,
1994); and Jim Collins, Good to Great (New York: HarperCollins, 2001). For
recent research critical of Collins’s work, see Bruce G. Resnick and Timothy
L. Smunt, “From Good to Great to . . . ,”Academy of Management Perspectives
(November, 2008), pp. 6–12; and Bruce Niendorf and Kristine Beck, “Good
to Great, or Just Good?” Academy of Management Perspectives (November,
2008), pp. 13–20.
32 See Bruce G. Resnick and Timothy L. Smunt, “From Good to Great
to . . .” Academy of Management Perspectives (November, 2008), pp. 6–12; and,
“Bruce Niendorf and Kristine Beck, “Good to Great, or Just Good?” Academy
of Management Perspectives (November, 2008), pp. 13–20.
33 Jim Collins, How the Mighty Fall: And Why Some Companies Never Give In
(New York: HarperCollins, 2009).
34 Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-
Truths, and Total Nonsense: Profiting from Evidence-Based Management
(Boston: Harvard Business School Press, 2006); Jeffrey Pfeffer and Robert
I. Sutton, “Management Half-Truths and Nonsense,” California Manage-
ment Review, vol. 48 (2006), pp. 77–100; and Jeffrey Pfeffer and Robert I.
Sutton, “Evidence-Based Management, Harvard Business Review ( Janu-
ary, 2006), R0601E.
35 Jeff rey Pfeff er, Th e Human Equation: Building Profi ts by Putting People
First (Boston: Harvard Business School Press, 1998); and Z. Charles O’Reilly
III and Jeff rey Pfeff er, Hidden Value: How Great Companies Achieve Extraor-
dinary Results with Ordinary People (Boston: Harvard Business School
Press, 2000).
36 Denise M. Rousseau, “On Organizational Behavior,” BizEd (May/June,
2008), pp. 30–31.
Feature Notes 3 Role Models—Information and quotes from stonyfieldfarms.com,
notablebiographies.com, and “25 Rich Ass Greenies Who Made Their
Fortune Saving the Environment,” earthfi rst.com (August 25, 2008).
Facts to Consider—Information from Deloitte LLP, “Leadership Counts:
2007 Deloitte & Touche USA Ethics & Workplace Survey Results,” Kiplinger
Business Resource Center ( June, 2007): www.kiplinger.com
Ethics Check—Example and quote from Morice Mendoza, “How to Create
a Green Supply Chain,” Financial Times, Kindle Edition (November 11, 2010).
Whole Foods—Information and quotes from Sarah Skidmore, “Path
to Health,” Columbus Dispatch ( January 7, 2010), pp. A10, A11; Stephen
Moore, “Th e Conscience of a Capitalist,” Wall Street Journal (October 3–4,
2009), p. A11; and “Employees First,” Time ( July 7, 2008), p. 4.
UN Global Leaders Compact—Information from Helen Jones, “CEOs
Now Find Th at Principles and Profi ts Can Mix Well,” Wall Street Journal
(November 22, 2010), p. R5. New Profit, Inc.—Information and quotes
from www.newprofit.com.
Endnotes 3 1 See the discussion by Terry Th omas, John W. Dienhart, and John R.
Schermerhorn, Jr., “Leading Toward Ethical Behavior in Business,” Academy
of Management Executive, vol. 18 (May 2004), pp. 56–66.
2 See the discussion by Lynn Sharpe Paine, “Managing for Organizational
Integrity,” Harvard Business Review (March/April 1994), pp. 106–17.
3 Desmond Tutu, “Do More Th an Win,” Fortune (December 30, 1991), p. 59.
4 Ibid.
5 For an overview, see Linda K. Trevino and Katherine A. Nelson, Manag-
ing Business Ethics, 3rd ed. (New York: Wiley, 2003).
6 Information from Sue Shellenbarger, “How and Why We Lie at the Offi ce:
From Pilfered Pens to Padded Accounts,” Wall Street Journal (March 24,
2005), p. D1.
7 Milton Rokeach, Th e Nature of Human Values (New York: Free Press,
1973). See also W. C. Frederick and J. Weber, “Th e Values of Corporate Execu-
tives and Th eir Critics: An Empirical Description and Normative Implica-
tions,” in W. C. Frederick and L. E. Preston (eds.), Business Ethics: Research
Issues and Empirical Studies (Greenwich, CT: JAI Press, 1990).
8 Case reported in Michelle Conlin, “Cheating—Or Postmodern Learn-
ing?” Business Week (May 14, 2007), p. 42.
9 See Gerald F. Cavanagh, Dennis J. Moberg, and Manuel Velasquez, “Th e
Ethics of Organizational Politics,” Academy of Management Review, vol. 6
(1981), pp. 363–74; Justin G. Locknecker, Joseph A. McKinney, and Carlos
W. Moore, “Egoism and Independence: Entrepreneurial Ethics,” Organiza-
tional Dynamics (Winter 1988), pp. 64–72; and Justin G. Locknecker, Joseph
A. McKinney, and Carlos W. Moore, “Th e Generation Gap in Business Ethics,”
Business Horizons (September/October 1989), pp. 9–14.
10 Raymond L. Hilgert, “What Ever Happened to Ethics in Business and in
Business Schools?” Th e Diary of Alpha Kappa Psi (April 1989), pp. 4–8.
11 Jerald Greenburg, “Organizational Justice: Yesterday, Today, and Tomor-
row,” Journal of Management, vol. 16 (1990), pp. 399–432; and Mary A.
Konovsky, “Understanding Procedural Justice and Its Impact on Business
Organizations,” Journal of Management, vol. 26 (2000), pp. 489–511.
12 Interactional justice is described by Robert J. Bies, “Th e Predicament of
Injustice: Th e Management of Moral Outrage,” in L. L. Cummings & B. M. Staw
(eds.), Research in Organizational Behavior, vol. 9 (Greenwich, CT: JAI Press,
1987), pp. 289–319. Th e example is from Carol T. Kulik & Robert L. Holbrook,
“Demographics in Service Encounters: Eff ects of Racial and Gender Con-
gruence on Perceived Fairness,” Social Justice Research, vol. 13 (2000),
pp. 375–402.
13 See, for example, M. Fortin and M. R. Fellenz, 2008. Hypocrisies of
Fairness: Towards a More Refl exive Ethical Base in Organizational Justice
Research and Practice. Journal of Business Ethics, vol. 78 (2008), pp. 415–433.
14 Th e United Nations Universal Declaration of Human Rights is available
online at: http://www.un.org/Overview/rights.html.
15 Robert D. Haas, “Ethics—A Global Business Challenge,” Vital Speeches of
the Day ( June 1, 1996), pp. 506–9.
16 Th is discussion is based on Th omas Donaldson, “Values in Tension: Eth-
ics Away from Home,” Harvard Business Review, vol. 74 (September/October
1996), pp. 48–62.
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17 Ibid; Th omas Donaldson and Th omas W. Dunfee, “Towards a Unifi ed
Conception of Business Ethics: Integrative Social Contracts Th eory,” Acad-
emy of Management Review, vol. 19 (1994), pp. 252–85.
18 Developed from Donaldson, op. cit.
19 Reported in Barbara Ley Toffl er, “Tough Choices: Managers Talk Eth-
ics,” New Management, vol. 4 (1987), pp. 34–39. See also Barbara Ley Toffl er,
Tough Choices: Managers Talk Ethics (New York: Wiley, 1986).
20 See discussion by Trevino and Nelson, op. cit., pp. 47–62.
21 Information from Steven N. Brenner and Earl A. Mollander, “Is the Ethics of
Business Changing?” Harvard Business Review, vol. 55 ( January/February 1977).
22 Deloitte LLP, “Leadership Counts: 2007 Deloitte & Touche USA Ethics &
Workplace Survey Results,” Kiplinger Business Resource Center ( June, 2007):
www.kiplinger.com.
23 “Who’s to Blame: Washington or Wall Street?” Newsweek (March 30,
2009): www.newsweek.com.
24 Th is research is summarized by Archie Carroll, “Pressure May Force
Ethical Hand,” BGS International Exchange (Fall 2004), p. 5.
25 Ibid.
26 Ibid.
27 Saul W. Gellerman, “Why ‘Good’ Managers Make Bad Ethical Choices,”
Harvard Business Review, vol. 64 ( July/August, 1986), pp. 85–90.
28 Stephen Moore, “Th e Conscience of a Capitalist,” Wall Street Journal
(October 3–4, 2009), p. A11.
29 Survey results from Del Jones, “48% of Workers Admit to Unethical or
Illegal Acts,” USA Today (April 4, 1997), p. A1.
30 Lawrence Kohlberg, The Psycholog y of Moral Development: The
Nature and Validity of Moral Stages (Essays in Moral Development, Vol-
ume 2) (New York: HarperCollins, 1984). See also the discussion by Linda
K. Trevino, “Moral Reasoning and Business Ethics: Implications for
Research, Education, and Management, Journal of Business Ethics, vol. 11
(1992), pp. 445–59.
31 See, for example, David Bielo, “MBA Programs for Social and Environ-
mental Stewardship,” Business Ethics (Fall 2005), pp. 22–28.
32 Alan L. Otten, “Ethics on the Job: Companies Alert Employees to Poten-
tial Dilemmas,” Wall Street Journal ( July 14, 1986), p. 17; and “Th e Business
Ethics Debate,” Newsweek (May 25, 1987), p. 36.
33 See the Josephson model for ethical decision making: www.
josephsoninstitute.org.
34 Examples from “Whistle-Blowers on Trial,” Business Week (March 24,
1997), pp. 172–78; and “NLRB Judge Rules for Massachusetts Nurses in
Whistle-Blowing Case,” American Nurse ( January/February 1998), p. 7. For a
review of whistleblowing, see Marcia P. Micelli and Janet P. Near, Blowing the
Whistle (Lexington, MA: Lexington Books, 1992); Micelli and Near, “Whistle-
blowing: Reaping the Benefi ts,” Academy of Management Executive, vol. 8
(August 1994), pp. 65–72; and Cynthia Cooper, Extraordinary Circumstances
(Hoboken, NJ: Wiley, 2009).
35 Information from Ethics Resource Center, “Major Survey of America’s
Workers Finds Substantial Improvements in Ethics”: www.ethics.org/releases/
nr_2003052l_nbes.html.
36 Information from James A. Waters, “Catch 20.5: Mortality as an Organiza-
tional Phenomenon,” Organizational Dynamics, vol. 6 (Spring 1978), pp. 3–15.
37 Information from “Gifts of Gab: A Start-Up’s Social Conscience Pays Off ,”
Business Week (February 5, 2001), p. F38.
38 Developed from recommendations of the Government Accountability
Project reported in “Blowing the Whistle without Paying the Piper,” Business
Week ( June 3, 1991): businessweek.com/archives.
39 Archie B. Carroll, “In Search of the Moral Manager,” Business Horizons
(March/April, 2001), pp. 7–15.
40 Kohlberg, op. cit.
41 Information from corporate Web site: www.gapinc.com/community
sourcing/vendor_conduct.htm.
42 See Marc Gunther, “Can Factory Monitoring Ever Really Work?” Busi-
ness Ethics (Fall 2005), p. 12.
43 Information from corporate Web site: www.gapinc.com/community
sourcing/vendor_conduct.htm.
44 See David Vogel, Th e Market for Virtue: Th e Potential and Limits of Cor-
porate Social Responsibility (Washington, D.C.: Brookings Institution Press,
2006); and Th omas et al., op. cit.
45 For more on this notion, see Alfred A. Marcus and Adam R. Fremeth,
“Green Management Matters Regardless,” Academy of Management Perspec-
tives, vol. 23 (August, 2009), pp. 17–26; and, Jeff rey Pfeff er, “Building Sustain-
able Organizations: Th e Human Factor,” Academy of Management Perspec-
tives, vol. 24 (February, 2010), pp. 34–45.
46 Joe Biesecker, “What Today’s College Graduates Want: It’s Not All About
Paychecks,” Central Penn Business Journal (August 10, 2007).
47 Sarah E. Needleman, “Th e Latest Offi ce Perk: Getting Paid to Volunteer,”
Wall Street Journal (April 29, 2008), p. D1.
48 Th e historical framework of this discussion is developed from Keith
Davis, “Th e Case For and Against Business Assumption of Social Responsi-
bility,” Academy of Management Journal ( June 1973), pp. 312–22; Keith Davis
and William Frederick, Business and Society: Management: Public Policy, Eth-
ics, 5th ed. (New York: McGraw-Hill, 1984). Th is debate is discussed by Joel
Makower in Putting Social Responsibility to Work for Your Business and the
World (New York: Simon & Schuster, 1994), pp. 28–33. See also Aneel Kar-
nani, “Th e Case Against Social Responsibility,” Wall Street Journal (August
23, 2010); www.usj.com.
49 Th e Friedman quotation is from Milton Friedman, Capitalism and Free-
dom (Chicago: University of Chicago Press, 1962); the Samuelson quotation
is from Paul A. Samuelson, “Love Th at Corporation,” Mountain Bell Magazine
(Spring 1971). Both are cited in Davis, op. cit.
50 See James K. Glassman, “When Ethics Meet Earnings,” International Herald
Tribune (May 24–25, 2003), p. 15; Simon Zaydek, “Th e Path to Corporate Social
Responsibility,” Harvard Business Review (December 2004), pp. 125–32.
51 See Makower, op. cit. (1994), pp. 71–75; Sandra A. Waddock and
Samuel B. Graves, “Th e Corporate Social Performance–Financial Perfor-
mance Link,” Strategic Management Journal (1997), pp. 303–19: and Vogel,
op. cit. (2006).
52 Michael E. Porter and Mark R. Kramer, “Shared Value: How to Rein-
vent Capitalism and Unleash a Wave of Innovation and Growth,” Harvard
Business Review ( January–February, 2011), pp. 62–77.
53 Archie B. Carroll, “A Th ree-Dimensional Model of Corporate Perfor-
mance,” Academy of Management Review, vol. 4 (1979), pp. 497–505. Carroll’s
continuing work in this area is reported in Mark S. Schwartz and Archie B.
Carroll, “Corporate Social Responsibility: A Th ree Domain Approach,” Busi-
ness Ethics Quarterly, vol. 13 (2003), pp. 503–30.
54 See the discussion by Porter and Kramer, op. cit.
55 Examples from Jim Phillips, “Business Leaders Say ‘Green’ Approach
Doable,” Athens News (March 27, 2008): www.athensnews.com; “Th e Bottom
Line on Business and the Environment,” Wall Street Journal (February 12,
2009), p. A7; and Alan G. Robinson and Dean M. Schroeder, “Greener and
Cheaper,” Wall Street Journal (March 23, 2009), p. R4.
56 Information from Helen Jones, “CEOs Now Find that Principles and
Profi ts Can Mix Well,” Wall Street Journal (November 22, 2010), p. R5.
57 Ibid.
58 Ibid.
59 Defi nition from www.sustainablebusiness.com.
60 www.wbcsd.org.
61 “Indra Nooyi of Pepsico, View from the Top,” Financial Times: www.
ft.com (February 1, 2010), retrieved March 11, 2010.
62 “Eco-nomics—Creating Environmental Capital,” Wall Street Journal
(March 8, 2010), p. R1.
63 From www.iso.org.
64 Pfeff er, op cit.
65 Abuses of micro-credit lending have been publicized in the press, and
both the microfi nance industry as a whole and the Grameen Bank in particu-
lar have been criticized by the Bangladesh government. Muhammad Yunus
published his own criticism of the industry and defense of the Grameen Bank
model in “Sacrifi cing Microcredit for Megaprofi ts,” Th e New York Times ( Janu-
ary 14, 2011): nytimes.com. A Norwegian documentary that aired criticisms
of how Yunus and Grameen Bank handled funds has largely been refuted, but
Yunus continues to be criticized by the Bangladesh government.
66 David Bornstein, How to Change the World—Social Entrepreneurs and
the Power of New Ideas (Oxford, UK: Oxford University Press, 2004).
67 See Laura D’ Andrea Tyson, “Good Works—With a Business Plan,” Busi-
ness Week (May 3, 2004), retrieved from Business Week Online (November
14, 2005) at www.Businessweek.com.
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Endnotes EN-5
68 Chip Fleiss, “Social Enterprise—the Fiegling Fourth Sector Soapbox,”
Financial Times ( June 15, 2009).
69 Drucker quote referenced and discussed at www.druckersociety.at/
repository/newsletter/09/newsletter.html.
Feature Notes 4 Role Models—Information from Kate Klonick, “Pepsi’s CEO a Refreshing
Change” (August 15, 2006): www.abcnews.com; Diane Brady, “Indra Nooyi:
Keeping Cool in Hot Water,” Business Week ( June 11, 2007), special report;
Indra Nooyi, “Th e Best Advice I Ever Got,” CNNMoney (April 30, 2008): www.
Cnnnmoney.com; “Indra Nooyi,” Wall Street Journal (November 10, 2008),
p. R3; and “Indra Nooyi of PepsiCo,” View from the Top, Financial Times:
www.ft.com (February 1, 2010), retrieved March 11, 2010.
Ethics Check—Story reported in and quotes from Economist ( June 17,
2006), vol. 379, issue 8482, pp. 65–66, 2p, 1c.
Facts to Consider—Information from “Six Products, Six Carbon Footprints,”
Wall Street Journal (October 6, 2008), p. R3; and, “Walmart Behind on Carbon
Goal,” Environmental Reader (April 18, 2010): www.environmentalleader.
com/2011/04/18/.
Zynga—Information from Douglas MacMillan, Peter Burrows, and Spencer
E. Ante, “Th e App Economy,” Business Week (November 2, 2009), pp. 44–49;
Kevin Casey, “Putting Your Money Where Your Mouse Is?” Th e Irish Times
(August 6, 2010), p. 6; and zynga.com/about.
Endnotes 4 1 Information and quotes from “Last Miner Out Hailed as a Shift Boss Who
Kept Group Alive,” news.blog.cnn.com (October 14, 2010); and Eva Bergara,
“Chilean Miners Honored in Ceremony, Football Game,” news.yahoo.com
(October 25, 2010).
2 Peter F. Drucker, “Looking Ahead: Implications of the Present,” Harvard
Business Review (September/October 1997), pp. 18–32. See also Shaker A.
Zahra, “An Interview with Peter Drucker,” Academy of Management Executive,
vol. 17 (August 2003), pp. 9–12.
3 For a good discussion, see Watson H. Agor, Intuition in Organizations:
Leading and Managing Productively (Newbury Park, CA: Sage, 1989); Herbert
A. Simon, “Making Management Decisions: Th e Role of Intuition and Emo-
tion,” Academy of Management Executive, vol. 1 (1987), pp. 57–64; Orlando
Behling and Norman L. Eckel, “Making Sense Out of Intuition,” Academy of
Management Executive, vol. 1 (1987), pp. 57–64; Orlando Behling and Norman
L. Eckel, “Making Sense Out of Intuition,” Academy of Management Executive,
vol. 5 (1991), pp. 46–54.
4 Alan Deutschman, “Inside the Mind of Jeff Bezos,” Fast Company, Issue 85
(August, 2004); www.fastcompany.com.
5 Quote from Susan Carey, “Pilot ‘in Shock’ as He Landed Jet in River,” Wall
Street Journal (February 9, 2009), p. A6.
6 Based on Carl Jung’s typology, as described in Donald Bowen, “Learn-
ing and Problem-Solving: You’re Never Too Jung,” in Donald D. Bowen, Roy
J. Lewicki, Donald T. Hall, and Francine S. Hall, eds., Experiences in Manage-
ment and Organizational Behavior, 4th ed. (New York: Wiley, 1997), pp. 7–13;
and John W. Slocum Jr., “Cognitive Style in Learning and Problem Solving,”
in ibid., pp. 349–53.
7 See Hugh Courtney, Jane Kirkland, and Patrick Viguerie, “Strategy
Under Uncertainty,” Harvard Business Review (November/December 1997),
pp. 67–79.
8 See George P. Huber, Managerial Decision Making (Glenview, IL: Scott,
Foresman, 1975). For a comparison, see the steps in Xerox’s problem-solving
process, as described in David A. Garvin, “Building a Learning Organization,”
Harvard Business Review ( July/August 1993), pp. 78–91; and the Josephson
model for ethical decision making described at www.josephsoninstitute.
org/MED/MED-4sevensteppath.htm.
9 Joseph B. White and Lee Hawkins Jr., “GM Cuts Deeper in North
America,” Wall Street Journal (November 22, 2005), p. A3. See also Rick
Wagoner, “A Portrait of My Industry,” Wall Street Journal (December 6,
2005), p. A20.
10 See Herbert A. Simon, Administrative Behavior (New York: Free Press,
1947); James G. March and Herbert A. Simon, Organizations (New York:
Wiley, 1958); and Herbert A. Simon, Th e New Science of Management Deci-
sion (New York: Harper, 1960).
11 Th is fi gure and the related discussion is developed from conversations
with Dr. Alma Acevedo of the University of Puerto Rico at Rio Piedras and
her articles “Of Fallacies and Curricula: A Case of Business Ethics,” Teaching
Business Ethics, vol. 5 (2001), pp. 157–170; and “Business Ethics: An Intro-
duction,” working paper (2009).
12 Based on Gerald F. Cavanagh, American Business Values, 4th ed. (Upper
Saddle River, NJ: Prentice-Hall, 1998).
13 Th e third spotlight question is based on the Josephson model for ethical
decision making: www.josephsoninstitute.org/MED/MED-4sevensteppath.
htm.
14 Information from “Lonnie Johnson,” USAA Magazine (Fall, 2007), p. 38;
and www.johnsonrd.com.
15 See, for example, Roger von Oech, A Whack on the Side of the Head (New
York: Warner Books, 1983) and A Kick in the Seat of the Pants (New York:
Harper & Row, 1986).
16 Teresa M. Amabile, “Motivating Creativity in Organizations,” California
Management Review, vol. 40 (Fall, 1997), pp. 39–58.
17 Developed from discussions by Edward DeBono, Lateral Th inking:
Creativity Step-by-Step (New York: HarperCollins, 1970); John S. Dacey and
Kathleen H. Lennon, Understanding Creativity (San Francisco: Jossey-Bass,
1998); and Bettina von Stamm, Managing Innovation, Design & Creativity
(Chichester, England: Wiley, 2003).
18 Th e classic work is Norman R. Maier, “Assets and Liabilities in Group
Problem Solving,” Psychological Review, vol. 74 (1967), pp. 239–49.
19 Th is presentation is based on the work of R. H. Hogarth, D. Kahneman,
A. Tversky, and others, as discussed in Max H. Bazerman, Judgment in Mana-
gerial Decision Making, 3rd ed. (New York: Wiley, 1994).
20 Barry M. Staw, “Th e Escalation of Commitment to a Course of Action,”
Academy of Management Review, vol. 6 (1981), pp. 577–87; and Barry M. Staw
and Jerry Ross, “Knowing When to Pull the Plug,” Harvard Business Review,
vol. 65 (March/April 1987), pp. 68–74.
21 Quotes from Jeff Kingston, “A Crisis Made in Japan,” Wall Street Journal
(February 6–7, 2010), pp. W1, W2; and Kate Linebaugh, Dionne Searcey, and
Norihiko Shirouzu, “Secretive Culture Led Toyota Astray,” Wall Street Journal
(February 10, 2010), pp. A1, A16.
22 Ibid; and Richard Tedlow, “Toyota Was in Denial. How About You?”
Bloomberg Businessweek (April 19, 2010), p. 76.
23 For scholarly reviews, see Dean Tjosvold, “Eff ects of Crisis Orienta-
tion on Managers’ Approach to Controversy in Decision Making,” Academy
of Management Journal, vol. 27 (1984), pp. 130–38; and Ian I. Mitroff , Paul
Shrivastava, and Firdaus E. Udwadia, “Eff ective Crisis Management,” Acad-
emy of Management Executive, vol. 1 (1987), pp. 283–92.
24 Anna Muoio, “Where Th ere’s Smoke It Helps to Have a Smoke Jumper,”
Fast Company, vol. 33, p. 290.
Feature Notes 5 Opening photo—Quote from “Japan Widens Evacuation Zone Around
Fukushima Nuclear Plant,” www.dailytelegraph.com (May 15, 2011).
Role Models—Information from Julie Bennett, “Don Th ompson Engineers
Winning Role as McDonald’s President,” Franchise Times (February 2008):
www.franchisetimes.com.
Facts to Consider—Information from Phred Dvorak, Baob Davis, and
Louise Radnofsky, “Firms Confront Boss-Subordinate Love Aff airs,” Wall
Street Journal (October 27, 2008), p. B5. Survey data from Society for Human
Resource Management.
Zynga—Information from Douglas MacMillan, Peter Burrows, and Spencer
E. Ante, “Th e App Economy,” BusinessWeek (November 2, 2009), pp. 44–49;
Kevin Casey, “Putting Your Money Where Your Mouse Is?” Th e Irish Times
(August 6, 2010), p. 6; and, zynga.com/about.
Endnotes 5 1 Eaton Corporation Annual Report, 1985.
2 Henry Mintzberg, “Th e Manager’s Job: Folklore and Fact,” Harvard Busi-
ness Review, vol. 53 ( July/August 1975), pp. 54–67; and Henry Mintzberg,
“Planning on the Left Side and Managing on the Right,” Harvard Business
Review, vol. 54 ( July/August 1976), pp. 46–55.
3 For a classic study, see Stanley Th une and Robert House, “Where Long-
Range Planning Pays Off ,” Business Horizons, vol. 13 (1970), pp. 81–87. For
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EndnotesEN-6
a critical review of the literature, see Milton Leontiades and Ahmet Teel,
“Planning Perceptions and Planning Results,” Strategic Management Journal
vol. 1 (1980), pp. 65–75; and J. Scott Armstrong, “Th e Value of Formal Plan-
ning for Strategic Decisions,” Strategic Management Journal, vol. 3 (1982),
pp. 197–211.
For special attention to the small business setting, see Richard B. Robinson
Jr., John A. Pearce II, George S. Vozikis, and Timothy S. Mescon, “Th e Relation-
ship Between Stage of Development and Small Firm Planning and Perfor-
mance,” Journal of Small Business Management, vol. 22 (1984), pp. 45–52; and
Christopher Orphen, “Th e Eff ects of Long–Range Planning on Small Business
Performance: A Further Examination,” Journal of Small Business Management,
vol. 23 (1985), pp. 16–23. For an empirical study of large corporations, see
Vasudevan Ramanujam and N. Venkatraman, “Planning and Performance: A
New Look at an Old Question,” Business Horizons, vol. 30 (1987), pp. 19–25.
4 Quote from Stephen Covey and Roger Merrill, “New Ways to Get Orga-
nized at Work,” USA Weekend (February 6/8, 1998), p. 18. Books by Stephen
R. Covey include: Th e 7 Habits of Highly Eff ective People: Powerful Lessons in
Personal Change (New York: Fireside, 1990), and Stephen R. Covey and Sandra
Merril Covey, Th e 7 Habits of Highly Eff ective Families: Building a Beautiful Family
Culture in a Turbulent World (New York: Golden Books, 1996).
5 McDonald’s Tech Turnaround,” Harvard Business Review (November
2004), p. 128.
6 Information from Carol Hymowitz, “Packed Calendars Rule over Execu-
tives,” Wall Street Journal ( June 16, 2008), p. B1.
7 Quotes from Business Week (August 8, 1994), pp. 78–86.
8 See William Oncken Jr. and Donald L. Wass, “Management Time: Who’s
Got the Monkey?” Harvard Business Review, vol. 52 (September/October
1974), pp. 75–80, and featured as an HBR classic, Harvard Business Review
(November/December 1999).
9 For more on the long term, see Danny Miller and Isabelle Le Breton-
Miller, Managing for the Long Run (Cambridge, MA: Harvard Business School
Press, 2005).
10 See Elliot Jaques, Th e Form of Time (New York: Russak & Co., 1982). For
an executive commentary on his research, see Walter Kiechel III, “How
Executives Th ink,” Fortune (December 21, 1987), pp. 139–44.
11 See Henry Mintzberg, “Rounding Out the Manager’s Job,” Sloan Manage-
ment Review (Fall 1994), pp. 1–25.
12 Excerpts in sample sexual harassment policy from American Express’s
advice to small businesses at www.americanexpress.com (retrieved Novem-
ber 21, 2005).
13 Information from “Avoiding a Time Bomb: Sexual Harassment,” Business
Week, Enterprise issue (October 13, 1997), pp. ENT20–21.
14 Paul Glader, “GE’s Immelt to Cite Lessons Learned,” Wall Street Journal
(December 15, 2009), p. B2.
15 For a thorough review of forecasting, see J. Scott Armstrong, Long-Range
Forecasting, 2nd ed. (New York: Wiley, 1985).
16 Forecasts in Stay Informed from “Long-Term Forecasts on EIU Country
Data and Market Indicators & Forecasts,” Th e Economist Intelligence Unit,
www.eiu.com (retrieved November 21, 2005).
17 Information and quotes from Guy Chazan and Neil King, “BP’s Pre-
paredness for Major Crisis Is Questioned,” Wall Street Journal (May 10, 2010),
p. A6; and Ben Casselman and Guy Chazan, “Disaster Plans Lacing at Deep
Rigs,” Wall Street Journal, (May 18, 2010), p. A1.
18 Th e scenario-planning approach is described in Peter Schwartz, Th e Art
of the Long View (New York: Doubleday/Currency, 1991); and Arie de Geus,
Th e Living Company: Habits for Survival in a Turbulent Business Environment
(Boston, MA: Harvard Business School Press, 1997).
19 Ibid.
20 See, for example, Robert C. Camp, Business Process Benchmarking (Mil-
waukee: ASQ Quality Press 1994); Michael J. Spendolini, Th e Benchmarking
Book (New York: AMACOM, 1992); and Christopher E. Bogan and Michael J.
English, Benchmarking for Best Practices: Winning Th rough Innovative Adap-
tation (New York: McGraw-Hill, 1994).
21 David Kiley, “One Ford for the Whole World,” Business Week ( June 15,
2009), pp. 58–59.
22 See, for example, Cecile Rohwedder and Keith Johnson, “Pace-setting
Zara Seeks More Speed to Fight Its Rising Cheap-Chic Rivals,” Wall Street
Journal (February 20, 2008), pp. B1, B6.
23 “How Classy Can 7-Eleven Get?” Business Week (September 1, 1997),
pp. 74–75; and Kellie B. Gormly, “7-Eleven Moving Up a Grade,” Columbus
Dispatch (August 3, 2000), pp. C1–C2.
24 T. J. Rodgers, with William Taylor and Rick Foreman, “No Excuses Man-
agement,” World Executive’s Digest (May 1994), pp. 26–30.
25 See Paul Ingrassia, “Th e Right Stuff ,” Wall Street Journal (April 8, 2005),
p. D5.
Feature Notes 6 Opening Quote—“Toyota CEO Tells Lawmakers: I’m Deeply Sorry,” Asso-
ciated Press: Moneynews.com (February 24, 2010).
Chick-fi l-A—Information and quotes from Daniel Yee, “Chick-fi l-A Recipe
Winning Customers,” Columbus Dispatch (September 9, 2006), p. D1; Tom
Murphy, “Chick-fi l-A plans aggressive product rollout initiatives,” Rocky
Mount Telegram (May 28, 2008): www.rockymounttelegram.com; and
“Chick-fi l-A Reaches 20,000th Scholarship Milestone” ( July 28, 2005), Chick-
fi l-A press release: www.csrwire.com.
Role Models—Information and quotes from Stacy Perman, “Scones and
Social Responsibility,” Business Week (August 21/28, 2006), p. 38; and www.
dancingdeer.com.
Ethics Check—Paul Davidson, “ ‘Climate Has Changed’ for Data Privacy,”
USA Today (May 12, 2006), p. B1; Ben Elgin, “Th e Great Firewall of China,”
Business Week ( January 23, 2006), pp. 32–34; Alison Maitland, “Skype Says
Text-Messages Censored by Partner in China,” Financial Times (April 19,
2006), p. 15; and, “Web Firms Criticized Over China,” CNN.com ( July 20, 2006).
Facts to Consider—Information from Sarah E. Needleman, “Businesses
Say Th eft by Th eir Workers Is Up,” Wall Street Journal (December 11, 2008),
p. B8; Michelle Conlin, “To Catch a Corporate Th ief,” Business Week (February
16, 2009), p. 52; Simona Covel, “Small Businesses Face More Fraud in Down-
turn,” Wall Street Journal (February 19, 2009), p. B5; “Increase in Data Th eft
Outstrips Physical Loss,” Financial Times (October 18, 2010) Kindle Edition.
Endnotes 6 1 Toyota’s problems with quality and product recalls were widely described
in the news media during January/February 2010. See, for example, Sharon
Terlep and Josh Mitchell, “U.S. Widens Toyota Probe to Electronics,” Wall
Street Journal (February 4, 2010), pp. B1, B12.
2 Quote from “An Open Letter to Toyota Customers,” Columbus Dispatch
(February 4, 2010), p. A12.
3 “Th e Renewal Factor: Friendly Fact, Congenial Controls,” Business Week
(September 14, 1987), p. 105.
4 Rob Cross and Lloyd Baird, “Technology Is Not Enough: Improving Per-
formance by Building Institutional Memory,” Sloan Management Review
(Spring 2000), p. 73.
5 Information from Pep Sappal, “Integrated Inclusion Initiative,” Wall
Street Journal (October 3, 2006), p. A2.
6 Example from George Anders, “Management Guru Turns Focus to
Orchestras, Hospitals,” Wall Street Journal (November 21, 2005), pp. B1, B5.
7 Information from Leon E. Wynter, “Allstate Rates Managers on Handling
Diversity,” Wall Street Journal (October 1, 1997), p. B1.
8 Information from Kathryn Kranhold, “U.S. Firms Raise Ethics Focus,”
Wall Street Journal (November 28, 2005), p. B4.
9 Information from Raju Narisetti, “For IBM, a Groundbreaking Sales
Chief,” Wall Street Journal ( January 19, 1998), pp. B1, B5.
10 Based on discussion by Harold Koontz and Cyril O’Donnell, Essentials
of Management (New York: McGraw-Hill, 1974), pp. 362–65; see also Cross
and Baird, op. cit.
11 Information from Louis Lee, “I’m Proud of What I’ve Made Myself Into—
What I’ve Created,” Wall Street Journal (August 27, 1997), pp. B1, B5; and Jim
Collins, “Bigger, Better, Faster,” Fast Company, vol. 71 ( June 2003), p. 74.
12 See Sue Shellenbarger, “If You Need to Work Better, Maybe Try Working
Less,” Wall Street Journal (September 23, 2009), p. D1.
13 Douglas McGregor, Th e Human Side of Enterprise (New York: McGraw-
Hill, 1960).
14 Th is distinction is made in William G. Ouchi, “Markets, Bureaucracies
and Clans,” Administrative Science Quarterly, vol. 25 (1980), pp. 129–41.
15 Martin LaMonica, “Wal-Mart Readies Long-Term Move into Solar
Power,” CNET News.com ( January 3, 2007).
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Endnotes EN-7
16 See Dale D. McConkey, How to Manage by Results, 3rd ed. (New York:
AMACOM, 1976); Stephen J. Carroll Jr. and Henry J. Tosi Jr., Management
by Objectives: Applications and Research (New York: Macmillan, 1973); and
Anthony P. Raia, Managing by Objectives (Glenview, IL: Scott, Foresman, 1974).
17 For a discussion of research on MBO, see Carroll and Tosi, op. cit.; Raia, op.
cit; and Steven Kerr, “Overcoming the Dysfunctions of MBO,” Management by
Objectives, vol. 5, no. 1 (1976). Information in part from Dylan Loeb McClain,
“Job Forecast: Internet’s Still Hot,” New York Times ( January 30, 2001), p. 9.
18 Th e work on goal setting and motivation is summarized in Edwin
A. Locke and Gary P. Latham, Goal Setting: A Motivational Technique Th at
Works! (Englewood Cliff s, NJ: Prentice-Hall, 1984).
19 McGregor, op. cit.
20 Th e “hot stove rules” are developed from R. Bruce McAfee and William
Poff enberger, Productivity Strategies: Enhancing Employee Job Performance
(Englewood Cliff s, NJ: Prentice-Hall, 1982), pp. 54–55. Th ey are originally
attributed to Douglas McGregor, “Hot Stove Rules of Discipline,” in G.
Strauss and L. Sayles (eds), Personnel: Th e Human Problems of Management
(Englewood Cliff s, NJ: Prentice-Hall, 1967).
21 For basic readings on quality control, see Joseph M. Juran, Quality Con-
trol Handbook, 3rd ed.(New York: McGraw-Hill, 1979) and “Th e Quality Tril-
ogy: A Universal Approach to Managing for Quality,” in H. Costin (ed.), Total
Quality Management (New York: Dryden, 1994); W. Edwards Deming, Out of
Crisis (Cambridge, MA: MIT Press, 1986) and “Deming’s Quality Manifesto,”
Best of Business Quarterly, vol. 12 (Winter 1990–1991), pp. 6–101; Howard
S. Gitlow and Shelly J. Gitlow, Th e Deming Guide to Quality and Competitive
Position (Englewood Cliff s, NJ: Prentice-Hall, 1987); and Rafael Aguay, Dr.
Deming: Th e American Who Taught the Japanese About Quality (New York:
Free Press, 1997).
22 Aguay, op. cit.; W. Edwards Deming, op. cit. (1986).
23 Ibid.
24 “See “Downsides of Just-In-Time Inventory,” Bloomberg BusinessWeek
(March 28–April 3, 2011), pp. 17–18.
25 Information from Karen Carney, “Successful Performance Measure-
ment: A Checklist,” Harvard Management Update (No. U9911B), 1999.
26 Robert S. Kaplan and David P. Norton, “Th e Balanced Scorecard: Mea-
sures Th at Drive Performance,” Harvard Business Review ( July/August, 2005);
see also Robert S. Kaplan and David P. Norton, Th e Balanced Scorecard
(Cambridge, MA: Harvard Business School Press, 1996).
Feature Notes 7 Patagonia—Information and quotes from Yvon Chouinard, Let My
People Go Surfi ng: Th e Education of a Reluctant Businessman (New York:
Penguin Press HC, 2005); Steve Hamm, “A Passion for the Plan,” Business
Week (August 21/28, 2006), pp. 92–94; and www.patagonia.com/web/us/
patagonia.go?assetid=2047&ln=24.
Role Models—Information and quotes from “Who’s Who on Obama’s
New Economic Advisory Board,” LA Times Blog (February 6, 2009): www.
latimesblogs.latimes.com; “ ‘Diversify’ Isn’t Just Smart Financial Advice,”
Black MBA (Winter, 2008/2009), p. 54; “Black Enterprise Announces 100 Most
Powerful African Americans in Corporate America,” press release (February
5, 2009): www.biz.yahoo.com/bw ; and www.blackentrepreneurprofi le.com/
fortune-500-ceos (February 23, 2009).
Ethics Check—Life and Death at an Outsourcing Factory: Information
and quotes from “Life and Death at the iPad Factory,” Bloomberg Business-
Week ( June 7–13, 2010), pp. 35–36.
Facts to Consider—Information from Daniel Costello, “Th e Drought is
Over (At Least for CEOs),” Th e New York Times (April 9, 2011); nytimes.com
(accessed May 3, 2011); Joann S. Lublin, “CEO Pay in 2010 Jumped 11%,”
Wall Street Journal (May 9, 2011), p. 81; and, AFL-CIO, “2011 CEO Paywatch,”
http://www.afl cio.org/.
Endnotes 7 1 Information and quotes from Marcia Stepanek, “How Fast Is Net Fast?”
Business Week E-Biz (November 1, 1999), pp. EB52–54.
2 Keith H. Hammond, “Michael Porter’s Big Ideas,” Fast Company (March
2001), pp. 150–56.
3 Gary Hamel and C. K. Prahalad, “Strategic Intent,” Harvard Business
Review (May/June 1989), pp. 63–76.
4 See “Gauging the Walmart Eff ect,” Wall Street Journal (December 3–4,
2005), p. A9; and Matthew Boyle, “Walmart’s Magic Moment,” Business Week
( June 15, 2009), pp. 58–59.
5 Geoff rey A. Fowler and Nick Wingfi eld, “Apple’s Showman Takes the
Stage,” Wall Street Journal (March 3, 2011), p. B1.
6 Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Man-
agement: Competitiveness and Globalization (Minneapolis: West, 1997), p. 197.
7 See William McKinley, Carol M. Sanchez, and A. G. Schick, “Organiza-
tional Downsizing: Constraining, Cloning, Learning,” Academy of Manage-
ment Executive, vol. 9 (August 1995), pp. 32–44.
8 Kim S. Cameron, Sara J. Freeman, and A.K. Mishra, “Best Practices in
White-Collar Downsizing: Managing Contradictions,” Academy of Manage-
ment Executive, vol. 4 (August 1991), pp. 57–73.
9 “Overheard,” Wall Street Journal (April 16, 2009), p. C10; and Geoff rey A.
Fowler and Evan Ramstad, “eBay Looks Abroad for Growth,” Wall Street
Journal (April 16, 2009), p. B2.
10 Th is strategy classifi cation is found in Hitt et al., op. cit.; the attitudes
are from a discussion by Howard V. Perlmutter, “Th e Tortuous Evolution of
the Multinational Corporation,” Columbia Journal of World Business, vol. 4
( January/February 1969).
11 Fowler and Ramstad, op. cit., 2009.
12 Adam M. Brandenburger and Barry J. Nalebuff , Co-Opetition: A Revolu-
tion Mindset that Combines Competition and Cooperation (New York: Ban-
tam, 1996).
13 Jonathan Spiva, “BMW ActiveHybrid 7 Review,” the dieseldriver.com
( July 1, 2010).
14 See Michael E. Porter, “Strategy and the Internet,” Harvard Business
Review (March 2001), pp. 63–78; and Michael Rappa, Business Models on the
Web (www.ecommerce.ncsu.edu/business_models.html. February 6, 2001).
15 See threadless.com
16 Peter F. Drucker, Management: Tasks, Responsibilities, Practices (New
York: Harper & Row, 1973), p. 122.
17 See Laura Nash, “Mission Statements—Mirrors and Windows,” Harvard
Business Review (March/April 1988), pp. 155–56; James C. Collins and Jerry I.
Porras, “Building Your Company’s Vision,” Harvard Business Review (September/
October 1996), pp. 65–77; and James C. Collins and Jerry I. Porras, Built to Last:
Successful Habits of Visionary Companies (New York: Harper Business, 1997).
18 Gary Hamel, Leading the Revolution (Boston, MA: Harvard Business
School Press, 2000), pp. 72–73.
19 Collins and Porras, op. cit., 1996 and 1997.
20 See Peter F. Drucker’s views on organizational objectives in his classic
books Th e Practice of Management (New York: Harper & Row, 1954) and Man-
agement: Tasks, Responsibilities, Practices (New York: Harper & Row, 1973).
For a more recent commentary, see his article “Management: Th e Problems
of Success,” Academy of Management Executive, vol. 1 (1987), pp. 13–19.
21 C. K. Prahalad and Gary Hamel, “Th e Core Competencies of the Corpo-
ration,” Harvard Business Review (May/June 1990), pp. 79–91; see also Hitt
et al., op. cit., pp. 99–103.
22 For a discussion of Michael Porter’s approach to strategic planning,
see his books, Competitive Strategy: Techniques for Analyzing Industries and
Competitors (New York: Free Press, 1980) and Competitive Advantage: Creat-
ing and Sustaining Superior Performance (New York: Free Press, 1986) and his
article, “What Is Strategy?” Harvard Business Review (November/December,
1996, pp. 61–78; and Richard M. Hodgetts’s interview “A Conversation with
Michael E. Porter: A Signifi cant Extension Toward Operational Improve-
ment and Positioning,” Organizational Dynamics (Summer 1999), pp. 24–33.
23 See Porter, op. cit. (1980 and 1986).
24 Information from www.polo.com.
25 www.vanguard.com.
26 For more on GE and Jeff rey Immelt, see “Th e Immelt Revolution,” Busi-
ness Week (March 28, 2005), pp. 64–73.
27 Richard G. Hammermesh, “Making Planning Strategic,” Harvard Business
Review, vol. 64 ( July/August 1986), pp. 115–20; and Richard G. Hammermesh,
Making Strategy Work (New York: Wiley, 1986).
28 See Gerald B. Allan, “A Note on the Boston Consulting Group Concept
of Competitive Analysis and Corporate Strategy,” Harvard Business School,
Intercollegiate Case Clearing House, ICCH9-175-175 (Boston: Harvard Busi-
ness School, June 1976).
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EndnotesEN-8
29 R. Duane Ireland and Michael A. Hitt, “Achieving and Maintaining Stra-
tegic Competitiveness in the 21st Century,” Academy of Management Execu-
tive, vol. 13 (1999), pp. 43–57.
30 www.patagonia.com/web/us/patagonia.go?assetid=3351.
31 Hammond, op. cit.
Feature Notes 8 Build-A-Bear—Information and quotes from “Build-A-Bear Workshop,
Inc., Funding Universe”: www.fundinguniverse.com/company-histories/
BuildABear-Workshop-Inc (accessed March 9, 2009); and www.buildabear.
com. See also Maxine Clark and Amy Joyner, Th e Bear Necessities of Business:
Building a Company with Heart (Hoboken, NJ: Wiley, 2007).
Role Models—Information and quotes from David Kiley, “Ford’s Savior?”
Business Week (March 16, 2009), pp. 31–34; and Alex Taylor III, “Fixing Up
Ford,” Fortune (May 14, 2009).
Facts to Consider—Information and quote from “Bosses Overestimate
Th eir Managing Skills,” Wall Street Journal (November 1, 2010), p. B10.
Endnotes 8 1 Henry Mintzberg and Ludo Van der Heyden, “Organigraphs: Draw-
ing How Companies Really Work,” Harvard Business Review (September/
October 1999), pp. 87–94.
2 Ibid.
3 Th e classic work is Alfred D. Chandler, Strategy and Structure (Cam-
bridge, MA: MIT Press, 1962).
4 See Alfred D. Chandler Jr., “Origins of the Organization Chart,” Harvard
Business Review (March/April 1988), pp. 156–57.
5 “A Question of Management,” Wall Street Journal ( June 2, 2009), p. R4.
6 Joann S. Lublin, “Chairman-CEO Split Gains Allies,” Wall Street Journal
(March 30, 2009), p. B4.
7 See David Krackhardt and Jeff rey R. Hanson, “Informal Networks: Th e
Company Behind the Chart,” Harvard Business Review ( July/August 1993),
pp. 104–11.
8 Information from Jena McGregor, “Th e Offi ce Chart Th at Really Counts,”
Business Week (February 27, 2006), pp. 48–49.
9 See Phred Dvorak, “Engineering Firm Charts Ties,” Wall Street Journal
( January 26, 2009): www.wsj.com.
10 See Kenneth Noble, “A Clash of Styles: Japanese Companies in the U.S.,”
New York Times ( January 25, 1988), p. 7.
11 Information from Ellen Byron, “A New Odd Couple: Google, P&G
Swap Workers to Spur Innovation,” Wall Street Journal (November 19,
2008), pp. A1, A18.
12 For a discussion of departmentalization, see H. I. Ansoff and R. G.
Bradenburg, “A Language for Organization Design,” Management Science,
vol. 17 (August 1971), pp. B705–B731; Mariann Jelinek, “Organization
Structure: Th e Basic Conformations,” in Mariann Jelinek, Joseph A. Litterer,
and Raymond E. Miles (eds.), Organizations by Design: Th eory and Practice
(Plano, TX: Business Publications, 1981), pp. 293–302; Henry Mintzberg,
“Th e Structuring of Organizations,” in James Brian Quinn, Henry Mintzberg,
and Robert M. James (eds.), Th e Strategy Process: Concepts, Contexts, and
Cases (Englewood Cliff s, NJ: Prentice-Hall, 1988), pp. 276–304.
13 “A Question of Management,” op. cit.
14 Example reported in “Top Business Teams: A Lesson Straight from
Mars,” Time (February 9, 2009), p. 40; and Howard M. Guttman, Great Busi-
ness Teams (Hoboken, NJ: Wiley, 2009).
15 Th ese alternatives are well described by Mintzberg, op. cit.
16 Norihiko Shirouzu, “Toyota Plans a Major Overhaul in U. S.,” Wall Street
Journal (April 10, 2009), p. B3.
17 Information and quotes from “Management Shake-Up to Create ‘Leaner
Structure’,” Financial Times ( June 11, 2009).
18 Information and quote from “Revamped GM Updates Image of Core
Brands,” Financial Times ( June 18, 2009).
19 Excellent reviews of matrix concepts are found in Stanley M. Davis
and Paul R. Lawrence, Matrix (Reading, MA: Addison-Wesley, 1977); Paul
R. Lawrence, Harvey F. Kolodny, and Stanley M. Davis, “Th e Human Side of
the Matrix,” Organizational Dynamics, vol. 6 (1977), pp. 43–61; and Harvey
F. Kolodny, “Evolution to a Matrix Organization,” Academy of Management
Review, vol. 4 (1979), pp. 543–53.
20 Davis and Lawrence, op. cit.
21 Susan Albers Mohrman, Susan G. Cohen, and Allan M. Mohrman Jr.,
Designing Team-Based Organizations (San Francisco: Jossey-Bass, 1996).
22 See Glenn M. Parker, Cross-Functional Teams (San Francisco: Jossey-
Bass, 1995).
23 Information from William Bridges, “Th e End of the Job,” Fortune (Sep-
tember 19, 1994), pp. 62–74; and Alan Deutschman, “Th e Managing Wisdom
of High-Tech Superstars,” Fortune (October 17, 1994), pp. 197–206.
24 See the discussion by Jay R. Galbraith, “Designing the Networked Orga-
nization: Leveraging Size and Competencies,” in Susan Albers Mohrman, Jay
R. Galbraith, Edward E. Lawler III, and Associates, Tomorrow’s Organizations:
Crafting Winning Strategies in a Dynamic World (San Francisco: Jossey-Bass,
1998), pp. 76–102. See also Rupert F. Chisholm, Developing Network Organiza-
tions: Learning from Practice and Th eory (Reading, MA: Addison-Wesley, 1998);
and Michael S. Malone, Th e Future Arrived Yesterday: Th e Rise of the Protean
Corporation and What It Means for You (New York: Crown Books, 2009).
25 See Jerome Barthelemy, “Th e Seven Deadly Sins of Outsourcing,” Acad-
emy of Management Executive, vol. 17 (2003), pp. 87–98; and Paulo Prada and
Jiraj Sheth, “Delta Air Ends Use of India Call Centers,” Wall Street Journal
(April 18–19, 2009), pp. B1, B5.
26 See the collection of articles by Cary L. Cooper and Denise M. Rousseau
(eds.), Th e Virtual Organization: Vol. 6, Trends in Organizational Behavior
(New York: Wiley, 2000).
27 For a discussion of organization theory, see W. Richard Scott, Organiza-
tions: Rational, Natural, and Open Systems, 4th ed. (Upper Saddle River, NJ:
Prentice-Hall, 1998).
28 For a classic work, see Jay R. Galbraith, Organizational Design (Reading,
MA: Addison-Wesley, 1977).
29 David Van Fleet, “Span of Management Research and Issues,” Academy
of Management Journal, vol. 26 (1983), pp. 546–52.
30 Information and quotes from Ellen Byron and Joann S. Lublin, “Appoint-
ment of New P&G Chief Sends Ripples Th rough Ranks,” Wall Street Journal
( June 11, 2009), P. B3.
31 Information from Tim Stevens, “Winning the World Over,” Industry
Week (November 15, 1999).
32 See George P. Huber, “A Th eory of Eff ects of Advanced Information
Technologies on Organizational Design, Intelligence, and Decision Making,”
Academy of Management Review, vol. 15 (1990), pp. 67–71.
33 Developed from Roger Fritz, Rate Your Executive Potential (New York:
Wiley, 1988), pp. 185–86; Roy J. Lewicki, Donald D. Bowen, Douglas T. Hall,
and Francine S. Hall, Experiences in Management and Organizational Behav-
ior, 3rd ed. (New York: Wiley, 1988), p. 144.
34 Max Weber, Th e Th eory of Social and Economic Organization, A. M.
Henderson (trans.) and H. T. Parsons (ed.) (New York: Free Press, 1974). For
classic treatments of bureaucracy, see also Alvin Gouldner, Patterns of Indus-
trial Bureaucracy (New York: Free Press, 1954); and Robert K. Merton, Social
Th eory and Social Structure (New York: Free Press, 1957).
35 Tom Burns and George M. Stalker, Th e Management of Innovation
(London: Tavistock, 1961), republished (London: Oxford University Press,
1994). See also Wesley D. Sine, Hitoshi Mitsuhashi, and David A. Kirsch,
“Revisiting Burns and Stalker: Formal Structure and New Venture Perfor-
mance in Emerging Economic Sectors,” Academy of Management Journal,
vol. 49 (2006), pp. 121–32. Th e Burns and Stalker study was later extended
by Paul R. Lawrence and Jay W. Lorsch, Organizations and Environment
(Boston: Division of Research, Graduate School of Business Administration,
Harvard University, 1967).
36 See Henry Mintzberg, Structure in Fives: Designing Eff ective Organiza-
tions (Englewood Cliff s, NJ: Prentice-Hall, 1983).
37 “What Ails Microsoft?” Business Week (September 26, 2005), p. 101.
38 “Should Microsoft Break Up, on Its Own?” Wall Street Journal (November
26–27, 2005), p. B16.
39 See, for example, Jay R. Galbraith, Edward E. Lawler III, and Associates,
Organizing for the Future (San Francisco: Jossey-Bass, 1993); and Mohrman
et al., op. cit.
40 Peter Senge, Th e Fifth Discipline: Th e Art and Practice of the Learning
Organization (New York: Doubleday, 1994).
41 See Rosabeth Moss Kanter, Th e Changing Masters (New York: Simon &
Schuster, 1983).
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Endnotes EN-9
42 Barney Olmsted and Suzanne Smith, Creating a Flexible Workplace: How
to Select and Manage Alternative Work Options (New York: American Man-
agement Association, 1989).
43 See Allen R. Cohen and Herman Gadon, Alternative Work Schedules: Inte-
grating Individual and Organizational Needs (Reading, MA: Addison-Wesley,
1978), p. 125; Simcha Ronen and Sophia B. Primps, “Th e Compressed Work
Week as Organizational Change: Behavioral and Attitudinal Outcomes,”
Academy of Management Review, vol. 6 (1981), pp. 61–74.
44 Information from Lesli Hicks, “Workers, Employers Praise Th eir Four-
Day Workweek,” Columbus Dispatch (August 22, 1994), p. 6.
45 Business for Social Responsibility Resource Center: www.bsr.org/
resourcecenter ( January 24, 2001); Anusha Shrivastava, “Flextime Is Now
Key Benefi t for Mom-Friendly Employers,” Columbus Dispatch (September
23, 2003), p. C2; Sue Shellenbarger, “Number of Women Managers Rises,”
Wall Street Journal (September 30, 2003), p. D2.
46 “Networked Workers,” Business Week (October 6, 1997), p. 8; and Diane
E. Lewis, “Flexible Work Arrangements as Important as Salary to Some,”
Columbus Dispatch (May 25, 1998), p. 8.
47 Christopher Rhoads and Sara Silver, “Working at Home Gets Easier,”
Wall Street Journal (December 29, 2005), p. B4.
48 For a review, see Wayne F. Cascio, “Managing a Virtual Workplace,”
Academy of Management Executive, vol. 14 (2000), pp. 81–90.
49 Quote from Phil Porter, “Telecommuting Mom Is Part of a National
Trend,” Columbus Dispatch (November 29, 2000), pp. H1, H2.
Feature Notes 9 Netfl ix—Information and quotes from Brian Steinberg, “Transforming
the Movie-Rental Model,” Advertising Age, vol. 79, no. 1 ( January 7, 2008);
Nick Wingfi eld, “Netfl ix vs. Naysayers,” Wall Street Journal (March 27, 2008),
pp. B1, B2; and Daniel Roth, “Netfl ix Everywhere: Sorry Cable, You’re His-
tory,” Wired Magazine (September 21, 2009): www.wired.com.
Role Models—Information from David A. Price, “From Dorm Room to
Wal-Mart,” Wall Street Journal (March 11, 2009), p. A13; “Huddler.com Inter-
view with CEO and Founder Tom Szaky,” www.greenhome.huddler.com/
wiki/terracycle; and Tom Szaky, Revolution in a Bottle (Knoxville, TN: Port-
folio Trade, 2009).
Ethics Check 9—Information and examples from Joe O’Shea, “How a Face-
book Update Can Cost You Your Job,” Irish Independent (September 1, 2010),
p. 34.
Facts to Consider—Data reported in “A Saner Workplace,” Business Week
( June 1, 2009), pp. 66–69, and based on excerpt from Claire Shipman and Katty
Kay, Womenomics: Write Your Own Rules for Success (New York: Harper Business,
2009); and “A to Z of Generation Y Attitudes,” Financial Times ( June 18, 2009).
Endnotes 9 1 See the discussion of Anthropologie in William C. Taylor and Polly
LaBarre, Mavericks at Work: Why the Most Original Minds in Business Win
(New York: William Morrow, 2006).
2 Edgar H. Schein, “Organizational Culture,” American Psychologist, vol. 45
(1990), pp. 109–19. See also Schein’s Organizational Culture and Leadership,
2nd ed. (San Francisco: Jossey-Bass, 1997); and Th e Corporate Culture Sur-
vival Guide (San Francisco: Jossey-Bass, 1999).
3 Information and quotes from Christopher Palmeri, “Now for Sale, the
Zappos Culture,” Business Week ( January 11, 2010), p. 57.
4 Jena McGregor, “Zappos’ Secret: It’s an Open Book,” Business Week
(March 23 & 30, 2009), p. 62.
5 James Collins and Jerry Porras, Built to Last (New York: Harper Business,
1994).
6 Rajiv Dutta, “eBay’s Meg Whitman on Building a Company’s Culture,”
Business Week (March 27, 2009): www.businessweek.com.
7 Wallin Wong, “Noncorporate Culture: Groupon’s Rapid Growth Built on
Relaxed Workplace, Openness, Creativity,” Th e Columbus Dispatch ( January
3, 2011), p. A6.
8 Ibid.
9 Schein, op. cit. (1997); Terrence E. Deal and Alan A. Kennedy, Corporate
Cultures: Th e Rites and Rituals of Corporate Life (Reading, MA: Addison-
Wesley, 1982); and Ralph Kilmann, Beyond the Quick Fix (San Francisco:
Jossey-Bass, 1984).
10 Schein, op. cit. (1997).
11 John P. Wanous, Organizational Entry, 2nd ed. (New York: Addison-
Wesley, 1992).
12 Scott Madison Patton, “Service Quality, Disney Style” (Lake Buena Vista,
FL: Disney Institute, 1997).
13 Th is is a simplifi ed model developed from Schein, op. cit. (1997).
14 James C. Collins and Jerry I. Porras, “Building Your Company’s Vision,”
Harvard Business Review (September/October 1996), pp. 65–77.
15 See corporate websites.
16 Tom’s of Maine example is from Jenny C. McCune, “Making Lemonade,”
Management Review ( June 1997), pp. 49–53.
17 See, for example, Lee G. Bolman and Terrence E. Deal, Reframing Orga-
nizations: Artistry, Fourth Edition Choice, and Leadership (San Francisco:
Jossey-Bass, 2008).
18 See Robert A. Giacalone and Carol L. Jurkiewicz (Eds.), Handbook of
Workplace Spirituality and Organizational Performance (Armonk, NY: M. E.
Sharpe, 2003).
19 See Peter F. Drucker, “Th e Discipline of Innovation,” Harvard Business
Review (November/December 1998), pp. 3–8.
20 Peter F. Drucker, Management: Tasks, Responsibilities, and Practices
(New York: Harper & Row, 1973), p. 797.
21 See Cortis R. Carlson and William W. Wilmont, Getting to “Aha” (New
York: Crown Business, 2006).
22 See for example Bloomberg Business Week reports on “Th e World’s Most
Innovative Companies.”
23 See “Green Business Innovations” and “New Life for Old Th reads,” both
in Business Week (April 28, 2008), special advertising section.
24 Border Green Energy Team—Information on Salinee Tavaranan and the
Border Green Energy Team is from bget.org.
25 Quote from “How to Measure Up,” Kellogg (Summer, 2009), p. 17.
26 David Bornstein, How to Change the World: Social Entrepreneurs and the
Power of New Ideas (Oxford, U.K.: Oxford University Press, 2004).
27 Example from Aubrey Henvetty, “Seeds of Change,” Kellogg (Summer,
2006), p. 13; and “Amid Turmoil, One Acre Fund Sows Hope in Africa,”
Kellogg (Spring, 2008), p. 7.
28 See Gary Hamel, Leading the Revolution (Boston, MA: Harvard Business
School Press, 2000).
29 Based on Edward B. Roberts, “Managing Invention and Innovation,”
Research Technology Management ( January/February 1988), pp. 1–19.
30 “Th e Joys and Perils of ‘Reverse Innovation’.” Business Week (October 5,
2009), p. 12.
31 Ibid. Also, example and quotes from “How to Compete in a World
Turned Upside Down,” Financial Times, Kindle edition (October 6, 2009).
32 Information and quotes from Nancy Gohring, “Microsoft: Stodgy or
Innovative? It’s All About Perception,” PC World ( July 25, 2008).
33 This discussion is stimulated by James Brian Quinn, “Managing
Innovation Controlled Chaos,” Harvard Business Review, vol. 63 (May/
June 1985).
34 Quote from www.ideo.com/culture/ (retrieved: March 11, 2009).
35 “ ‘Mosh Pits’ of Creativity,” Business Week (November 7, 2005), p. 99.
36 Reena Jana, “Brickhouse: Yahoo’s Hot Little Incubator,” Business Week
(November, 2007), p. IN 14.
37 “How Google Fuels Its Idea Factory,” Business Week (May 12, 2008),
pp. 54–55.
38 Kenneth Labich, “Th e Innovators,” Fortune ( June 6, 1988), pp. 49–64.
39 Quote from Brad Stone, “Amid the Gloom, an E-Commerce War,” New
York Times (October 12, 2008): www.nytimes.com.
40 Quote from Pilita Clark, “Delayed, Not Cancelled,” Financial Times
(December 19, 2009).
41 Reported in Carol Hymowitz, “Task of Managing Changes in Workplace
Takes a Careful Hand,” Wall Street Journal ( July 1, 1997), p. B1.
42 For an overview, see W. Warner Burke, Organization Change: Th eory and
Practice (Th ousand Oaks, CA: Sage, 2002).
43 For a discussion of alternative types of change, see David A. Nadler and
Michael L. Tushman, Strategic Organizational Design (Glenview, II: Scott,
Foresman, 1988); John P. Kotter, “Leading Change: Why Transformation
Eff orts Fail,” Harvard Business Review (March/April 1995), pp. 59–67; and
Burke, op. cit.
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EndnotesEN-10
44 Michael Beer and Nitin Nohria, “Cracking the Code of Change”; Harvard
Business Review (May–June 2000), pp. 138–141; and “Change Management,
An Inside Job,” Economist ( July 15, 2000), p. 61.
45 Ibid. Beer and Nohria, op. cit.; and “Change Management, An Inside Job,”
Economist ( July 15, 2000), p. 61.
46 Based on Kotter, op. cit.
47 Beer & Nohria, op. cit.
48 Kurt Lewin, “Group Decision and Social Change,” in G. E. Swanson, T. M.
Newcomb, and E. L. Hartley (eds.), Readings in Social Psychology (New York:
Holt, Rinehart, 1952), pp. 459–473.
49 Th is discussion is based on Robert Chin and Kenneth D. Benne, “Gen-
eral Strategies for Eff ecting Changes in Human Systems,” in Warren G.
Bennis, Kenneth D. Benne, Robert Chin, and Kenneth E. Corey (eds.), Th e
Planning of Change, 3rd ed. (New York: Holt, Rinehart, 1969), pp. 22–45.
50 Th e change agent descriptions here and following are developed from
an exercise reported in J. William Pfeiff er and John E. Jones, A Handbook
of Structured Experiences for Human Relations Training, vol. 2 (LaJolla, CA:
University Associates, 1973).
51 Ram N. Aditya, Robert J. House, and Steven Kerr, “Th eory and Practice
of Leadership: Into the New Millennium,” Chapter 6 in Cary L. Cooper and
Edwin A. Locke, Industrial and Organizational Psychology: Linking Th eory
with Practice (Malden, MA: Blackwell, 2000).
52 Information from Mike Schneider, “Disney Teaching Execs Magic of
Customer Service,” Columbus Dispatch (December 17, 2000), p. G9.
53 Teresa M. Amabile, “How to Kill Creativity,” Harvard Business Review
(September/October 1998), pp. 77–87.
54 See Jeff rey D. Ford and Laurie W. Ford, “Decoding Resistance to Change,”
Harvard Business Review (April, 2009), pp. 99–103.
55 John P. Kotter and Leonard A. Schlesinger, “Choosing Strategies for
Change,” Harvard Business Review, vol. 57 (March/April 1979), pp. 109–112.
Feature Notes 10 Working Mother—Information and quote from workingmother.com (retrieved
September 29, 2006, and August 1, 2008); see also workingmother.com.
Role Models—Information and quotes from David A. Kaplan, “#1 SAS: Th e
Best Company to Work For,” Fortune ( January 26, 2010), Kindle edition.
Ethics Check—Information from Jennifer Saranow, “Car Dealers
Recruit Saleswomen at the Mall,” Wall Street Journal (April 12, 2006),
pp. B1, B3.
Facts to Consider—Information from Joe Light, “Human-Resource
Executives Say Reviews Are Off the Mark,” Wall Street Journal (November
8, 2010), p. B8.
Endnotes 10 1 See Jeff rey Pfeff er, Th e Human Equation: Building Profi ts by Putting People
First (Boston: Harvard University Press, 1998).
2 Jeff rey Pfeff er and John F. Veiga, “Putting People First for Organizational
Success,” Academy of Management Executive, vol. 13 (May 1999), pp. 37–48.
3 Ibid.; and Pfeff er, op. cit. See also James N. Baron and David M. Kreps,
Strategic Human Resources: Frameworks for General Managers (New York:
Wiley, 1999).
4 Quote from William Bridges, “Th e End of the Job,” Fortune (September
19, 1994), p. 68.
5 Information from “New Face at Facebook Hopes to Map Out a Road to
Growth,” Wall Street Journal (April 15, 2008), pp. B1, B5.
6 Baron and Kreps, op. cit.
7 Quotes from Kris Maher, “Human-Resources Directors Are Assuming
Strategic Roles,” Wall Street Journal ( June 17, 2003), p. B8.
8 Ibid.
9 See also R. Roosevelt Th omas Jr.’s books, Beyond Race and Gender (New
York: AMACOM, 1999) and (with Marjorie I. Woodruff ) Building a House for
Diversity (New York: AMACOM, 1999); and Richard D. Bucher, Diversity Con-
sciousness (Englewood Cliff s, NJ: Prentice-Hall, 2000).
10 Information from Courtney E. Martin, “Wal-Mart v. Dukes Ruling is
Out of Synch with 21st Century Sex Discrimination,” Th e Christian Science
Monitor ( June 22, 2011): csmonitor.com; Dahlia Lithwick, “Class Dismissed:
Th e Supreme Court Decides Th at the Women of Wal-Mart Can’t Have Th eir
Day in Court,” slate.com ( June 20, 2011); and, “Walmart Statement Regarding
Supreme Court Ruling in Dukes Case,” corporate press release ( June 20,
2011): walmartstores.com/pressromm.
11 For a discussion of affi rmative action, see R. Roosevelt Th omas Jr.,
“From ‘Affi rmative Action’ to ‘Affi rming Diversity,’ ” Harvard Business Review
(November/December 1990), pp. 107–117.
12 See the discussion by David A. DeCenzo and Stephen P. Robbins, Human
Resource Management, 6th ed. (New York: Wiley, 1999), pp. 66–68 and 81–83.
13 Ibid., pp. 77–79.
14 See, for example, Melanie Trottman, “Charges of Bias at Work Increase,”
Wall Street Journal ( January 12, 2011), p. A2.
15 Case reported in Sue Shellenbarger, “Work & Family Mailbox,” Wall
Street Journal (March 11, 2009), p. D6.
16 See Frederick S. Lane, Th e Naked Employee: How Technology Is Compro-
mising Workplace Privacy (New York: Amacom, 2003).
17 Th is and other cases are described in Debra Cassens Weiss, “Companies
Face ‘Legal Potholes’ as Th ey Crack Down on Workers’ Social Media Posts,”
ABAJournal.com (posted January 24, 2011).
18 Information from Sheryl Gay Stolberg, “Obama Signs Equal-Pay Legisla-
tion,” New York Times ( January 30, 2009): www.nytimes.com.
19 “What to Expect When You’re Expecting,” Business Week (May 26, 2008),
p. 17.
20 Ibid; and Madeline Heilman and Tyhler G. Okimoto, “Motherhood: A
Potential Source of Bias in Employment Decisions,” Journal of Applied Psy-
chology, vol. 93, no. 1 (2008), pp. 189–98.
21 Information and quotes from Jennifer Levitz and Philip Shiskin, “More
Workers Cite Age Bias After Layoff s,” Wall Street Journal (March 11, 2009),
pp. D1, D2.
22 Information from Adam Lashinsky, “Zappos: Life After Acquisition,”
tech.fortune.cnn.com (November 24, 2010).
23 “Th e Smart Way to Hire Workers,” Th e Economist, Kindle edition (Febru-
ary 4, 2010).
24 Ibid.
25 See Sarah E. Needleman, “Initial Phone Interviews Do Count,” Wall
Street Journal (February 7, 2006), p. 29.
26 Information and quote from Sarah E. Needleman, “Th e New Trouble on
the Line,” Wall Street Journal ( June 2, 2009): www.wsj.com.
27 See John P. Wanous, Organizational Entry: Recruitment, Selection, and
Socialization of Newcomers (Reading, MA: Addison-Wesley, 1980), pp. 34–44.
28 Josey Puliyenthuruthel, “How Google Searches for Talent,” Business
Week (April 11, 2005), p. 52.
29 Quote from Ronald Henkoff , “Finding, Training, and Keeping the Best
Service Workers,” Fortune (October 3, 1994), pp. 110–122.
30 Kimes, op. cit.
31 See Harry J. Martin, “Lessons Learned,” Wall Street Journal (December
15, 2008), p. R11.
32 “A to Z of Generation Y Attitudes,” Financial Times ( June 18, 2009); and
“When Th ree Generations Can Work Better Th an One,” Financial Times
(September 16, 2009).
33 Dick Grote, “Performance Appraisal Reappraised,” Harvard Business
Review Best Practice (1999), Reprint F00105.
34 See Larry L. Cummings and Donald P. Schwab, Performance in Organi-
zations: Determinants and Appraisal (Glenview, IL: Scott, Foresman, 1973).
35 For a good review, see Gary P. Latham, Joan Almost, Sara Mann, and
Celia Moore, “New Developments in Performance Management,” Organiza-
tional Dynamics, vol. 34, no. 1 (2005), pp. 77–87.
36 See Mark R. Edwards and Ann J. Ewen, 360-Degree Feedback: Th e Pow-
erful New Tool for Employee Feedback and Performance Improvement (New
York: Amacom, 1996).
37 Examples are from Jena McGregor, “Job Review in 140 Keystrokes,” Busi-
ness Week (March 23 & 30, 2009), p. 58.
38 Kimes, op. cit.
39 Timothy Butler and James Waldroop, “Job Sculpting: Th e Art of Retain-
ing Your Best People,” Harvard Business Review (September/October 1999),
pp. 144–52.
40 Information from “What Are the Most Eff ective Retention Tools?” For-
tune (October 9, 2000), p. S7.
41 Data reported in “A Saner Workplace,” Business Week ( June 1, 2009),
pp. 66–69, and based on excerpt from Claire Shipman and Katty Kay,
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Womenomics: Write Your Own Rules for Success (New York: Harper Busi-
ness, 2009); see also “A to Z of Generation Y Attitudes,” op. cit.
42 See Betty Friedan, Beyond Gender: Th e New Politics of Work and the
Family (Washington, DC: Woodrow Wilson Center Press, 1997); and James
A. Levine, Working Fathers: New Strategies for Balancing Work and Family
(Reading, MA: Addison-Wesley, 1997).
43 Data from “A Saner Workplace,” op. cit., and based on excerpt from Ship-
man and Kay, op. cit.
44 Study reported in Ann Belser, “Employers Using Less-Costly Ways to
Retain Workers,” Columbus Dispatch ( June 1, 2008), p. D3.
45 Information from Sue Shellenbarger, “What Makes a Company a Great
Place to Work Today,” Wall Street Journal (October 4, 2007), p. D1.
46 Information from ibid.
47 Examples from Amy Saunders, “A Creative Approach to Work,” Colum-
bus Dispatch (May 2, 2008), pp. C1, C9; Shellenbarger, op. cit. (2007); and
Michelle Conlin and Jay Greene, “How to Make a Microserf Smile,” Business
Week (September 10, 2007), pp. 57–59.
48 “A Saner Workplace,” op. cit.
49 Quote from Sudeep Reddy, “Wary Companies Rely on Temporary Work-
ers,” Wall Street Journal (March 6–7, 2010), p. A. 4.
50 Information and quotes from Peter Coy, Michelle Conlin, and Moira
Herbst, “Th e Disposable Worker,” Business Week ( January 18, 2010), pp. 33–39.
51 Ibid.; and “Don’t Call Me Victim,” Business Week ( January 25, 2010), p. 69.
52 Michael Orey, “Th ey’re Employees, No, Th ey’re Not,” Business Week
(November 16, 2009), pp. 73–74.
53 See Kaja Whitehouse, “More Companies Off er Packages Linking Pay
Plans to Performance,” Wall Street Journal (December 13, 2005), p. B6.
54 Ibid.
55 Erin White, “How to Reduce Turnover,” Wall Street Journal (November
21, 2005), p. B5.
56 Ibid.
57 Information from Susan Pulliam, “New Dot-Com Mantra: ‘Just Pay Me
in Cash, Please,’” Wall Street Journal (November 28, 2000), p. C1.
58 Nanette Byrnes, “Pain, but No Layoff s at Nucor,” Business Week (March
26, 2009): www.businessweek.com.
59 Information from www.intel.com; and “Stock Ownership for Everyone,”
Hewitt Associates (November 27, 2000): www.hewitt.com/hewitt/business/
talent/subtalent/con_bckg_global.htm.
60 “Benefi ts: For Companies, the Runaway Train Is Slowing Down,” Busi-
ness Week (February 16, 2009), p. 15.
61 For reviews, see Richard B. Freeman and James L. Medoff , What Do
Unions Do? (New York: Basic Books, 1984); Charles C. Heckscher, Th e New
Unionism (New York: Basic Books, 1988); and Barry T. Hirsch, Labor Unions
and the Economic Performance of Firms (Kalamazoo, MI: W.E. Upjohn Insti-
tute for Employment Research, 1991).
62 U.S. Bureau of Labor Statistics, “Union Members Survey,” News Release
( January 21, 2011): www.ubls.gov.
63 Example from Timothy Aeppel, “Pay Scales Divide Factory Floors,” Wall
Street Journal (April 9, 2008), p. B4.
64 Matthew Dolan, “Ford to Begin Hiring at Much Lower Wages,” Wall
Street Journal ( January 26, 2010), p. B1.
Feature Notes 11 Kraft Foods—Information and quotes from Irene Rosenfeld, “Irene
Rosenfeld Drives Change with ‘Rules of the Road’,” Wall Street Journal, Spe-
cial Advertising Section (October 6, 2009), p. A17; David Kesmodel and
Ceceilie Rohwedder, “Sugar and Spice: A Clash of Two Change Agents,” Wall
Street Journal (September 8, 2009), p. A17; Ilan Brat, “A Jar of New Vegmite,
a Window into Kraft,” Wall Street Journal (September 30, 2009), pp. B1, B2;
and Susan Verfi eld and Michael Arndt, “Kraft’s Sugar Rush,” Business Week
( January 25, 2010), pp. 37–39.
Role Models—Information and quotes from Lorraine Monroe, “Leader-
ship Is About Making Vision Happen—What I Call ‘Vision Acts,’ ” Fast Com-
pany (March 2001), p. 98; Lorraine Monroe Leadership Institute Web site:
www.lorrainemonroe.com. See also Lorraine Monroe, Nothing’s Impossible:
Leadership Lessons from Inside and Outside the Classroom (New York: Public
Aff airs Books, 1999), and Th e Monroe Doctrine: An ABC Guide to What Great
Bosses Do (New York: PublicAff airs Books, 2003).
Ethics Check—Th e zone of indiff erence is described by Chester Barnard in
Functions of the Executive (Cambridge, MA: Harvard University Press, 1971),
30th Anniversary Edition.
Facts to Consider—Information from “Many U.S. Employees Have Nega-
tive Attitudes to Th eir Jobs, Employers and Top Managers,” Harris Poll #38
(May 6, 2005), retrieved from www.harrisinteractive.com.
Endnotes 11 1 Abraham Zaleznick, “Leaders and Managers: Are Th ey Diff erent?”
Harvard Business Review (May/June 1977), pp. 67–78.
2 Tom Peters, “Rule #3: Leadership Is Confusing as Hell,” Fast Company
(March 2001), pp. 124–40.
3 Quotations from Marshall Loeb, “Where Leaders Come From,” Fortune
(September 19, 1994), pp. 241–42; Genevieve Capowski, “Anatomy of a
Leader: Where Are the Leaders of Tomorrow?” Management Review (March
1994), pp. 10–17. For additional thoughts, see Warren Bennis, Why Leaders
Can’t Lead (San Francisco: Jossey-Bass, 1996).
4 See Jean Lipman-Blumen, Connective Leadership: Managing in a Chang-
ing World (New York: Oxford University Press, 1996), pp. 3–11.
5 Rosabeth Moss Kanter, “Power Failure in Management Circuits,” Harvard
Business Review ( July/August 1979), pp. 65–75.
6 Th e classic treatment of these power bases is John R. P. French Jr. and
Bertram Raven, “Th e Bases of Social Power,” in Darwin Cartwright (ed.),
Group Dynamics: Research and Th eory (Evanson, IL: Row, Peterson, 1962),
pp. 607–13.
7 For managerial applications of this basic framework, see Gary Yukl
and Tom Taber, “Th e Eff ective Use of Managerial Power,” Personnel, vol. 60
(1983), pp. 37–49; and Robert C. Benfari, Harry E. Wilkinson, and Charles
D. Orth, “Th e Eff ective Use of Power,” Business Horizons, vol. 29 (1986), pp.
12–16. Gary A. Yukl, Leadership in Organizations, 4th ed. (Englewood Cliff s,
NJ: Prentice-Hall, 1998), includes “information” as a separate, but related,
power source.
8 James M. Kouzes and Barry Z. Posner, “Th e Leadership Challenge,” Suc-
cess (April 1988), p. 68. See also their books Credibility: How Leaders Gain
and Lose It: Why People Demand It (San Francisco: Jossey-Bass, 1996);
Encouraging the Heart: A Leader’s Guide to Rewarding and Recognizing Oth-
ers (San Francisco: Jossey-Bass, 1999); and Th e Leadership Challenge: How
to Get Extraordinary Th ings Done in Organizations, 3rd ed. (San Francisco:
Jossey-Bass, 2002).
9 Quote from Andy Serwer, “Game Changers: Legendary Basketball Coach
John Wooden and Starbucks’ Howard Schultz Talk About a Common Inter-
est—Leadership,” Fortune (August 11, 2008): www.cnnmoney.com.
10 Burt Nanus, Visionary Leadership: Creating a Compelling Sense of Vision
for Your Organization (San Francisco: Jossey-Bass, 1992).
11 Th e early work on leader traits is well represented in Ralph M. Stogdill,
“Personal Factors Associated with Leadership: A Survey of the Literature,”
Journal of Psychology, vol. 25 (1948), pp. 35–71. See also Edwin E. Ghiselli,
Explorations in Management Talent (Santa Monica, CA: Goodyear, 1971);
and Shirley A. Kirkpatrick and Edwin A. Locke, “Leadership: Do Traits Really
Matter?” Academy of Management Executive (1991), pp. 48–60.
12 See also John W. Gardner’s article, “Th e Context and Attributes of Lead-
ership,” New Management, vol. 5 (1988), pp. 18–22; John P. Kotter, Th e Lead-
ership Factor (New York: Free Press, 1988); and Bernard M. Bass, Stogdill’s
Handbook of Leadership (New York: Free Press, 1990).
13 Kirkpatrick and Locke, op. cit. (1991).
14 Th is terminology comes from Robert R. Blake and Jane Strygley Mouton,
Th e New Managerial Grid III (Houston: Gulf Publishing, 1985) and the classic
studies by Kurt Lewin and his associates at the University of Iowa. See, for exam-
ple, K. Lewin and R. Lippitt, “An Experimental Approach to the Study of Autoc-
racy and Democracy: A Preliminary Note,” Sociometry, vol. 1 (1938), pp. 292–300;
K. Lewin, “Field Th eory and Experiment in Social Psychology: Concepts and
Methods,” American Journal of Sociology, vol. 44 (1939); and K. Lewin, R. Lippitt,
and R. K. White, “Patterns of Aggressive Behavior in Experimentally Created
Social Climates,” Journal of Social Psychology, vol. 10 (1939), pp. 271–301.
15 See Blake and Mouton, op. cit.
16 For a good discussion of this theory, see Fred E. Fiedler, Martin M. Chemers,
and Linda Mahar, Th e Leadership Match Concept (New York: Wiley, 1978);
Fiedler’s current contingency research with the cognitive resource theory
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is summarized in Fred E. Fiedler and Joseph E. Garcia, New Approaches to
Eff ective Leadership (New York: Wiley, 1987).
17 Paul Hersey and Kenneth H. Blanchard, Management and Organiza-
tional Behavior (Englewood Cliff s, NJ: Prentice-Hall, 1988). For an interview
with Paul Hersey on the origins of the model, see John R. Schermerhorn Jr.,
“Situational Leadership: Conversations with Paul Hersey,” Mid-American
Journal of Business (Fall 1997), pp. 5–12.
18 See Claude L. Graeff , “Th e Situational Leadership Th eory: A Critical
View,” Academy of Management Review, vol. 8 (1983), pp. 285–91; and Car-
men F. Fernandez and Robert P. Vecchio, “Situational Leadership Th eory
Revisited: A Test of an Across-Jobs Perspective,” Leadership Quarterly, vol. 8
(summer 1997), pp. 67–84.
19 See, for example, Robert J. House, “A Path-Goal Th eory of Leader Eff ec-
tiveness,” Administrative Sciences Quarterly, vol. 16 (1971), pp. 321–38; and
Robert J. House and Terrence R. Mitchell, “Path-Goal Th eory of Leadership,”
Journal of Contemporary Business (Autumn 1974), pp. 81–97. Th e path-goal
theory is reviewed by Bass, op. cit., and Yukl, op. cit. A supportive review of
research is off ered in Julie Indvik, “Path-Goal Th eory of Leadership. A Meta-
Analysis,” in John A. Pearce II and Richard B. Robinson Jr. (eds.), Academy of
Management Best Paper Proceedings (1986), pp. 189–92.
20 See the discussions of path-goal theory in Yukl, op. cit.; and Bernard M.
Bass, “Leadership: Good, Better, Best,” Organizational Dynamics (Winter
1985), pp. 26–40.
21 See Steven Kerr and John Jermier, “Substitutes for Leadership: Th eir
Meaning and Measurement,” Organizational Behavior and Human Perfor-
mance, vol. 22 (1978), pp. 375–403; Jon P. Howell and Peter W. Dorfman,
“Leadership and Substitutes for Leadership Among Professional and Non-
professional Workers,” Journal of Applied Behavioral Science, vol. 22 (1986),
pp. 29–46.
22 An early presentation of the theory is F. Dansereau Jr., G. Graen, and
W. J. Haga, “A Vertical Dyad Linkage Approach to Leadership Within Formal
Organizations: A Longitudinal Investigation of the Role Making Process,”
Organizational Behavior and Human Performance, vol. 13, pp. 46–78.
23 Th is discussion is based on Yukl, op. cit., pp. 117–22.
24 Ibid.
25 Victor H. Vroom and Arthur G. Jago, Th e New Leadership: Managing Par-
ticipation in Organizations (Englewood Cliff s, NJ: Prentice-Hall, 1988). Th is
is based on earlier work by Victor H. Vroom, “A New Look in Managerial
Decision-Making,” Organizational Dynamics (Spring 1973), pp. 66–80; and
Victor H. Vroom and Phillip Yetton, Leadership and Decision-Making (Pitts-
burgh: University of Pittsburgh Press, 1973).
26 Vroom and Jago, op. cit.
27 For a related discussion, see Edgar H. Schein, Process Consultation Revis-
ited: Building the Helping Relationship (Reading, MA: Addison-Wesley, 1999).
28 For a review, see Yukl, op. cit.
29 See the discussion by Victor H. Vroom, “Leadership and the Decision
Making Process,” Organizational Dynamics, vol. 28 (2000), pp. 82–94.
30 Survey data from Gallup Leadership Institute, Briefi ngs Report 2005-
01 (Lincoln, NE: University of Nebraska-Lincoln); “Th e Stat,” Business Week
(September 12, 2005), p. 16; and “U.S. Job Satisfaction Keeps Falling, the Con-
ference Board Reports Today,” Th e Conference Board (February 28, 2005),
retrieved from www.conference-board.org.
31 Among the popular books addressing this point of view are Warren
Bennis and Burt Nanus, Leaders: Th e Strategies for Taking Charge (New York:
Harper Business 1997); Max DePree, Leadership Is an Art (New York: Double-
day, 1989); Kouzes and Posner, op. cit. (2002).
32 Th e distinction was originally made by James McGregor Burns, Lead-
ership (New York: Harper & Row, 1978) and was further developed by Ber-
nard Bass, Leadership and Performance Beyond Expectations (New York: Free
Press, 1985), and Bernard M. Bass. “Leadership: Good, Better, Best,” Organi-
zational Dynamics (Winter 1985), pp. 26–40. See also Bernard M. Bass, “Does
the Transactional-Transformational Leadership Paradigm Transcend Orga-
nizational and National Boundaries?” American Psychologist, vol. 52 (Febru-
ary 1997), pp. 130–39.
33 See the discussion in Bass, op. cit., 1997.
34 Th is list is based on Kouzes and Posner, op. cit.; Gardner, op. cit.
35 Daniel Goleman, “Leadership Th at Gets Results,” Harvard Business Review
(March/April 2000), pp. 78–90. See also his books Emotional Intelligence
(New York: Bantam Books, 1995) and Working with Emotional Intelligence
(New York: Bantam Books, 1998).
36 Daniel Goleman, Annie McKee, and Richard E. Boyatzis, Primal Lead-
ership: Realizing the Power of Emotional Intelligence (Boston, MA: Harvard
Business School Press, 2002), p. 3.
37 Daniel Goleman, “What Makes a Leader?” Harvard Business Review
(November/December 1998), pp. 93–102.
38 Goleman, Working with Emotional Intelligence, op. cit. (1998).
39 Information from “Women and Men, Work and Power,” Fast Company,
issue 13 (1998), p. 71.
40 Jane Shibley Hyde, “Th e Gender Similarities Hypothesis,” American Psy-
chologist, vol. 60, no. 6 (2005), pp. 581–92.
41 A. H. Eagley, S. J. Daran, and M. G. Makhijani, “Gender and the Eff ectiveness
of Leaders: A Meta-Analysis,” Psychological Bulletin, vol. 117 (1995), pp. 125–45.
42 Research on gender issues in leadership is reported in Sally Helgesen,
Th e Female Advantage: Women’s Ways of Leadership (New York: Doubleday,
1990); Judith B. Rosener, “Ways Women Lead,” Harvard Business Review
(November/December 1990), pp. 119–25; Alice H. Eagley, Steven J. Karau,
and Blair T. Johnson, “Gender and Leadership Style Among School Prin-
cipals: A Meta Analysis,” Administrative Science Quarterly, vol. 27 (1992),
pp. 76–102; Lipman-Blumen, op. cit.; Alice H. Eagley, Mary C. Johannesen-
Smith, and Marloes L. van Engen, “Transformational, Transactional and
Laissez-Faire Leadership: A Meta-Analysis of Women and Men,” Psychologi-
cal Bulletin, vol. 124, no. 4 (2003), pp. 569–591; and Carol Hymowitz, “Too
Many Women Fall for Stereotypes of Selves, Study Says,” Wall Street Journal
(October 24, 2005), p. B. 1.
43 Herminia Ibarra and Otilia Obodaru, “Women and the Vision Th ing,”
Harvard Business Review ( January, 2009): Reprint R0901E.
44 Data reported by Rochelle Sharpe, “As Women Rule,” Business Week
(November 20, 2000), p. 75.
45 Eagley et al., op. cit. (2003); Hymowitz, op. cit.; Rosener, op. cit.; Vroom,
op. cit.; and, Ibarra and Obodaru, op. cit.
46 Rosener, op. cit, (1990).
47 See research summarized by Stephanie Armour, “Do Women Compete
in Unhealthy Ways at Work?” USA Today (December 30, 2005), pp. B1–B2.
48 Quote from “As Leaders, Women Rule,” Business Week (November 20,
2000), pp. 75–84. Rosabeth Moss Kanter is the author of Men and Women of
the Corporation, 2nd ed. (New York: Basic Books, 1993).
49 Del Jones, “Women CEOs Slowly Gain on Corporate America,” USA
Today ( January 1, 2009): www.usatoday.com; and Morice Mendoza, “Davos
2009: Where Are the Women?” Business Week ( January 26, 2009): www.
businessweek.com.
50 Hyde, op. cit.; Hymowitz, op. cit.
51 For debate on whether some transformational leadership qualities tend
to be associated more with female than male leaders, see “Debate: Ways
Women and Men Lead,” Harvard Business Review ( January/February 1991),
pp. 150–60.
52 See Th omas et al, op. cit.
53 “Many U.S. Employees Have Negative Attitudes to Th eir Jobs, Employ-
ers and Top Managers,” Harris Poll #38 (May 6, 2005), retrieved from www.
harrisinteractive.com.
54 Information from “Th e Stat,” Business Week (September 12, 2005), p. 16.
55 See Terry Th omas, John R. Schermerhorn Jr., and John W. Dienhart,
“Strategic Leadership of Ethical Behavior in Business,” Academy of Manage-
ment Executive, vol. 18 (May 2004), pp. 56–66.
56 Doug May, Adrian Chan, Timothy Hodges, and Bruce Avolio, “Develop-
ing the Moral Component of Authentic Leadership,” Organizational Dynam-
ics, vol. 32 (2003), pp. 247–60.
57 Peter F. Drucker, “Leadership: More Doing than Dash,” Wall Street Jour-
nal ( January 6, 1988), p. 16.
58 “Information from Southwest CEO Puts Emphasis on Character,” USA
Today (September 26, 2004), retrieved from www.usatoday/money/compa-
nies/management on December 12, 2005.
59 See Drucker, op cit., 1988.
60 Robert K. Greenleaf and Larry C. Spears, Th e Power of Servant Leader-
ship: Essays (San Francisco: Berrett-Koehler, 1996).
61 Jay A. Conger, “Leadership: Th e Art of Empowering Others,” Academy of
Management Executive, vol. 3 (1989), pp. 17–24.
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62 Max DePree, “An Old Pro’s Wisdom: It Begins with a Belief in People,”
New York Times (September 10, 1989), p. F2; DePree, op. cit.; David Woodruff ,
“Herman Miller: How Green Is My Factory,” Business Week (September 16,
1991), pp. 54–56; and Max DePree, Leadership Jazz (New York: Doubleday,
1992).
63 Lorraine Monroe, “Leadership Is About Making Vision Happen—What
I Call ‘Vision Acts,’” Fast Company (March 2001), p. 98; School Leadership
Academy Web site: www.lorrainemonroe.com.
64 Greenleaf and Spears, op. cit., p. 78.
Feature Notes 12 Th e Social Network—Eric Ditzian, “Th e Social Network: Th e Reviews are
In!” mtv.com (October 1, 2010); and Ethan Smith, “ ‘Social Network’ Opens at
No. 1,” Wall Street Journal (October 4, 2010), p. B5.
Spanx—Information from Andrew Ward, “Spanx Queen Firms Up the
Bottom Line,” Financial Times (November 30, 2006), p. 7; and Simona Covel,
“A Dated Industry Gets a Modern Makeover,” Wall Street Journal (August 7,
2008), p. B9.
Role Models—Information and quotes from corporate Web sites; Th e
Entrepreneur’s Hall of Fame: www.1tbn.com/halloff ame.html; Knowledge@
Wharton, “Th e Importance of Being Richard Branson,” Wharton School
Publishing ( June 3, 2005): www.whartonsp.com; and Diane Brady, “Richard
Branson,” Bloomberg BusinessWeek (November 22–28, 2010), p. 122.
Facts to Consider—See Linda Grant, “Happy Workers, High Returns,” For-
tune ( January 12, 1998), p. 81; Timothy A. Judge, “Promote Job Satisfaction
Th rough Mental Challenge,” Chapter 6 in Edwin A. Locke, ed., Th e Blackwell
Handbook of Organizational Behavior (Malden, MA: Blackwell, 2004); “U.S.
Employees More Dissatisfi ed with Th eir Jobs,” Associated Press (February
28, 2005), retrieved from www.msnbc.com; “U.S. Job Satisfaction Keeps
Falling, the Conference Board Reports Today,” Th e Conference Board (Feb-
ruary 28, 2005): www.conference-board.org; and, “Grateful to Be Employed,
Bored Half to Death,” Bloomberg Businessweek ( June 20–26, 2011), pp. 35–36.
Endnotes 12 1 Th is example is reported in Esquire (December 1986), p. 243. Emphasis
is added to the quotation. Note: Nussbaum became director of the Labor
Department’s Women’s Bureau during the Clinton administration and sub-
sequently moved to the AFL–CIO as head of the Women’s Bureau.
2 See H. R. Schiff man, Sensation and Perception: An Integrated Approach,
3rd ed. (New York: Wiley, 1990).
3 Information from “Misconceptions About Women in the Global Arena Keep
Th eir Numbers Low,” Catalyst study: www.catalystwomen.org/home.html.
4 Th e classic work is Dewitt C. Dearborn and Herbert A. Simon, “Selective
Perception: A Note on the Departmental Identifi cation of Executives,” Soci-
ometry, vol. 21 (1958), pp. 140–44. See also J. P. Walsh, “Selectivity and Selec-
tive Perception: Belief Structures and Information Processing,” Academy of
Management Journal, vol. 24 (1988), pp. 453–70.
5 Quote from Sheila O’Flanagan, “Underestimate Casual Dressers at Your
Peril,” Th e Irish Times ( July 22, 2005).
6 See William L. Gardner and Mark J. Martinko, “Impression Management
in Organizations,” Journal of Management ( June 1988), pp. 332–43.
7 Sandy Wayne and Robert Liden, “Eff ects of Impression Management on
Performance Ratings,” Academy of Management Journal (February 2005),
pp. 232–52.
8 See M. R. Barrick and M. K. Mount, “Th e Big Five Personality Dimensions
and Job Performance: A Meta-Analysis,” Personnel Psychology, vol. 44 (1991),
pp. 1–26.
9 For a sample of research, see G. M. Hurtz and J. J. Donovan, “Personal-
ity and Job Performance: Th e Big Five Revisited,” Journal of Applied Psychol-
ogy, vol. 85 (2000), pp. 869–79; and T. A. Judge and R. Ilies, “Relationship of
Personality to Performance Motivation: A Meta-Analytic Review,” Journal of
Applied Psychology, vol. 87 (2002), pp. 797–807.
10 Carl G. Jung, Psychological Types, H. G. Baynes trans. (Princeton, NJ:
Princeton University Press, 1971).
11 I. Briggs-Myers, Introduction to Type (Palo Alto, CA: Consulting Psychol-
ogists Press, 1980).
12 See, for example, William L. Gardner and Mark J. Martinko, “Using the
Myers-Briggs Type Indicator to Study Managers: A Literature Review and
Research Agenda,” Journal of Management, vol. 22 (1996), pp. 45–83; Naomi
L. Quenk, Essentials of Myers-Briggs Type Indicator Assessment (New York:
Wiley, 2000).
13 Th is discussion based in part on John R. Schermerhorn Jr., James G.
Hunt, and Richard N. Osborn, Organizational Behavior, 9th ed. (New York:
Wiley, 2005), pp. 54–60.
14 J. B. Rotter, “Generalized Expectancies for Internal Versus External Con-
trol of Reinforcement,” Psychological Monographs, vol. 80 (1966), pp. 1–28.
15 T. W. Adorno, E. Frenkel-Brunswick, D. J. Levinson, and R. N. Sanford,
Th e Authoritarian Personality (New York: Harper & Row, 1950).
16 Niccolo Machiavelli, Th e Prince, trans. George Bull (Middlesex, UK:
Penguin, 1961).
17 See M. Snyder, Public Appearances/Private Realities: Th e Psychology of
Self-Monitoring (New York: Freeman, 1987).
18 See Arthur P. Brief, Randall S. Schuler, and Mary Van Sell, Managing Job
Stress (Boston: Little, Brown, 1981), pp. 7, 8.
19 Th e classic work is Meyer Friedman and Ray Roseman, Type A Behavior
and Your Heart (New York: Knopf, 1974).
20 Sue Shellenbarger, “Do We Work More or Not? Either Way, We Feel Fraz-
zled,” Wall Street Journal ( July 30, 1997), p. B1.
21 See, for example, “Desk Rage,” Business Week (November 27, 2000), p. 12.
22 See Hans Selye, Stress in Health and Disease (Boston: Butterworth, 1976).
23 Carol Hymowitz, “Can Workplace Stress Get Worse?” Wall Street Journal
( January 16, 2001), pp. B1, B3.
24 See Steve M. Jex, Stress and Job Performance (San Francisco: Jossey-Bass,
1998).
25 Th e extreme case of “workplace violence” is discussed by Richard V.
Denenberg and Mark Braverman, Th e Violence-Prone Workplace (Ithaca, NY:
Cornell University Press, 1999).
26 David Gauthier-Villars and Leila Abboud, “In France, CEOs Can Become
Hostages,” Wall Street Journal (April 3, 2009), pp. B1, B4.
27 See Daniel C. Ganster and Larry Murphy, “Workplace Interventions to
Prevent Stress-Related Illness: Lessons from Research and Practice,” Chap-
ter 2 in Cary L. Cooper and Edwin A Locke (eds.), Industrial and Organiza-
tional Psychology: Linking Th eory with Practice (Malden, MA: Blackwell Busi-
ness, 2000); Jonathan D. Quick, Amy B. Henley, and James Campbell Quick,
“Th e Balancing Act—At Work and at Home,” Organizational Dynamics, vol.
33 (2004), pp. 426–37.
28 Data from “Michael Mandel, “Th e Real Reasons You’re Working So
Hard,” Business Week (October 3, 2005), pp. 60–70; “Many U.S. Employees
Have Negative Attitudes to Th eir Jobs, Employers and Top Managers,” Th e
Harris Poll #38 (May 6, 2005), retrieved from www.harrisinteractive.com; Sue
Shellenbarger, “If You Need to Work Better, Maybe Try Working Less,” Wall
Street Journal (September 23, 2009), pp. D1, D2.
29 See Melinda Beck, “Stress So Bad It Hurts—Really,” Wall Street Journal
(March 17, 2009), pp. D1, D6.
30 Information and quote from Joann S. Lublin, “How One Black Woman
Lands Her Top Jobs: Risks and Networking,” Wall Street Journal (March 4,
2003), p. B1.
31 Martin Fishbein and Icek Ajzen, Belief, Attitude, Intention and Behavior:
An Introduction to Th eory and Research (Reading, MA: Addison-Wesley, 1973).
32 See Leon Festinger, A Th eory of Cognitive Dissonance (Palo Alto, CA:
Stanford University Press, 1957).
33 For an overview, see Paul E. Spector, Job Satisfaction (Th ousand Oaks,
CA: Sage, 1997); Timothy A. Judge and Allan H. Church, “Job Satisfaction:
Research and Practice,” Chapter 7 in Cooper and Locke (eds.), op. cit. (2000);
Timothy A. Judge, “Promote Job Satisfaction Th rough Mental Challenge,”
Chapter 6 in Edwin A. Locke (ed.), Th e Blackwell Handbook of Principles of
Organizational Behavior (Malden, MA: Blackwell, 2004).
34 Information in Stay Informed from Linda Grant, “Happy Workers,
High Returns,” Fortune ( January 12, 1998), p. 81; Judge and Church op.
cit. (2004); “U.S. Employees More Dissatisfi ed with Th eir Jobs,” Associated
Press (February 28, 2005), retrieved from www.msnbc.com; “U.S. Job Sat-
isfaction Keeps Falling, the Conference Board Reports Today,” Th e Confer-
ence Board (February 28, 2005), retrieved from www.conference-board.
org; and Salary.com, “Survey Shows Impact of Downturn on Job Satis-
faction,” OH&S: Occupational Health and Safety (February 7, 2009): www.
ohsonline.com.
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35 What Workers Want: A Worldwide Study of Attitudes to Work and Work-
Life Balance (London: FDS International, 2007).
36 Data reported in “When Loyalty Erodes, So Do Profi ts,” Business Week
(August 13, 2001), p. 8.
37 Dennis W. Organ, Organizational Citizenship Behavior: Th e Good Soldier
Syndrome (Lexington, MA: Lexington Books, 1988).
38 See Mark C. Bolino and William H. Turnley, “Going the Extra Mile: Culti-
vating and Managing Employee Citizenship Behavior,” Academy of Manage-
ment Executive, vol. 17 (August 2003), pp. 60–67.
39 Tony DiRomualdo, “Th e High Cost of Employee Disengagement” ( July 7,
2004): www.wistechnology.com.
40 Th ese relationships are discussed in Charles N. Greene, “Th e
Satisfaction- Performance Controversy,” Business Horizons, vol. 15 (1982),
pp. 31; Michelle T. Iaff aldano and Paul M. Muchinsky, “Job Satisfaction and
Job Performance: A Meta Analysis,” Psychological Bulletin, vol. 97 (1985),
pp. 251–73.
41 Th is discussion follows conclusions in Judge, op. cit. (2004). For a sum-
mary of the early research, see Iaff aldano and Muchinsky, op. cit.
42 Daniel Goleman, “Leadership Th at Gets Results,” Harvard Business
Review (March–April 2000), pp. 78–90. See also his books Emotional Intel-
ligence (New York: Bantam Books, 1995) and Working with Emotional
Intelligence (New York: Bantam Books, 1998).
43 “Charm Off ensive: Why America’s CEOs Are So Eager to Be Loved,” Busi-
nessWeek ( June 26, 2006): businessweek.com (retrieved September 20, 2008).
44 See Robert G. Lord, Richard J. Klimoski, and Ruth Knafer (eds.), Emo-
tions in the Workplace; Understanding the Structure and Role of Emotions in
Organizational Behavior (San Francisco: Jossey-Bass, 2002); Roy L. Payne
and Cary L. Cooper (eds.), Emotions at Work: Th eory Research and Applica-
tions for Management (Chichester, UK: Wiley, 2004); and Daniel Goleman
and Richard Boyatzis, “Social Intelligence and the Biology of Leadership,”
Harvard Business Review (September 2008), Reprint R0809E.
45 J. E. Bono and R. Ilies, “Charisma, Positive Emotions and Mood Con-
tagion,” Leadership Quarterly, vol. 17 (2006), pp. 317–34; and Goleman and
Boyatzis, op. cit.
Feature Notes 13 Role Models—Information and quotes from Julie Flaherty, “A Parting Gift
from the Boss Who Cared,” New York Times (September 28, 2000), pp. C1,
C25; Business Wire press release, “Employees of the Butcher Company Share
over $18 Million as Owner Shares Benefi ts of Success” (September 21, 2000);
and “Butcher, Charles,” New York Times ( June 20, 2004): www.nytimes.com.
Facts to Consider—Information from “UK Headhunters Pledge New Focus
on Gender,” Financial Times, Kindle Edition (May 11, 2011).
Ethics Check—Information on this situation from Jared Sandberg, “Why You
May Regret Looking at Papers Left on the Offi ce Copier,” Wall Street Journal
( June 20, 2006), p. B1.
HopeLab—Information from “HopeLab Video Games for Health,” Fast
Company (December, 2008/ January, 2009), p. 116; and www.hopelab.org.
Endnotes 13 1 Photo quote on J. K. Rowling from “J. K. Rowling; Learning to Live with
Fame, Fortune, and Life without Harry,” Th e Independent ( July 8, 2007);
www.independent.co.uk. Additional information from Melinda Beck, “If at
First You Don’t Succeed, You’re in Excellent Company,” Wall Street Journal
(April 29, 2008), p. D1.
2 See Abraham H. Maslow, Eupsychian Management (Homewood, IL:
Richard D. Irwin, 1965); and Abraham H. Maslow, Motivation and Person-
ality, 2nd ed. (New York: Harper & Row, 1970). For a research perspective,
see Mahmoud A. Wahba and Lawrence G. Bridwell, “Maslow Reconsidered:
A Review of Research on the Need Hierarchy,” Organizational Behavior and
Human Performance, vol. 16 (1976), pp. 212–40.
3 Clayton P. Alderfer, Existence, Relatedness, and Growth (New York: Free
Press, 1972).
4 Examples and quotes from Jane Hodges, “A Virtual Matchmaker for Vol-
unteers,” Wall Street Journal (February 12, 2009), p. D3; Dana Mattioli, “Th e
Laid-Off Can Do Well Doing Good,” Wall Street Journal (March 17, 2009),
p. D1; Elizabeth Garone, “Paying It Forward Is a Full-Time Job,” Wall Street
Journal (March 17, 2009), p. D4.
5 Developed originally from a discussion in Edward E. Lawler III, Motiva-
tion in Work Organizations (Monterey, CA: Brooks/Cole Publishing, 1973),
pp. 30–36.
6 For a collection of McClelland’s work, see David C. McClelland, Th e
Achieving Society (New York: Van Nostrand, 1961); “Business Drive and
National Achievement,” Harvard Business Review, vol. 40 ( July/August 1962),
pp. 99–112; David C. McClelland, Human Motivation (Glenview, IL: Scott,
Foresman, 1985); David C. McClelland and Richard E. Boyatsis, “Th e Lead-
ership Motive Pattern and Long-Term Success in Management,” Journal of
Applied Psychology, vol. 67 (1982), pp. 737–43.
7 David C. McClelland and David H. Burnham, “Power Is the Great Motiva-
tor,” Harvard Business Review (March/April 1976), pp. 100–10.
8 Th e complete two-factor theory is in Frederick Herzberg, Bernard
Mausner, and Barbara Block Synderman, Th e Motivation to Work, 2nd ed.
(New York: Wiley, 1967); Frederick Herzberg, “One More Time: How Do
You Motivate Employees?” Harvard Business Review ( January/February
1968), pp. 53–62, and reprinted as an HBR classic (September/October
1987), pp. 109–20.
9 Critical reviews are provided by Robert J. House and Lawrence A. Wig-
dor, “Herzberg’s Dual-Factor Th eory of Job Satisfaction and Motivation: A
Review of the Evidence and a Criticism,” Personnel Psychology, vol. 20 (Win-
ter 1967), pp. 369–89; and Steven Kerr, Anne Harlan, and Ralph Stogdill,
“Preference for Motivator and Hygiene Factors in a Hypothetical Interview
Situation,” Personnel Psychology, vol. 27 (Winter 1974), pp. 109–24. See also
Frederick Herzberg, “Workers’ Needs: Th e Same Around the World,” Industry
Week (September 21, 1987), pp. 29–32.
10 See, for example, Greg R. Oldham and J. Richard Hackman, “Not What It
Was and Not What It Will Be: Th e Future of Job Design Research,” Journal of
Organizational Behavior, vol. 31 (2010), pp. 463–479.
11 See Herzberg et al., op. cit. (1967). Th e quotation is from Herzberg, op.
cit. (1968).
12 For a complete description of the core characteristics model, see J.
Richard Hackman and Greg R. Oldham, Work Redesign (Reading, MA: Addison-
Wesley, 1980).
13 See, for example, J. Stacy Adams, “Toward an Understanding of Ineq-
uity,” Journal of Abnormal and Social Psychology, vol. 67 (1963), pp. 422–36;
and J. Stacy Adams, “Inequity in Social Exchange,” in vol. 2, L. Berkowitz
(ed.), Advances in Experimental Social Psychology (New York: Academic
Press, 1965), pp. 267–300.
14 See, for example, J. W. Harder, “Play for Pay: Eff ects of Inequity in a Pay-
for-Performance Context,” Administrative Science Quarterly, vol. 37 (1992),
pp. 321–35.
15 Information and quotes from Alistair Barr, “A Look at Some of the Most
Luxurious Executive Perks,” Columbus Dispatch (May 24, 2009), p. D1.
16 Victor H. Vroom, Work and Motivation (New York: Wiley, 1964; repub-
lished by Jossey-Bass, 1994).
17 “Th e Boss: Goal by Goal,” New York Times (August 31, 2008), p. 10.
18 Th e work on goal-setting theory is well summarized in Edwin A. Locke
and Gary P. Latham, Goal Setting: A Motivational Technique Th at Works!
(Englewood Cliff s, NJ: Prentice Hall, 1984). See also Edwin A. Locke, Kenneth
N. Shaw, Lisa A. Saari, and Gary P. Latham, “Goal Setting and Task Perfor-
mance 1969–1980,” Psychological Bulletin, vol. 90 (1981), pp. 125–52; Mark
E. Tubbs, “Goal Setting: A Meta-Analytic Examination of the Empirical
Evidence,” Journal of Applied Psychology, vol. 71 (1986), pp. 474–83; and
Terence R. Mitchell, Kenneth R. Th ompson, and Jane George-Falvy, “Goal
Setting: Th eory and Practice,” Chapter 9 in Cary L. Cooper and Edwin A.
Locke (eds.), Industrial and Organizational Psychology: Linking Th eory with
Practice (Malden, MA: Blackwell Business, 2000), pp. 211–49.
19 For a recent critical discussion of goal-setting theory, see Lisa D.
Ordonez, Maurice E. Schweitzer, Adam D. Galinsky, and Max H. Bazer-
man, “Goals Gone Wild: Th e Systematic Side Eff ects of Overprescribing
Goal Setting,” Academy of Management Perspectives, vol. 23 (February 2009),
pp. 6–16; and Edwin A. Locke and Gary P. Latham, “Has Goal Setting Gone
Wild, or Have Its Attackers Abandoned Good Scholarship?” Academy of
Management Perspectives, vol. 23 (February, 2009), pp. 17–23.
20 Gary P. Latham and Edwin A. Locke, “Self-Regulation Th rough Goal Set-
ting,” Organizational Behavior and Human Decision Processes, vol. 50 (1991),
pp. 212–47.
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Endnotes EN-15
21 Edwin A. Locke, “Guest Editor’s Introduction: Goal-Setting Th eory and
Its Applications to the World of Business,” Academy of Management Execu-
tive, vol. 18, no. 4 (2004), pp. 124–25.
22 E. L. Th orndike, Animal Intelligence (New York: Macmillan, 1911), p. 244.
23 B. F. Skinner, Walden Two (New York: Macmillan, 1948); Science and
Human Behavior (New York: Macmillan, 1953); Contingencies of Reinforce-
ment (New York: Appleton-Century-Crofts, 1969).
24 For a good review, see Lee W. Frederickson (ed.), Handbook of Organi-
zational Behavior Management (New York: Wiley-Interscience, 1982); Fred
Luthans and Robert Kreitner, Organizational Behavior Modifi cation (Glen-
view, IL: Scott-Foresman, 1985); and Andrew D. Stajkovic and Fred Luthans,
“A Meta-Analysis of the Eff ects of Organizational Behavior Modifi cation on
Task Performance 1975–95,” Academy of Management Journal, vol. 40 (1997),
pp. 1122–49.
25 Knowledge@Wharton, “Th e Importance of Being Richard Branson,”
Wharton School Publishing ( June 3, 2005): www.whartonsp.com.
26 Richard Gibson, “Pitchman in the Corner Offi ce,” Wall Street Journal
(October 24, 2007), p. D10. See also David Novak, Th e Education of an Acci-
dental CEO : Lessons Learned from the Trailer Park to the Corner Offi ce (New
York: Crown Business, 2007).
27 Edwin A. Locke, “Th e Myths of Behavior Mod in Organizations,” Acad-
emy of Management Review, vol. 2 (October 1977), pp. 543–53.
Feature Notes 14 Role Models—Information and quotes from Robert D. Hof, “Amazon’s
Risky Bet,” Business Week (November 13, 2006), p. 52; Jon Neale, “Jeff Bezos,”
Business Wings (February 16, 2007): www.businesswings.com.uk; Alan
Deutschman, “Inside the Mind of Jeff Bezos,” Fast Company (December 19,
2007): www.fastcompany.com/magazine/85; and http://en.wikipedia.org/
wiki/Jeff _Bezos.
Ethics Check—Some information from Williams, and Stephen Harkins,
“Many Hands Make Light the Work: Th e Causes and Consequences of Social
Loafi ng,” Journal of Personality and Social Psychology, vol. 37 (1978), pp. 822–32;
and W. Jack Duncan, “Why Some People Loaf in Groups and Others Loaf
Alone,” Academy of Management Executive, vol. 8 (1994), pp. 79–80.
Facts to Consider—Information from “Two Wasted Days at Work,”
CNNMoney.com (March 16, 2005): www.cnnmoney.com.
Endnotes 14 1 See, for example, Edward E. Lawler III, Susan Albers Mohrman, and
Gerald E. Ledford Jr., Employee Involvement and Total Quality Management:
Practices and Results in Fortune 1000 Companies (San Francisco: Jossey-Bass,
1992); Susan A. Mohrman, Susan A. Cohen, and Monty A. Mohrman, Design-
ing Team-Based Organizations: New Forms for Knowledge Work (San Fran-
cisco: Jossey-Bass, 1995).
2 Jon R. Katzenbach and Douglas K. Smith, Th e Wisdom of Teams: Creating the
High Performance Organization (Boston: Harvard Business School Press, 1993).
3 See Edward E. Lawler III, From the Ground Up: Six Principles for Building
the New Logic Corporation (San Francisco: Jossey-Bass, 1996), p. 131.
4 Data from Lynda C. McDermott, Nolan Brawley, and William A. Waite,
World-Class Teams: Working Across Borders (New York: Wiley, 1998), p. 5;
survey reported in “Meetings Among Top Ten Time Wasters,” San Francisco
Business Times (April 7, 2003); www.bizjournals.com/sanfrancisco/stories/
2003/04/07/daily21.html.
5 Information from Scott Th urm, “Teamwork Raises Everyone’s Game,”
Wall Street Journal (November 7, 2005), p. B7.
6 Harold J. Leavitt, “Suppose We Took Groups More Seriously,” in Eugene
L. Cass and Frederick G. Zimmer (eds.), Man and Work in Society (New York:
Van Nostrand Reinhold, 1975), pp. 67–77.
7 See Marvin E. Shaw, Group Dynamics: Th e Psychology of Small Group
Behavior, 2nd ed. (New York: McGraw-Hill, 1976); Leavitt, op. cit.
8 A classic work is Bib Latané, Kipling Williams, and Stephen Harkins, “Many
Hands Make Light the Work: Th e Causes and Consequences of Social Loaf-
ing,” Journal of Personality and Social Psychology, vol. 37 (1978), pp. 822–32.
See also John M. George, “Extrinsic and Intrinsic Origins of Perceived Social
Loafi ng in Organizations,” Academy of Management Journal (March 1992),
pp. 191–202; and W. Jack Duncan, “Why Some People Loaf in Groups While
Others Loaf Alone,” Academy of Management Executive, vol. 8 (1994), pp. 79–80.
9 Th e “linking pin” concept is introduced in Rensis Likert, New Patterns of
Management (New York: McGraw-Hill, 1962).
10 See discussion by Susan G. Cohen and Don Mankin, “Th e Changing
Nature of Work,” in Susan Albers Mohrman, Jay R. Galbraith, Edward E.
Lawler III, and associates, Tomorrow’s Organization: Crafting Winning Capa-
bilities in a Dynamic World (San Francisco: Jossey-Bass, 1998), pp. 154–78.
11 Information from “Diversity: America’s Strength,” special advertising
section, Fortune ( June 23, 1997); and American Express corporate commu-
nication (1998).
12 See Susan D. Van Raalte, “Preparing the Task Force to Get Good Results,”
S.A.M. Advanced Management Journal, vol. 47 (Winter 1982), pp. 11–16;
Walter Kiechel III, “Th e Art of the Corporate Task Force,” Fortune ( January
28, 1991), pp. 104–06.
13 Developed from Eric Matson, “Th e Seven Sins of Deadly Meetings,” Fast
Company (April/May 1996), p. 122.
14 Mohrman et al., op. cit. (1998).
15 Information from Jenny C. McCune, “Making Lemonade,” Management
Review ( June 1997), pp. 49–53.
16 For a good discussion of quality circles, see Edward E. Lawler III and
Susan A. Mohrman, “Quality Circles After the Fad,” Harvard Business Review,
vol. 63 ( January/February 1985), pp. 65–71; Edward E. Lawler III and Susan
Albers Mohrman, “Employee Involvement, Reengineering, and TQM: Focus-
ing on Capability Development,” in Mohrman et al. (1998), pp. 179–208.
17 William M. Bulkeley, “Computerizing Dull Meetings Is Touted as an
Antidote to the Mouth Th at Bored,” Wall Street Journal ( January 28, 1992),
pp. B1, B2.
18 See Wayne F. Cascio, “Managing a Virtual Workplace,” Academy of Man-
agement Executive, vol. 14 (2000), pp. 81–90.
19 Robert D. Hof, “Teamwork, Supercharged,” Business Week (November 21,
2005), pp. 90–92.
20 See Sheila Simsarian Webber, “Virtual Teams: A Meta-Analysis,” http://
www.shrm.org/foundation/fi ndings.asp.
21 See Stacie A. Furst, Martha Reeves, Benson Rosen, and Richard S. Black-
burn, “Managing the Life Cycle of Virtual Teams,” Academy of Management
Executive, vol. 18, no. 2 (2004), pp. 6–11.
22 R. Brent Gallupe and William H. Cooper, “Brainstorming Electronically,”
Sloan Management Review (Winter 1997), pp. 11–21; Cascio, op. cit.
23 Cascio, op. cit.; Furst et al., op. cit.
24 See, for example, Paul S. Goodman, Rukmini Devadas, and Terri L.
Griffi th Hughson, “Groups and Productivity: Analyzing the Eff ectiveness of
Self-Managing Teams,” in John R. Campbell and Richard J. Campbell, Produc-
tivity in Organizations (San Francisco: Jossey-Bass, 1988); Jack Orsbrun, Linda
Moran, Ed Musslewhite, and John H. Zenger, with Craig Perrin, Self-Directed
Work Teams: Th e New American Challenge (Homewood, IL: Business One
Irwin, 1990); Dale E. Yeatts and Cloyd Hyten, High Performing Self- Managed
Work Teams (Th ousand Oaks, CA: Sage, 1997).
25 See, for example, J. Richard Hackman and Nancy Katz, “Group Behavior
and Performance,” in Susan T. Fiske, Daniel T. Gilbert, and Gardner Lindzey
(eds.), Handbook of Social Psychology, 5th ed. (Hoboken, NJ: Wiley, 2010),
pp. 1208–51.
26 Goodman et al., op. cit.; Orsbrun et al., op. cit.; Yeatts and Hyten, op. cit.;
and Lawler et al., op. cit., 1992.
27 For a review of research on group eff ectiveness, see J. Richard Hackman,
“Th e Design of Work Teams,” in Jay W. Lorsch (ed.), Handbook of Organiza-
tional Behavior (Englewood Cliff s, NJ: Prentice-Hall, 1987), pp. 315–42; and
J. Richard Hackman, Ruth Wageman, Th omas M. Ruddy, and Charles L. Ray,
“Team Eff ectiveness in Th eory and Practice,” in Cary L. Cooper and Edwin A.
Locke, Industrial and Organizational Psychology: Linking Th eory with Prac-
tice (Malden, MA: Blackwell, 2000).
28 For a discussion of eff ectiveness in the context of top management
teams, see Edward E. Lawler III, David Finegold, and Jay A. Conger, “Cor-
porate Boards: Developing Eff ectiveness at the Top,” in Mohrman, op. cit.
(1998), pp. 23–50.
29 Quote from Alex Markels, “Money & Business,” U.S. News online (October
22, 2006).
30 “Dream Teams,” Northwestern (Winter 2005), p. 10; Matt Golosinski,
“Teamwork Takes Center Stage,” Northwestern (Winter 2005), p. 39.
31 Golosinski, op. cit., p. 39.
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EndnotesEN-16
32 Information from Susan Carey, “Racing to Improve,” Wall Street Journal
(March 24, 2006), pp. B1, B6.
33 Robert D. Hof, “Amazon’s Risky Bet,” BusinessWeek (November 13, 2006),
p. 52.
34 J. Steven Heinen and Eugene Jacobson, “A Model of Task Group Develop-
ment in Complex Organizations and a Strategy of Implementation,” Acad-
emy of Management Review, vol. 1 (1976), pp. 98–111; Bruce W. Tuckman,
“Developmental Sequence in Small Groups,” Psychological Bulletin, vol. 63
(1965), pp. 384–99; Bruce W. Tuckman and Mary Ann C. Jensen, “Stages of
Small-Group Development Revisited,” Group & Organization Studies, vol. 2
(1977), pp. 419–27.
35 See Warren Watson, “Cultural Diversity’s Impact on Interaction Process
and Performance,” Academy of Management Journal, vol. 16 (1993); Christo-
pher Earley and Elaine Mosakowski, “Creating Hybrid Team Structures: An
Empirical Test of Transnational Team Functioning,” Academy of Management
Journal, vol. 5 (February 2000), pp. 26–49; Eric Kearney, Diether Gebert, and
Sven C. Voilpel, “When and How Diversity Benefi ts Teams: Th e Importance
of Team Members’ Need for Cognition,” Academy of Management Journal,
vol. 52 (2009), pp. 582–598; and Aparna Joshi and Hyuntak Roh, “Th e Role
of Context in Work Team Diversity Research: A Meta-Analytic Approach,”
Academy of Management Journal, vol. 52 (2009), pp. 599–628.
36 See, for example, Edgar Schein, Process Consultation (Reading, MA:
Addison-Wesley, 1988); and Linda C. McDermott, Nolan Brawley, and William
A. Waite, World-Class Teams: Working Across Borders (New York: Wiley, 1998).
37 For a good discussion, see Robert F. Allen and Saul Pilnick, “Confront-
ing the Shadow Organization: How to Detect and Defeat Negative Norms,”
Organizational Dynamics (Spring 1973), pp. 13–16.
38 See Schein, op. cit., pp. 76–79.
39 Marvin E. Shaw, Group Dynamics: Th e Psychology of Small Group Behav-
ior (New York: McGraw-Hill, 1976).
40 A classic work in this area is K. Benne and P. Sheets, “Functional Roles
of Group Members,” Journal of Social Issues, vol. 2 (1948), pp. 42–47; see also
Likert, op. cit., pp. 166–69; Schein, op. cit., pp. 49–56.
41 Based on John R. Schermerhorn Jr., James G. Hunt, and Richard N.
Osborn, Organizational Behavior, 7th ed. (New York: Wiley, 2000), pp. 345–46.
42 Schein, op. cit., pp. 69–75.
43 A good overview is William D. Dyer, Team-Building (Reading, MA:
Addison-Wesley, 1977).
44 Dennis Berman, “Zap! Pow! Splat!” Business Week, Enterprise issue (Feb-
ruary 9, 1998), p. ENT22.
45 Schein, op. cit., pp. 69–75.
46 Victor H. Vroom and Arthur G. Jago, Th e New Leadership: Managing
Participation in Organizations (Englewood Cliff s, NJ: Prentice Hall, 1988);
Victor H. Vroom, “A New Look in Managerial Decision-Making,” Organiza-
tional Dynamics (Spring 1973), pp. 66–80; Victor H. Vroom and Phillip
Yetton, Leadership and Decision-Making (Pittsburgh: University of Pittsburgh
Press, 1973).
47 See Kathleen M. Eisenhardt, Jean L. Kahwajy, and L. J. Bourgeois III,
“How Management Teams Can Have a Good Fight,” Harvard Business Review
( July/August 1997), pp. 77–85.
48 Michael A. Roberto, “Why Making the Decisions the Right Way Is More
Important Th an Making the Right Decisions,” Ivey Business Journal (Septem-
ber/October 2005), pp. 1–7.
49 See Irving L. Janis, “Groupthink,” Psychology Today (November 1971), pp.
43–46; and Victims of Groupthink, 2nd ed. (Boston: Houghton Miffl in, 1982).
50 See also Michael Harvey, M. Ronald Buckley, Milorad M. Novicevic,
and Jonathon R. B. Halbesleben, “Th e Abilene Paradox After Th irty Years:
A Global Perspective,” Organizational Dynamics, vol. 33 (2004), pp. 215–26.
51 Janis, op. cit.
52 Ibid.
53 Richard E. Walton, Interpersonal Peacemaking: Confrontations and
Th ird-Party Consultation (Reading, MA: Addison-Wesley, 1969), p. 2.
54 See Kenneth W. Th omas, “Confl ict and Confl ict Management,” in M. D.
Dunnett (ed.), Handbook of Industrial and Organizational Behavior (Chicago:
Rand McNally, 1976), pp. 889–935.
55 See Robert R. Blake and Jane Strygley Mouton, “Th e Fifth Achievement,”
Journal of Applied Behavioral Science, vol. 6 (1970), pp. 413–27; and Alan C.
Filley, Interpersonal Confl ict Resolution (Glenview, IL: Scott, Foresman, 1975);
and L. David Brown, Managing Confl ict at Organizational Interfaces (Reading,
MA: Addison-Wesley, 1983).
56 Filley, op. cit.
Feature Notes 15 Th e Devil Wears Prada—W. C. Byham, “Start Networking Right Away
(Even if You Hate It).” Harvard Business Review, vol. 22 ( January 2009).
Jay-Z—Information and quotes from John Jurgensen, “Th e State of Jay-Z’s
Empire,” Wall Street Journal (October 22, 2010), pp. D1, D2.
Role Models—Information and quotes from Adam Bryant, “Give Your Staff
a Reason to Work for You,” International Herald Tribune ( July 5, 2010), p. 17.
Ethics Check—Information from Bridget Jones, “Blogger Fire Fury,” CNN.
com ( July 19, 2006).
Facts to Consider—Information from American Management Asso-
ciation, “Electronic Monitoring & Surveillance Survey” (February 8, 2008):
www.press.amanet.org/press-releases; and Liz Wolgemuth, “Why Web Surf-
ing Is a No Problem,” U.S. News & World Report (August 22, 2008): www.
usnews.com/blogs.
Undercover Boss—Information and quotes from “Undercover Boss Gets
the Communication Message,” Financial Times ( June 9, 2009).
Endnotes 15 1 See Henry Mintzberg, Th e Nature of Managerial Work (New York: Harper
& Row, 1973 and Harper-Collins, 1997; John P. Kotter, “What Eff ective Gen-
eral Managers Really Do,” Harvard Business Review, vol. 60 (November/
December 1982), pp. 156–157; and Th e General Managers (New York:
Macmillan, 1986).
2 Mintzberg, op cit.
3 Kotter, op cit.
4 “Relationships Are the Most Powerful Form of Media,” Fast Company
(March 2001), p. 100.
5 Information from American Management Association (AMA), “Th e Pas-
sionate Organization Fast-Response Survey” (September 25–29, 2000), and
organization Web site: http://www.amanet.org/aboutama/index.htm.
6 Survey information from “What Do Recruiters Want?” BizEd (Novem-
ber/December 2002), p. 9; “Much to Learn, Professors Say,” USA Today ( July
5, 2001), p. 8D; and AMA, op. cit.
7 Jay A. Conger, Winning ’Em Over: A New Model for Managing in the Age of
Persuasion (New York: Simon & Schuster, 1998), pp. 24–79.
8 Th is discussion developed from ibid.
9 Quotations from John Huey, “America’s Most Successful Merchant,” For-
tune (September 23, 1991), pp. 46–59; see also Sam Walton and John Huey,
Sam Walton: Made in America: My Story (New York: Bantam Books, 1993).
10 Business Week (February 10, 1992), pp. 102–08.
11 See Robert H. Lengel and Richard L. Daft, “Th e Selection of Communica-
tion Media as an Executive Skill,” Academy of Management Executive, vol. 2
(August 1988), pp. 225–32.
12 See Ibid.
13 See Eric Matson, “Now Th at We Have Your Complete Attention,” Fast
Company (February/March 1997), pp. 124–32.
14 Information from Sam Dillon, “What Corporate America Can’t Build: A
Sentence,” New York Times (December 7, 2004).
15 David McNeill, Hand and Mind: What Gestures Reveal About Th ought
(Chicago: University of Chicago Press, 1992).
16 Martin J. Gannon, Paradoxes of Culture and Globalization (Los Angeles:
Sage, 2008), p. 76.
17 McNeill, op. cit.
18 Tom Peters and Nancy Austin, A Passion for Excellence (New York: Ran-
dom House, 1985). “Epigrams and Insights from the Original Modern Guru,”
Financial Times, Kindle edition (March 4, 2010). See also Tom Peters, Th e Little
Big Th ings: 163 Ways to Pursue EXCELLENCE (New York: HarperStudio, 2010).
19 Adapted from Richard V. Farace, Peter R. Monge, and Hamish M. Rus-
sell, Communicating and Organizing (Reading, MA: Addison-Wesley, 1977),
pp. 97–98.
20 Examples and quotes from Business Week ( July 8, 1991), pp. 60–61; www.
ccl.org/leadership/programs/profi les/lisaDitullio.aspx (retrieved August
12, 2008); and, Joe Walker, “Executives Learn New Skills to Improve Th eir
Communication,” Wall Street Journal (May 6, 2010), p. B3.
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21 Quote from Andy Serwer, “Game Changers: Legendary Basketball
Coach John Wooden and Starbucks’ Howard Schultz Talk about a Common
Interest—Leadership,” Fortune (August 11, 2008): www.cnnmoney.com.
22 Th is discussion is based on Carl R. Rogers and Richard E. Farson, “Active
Listening” (Chicago: Industrial Relations Center of the University of Chi-
cago, n.d.); see also Carl R. Rogers and Fritz J. Roethlisberger, “Barriers and
Gateways to Communication,” Harvard Business Review (November/Decem-
ber, 2001), Reprint 91610.
23 Ibid.
24 Information from Carol Hymowitz, “Managers See Feedback from Th eir
Staff ers as Most Valuable,” Wall Street Journal (August 22, 2000), p. B1.
25 A useful source of guidelines is John J. Gabarro and Linda A. Hill, “Man-
aging Performance,” Note 9-96-022 (Boston, MA: Harvard Business School
Publishing, n.d.).
26 A classic work on proxemics is Edward T. Hall’s book Th e Hidden Dimen-
sion (Garden City, NY: Doubleday, 1986).
27 Information from Rachel Metz, “Offi ce Décor First Change by New AOL
Executive,” Columbus Dispatch (May 25, 2009), p. A7.
28 Amy Saunders, “A Creative Approach to Work,” Columbus Dispatch (May
2, 2008), pp. C1, C9.
29 Information and quotes from Adam Bryant, “Creating Trust by Destroy-
ing Hierarchy,” Global Edition of the New York Times (February 15, 2010), p. 19.
30 Information and quote from Kelly K. Spors, “Top Small Workplaces
2009,” Wall Street Journal (September 28, 2009), pp. R1–R4.
31 Information and quotes from Sarah E. Needleman, “Th nx for the IView! I
Wud Luv to Work 4 U!!;),” Wall Street Journal Online ( July 31, 2008).
32 Stephanie Cliff ord, “Video Prank at Domino’s Taints Brand,” New York
Times (April 16, 2009): www.nytimes.com; and Deborah Stead, “An Unwel-
come Delivery,” Business Week (May 4, 2009), p. 15.
33 For a review of legal aspects of e-mail privacy, see William P. Smith and
Filiz Tabak, “Monitoring Employee E-Mails: Is Th ere Any Room for Privacy?”
Academy of Management Perspectives, vol. 23 (November, 2009), pp. 33–48.
34 Information and quotes from Michelle Conlin and Douglas MacMillan,
“Managing the Tweets,” Business Week ( June 1, 2009), pp. 20–21.
35 Information from Carol Hymowitz, “More American Chiefs Are Taking
Top Posts at Overseas Concerns,” Wall Street Journal (October 17, 2005), p. B1.
36 Examples reported in Martin J. Gannon, Paradoxes of Culture and
Globalization (Los Angeles: Sage Publications, 2008), p. 80.
37 Information from Ben Brown, “Atlanta Out to Mind Its Manners,” USA
Today (March 14, 1996), p. 7.
Feature Notes 16 Finding Forrester—Project Implicit (https://implicit.harvard.edu/implicit/).
Role Models—Information and quotes from Joshua Molina, “A Vision for
Change: Tech Innovator and Entrepreneur David Segura,” HispanicBusiness.
com (December 3, 2008): www.hispanicbusiness.com; “2008 Ernst & Young
Entrepreneur of the Year: David Segura,” Smart Business Detroit ( July, 2008);
and “David Segura Hispanic Business Entrepreneur of the Year,” press release,
Michigan Minority Business Council (November 13, 2008): www.mmbdc.com.
Ethics Check—Information and quotes from Susan Chandler, “’Fair
Trade’ Label Enters Retail Market,” Columbus Dispatch (October 16, 2006),
p. G6; and www.fairindigo.com/about.
Facts to Consider—Information from What Workers Want: A Worldwide
Study of Attitudes to Work and Work-Life Balance (London: FDS International
Limited, 2007).
Massmart and Walmart—Information and quotes from Robb M. Stewart,
“Wal-Mart Checks Out a New Continent,” Wall Street Journal (October 27,
2010), pp. B1, B2; and Robb M. Stewart, “Wal-Mart Sets Africa Deal,” Wall
Street Journal (November 30, 2010), p. B2.
Haier Group—Example from Mei Fong, “Chinese Refrigerator Maker
Finds U.S. Chilly,” Wall Street Journal (March 16, 2010), p. C10.
Endnotes 16 1 Lee Gardenswartz and Anita Rowe, Managing Diversity: A Complete Desk
Reference and Planning Guide (Chicago: Irwin, 1993).
2 R. Roosevelt Th omas Jr., Beyond Race and Gender (New York: AMACOM,
1992), p. 10; see also R. Roosevelt Th omas Jr., “ ‘From Affi rmative Action’ to
‘Affi rming Diversity,’ ” Harvard Business Review (November/December 1990),
pp. 107–17; R. Roosevelt Th omas Jr., with Marjorie I. Woodruff , Building a
House for Diversity (New York: AMACOM, 1999).
3 Survey reported in “Th e Most Inclusive Workplaces Generate the Most
Loyal Employees,” Gallup Management Journal (December 2001), retrieved
from http://gmj.gallup.com/press_room/release.asp?i=117.
4 Carol Stephenson, “Leveraging Diversity to Maximum Advantage: Th e
Business Case for Appointing More Women to Boards,” Ivey Business Journal
(September/October 2004), Reprint #9B04TE03, pp. 1–8.
5 Donald H. Oliver, “Achieving Results Th rough Diversity: A Strategy for
Success,” Ivey Business Journal (March/April, 2005), Reprint #9B05TB09, pp. 1–6.
6 Th omas Kochan, Katerina Bezrukova, Robin Ely, Susan Jackson, Aparna
Joshi, Karen Jehn, Jonathan Leonard, David Levine, and David Th omas,
“Th e Eff ects of Diversity on Business Performance: Report of the Diver-
sity Research Network,” reported in SHRM Foundation Research Findings
(retrieved from www.shrm.org/foundation/fi ndings.asp). Full article pub-
lished in Human Resource Management, vol. 42 (2003), pp. 3–21.
7 Oliver, op. cit.
8 Gardenswartz and Rowe, op. cit., p. 220.
9 Taylor Cox Jr., Cultural Diversity in Organizations (San Francisco: Berrett
Koehler, 1994).
10 Nanette Byrnes and Roger O. Crockett, “An Historic Succession at Xerox,”
Business Week ( June 9, 2008), pp. 18–21.
11 See Anthony Robbins and Joseph McClendon III, Unlimited Power: A
Black Choice (New York: Free Press, 1997); and Augusto Failde and William
Doyle, Latino Success: Insights from America’s Most Powerful Latino Execu-
tives (New York: Free Press, 1996).
12 Barbara Benedict Bunker, “Appreciating Diversity and Modifying Orga-
nizational Cultures: Men and Women at Work,” in Suresh Srivastiva and
David L. Cooperrider, Appreciative Management and Leadership (San Fran-
cisco: Jossey-Bass, 1990), Chapter 5.
13 See Gary N. Powell, Women-Men in Management (Th ousand Oaks, CA:
Sage, 1993); and Cliff Cheng (ed.), Masculinities in Organizations (Th ousand
Oaks, CA: Sage, 1996). For added background, see also Sally Helgesen,
Everyday Revolutionaries: Working Women and the Transformation of
American Life (New York: Doubleday, 1998).
14 Information from “Demographics: Th e Young and the Restful,” Harvard
Business Review (November 2004), p. 25.
15 “Many U.S. Employees Have Negative Attitudes to Th eir Jobs, Employers
and Top Managers,” Th e Harris Poll #38 (May 6, 2005), available from www.
harrisinteractive.com; and “U. S. Job Satisfaction Keeps Falling,” Th e Confer-
ence Board Reports Today (February 25, 2005; retrieved from www.conference-
board.org).
16 Mayo Clinic, “Workplace Generation Gap: Understand Diff erences
Among Colleagues” ( July 6, 2005), retrieved from http://www.cnn.com/
HEALTH/library/WL/00045.html).
17 Information based on “Th e Conundrum of the Glass Ceiling,” op. cit.
18 Stephanie N. Mehta, “What Minority Employees Really Want,” Fortune
( July 10, 2000), pp. 181–86.
19 “Bias Cases by Workers Increase 9%,” Wall Street Journal (March 6, 2008),
p. D6; and ibid. See also “Th e 50 Women to Watch: 2005,” Wall Street Journal
(October 31, 2005), pp. R1–R11.
20 Th omas, op. cit. (1990, 1992).
21 Amy Chozick, “Beyond the Numbers,” Wall Street Journal (November 14,
2005), p. R4.
22 Th omas, op. cit. (1992), p. 17.
23 Information from “100 Best Corporate Citizens,” Business Ethics online
(retrieved from www.business-ethics.com, November 1, 2005).
24 Th omas, op. cit. (1992), p. 17.
25 Th omas and Woodruff , op. cit. (1999), pp. 211–26.
26 “Diversity Today: Corporate Recruiting Practices in Inclusive Work-
places,” Fortune ( June 12, 2000), p. S4.
27 For a good overview, see Richard D. Lewis, Th e Cultural Imperative:
Global Trends in the 21st Century (Yarmouth, ME: Intercultural Press, 2002);
and Martin J. Gannon, Understanding Global Cultures (Th ousand Oaks, CA:
Sage, 1994).
28 Based on Bunker, op. cit., pp. 127–49.
29 Examples reported in Neil Chesanow, Th e World-Class Executive (New
York: Rawson Associates, 1985).
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EndnotesEN-18
30 P. Christopher Earley and Elaine Mosakowski, “Toward Cultural Intel-
ligence: Turning Cultural Diff erences into Workplace Advantage,” Academy
of Management Executive, vol. 18 (2004), pp. 151–57.
31 See Gary P. Ferraro, “Th e Need for Linguistic Profi ciency in Global
Business,” Business Horizons (May/June 1996), pp. 39–46; quote from Carol
Hymowitz, “Companies Go Global, but Many Managers Just Don’t Travel
Well,” Wall Street Journal (August 15, 2000), p. B1. See also Edward T. Hall,
Th e Silent Language (New York: Anchor Books, 1959).
32 Edward T. Hall, Beyond Culture (New York: Doubleday, 1976).
33 Edward T. Hall, Hidden Diff erences (New York: Doubleday, 1990).
34 See, for example, Fons Trompenaars, Riding the Waves of Culture: Under-
standing Cultural Diversity in Business (London: Nicholas Brealey Pub-
lishing, 1993); Harry C. Triandis, Culture and Social Behavior (New York:
McGraw-Hill, 1994); Steven H. Schwartz, “A Th eory of Cultural Values and
Some Implications for Work,” Applied Psychology: An International Review,
vol. 48 (1999), pp. 23–49; Martin J. Gannon, Understanding Global Cultures,
3rd ed. (Th ousand Oaks, CA: Sage, 2004); and Robert J. House, Paul J. Hanges,
Mansour Javidan, Peter W. Dorfman, and Vipin Gupta (eds.), Culture, Leader-
ship and Organizations: Th e GLOBE Study of 62 Societies (Th ousand Oaks, CA:
Sage Publications, Inc., 2004).
35 Geert Hofstede, Culture’s Consequences (Beverly Hills, CA: Sage, 1984),
and Culture’s Consequences: Comparing Values, Behaviors, Institutions and
Organizations Across Nations, 2nd ed. (Th ousand Oaks, CA: Sage, 2001). See
also Michael H. Hoppe, “An Interview with Geert Hofstede,” Academy of Man-
agement Executive, vol. 18 (2004), pp. 75–79.
36 Geert Hofstede and Michael H. Bond, “Th e Confucius Connection:
From Cultural Roots to Economic Growth,” Organizational Dynamics, vol.
16 (1988), pp. 4–21.
37 Th is dimension is explained more thoroughly by Geert Hofstede et
al., Masculinity and Femininity: Th e Taboo Dimension of National Cultures
(Th ousand Oaks, CA.: Sage, 1998).
38 Information from “Th e Conundrum of the Glass Ceiling,” op cit.; and
“Japan’s Diversity Problem,” Wall Street Journal (October 24, 2005), pp. B1, B5.
39 “Japan’s Diversity Problem,” op. cit.
40 See Hofstede and Bond, op. cit.
41 See Geert Hofstede, Culture and Organizations: Software of the Mind
(London: McGraw-Hill, 1991).
42 Th is summary is based on Mansour Javidan, P. Dorfman, Mary Sully de
Luque, and Robert J. House, “In the Eye of the Beholder: Cross Cultural Les-
sons in Leadership from Project GLOBE,” Academy of Management Perspec-
tives (February, 2006), pp. 67–90.
Feature Notes 17 Opening Quote—International Labour Organization, Facts on Child Labor
2010 (Geneva, Switzerland: April 1, 2010).
Th e Amazing Race—E. R. Goldstein, “What If ‘English Only’ Isn’t Wrong?”,
Wall Street Journal (August 2010). Retrieved December 8, 2010 from http://online.
wsj.com/article/SB10001424052748704002104575290602423212366.html
Role Models—Information and quotes from www.limited.com/feature.
jsp; and Time Ferna, “Success of ‘Secret’ in Brazil Startling,” Columbus Dis-
patch (October 24, 2010), pp. D1, D2.
Ethics Check 17—Information from Raul Burgoa, “Bolivia Seizes Control
of Oil and Gas Fields,” Bangkok Post (May 3, 2006), p. B5.
Facts to Consider—Information from Transparency International, “Cor-
ruption Perceptions Index 2008” and “Bribe Payers Index” (December 9,
2008), both available from: www.transparency.org.
Rwanda—Information and quote from Steve Hamm, “Into Africa: Capi-
talism from the Ground Up,” Business Week (May, 4 2009), pp. 60–61.
Endnotes 17 1 Sample articles include “Globalization Bites Boeing,” Business Week
(March 24, 2008), p. 32; “One World, One Car, One Name,” Business Week
(March 24, 2008), p. 32; Eric Bellman and Jackie Range. “Indian-Style Merg-
ers: Buy a Brand, Leave it Alone,” Wall Street Journal (March 22–23, 2008), pp.
A9, A14; and David Kiley, “One Ford for the Whole Wide World,” Business
Week ( June 15, 2009), pp. 58–59.
2 Pietra Rivoli, Th e Travels of a T-Shirt in the Global Economy, 2nd ed.
(Hoboken, NJ: Wiley, 2009).
3 See for example Kenichi Ohmae’s books Th e Borderless World: Power and
Strategy in the Interlinked Economy (New York: Harper, 1989); Th e End of the
Nation State (New York: Free Press, 1996); Th e Invisible Continent: Four Stra-
tegic Imperatives of the New Economy (New York: Harper, 1999); and Th e Next
Global Stage: Challenges and Opportunities in Our Borderless World (Philadel-
phia: Wharton School Publishing, 2006).
4 For a discussion of globalization, see Th omas L. Friedman, Th e Lexus and
the Olive Tree: Understanding Globalization (New York: Bantam Doubleday
Dell, 2000); John Micklethwait and Adrian Woodridge, A Future Perfect: Th e
Challenges and Hidden Promise of Globalization (New York: Crown, 2000);
and Th omas L. Friedman, Th e World Is Flat: A Brief History of the Twenty-First
Century (New York: Farrar, Straus and Giroux, 2005).
5 Rosabeth Moss Kanter, World Class: Th inking Locally in the Global
Economy (New York: Simon & Schuster, 1995), preface.
6 Paul Wilson, “Foreign Companies Big Employers in Ohio,” Columbus
Dispatch (December 26, 2005), p. F6.
7 Quote from John A. Byrne, “Visionary vs. Visionary,” Business Week
(August 28, 2000), p. 210.
8 See Mauro F. Guillén and Esteban García-Canal, “Th e American Model of
the Multinational Firm and the ‘New’ Multinationals from Emerging Econo-
mies,” Academy of Management Perspectives, vol. 23 (2009), pp. 23–35.
9 Information from newbalance.com/corporate.
10 Information in box from “Factory to the World,” National Geographic
(May, 2008), p. 170. For how Chinese fi rms are being aff ected by the global
economic slowdown, see Dexter Roberts, “China’s Factory Blues,” Business
Week (April 7, 2008), pp. 78–82.
11 “Survey: Intellectual Property Th eft Now Accounts for 31% of Global
Counterfeiting.” Gieschen Consultancy, February 25, 2005.
12 Information from “Not Exactly Counterfeit,” Fortune (April 26, 2006):
oney.cnn.com/magazines/fortune.
13 Criteria for choosing joint venture partners developed from Anthony
J. F. O’Reilly, “Establishing Successful Joint Ventures in Developing Nations:
A CEO’s Perspective,” Columbia Journal of World Business (Spring 1988), pp.
65–71; and “Best Practices for Global Competitiveness,” Fortune (March 30,
1998), pp. S1–S3, special advertising section.
14 Karby Leggett, “U.S. Auto Makers Find Promise—and Peril—in China,”
Wall Street Journal ( June 19, 2003), p. B1; “Did Spark Spark a Copycat?” Busi-
ness Week (February 7, 2005), p. 64.
15 Quote from Charles Forelle and Don Clark, “Intel Fine Jolts Tech Sector,”
Wall Street Journal (May 14, 2009), pp. A1, A14.
16 “Starbucks Wins Trademark Case,” Th e Economic Times, Bangalore
( January 3, 2006), p. 8.
17 Th is index is reported in Th e Economist. Data in table are from “Bun-
fi ght,” economist.com (October 14, 2010).
18 Many newspapers and magazines publish annual lists of the world’s
largest multinational corporations. Fortune’s annual listing is available from
www.fortune.com.
19 See Fortune.com and Ftimes.com.
20 See Peter F. Drucker, “Th e Global Economy and the Nation-State,” For-
eign Aff airs, vol. 76 (September/October 1997), pp. 159–71.
21 Information from Steve Hamm, “IBM vs. TATA: Which Is More Ameri-
can?” Business Week (May 5, 2008), p. 28.
22 Michael Mandel, “Multinationals: Are Th ey Good for America?,” Business
Week (February 28, 2008): businessweek.com.
23 Ibid.
24 “Count: Really Big Business,” Fast Company (December, 2008/ January,
2009), p. 46.
25 Adapted from R. Hall Mason, “Confl icts Between Host Countries and Mul-
tinational Enterprise,” California Management Review, vol. 17 (1974), pp. 6, 7.
26 See Dionne Searcey, “U.S. Cracks Down on Corporate Bribes,” Wall Street
Journal (May 26, 2009), pp. A1–A4.
27 Marc Gunther, “Can Factory Monitoring Ever Really Work?” Business
Ethics (Fall 2005), p. 12.
28 Information and quote from Andrew Morse and Nick Wingfi eld, “Micro-
soft Will Investigate Conditions at Chinese Plant,” Wall Street Journal (April
16, 2010), p. B7.
29 “An Industry Monitors Child Labor,” New York Times (October 16, 1997),
pp. B1, B9; and Rugmark International Web site: www.rugmark.de.
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Endnotes EN-19
30 Information and quote from Andrew Morse and Nick Wingfi eld, “Apple
Audits Labor Practices,” Wall Street Journal (March 1, 2010), p. B3.
31 See Robert B. Reich, “Who Is Th em?” Harvard Business Review (March/
April 1991), pp. 77–88.
32 Carol Hymowitz, “Th e New Diversity,” Wall Street Journal (November 14,
2005), p. R1.
33 Th is summary is based on Mansour Javidan, P. Dorfman, Mary Sully
de Luque, and Robert J. House, “In the Eye of the Beholder: Cross Cultural
Lessons in Leadership from Project GLOBE,” Academy of Management
Perspectives (February 2006), pp. 67–90; and Martin J. Gannon, Paradoxes of
Culture and Globalization (Th ousand Oaks, CA: Sage, 2008), p. 52.
Feature Notes 18 Role Models—Information and quotes from Joe Higgins, “Athens Business
Owner Presented State Award,” Athens Messenger (November 18, 2009), p. 3;
and Samantha Pirc, “A Local Success Story: Q&A with Michelle Greenfi eld of
Th ird Sun,” OHIO Today (Fall/Winter, 2009), pp. 14, 15.
Ethics Check—Information from Jessica Shambora, “Th e Story Behind the
World’s Hottest Shoemaker,” Financial Times, Kindle edition (March 21, 2010);
www.toms.com/movement-one-for-one; and John Tozzi, “Th e Ben & Jerrys’
Law: Principles Before Profi t,” Bloomberg Businessweek (April 26–May 2, 2010),
pp. 69, 70.
Facts to Consider—Data reported by Karen E. Klein, “Minority Start Ups:
A Measure of Progress,” Business Week (August 25, 2005), retrieved from
www.businessweekonline; and press release, Minority Business Develop-
ment Agency (March 5, 2009): www.mbda.gov ; “Minority-Owned Business
Growth & Global Reach,” U. S. Department of Commerce MBDA: www.
mdba.org (revised March, 2011); and, Leah Yomtovian, “Th e Funding Land-
scape for Minority Entrepreneurs,” ideacrossing.org (February 16, 2011).
Endnotes 18 1 Information and quotes for these examples from Alison Damasi, “No
Job? Create One,” Bloomberg Businessweek (March 22 & 29, 2010), p. 89; Laura
Lorber, “Older Entrepreneurs Target Peers,” Wall Street Journal (February 16,
2010), p. B6; and Dale Buss, “Th e Mothers of Invention,” Wall Street Journal
(February 8, 2010), p. R7.
2 Information from “Women Business Owners Receive First-Ever Micro
Loans Via the Internet,” Business Wire (August 9, 2000); Jim Hopkins, “Non-
Profi t Loan Group Takes Risks on Women in Business,” USA Today (August
9, 2000), p. 2B; and “Women’s Group Grants First Loans to Entrepreneurs,”
Columbus Dispatch (August 10, 2000), p. B2.
3 Speech at the Lloyd Greif Center for Entrepreneurial Studies, Marshall
School of Business, University of Southern California, 1996.
4 Th is list is developed from Jeff ry A. Timmons, New Venture Creation:
Entrepreneurship for the 21st Century (New York: Irwin/McGraw-Hill, 1999),
pp. 47–48; and Robert D. Hisrich and Michael P. Peters, Entrepreneurship, 4th
ed. (New York: Irwin/McGraw-Hill, 1998), pp. 67–70.
5 Information for these profi les from the corporate Web sites; the Entre-
preneur’s Hall of Fame: www.ltbn.com/halloff ame.html; people.forbes.com;
Josh Quittner, “Th e Flickr Founders,” Time (April 30, 2006): www.time.com
(accessed May 17, 2010); and www.hunch.com.
6 For the top-selling franchises, see “Top 10 Franchises for 2009,” Entrepre-
neur Magazine ( January, 2009): www.entrepreneur.com.
7 For a review and discussion of the entrepreneurial mind, see Timmons,
op. cit., pp. 219–225.
8 Timothy Butler and James Waldroop, “Job Sculpting: Th e Art of Retaining Your
Best People,” Harvard Business Review (September/October 1999), pp. 144–52.
9 Based on research summarized by Hisrich and Peters, op. cit., pp. 70–74.
10 Information and quote from Jim Hopkins, “Serial Entrepreneur Strikes
Again at Age 70,” USA Today (August 15, 2000).
11 See the review by Hisrich and Peters, op. cit.; and Paulette Th omas,
“Entrepreneurs’ Biggest Problems and How Th ey Solve Th em,” Wall Street
Journal Reports (March 17, 2003), pp. R1, R2.
12 Ibid.
13 Quote from www.anitaroddick.com/aboutanita.php (accessed April 24,
2010).
14 “New Census Data Reinforces the Economic Power of Women-Owned
Businesses in the U.S. says NAWBO,” National Association of Women
Business Owners press release ( July 15, 2010); nawbo.org; Mark D. Wolf,
“Women-Owned Business: America’s New Job Creation Engine,” Forbes.com
( January 12, 2010); and Paths to Entrepreneurship: New Directions for Women
in Business (New York: Catalyst, 1998) as summarized on the National Foun-
dation for Women Business Owners Web site: www.nfwbo.org/key.html.
15 Paths to Entrepreneurship, op. cit.; and Women Business Owners of Color:
Challenges and Accomplishments (Washington, DC: National Foundation for
Women Business Owners, 1998).
16 Information from www.mbda.gov; and, Leah Yomtovian, “Th e Funding
Landscape for Minority Entrepreneurs,” ideacrossing.org (February 16, 2011).
17 David Bornstein, How to Change the World: Social Entrepreneurs and the
Power of New Ideas (Oxford, U.K.: Oxford University Press, 2004).
18 See Laura D’ Andrea Tyson, “Good Works—With a Business Plan,” Busi-
ness Week (May 3, 2004), retrieved from Business Week Online (November 14,
2005) at www.businessweek.com.
19 Examples are from “Growing Green Business,” Northwestern (Winter,
2007), p. 19; and Regina McEnery, “Cancer Patients Getting the White-Glove
Treatment,” Columbus Dispatch (March 1, 2008).
20 See “Th e 10 Best Social Enterprises of 2009,” Fast Company (December 1,
2009): fastcompany.com.
21 Th e Facts About Small Business 1999 (Washington, DC: U.S. Small Busi-
ness Administration, Offi ce of Advocacy).
22 Reported by Sue Shellenbarger, “Plumbing for Joy? Be Your Own Boss,”
Wall Street Journal (September 16, 2009), pp. D1, D2.
23 Ibid.
24 See U.S. Small Business Administration Web site: www.sba.gov ; and
Statistical Abstract of the United States (Washington, DC: U.S. Census
Bureau, 1999).
25 “Small Business Expansions in Electronic Commerce,” U.S. Small Busi-
ness Administration, Offi ce of Advocacy ( June 2000).
26 Information from Will Christensen, “Rod Spencer’s Sports-Card Business
Has Migrated Cyberspace Marketplace,” Columbus Dispatch ( July 24, 2000), p. F1.
27 Discussion based on “Th e Life Cycle of Entrepreneurial Firms,” in Ricky
Griffi n (ed.), Management, 6th ed. (New York: Houghton Miffl in, 1999),
pp. 309–10; and Neil C. Churchill and Virginia L. Lewis, “Th e Five Stages of
Small Business Growth,” Harvard Business Review (May/June 1993), pp. 30–50.
28 Information reported in “Th e Rewards,” Inc. State of Small Business (May
20–21, 2001), pp. 50–51.
29 Data reported by Th e Family Firm Institute: www.ffi .org/looking/
factsfb.html.
30 Conversation from the case “Am I My Uncle’s Keeper?” by Paul I. Karof-
sky (Northeastern University Center for Family Business) and published at
www.fambiz.com/contprov.cfm? ContProvCode=NECFB&ID=140.
31 Survey of Small and Mid-Sized Businesses: Trends for 2000, conducted by
Arthur Andersen and National Small Business United.
32 Ibid.
33 See U.S. Small Business Administration Web site: www.sba.gov.
34 George Gendron, “Th e Failure Myth,” Inc. ( January 2001), p. 13. Informa-
tion and quotes from Dana Mattioli, “Recession Spells End for Many Family
Enterprises,” Wall Street Journal (October 6, 2009), p. B6.
35 Based on Norman M. Scarborough and Th omas W. Zimmerer, Eff ective
Small Business Management (Englewood Cliff s, NJ: Prentice-Hall, 2000), pp.
25–30; and Scott Clark, “Most Small-Business Failures Tied to Poor Manage-
ment,” Business Journal (April 10, 2000).
36 Anne Field, “Business Incubators Are Growing Up,” Business Week
(November 16, 2009), p. 76.
37 See www.sba.gov/aboutsba.
38 Developed from William S. Sahlman, “How to Write a Great Business
Plan,” Harvard Business Review ( July/August 1997), pp. 98–108.
39 Marcia H. Pounds, “Business Plan Sets Course for Growth,” Columbus
Dispatch (March 16, 1998), p. 9; see also fi rm Web site: www.calcustoms.com.
40 Standard components of business plans are described in many books,
such as Linda Pinson, Anatomy of a Business Plan: Th e Step-by-Step Guide to
Building the Business and Securing Your Company’s Future (Tustin, CA: Out of
Your Mind . . . and Into the Marketplace, 2008). Scarborough and Zimmerer,
op. cit.; and on Web sites such as American Express Small Business Services,
Business Town.com., and BizplanIt.com.
41 “You’ve Come a Long Way Baby,” Business Week Frontier ( July 10, 2000).
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EndnotesEN-20
SKILL-BUILDING PORTFOLIO
Self-Assessment Notes 1 Some Items included in Outcome Measurement Project, Phase I and
Phase II Reports (St. Louis: American Assembly of Collegiate Schools of
Business, 1986).
2 Item list from James Weber, “Management Value Orientations: A Typol-
ogy and Assessment,” International Journal of Value Based Management,
vol. 3, no. 2 (1990), pp. 37–54.
3 AIM Survey (El Paso, TX: ENFP Enterprises, 1989). Copyright © 1989 by
Weston H. Agor. Used by permission.
4 Suggested by a discussion in Robert Quinn, Sue R. Faerman, Michael P.
Th ompson, and Michael R. McGrath, Becoming a Master Manager: A Con-
temporary Framework (New York: Wiley, 1990), pp. 75–76.
5 Julian P. Rotter, “External Control and Internal Control,” Psychology
Today ( June, 1971), p. 42. Used by permission.
6 Joseph A. Devito, Messages: Building Interpersonal Communication Skills,
3rd ed. (New York: HarperCollins, 1996), referencing William Haney, Com-
municational Behavior: Text and Cases, 3rd ed. (Homewood, IL: Irwin, 1973).
Reprinted by permission.
7 Questionnaire adapted from L. Steinmetz and R. Todd, First Line Man-
agement, 4th ed. (Homewood, IL: BPI/Irwin, 1986), pp. 64–67. Used by per-
mission.
8 Based on S. Budner, “Intolerance of Ambiguity as a Personality Variable,”
Journal of Personality, vol. 30, no. 1 (1962), pp. 29–50.
9 Developed in part from Robert E. Quinn, Sue R. Faerman, Michael P.
Th ompson, and Michael R. McGrath, Becoming a Master Manager! A Con-
temporary Framework (New York: Wiley, 1990), p. 187. Used by permission.
10 Fred E. Fiedler and Martin M. Chemers, Improving Leadership Eff ective-
ness: Th e Leader Match Concept, 2nd ed. (New York: Wiley, 1984). Used by
permission.
11 Adapted from R.W. Bortner, “A Short Rating Scale as a Potential Mea-
sure of Type A Behavior, “Journal of Chronic Diseases, vol. 22 (1966), pp.
87–91. Used by permission.
12 Developed from Lynda McDermott, Nolan Brawley, and William Waite,
World-Class Teams: Working Across Borders (New York: Wiley, 1998).
13 Douglas T. Hall, Donald D. Bowen, Roy J. Lewicki, and Francine S. Hall,
Experiences in Management and Organizational Behavior, 2nd ed. (New York:
Wiley, 1985). Used by permission.
14 Developed from “Is Your Company Really Global?” Business Week
(December 1, 1997).
15 Instrument adapted from Norman M. Scarborough and Th omas W.
Zimmerer, Eff ective Small Business Management, 3rd ed. (Columbus: Merrill,
1991), pp. 26–27.
Class Exercise Notes 1 Adapted from John R. Schermerhorn Jr., James G. Hunt, and Richard N.
Osborn, Managing Organizational Behavior, 3rd ed. (New York: Wiley, 1988),
pp. 32–33. Used by permission.
2 Developed from Sara L. Rynes, Tamara L. Giluk, and Kenneth G. Brown,
“Th e Very Separate Worlds of Academic and Practitioner Periodicals in
Human Resource Management: Implications for Evidence-Based Manage-
ment,” Academy of Management Journal, vol. 50 (October 2008), p. 986.
3 Adapted from “Lost at Sea: A Consensus-Seeking Task,” in the 1975
Handbook for Group Facilitators. Used with permission of University Associ-
ates, Inc.
4 Suggested by an exercise in John F. Veiga and John N. Yanouzas, Th e
Dynamics of Organization Th eory: Gaining a Macro Perspective (St. Paul, MN:
West, 1979), pp. 69–71.
5 Developed from Eugene Owens, “Upward Appraisal: An Exercise in Sub-
ordinate’s Critique of Superior’s Performance,” Exchange: Th e Organizational
Behavior Teaching Journal, vol. 3 (1978), pp. 41–42.
6 Vignettes from Victor H. Vroom and Arthur G. Jago, Th e New Leadership
(Englewood Cliff s, NJ: Prentice-Hall, 1988). Used by permission.
7 Adapted from Roy J. Lewicki, Donald D. Bowen, Douglas T. Hall, and
Francine S. Hall, “What Do You Value in Work?” Experiences in Management
and Organizational Behavior, 3rd ed. (New York: Wiley, 1988), pp. 23–26.
Used by permission.
8 Developed from Brian Dumaine, “Why Do We Work?” Fortune (Decem-
ber 26, 1994), pp. 196–204.
9 Adapted from William Dyer, Team Building, 2nd ed. (Reading, MA: Addison-
Wesley, 1987), pp. 123–25.
10 Suggested by feedback questionnaire in Judith R. Gordon, A Diagnostic
Approach to Organizational Behavior, 3rd ed. (Boston: Allyn & Bacon, 1991),
p. 298.
11 From Sidney B. Simon, Howard Kirschenbaum, and Leland Howe, Val-
ues Clarifi cation, Th e Handbook, rev. ed. © 1991, Values Press, P.O. Box 450,
Sunderland, MA. 01375.
12 Quote from woopidoo.com/businessquotes (retrieved September
16, 2006). See also Michael Gerber, Th e E-Myth Revisited: Why Most Small
Businesses Don’t Work and What to Do About It (New York: HarperCollins,
2001).
Team Project Notes 1 Developed in part from Roy J. Lewicki, Donald D. Bowen, Douglas T. Hall,
and Francine S. Hall, Experiences in Management and Organizational Behav-
ior, 3rd ed. (New York: Wiley, 1988), pp. 261–67. Used by permission.
2 Developed from Roy J. Lewicki, Donald D. Bowen, Douglas T. Hall, and
Francine S. Hall, Experiences in Management and Organizational Behavior,
4th ed. (New York: Wiley, 1997), pp. 195–97.
3 Th omas L. Friedman, Th e World Is Flat: A Brief History of the Twenty-First
Century (New York: Farrar, Straus and Giroux, 2005).
Case 1 Bibliography “Trader Joe’s Market.” Supermarket News. http://supermarketnews.com/
profi les/top75/trader_joes_market11/. Accessed 2/6/11.
Beth Kowitt. “Inside the secret world of Trader Joe’s.” Fortune. Posted
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joes_full_version.fortune/index.htm. Accessed 2/6/11.
“Aldi Sud.” Fast Company. http://www.fastcompany.com/mic/2010/pro-
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com/Salary/Trader-Joe-s-Store-Manager-Salaries-E5631_D_KO13,26.htm.
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Deborah Orr, “Th e Cheap Gourmet,” Forbes (April 10, 2006).
Business Week Online (February 21, 2008).
Kerry Hannon, “Let Th em Eat Ahi Jerky,” U.S. News & World Report ( July
7, 1997).
Marianne Wilson, “When Less is More,” Chain Store Age (November
2006).
Supermarket News’s Top 75 Retailers ( January 12, 2009).
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www.traderjoes.com/how_we_do_biz.html.
“Win at the Grocery Game,” Consumer Reports (October 2006), p. 10.
www.traderjoes.com/tjs_faqs.asp#DiscontinueProducts.
www.latimes.com/business/la-fi -tj12feb12,1,1079460.story.
Jena McGregor, “2004 Customer 1st,” Fast Company (October 2004).
Irwin Speizer, “Th e Grocery Chain Th at Shouldn’t Be,” Fast Company
(February 2004).
Heidi Brown, “Buy German,” Forbes ( January 12, 2004).
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Irwin Speizer, “Shopper’s Special,” Workforce Management (September
2004).
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“Downturn Could Burn Whole Foods,” Th e Walls Street Journal (November
3, 2008), pp. B1.
“Employees First!” Time ( July 7, 2008), p. 4.
http://www.wholefoodsmarket.com/company/index.php.
“Employees First!” Time ( July 7, 2008), p. 4.
“Downturn Could Burn Whole Foods,” Th e Wall Street Journal (November
3, 2008), pp. B1, B9.
Matt Andrejczak, “Have Investors Whet Th eir Appetite on Whole Foods?”
MarketWatch (May 19, 2009).
“Downturn Could Burn Whole Foods.”
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Endnotes EN-21
Case 2 Bibliography Sonya Dowsett. “Zara Owner Inditex Q1 Net Profi t Up 63 Percent.”
International Business Times. 6/9/10. http://www.ibtimes.com/articles/
27536/20100609/zara-owner-inditex-q1-net-profit-up-63-percent.htm.
Accessed 2/6/11.
Julia Caesar. “Zara launches online retail store.” BBC News. Posted 9/2/10.
http://www.bbc.co.uk/news/business-11155437. Accessed DATE.
“Our Group.” Inditex. http://www.inditex.com/en/who_we_are/our_group.
Accessed 2/6/11.
Inditex Press Dossier: www.inditex.com/en/press/information/press_kit
(accessed May 17, 2009).
“Zara Grows as Retail Rivals Struggle,” Wall Street Journal (March 26,
2009).
“Zara, A Spanish Success Story,” CNN ( June 15, 2001).
Cecile Rohwedder and Keith Johnson, “Pace-setting Zara Seeks More
Speed to Fight Its Rising Cheap-Chic Rivals,” Wall Street Journal (February,
20, 2008), p. B1.
“Zara: Taking the Lead in Fast-Fashion,” Business Week (April 4, 2006).
“Zara Grows as Retail Rivals Struggle,” Wall Street Journal (March 26, 2009).
Diana Middleton, “Fashion for the Frugal,” Th e Florida Times-Union
(October 1, 2006).
“Who We Are,” www.inditex.com/en/who_we_are/timeline (accessed
May 18, 2008).
“Shining Examples,” Economist ( June 17, 2006).
“Westfi eld Looks to Zara for Fuller Figure of $1 bn Australian,” Th e Austra-
lian (September 3, 2007), p. 3.
“Ortega’s Empire Showed Rivals New Style of Retailing,” Th e Times (United
Kingdom) ( June 14, 2007).
Case 3 Bibliography Monte Burke. “Wal-Mart, Patagonia Team to Green Business.” Forbes. Posted
5/6/10, 12:20 PM. http://www.forbes.com/forbes/2010/0524/rebuilding-sus-
tainability-eco-friendly-mr-green-jeans.html. Accessed 2/2/11.
Kent Garber. “Yvon Chouinard: Patagonia Founder Fights for the Envi-
ronment.” U.S. News. Posted 10/22/09. http://www.usnews.com/news/
best-leaders/articles/2009/10/22/yvon-chouinard-patagonia-founder-
fi ghts-for-the-environment. Accessed 2/2/11.
“Patagonia.” Inc. http://www.inc.com/top-workplaces/2010/profi le/
patagonia-richard-sheahan.html. Accessed 2/3/11.
Jennifer Wang. “Patagonia, From the Ground Up.” Entrepreneur. Posted
6/10. http://www.entrepr neur.com/magazine/entrepreneur/2010/
june/206536.html. Accessed 2/2/11.
“Environmentalism: Our Common Waters.” Patagonia. http://www.pata-
gonia.com/us/patagonia.go?assetid=1865. Accessed 2/3/11.
“Keep Earth in Business.” 1% For the Planet. http://www.onepercentfor
theplanet.org/en/. Accessed 2/3/11.
Kristall Lutz. “What Makes Patagonia ‘Th e Coolest Company on the
Planet’: Insights from Founder Yvon Chouinard.” Opportunity Green. Posted
1/27/11. http://opportunitygreen.com/green-business-blog/2011/01/27/
what-makes-patagonia-the-coolest-company-on-the-planet-insights-from-
founder-yvon-chouinard/. Accessed 2/2/11.
“Environmental Internships.” Patagonia. http://www.patagonia.com/eu/
enSE/patagonia.go?assetid=9153. Accessed 2/3/11.
“Tools for Grassroots Activists Conference.” Patagonia. http://www.pata-
gonia.com/us/patagonia.go?assetid=15372. Accessed 2/3/11.
“Our History.” Patagonia. http://www.patagonia.com/us/patagonia.
go?assetid=3351. Accessed 2/3/11.
“Introducing the Common Th reads Initiative.” Patagonia. http://www.
patagonia.com/us/patagonia.go?assetid=1956. Accessed 2/3/11.
Case 4 Bibliography “Amazon.com Announces Fourth Quarter Sales Up 36% to $12.95 Billion.”
Amazon. Posted 1/27/11. http://phx.corporate-ir.net/phoenix.zhtml?c=
176060&p=irol-newsArticle&ID=1521090&highlight=. Accessed 2/24/11.
Stuart Dredge. “Kindle app for iPhone and iPad may get webby to avoid
Apple’s new rules.” CNET UK. Posted 2/24/11, 12:14 PM. http://crave.cnet.
co.uk/mobiles/kindle-app-for-iphone-and-ipad-may-get-webby-to-avoid-
apples-new-rules-50002913/. Accessed 2/24/11.
Jeff rey A. Trachtenberg. “Barnes & Noble Names Its Web Chief as CEO .”
Wall Street Journal. Posted 3/19/10. http://online.wsj.com/article/SB100014
24052748704207504575129313539265910.html. Accessed 2/20/11.
www.amazon.com.
http://www.amazon.com/Locations-Careers/b?ie=UTF8&node=239366011.
www.jumpstart-it.com/jumpstart-it-on-amazon.html.
Sean O’Neill, “Indulge Your Literary Urge,” Kiplinger’s Personal Finance,
vol. 59, no. 8 (August 2005).
“Amazon CEO Takes Long View,” USA Today ( July 6, 2005).
David Meerman Scott, “Th e Flip Side of Free,” eContent, vol. 28, no. 10
October 2005.
“New Amazon MP3 Clips Widget Ads to Suite of Digital Product Widgets?”
(accessed at http://top10-charts.com/news.php?nid=40273 May 29, 2008).
Th omas Ricker, “Amazon Adds Audible to its Digital Empire” (accessed at
http://www.engadget.com/2008/01/31/amazon-adds-audible-to-its-digital-
empire/ May 28, 2008).
“Amazon Unbox on TiVo” (accessed at http://www.amazon.com/gp/
video/tivo May 29, 2008).
Steven Levy, “Th e Future of Reading,” Newsweek (November 26, 2007).
Tim O Reilly, “Why Kindle Should Be an Open Book,” Forbes (accessed
at http://www.forbes.com/2009/02/22/kindle-oreilly-ebooks-technology-
breakthroughs_oreilly.html).
http://www.applelink s.com/index.php/more/amazon_launch es_
o p t i m i z e d _ k i n d l e _ st o re _ s e a m l e ss ly _ i n t e g ra t e d _ w i t h _ k i n d l e _ f o / .
Accessed March 4, 2009.
Brad Stone, “Th e Zappos Way of Managing,” Th e New York Times (March
28, 2009).
http://about.zappos.com/zappos-story/looking-ahead-let-there-be-
anything-and-everything.
http://about.zappos.com/press-center/zappos-fi nds-perfect-fi t Zappos
fi nds a perfect fi t.
Gene Marks, “Many Happy Returns” (accessed at http://www.forbes.com/
2009/01/05/zappos-retail-return-ent-manage-cx_gm_0105genemarks
returns.html).
h t t p : / / w w w . b u s i n e s s w e e k . c o m / s m a l l b i z / c o n t e n t / s e p 2 0 0 8 /
sb20080916_288698.htm).
http://about.zappos.com/press-center/workplace-fun-shoe-fi ts-zappos.
“Zappos Secret: It’s an Open Book,” Business Week (March 23 & 30, 2009).
Case 5 Bibliography “Nordstrom Beats Macy’s and Saks by Moving Inventories.” Bloomberg.
Posted 4/8/09, 4:19 PM. http://www.bloomberg.com/apps/news?pid=news
archive&sid=a54WN3jQ6TEs. Accessed 1/18/11.
“Nordstrom Uses Web to Locate Items and Increase Sales.” Th e New York
Times. Posted 8/23/2010. http://www.nytimes.com/2010/08/24/business/
24shop.html. Accessed 1/18/21.
Jake Batsell. “Nordstrom gets in step with tracking its inventory.” Th e
Seattle Times. Posted 2/10/02. http://community.seattletimes.nwsource.
com/archive/?date=20020210&slug=nordstrom10. Accessed 2/7/11.
Case 6 Bibliography Dean Takahashi. “EA’s chief creative offi cer describes game indus-
try’s re-engineering.” GamesBeat. Posted 8/26/09. http://venturebeat.
com/2009/08/26/eas-chief-creative-offi cer-describes-game-industrys-re-
engineering/. Accessed 2/20/11.
Ben Fritz. “Viacom sold Harmonix for $50, saved $50 million on taxes.” Los
Angeles Times. Posted 1/4/11. http://latimesblogs.latimes.com/entertainment
newsbuzz/2011/01/viacom-sold-harmonix-for-50-saved-50-million-on-taxes.
html. Accessed 2/20/11.
Christopher Grant. “Jobs: 1/3 of iPhone App Store launch apps are games.”
Website Joystiq. Posted 7/10/08. http://www.joystiq.com/2008/07/10/jobs-
1-3-of-iphone-app-store-launch-apps-are-games/. Accessed 2/20/11.
Chris Morris. “Video Game Faceoff : EA vs Activision.” CNBC. Posted
2/11/2010. http://www.cnbc.com/id/35352043/Video_Game_Faceoff _EA_
vs_Activision. Accessed 2/20/11.
Mark Serrels. “Digital Distribution: Is EA the Best Prepared Publisher?”
Kotaku. Posted 2/2/11. http://www.kotaku.com.au/2011/02/digital-distribution-
is-ea-the-best-prepared-publisher/. Accessed 2/20/11.
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EndnotesEN-22
“Numbers.” Zynga. http://www.zynga.com/about/numbers.php. Accessed
2/20/11.
“Facts.” Zynga. http://www.zynga.com/about/facts.php. Accessed 2/20/11.
Joab Jackson. “Zynga’s Secret to Success: Connecting Casual Friends.”
CIO. Posted 2/15/11. http://www.cio.com/article/664955/Zynga_s_Secret_
to_Success_Connecting_Casual_Friends. Accessed 2/20/11.
“EA Reports Fourth Quarter and Fiscal Year 2009 Results,” http://news.
ea.com/news/ea/20090505006595/en (accessed May 23, 2009).
David Whelan, “Name Recognition,” Forbes ( June 20, 2005).
Martin McEachern, “Th e Only Game in Town,” Computer Graphics World
(October 2005).
Owen Good, “Lawsuit: Retired NFLers Cheated by EA, Union” (accessed
May 23, 2009, at http://kotaku.com/5059011/lawsuit-retired-nfl ers-cheated-
by-ea-union).
“Anti-trust lawsuit over exclusive license contract” (accessed July 9, 2008,
at http://www.aolcdn.com/tmz_socumetns/0611_nfl _ea_wm.pdf ).
Kenneth Hein, “Gaming Product Placement Gets Good Scores in Study,”
Brandweek (December 5, 2005).
Nick Wingfi eld, “Electronic Arts Off ers $2 Billion for Take-Two,” Wall
Street Journal (February 25, 2008).
Nick Wingfi eld, “Take-Two’s Earnings Report May Be a Coda to EA Off er,”
Wall Street Journal (December 15, 2008).
Software Top 100: “Th e World’s Largest Software Companies” (accessed
May 23, 2009, at http://www.softwaretop100.org/).
“Take 2 Interactive Corporate Overview” (accessed at http://ir.take2games.
com/).
Case 7 Bibliography “Guatemala/Mexico.” Frontline World. http://www.pbs.org/frontlineworld/
stories/guatemala.mexico/facts.html. Accessed 2/8/11.
“Company Snapshot.” Dunkin’ Donuts. http://www.dunkindonuts.com/
content/dunkindonuts/en/company.html. Accessed 2/8/11.
“Dunkin’ Donuts Announces Robust Development Growth in 2010.” Dunkin’
Donuts. Posted 2/3/11. http://news.dunkindonuts.com/dunkin+donuts/
dunkin+donuts+news/dunkin+donuts+announces+robust+2010+growth.
htm. Accessed 2/8/11.
dunkindonuts.com/aboutus/company/products/Cof feeConsFacts.
aspx?Section=company.
Susan Spielberg, “For Snack Chains, Coff ee Drinks the Best Way to
Sweeten Profi ts,” Nation’s Restaurant News ( June 27, 2005).
www.bizjournals.ocm/boston/gen/company.html?gcode=3AF1302DF8B
5463AA3EA890B32D5B9C2.
Kara Kridler, “Dunkin Donuts to Add 150 Stores in Baltimore-Washington
Area,” Daily Record (Baltimore) (May 6, 2005).
Janet Adamy, “As Starbucks Pares Stores, Tension Rises Over Leases,” Th e
Wall Street Journal (October 13, 2008), p. B1.
http://www.reuters.com/article/pressRelease/idUS133273+14-Apr-
2009+PRN20090414.
https://www.dunkindonuts.com/downloads/pdf/DD_Press_Kit.pdf.
http://leadership.wharton.upenn.edu/digest/attachments/BW-EBIZ_
How-Fast.pdf.
Janet Adamy, “Starbucks Plays Common Joe,” Th e Wall Street Journal
(February 9, 2009), p. B3.
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-news
Article&ID=1267447&highlight.
http://news.starbucks.com/article_display.cfm?article_id=180.
Janet Adamy, “Starbucks Takes Plunge into Instant Coff ee,” Th e Wall Street
Journal (February 13, 2009), p. B8.
Case 8 Bibliography “Nike Could Grab 6% of Global Sports Apparel Market.” NASDAQ. Posted
9/21/10. http://community.nasdaq.com/News/2010-09/nike-could-grab-
6-of-global-sports-apparel-market.aspx?storyid=37156. Accessed 2/17/11
“Nike.” WikiInvest. http://www.wikinvest.com/stock/Nike_%28NKE%29.
Accessed 2/17/11.
“Nike Furthers Its Commitment to Open Innovation and Sustainability.”
Nike. http://www.nikebiz.com/responsibility/. Accessed 2/17/11.
“Phil Knight.” Forbes. http://www.forbes.com/profi le/Phil-Knight. Accessed
2/17/11.
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articles moneycentral.msn.com/Investigating/CNBC/TVReports/Nike-
StarEndorsements.aspx.
nikeresponsibility.com/#workers-facotries/active_factories.
Aaron Bernstein, “Nike Names Names,” BusinessWeek Online (April 13, 2005).
http://adage.com/moy2008/article?article_id=131755.
Stanley Holmes, “Green Foot Forward,” BusinessWeek (November 28, 2005).
“Nike Replaces CEO After 13 months,” USA Today ( January 24, 2006).
“Just Doing It,” Economist, vol. 376, no. 8438 (August 6, 2005).
Nike 2008 Annual Report. http://media.corporate-ir.net/media_fi les/
irol/10/100529/ar_08/nike_ar_2008/docs/Nike_AR_2008.pdf downloaded
May 28, 2009.
http://www.nikebiz.com/media/pr/2009/05/14_NikeRestructuring
Statement.html.
http://www.newbalance.com/corporate/aboutus/corporate_about_
ourcompany.php.
Case 9 Bibliography Sam Abuelsamid. “Mac sales growth continues to surge ahead of PCs 3 to
1.” TUAW. Posted 11/23/10. http://www.tuaw.com/2010/11/23/mac-sales-
growth-continues-to-surge-ahead-of-pcs-3-to-1/. Accessed 2/26/11.
“Locating iPhone Wireless Carriers.” Apple. Posted 2/25/11. http://sup-
port.apple.com/kb/ht1937. Accessed 2/26/11.
Sarah Jacobsson Purewal. “iPad, Fastest-Selling Electronic Device . . .
Ever.” PC World. Posted 10/5/10. http://www.pcworld.com/article/206953/
ipad_fastestselling_electronic_deviceever.html. Accessed 2/26/11.
Lexton Snol. “93% of Tablets Sold Are iPads.” PC World. Posted 2/24/11.
http://www.pcworld.com/article/220600/93_of_tablets_sold_are_ipads.
html#tk.mod_rel. Accessed 2/26/11.
Apple Inc. home page: http://www.apple.com.
Pixar home page: http://www.pixar.com.
apple20.blogs.fortune.cnn.com/2008/04/01/analyst-apples-us-con-
sumer-market-share-now-21-percent/.
apple20.blogs.fortune.cnn.com/2008/05/19/report-apples-market-
share-of-pcs-over-1000-hits-66/.
Brad Stone, “Apple’s Chief Takes a Medical Leave.”
Peter Burrows, “Th e Improbable Heroes of Toontown,” BusinessWeek
(May 26, 2008), pp. 81–82.
Case 10 Bibliography Tracy V. Wilson. “How Netfl ix Works.” How Stuff Works. http://electronics.
howstuff works.com/netfl ix.htm/printable. Accessed 2/16/11.
“Customer Satisfaction with E-Commerce Stalls According to American
Customer Satisfaction Index.” MarketWatch. Posted 2/15/11. http://www.
marketwatch.com/story/customer-satisfaction-with-e-commerce-stalls-
according-to-american-customer-satisfaction-index-2011-02-15. Accessed
2/16/11.
“Netfl ix Adds 7.7 Million Subscribers in 2010 to Pass 20 Million.” Read-
WriteWeb. Posted 1/26/11. http://www.readwriteweb.com/archives/netfl ix_
adds_77_million_subscribers_in_2010_to_pas.php. Accessed 2/16/11.
Juan Martinez. “Netfl ix Q4 2010 revenue jumps 34% despite marketing
cut.” Direct Marketing News. Posted 1/26/11. http://www.dmnews.com/
netfl ix-q4-2010-revenue-jumps-34-despite-marketing-cut/article/195063/.
Accessed 2/16/11.
“Media Center.” Netfl ix. http://www.netfl ix.com/MediaCenter. Accessed
2/16/11.
Mark Heffl inger. “Coinstar Buys Rest of DVD Kiosk Firm Redbox for Up to
$176M.” DigitalMediaWire. Posted 2/13/09, 8:28 AM. http://www.dmwmedia.
com/news/2009/02/13/coinstar-buys-rest-dvd-kiosk-fi rm-redbox-$176m.
Accessed 2/20/11.
Mitch Lowe. “Redbox Chief: We Are an Engine for Industry Growth.” Th e
Wrap. Posted 10/2/09, 2:44 PM. http://www.thewrap.com/blog-post/redbox-
chief-we-are-engine-industry-growth-8165. Accessed 2/20/11.
Netfl ix Consumer Press Kit, at http:cdn-0.nfl ximg.com/us/pdf/Consumer_
Press_Kit.pdf (accessed May 27, 2009).
Jennifer Netherby, “Netfl ix Builds Profi t, Subs,” Video Business ( January
21, 2008).
Susanne Ault, “Netfl ix No. 1 in Online Customer Service,” Video Business
(May 19, 2008).
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Endnotes EN-23
Mary Brandel, “Th e ‘In’ Crowd,” Computerworld (March 3, 2008).
Danny King, “Netfl ix Now,” Video Business (May 1, 2008).
Josh Quittner, “Th e Idiot Box Gets Smart,” Time, vol. 171, no. 22 ( June 2, 2008).
Brian Steinberg, “Transforming the Movie-Rental Model,” Advertising Age,
vol. 79, no. 1 ( January 7, 2008).
Lynn Blumenstein, “Small Libraries Start Using Netfl ix,” Library Journal,
vol. 133, no. 7 (April 15, 2008).
Daniel McGinn, “Sure, We’ve Got Th at!” Newsweek, vol. 151, no. 10 (March
10, 2008).
Nick Wingfi eld, “Netfl ix vs. Naysayers,” Wall Street Journal (March 27,
2008), pp. B1, B2.
Michelle Conlin, “Netfl ix: Flex to the Max,” BusinessWeek (September 4,
2007), p. 72.
Case 11 Bibliography “Golfsmith Shoots Well Below Par with Help from SAS.” SAS. http://www.
sas.com/success/golfsmithint.html. Accessed 2/10/11.
“Customer Success.” SAS. http://www.sas.com/success/. Accessed 2/10/11.
Michael J. Beller and Alan Barnett. “Next Generation Business Analytics”.
Lightship Partners LLC. http://www.slideshare.net/LightshipPartners/
next-generation-business-analytics-presentation. Accessed 2/10/11
Th omas H. Davenport and Jeanne G Harris. Competing on Analytics: Th e
New Science of Winning. Harvard Business School Press, 2007.
“Oklahoma City Community College uses SAS Business Analytics to make
proactive decisions for student success.” SAS. http://www.sas.com/success/
occc.html. Accessed 2/10/11.
“Daiichi Sankyo demonstrates a signifi cant ROI with SAS Drug Development.”
SAS. http://www.sas.com/success/daiichisankyo.html. Accessed 2/10/11.
Randall Lane. “Pampering the Customers, Pampering the Employees.”
Forbes. Posted 10/14/96, 11:37 AM. http://www.forbes.com/2007/11/08/
sas-corestates-goognight-biz-cz_rl_1108sas.html. Accessed 2/10/11.
Michael Shashoua. “SunGard launches social media surveillance.” Risk.net.
Posted 2/7/11. http://www.risk.net/operational-risk-and-regulation/news/
2024519/sungard-launches-social-media-surveillance. Accessed 2/21/11.
Case 12 Bibliography Jackie Cohen. “Facebook Gets More Views Th an Yahoo, ComScore Says.”
All Facebook. Posted 12/26/10. http://www.allfacebook.com/facebook-gets-
more-views-than-yahoo-comscore-says-2010-12. Accessed 2/17/11.
Jolie O’Dell. “Facebook’s Ad Revenue Hit $1.86B for 2010.” Mashable.
Posted 1/17/11. http://mashable.com/2011/01/17/facebooks-ad-revenue-
hit-1-86b-for-2010/. Accessed 2/17/11.
Lauren Indvik. “Facebook Users Upload Record-Breaking 750M Pho-
tos Over New Year’s Weekend.” Mashable. Posted 1/4/11. http://mashable.
com/2011/01/04/facebook-photos-750-million/. Accessed 2/17/11.
“Statistics.” Facebook. http://www.facebook.com/press/info.php?statistics.
Accessed 2/17/11.
Emily Steel and Geoff rey A. Fowler. “Facebook in Privacy Breach.” Wall
Street Journal. Posted 10/18/10. http://online.wsj.com/article/SB100014240
52702304772804575558484075236968.html. Accessed 2/17/11.
Alexei Oreskovic. “LinkedIn’s secret anti-Facebook weapon: Keg
Stands.” Mediafi le. Posted 4/17/10, 4.55 PM. http://blogs.reuters.com/
mediafi le/2010/11/17/linkedins-secret-anti-facebook-weapon-keg-stands/.
Accessed 2/21/11.
Bruno Aziza. “Why LinkedIn Is More Valuable Th an Facebook.” Forbes.
Posted 2/16/11. http://blogs.forbes.com/ciocentral/2011/02/16/why-linkedin-
is-more-valuable-than-facebook/. Accessed 2/21/11.
Spencer E. Ante, “Facebook’s Land Grab in the Face of a Downturn,”
BusinessWeek (December 1, 2008).
Jessi Hempel, “Finding Cracks in Facebook,” Fortune, vol. 157, no. 11 (May
26, 2008).
Catherine Holahan, “Facebook’s New Friends Abroad,” BusinessWeek
Online (May 14, 2008).
Bill Greenwood, “MySpace, Facebook, Google Integrate Data Portability,”
Information Today, vol. 25, no. 6 ( June 2008).
“Facebook Exodus,” nytimes.com/2009/08/30 (accessed September 3, 2008).
Dan Tynan, “The 25 Worst Web Sites,” PC World (accessed at
http://www.fastc ompany.c om/ma gazin e/128/my space-th e-sequ el .
html?page=0%2C1).
Case 13 Bibliography Barbara Farfan. “Panera Expands in Recession, Leverages Its Strengths in
a Weak Economy.” About.com. http://retailindustry.about.com/od/retailtrend
setters/ig/2010-US-Retail-Store-Openings/Panera-2010-Store-Openings.htm.
Accessed 2/17/11.
“TOMS Company Overview.” TOMS. http://www.toms.com/corporate-info/.
Accessed 2/21/11.
JJ Ramberg. “Sole Saver.” Entrepreneur. Posted 6/08. http://www.
entrepreneur.com/magazine/entrepreneur/2008/june/193766.html .
Accessed 2/21/11.
http://www.panerabread.com/about/company/.
www.bakingbusiness.com/bs/channel.asp?ArticleID=73003 (access ed
August 2, 2006).
“Panera Bread Removes Trans Fat from Menu,” Panera Bread press release
(February 23, 2006).
Ron Shaich, speech at Annual Meeting 2006, Temple Israel ( June 28, 2006).
Ron Miller, “Wi Fi Continues Its Extended Coff ee Break,” Information
Week ( January 4, 2006). Accessed August 2, 2006.
Jeff erson Graham, “As Wi-Fi Spreads, More Free Locations Popping Up,”
USA Today (December 8, 2005) (accessed August 2, 2006, at usatoday.com/
tech/wireless/2005-12-08-wi-fi -free_x.htm).
“Panera Bread Recognized as Top Performer in Restaurant Category for
One-, Five-, Ten-Year Returns to Shareholders,” Panera Bread press release
(May 4, 2006).
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFA7bcdaR
gL4&refer=home.
Case 14 Bibliography “Pixar.” Box Offi ce Mojo. http://www.boxoffi cemojo.com/franchises/
chart/?id=pixar.htm. Accessed 2/28/11.
See David A. Price, Th e Pixar Touch (New York: Knopf, 2008); and Ed
Catmull, “How Pixar Fosters Collective Creativity,” Harvard Business
Review (September 2008), Reprint R0809D.
Doug Childers, “Pixar’s success is more than just pixel-deep,” in Rich.com
( June 1, 2008).
Greg Sandoval, “New Competitors Challenge Pixar’s Animation Domina-
tion,” Th e Sacramento Union (December 2, 2005).
“How Disney Knew it Needed Pixar,” Fortune, vol. 153, no. 10 (May 29, 2006).
Pixar corporate Overview at http://www.pixar.com/companyinfo/
about_us/overview.htm. Accessed June 8, 2008.
www.worstpreviews.com/review.php?id=758§ion=preview.
See Price, op. cit.; Peter Burrow, “Th e Improbable Heroes of Toontown,”
BusinessWeek (May 26, 2008), p. 82; and Paul Boutin, “An Industry Gets Ani-
mated,” Wall Street Journal (May 14, 2008), p. A19.
Brent Schlender and Christopher Tkaczyk, “Pixar’s Magic Man,” Fortune,
vol. 153, no. 10 (May 29, 2006).
David Price, “How Pixar Cheated Death,” Inc., vol. 28, no. 6 ( June 2006).
Jia Lynn Yang, “How Disney Picked Up Pixar,” Fortune, vol. 157, no. 9 (May
5, 2008).
Peter Sanders, “Disney Learns Lessons from Pixar,” Wall Street Journal
(October 27, 2008).
Peter Cohen, “Disney Buys Pixar,” Macworld vol. 23, no. 4 (April 2006).
Case 15 Bibliography Claire Cain Miller. “Why Twitter’s C.E.O. Demoted Himself.” Th e New York
Times. Posted 10/3010. http://www.nytimes.com/2010/10/31/technology/31ev.
html. Accessed 2/14/11.
David Sarno. “Twitter Creator Jack Dorsey Illuminates the Site’s
Founding Document.” Los Angeles Times. Posted 2/18/09, 5:04 PM. http://
latimesblogs.latimes.com/technolog y/2009/02/twitter -creator.html .
Accessed 2/14/11.
Om Malik. “Odeo RIP. Hello Obvious Corp.” GigaOM. Posted 10/22/06. http://
gigaom.com/2006/10/25/odeo-rip-hello-obvious-corp/. Accessed 2/14/11.
Claire Cain Miller. “Who’s Driving Twitter’s Popularity? Not Teens.” Th e
New York Times. Posted 8/5/09. http://www.nytimes.com/2009/08/26/
technology/internet/26twitter.html. Accessed 2/14/11.
John Yembrick and Kelly Humphries. “NASA Extends the World Wide
Web Out Into Space.” NASA. Posted 1/22/10. http://www.nasa.gov/home/
hqnews/2010/jan/HQ_M10-011_Hawaii221169.html. Accessed 2/14/11.
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EndnotesEN-24
Claudine Beaumont. “Twitter users send 50 million tweets per day.” Th e
Telegraph. Posted 2/23/10, 9:15 AM. http://www.telegraph.co.uk/technology/
twitter/7297541/Twitter-users-send-50-million-tweets-per-day.html. Accessed
2/14/11.
“Twitter is the best way to discover what’s new in your world.” Twitter.
http://twitter.com/about. Accessed 2/15/11.
Claire Cain Miller. “Sports Fans Break Records on Twitter.” Th e New York
Times. Posted 6/18/10, 6:36. http://bits.blogs.nytimes.com/2010/06/18/
sports-fans-break-records-on-twitter/. Accessed 2/14/11.
Jennifer Van Grove. “Twitter Sets New Record: 3,283 Tweets Per Second.”
Mashable. Posted 6/25/10. http://mashable.com/2010/06/25/tps-record/.
Accessed 2/4/11.
Maggie Shiels. “Web slows after Jackson’s death.” BBC News. Posted 6/29/09.
http://news.bbc.co.uk/2/hi/technology/8120324.stm. Accessed 2/14/11.
David Hamilton. “Twitter’s Uptime Has Not Improved.” Th e WHIR. Posted
11/19/09. http://www.thewhir.com/web-hosting-news/111909_Twitters_
Uptime_Has_Not_Improved_CheckMySitecom. Accessed 2/15/11.
Jason Pontin. “From Many Tweets, One Loud Voice on the Internet.” Th e
New York Times. Posted 4/22/07. http://www.nytimes.com/2007/04/22/
business/yourmoney/22stream.html?_r=1. Accessed 2/14/11.
Ryan Kelly, ed. “Twitter Study Reveals Interesting Results About Usage.” Pear
Analytics. Posted 8/12/09. http://www.pearanalytics.com/blog/wp-content/
uploads/2010/05/Twitter-Study-August-2009.pdf. Accessed 2/14/11.
Clive Th ompson. “Brave New World of Digital Intimacy.” Th e New
York Times. Posted 11/5/08. http://www.nytimes.com/2008/09/07/
magazine/07awareness-t.html. Accessed 2/14/11.
Danah Boyd. “Twitter: “pointless babble” or peripheral awareness + social
grooming?” Apophoria. Posted 8/16/09. http://www.zephoria.org/thoughts/
archives/2009/08/16/twitter_pointle.html. Accessed 2/14/11.
Soren Gordhamer. “Changing Communication As We Know It: Twitter.” Th e
Huffi ngton Post. Posted 2/5/10, 1:28 AM. http://www.huffi ngtonpost.com/soren-
gordhamer/changing-communication-as_b_450486.html. Accessed 2/14/11.
Munindra Khaund. “Is Twitter, by changing our communication, chang-
ing how we conduct business?” SlideShare. http://www.slideshare.net/
mkhaund/is-twitterby-changing-our-communication-changing-how-we-
conduct-business. Accessed 2/14/11.
Ericka Chickowski. “25 Fast Facts About Twitter in the Workplace.” Baseline.
Posted 9/24/10. http://www.baselinemag.com/c/a/Business-Intelligence/25-
Fast-Facts-About-Twitter-in-the-Workplace-212013/. Accessed 2/14/11.
Joel Postman. “Seven rules for establishing a corporate presence on Twit-
ter.” Socialized. Posted 8/20/08. http://www.socializedpr.com/twitter-seven-
rules/. Accessed 2/14/11s
Robert Scoble. “Yammer: Changing the way we communicate at work.”
Building43. Posted 2/9/11. http://www.building43.com/videos/2011/02/15/
yammer-changing-the-way-we-communicate-at-work/. Accessed 2/22/11.
Case 16 Bibliography Norm Bafunno. “Amid sales declines and recalls, TMMI stays the course.”
Evansville Courier & Press. Posted 1/3/11. http://www.courierpress.com/
news/2011/jan/03/norm-bafunno/. Accessed 2/17/11.
Bill Vlasic. “Ford’s Bet: It’s a Small World After All.” Th e New York Times.
Posted 1/9/10. http://www.nytimes.com/2010/01/10/business/10ford.html.
Accessed 2/22/11.
“Toyota Outsells GM, Ford Posts Eye-Popping Loss,” US News & World
Reports (posted online July 24, 2008), wsj.com/mdc/public/page/2_3022-
autosales.html.
M. Reza Vaghefi , “Creating Sustainable Competitive Advantage: Th e Toyota
Philosophy and Its Eff ects,” Mastering Management Online (October 2001)
(accessed January 13, 2006, at www.ftmastering.com/mmo/index.htm).
“Top 10 SUVs, Pickups and Minivans with the Best Residual Value for
2005,” Edmunds.com (accessed January 14, 2006, at www.edmunds.com/
reviews/list/top10/103633/article.html).
“Making Th ings: Th e Essence and Evolution of the Toyota Production
System,” Toyota Motor Corporation (www.toyota.com).
“Th e ‘Th inking’ Production System: TPS as a Winning Strategy for Devel-
oping People in the Global Manufacturing Environment,” Toyota Motor Cor-
poration (www.toyota.com).
money.cnn.com/magazines/fortune/fortune_archive/2006/03/06/8370702/
index.htm.
www.toyota.com/about/our_news/product.html.
Rick Newman, “Toyota’s Next Turn,” US News & World Report (posted
online June 16, 2008).
Kate Linebaugh, “Idle Workers Busy at Toyota,” Wall Street Journal (October
13, 2008).
Case 17 Bibliography “Harley announces fourth straight quarter of sales growth in Europe.” Cre-
ative Cycles. Posted 10/11/10. http://blog.creativecycles.com/harley-announce-
fourth-straight-quarter-of-sales-growth-in-europe/. Accessed 2/17/11.
Sara Sidner. “Harley-Davidson to build bikes in India.” CNN. Posted 11/4/10.
http://articles.cnn.com/2010-11-04/world/india.bikes_1_india-market-
harley-davidsons-haryana?_s=PM:WORLD. Accessed 2/17/11.
http://www.harley-davidson.com/wcm/Content/Pages/Events/100th_
anniversary.jsp?locale=en_US (accessed May 25, 2009).
Malia Boyd, “Harley-Davidson Motor Company,” Incentive (September
1993), pp. 26–27.
Shrader et al., “Harley-Davidson, Inc.—1991,” In Fred David, ed., Strategic
Management, 4th ed. (New York: Macmillan, 1993), p. 655.
Marktha H. Peak, “Harley-Davidson: Going Whole Hog to Provide Stake-
holder Satisfaction,” Management Review, vol. 82 ( June 1993), p. 53.
http://www.motorcyclistonline.com/calendar/122_0709_hog_mem-
bers_adirondacks/index.html (accessed May 18, 2009).
Kevin Kelly and Karen Miller, “Th e Rumble Heard Round the World:
Harley’s,” BusinessWeek (May 24, 1993), p. 60.
Sandra Dallas and Emily Th ornton, “Japan’s Bikers: Th e Tame Ones,”
BusinessWeek (October 20, 1997), p. 159.
http://www.motorcyclistonline.com/newsandupdates/harley_davidson_
chinese_motorcycle_market/index.html.
“H-D Cautiously Upbeat over Beijing Dealer,” Dealer News (May 2006), p. 67.
Harley-Davidson Motorcycles and Customer Data: Registrations
(accessed May 20, 2008, at http://investor.harley-davidson.com/registra-
tions.cfm?locale=en_US&bmLocale=en_US).
http://seekingalpha.com/article/75695-high-gas-prices-may-help-harley-
davidson-more-evidence (accessed May 21, 2008).
http://www.businessweek.com/investor/content/apr2009/pi20090416_
239475_page_2.htm.
Case 18 Bibliography Stacy Perman. “In-N-Out Burger’s Marketing Magic.” Bloomberg Business-
week. Posted 4/24/09, 12:15 PM. http://www.businessweek.com/smallbiz/
content/apr2009/sb20090424_877655.htm. Accessed 2/17/11.
Stacy Perman. “In-N-Out Burger: Professionalizing Fast Food.” Bloomberg
Businessweek. Posted 4/9/09, 5:00 PM. http://www.businessweek.com/mag-
azine/content/09_16/b4127068288029.htm. Accessed 2/17/11.
“In-N-Out Burger to open restaurants in Texas.” OC Register. Posted 5/26/10.
http://articles.ocregister.com/2010-05-26/food/24553290_1_burger-chain-
open-restaurants-beef-processing-plant. Accessed 2/17/11.
Frank Pellegrini. “Restaurant Review: Th e In-N-Out Burger.” TIME. Posted
8/21/2000. http://www.time.com/time/nation/article/0,8599,53002,00.html.
Accessed 2/17/11.
Nancy Luna, “Sprinkles Bakery to Open in Corona del Mar,” Th e Orange
County Register (May 18, 2006).
Morco R. della Cava, “Cupcake Bakeries Cater to the Kid in Us,” USA
Today (September 18, 2007).
“Cupcake Crazy!” People in Touch ( July 31, 2006).
http://www.sprinkles.com/fl avors.html.
TomKat’s Tasty Holiday Treats,” OK Magazine (December 21, 2007).
Audrey Davidow, “So, Sweetie, I Quit to Bake Cupcakes,” Th e New York
Times ( June 3, 2007).
“Cupcake Bakeries,” USA Today, op. cit.
“Sprinkles Cupcake Bakery” (accessed May 25, 2008, at www.dmagazine.
com).
Joel Stein, “Cupcake Nation,” Time (August 28, 2006).
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What’s Inside Photo: Bart Sadowski/iStockphoto. Explore Yourself Photo: Greg Epperson/iStockphoto. Tips to Remem- ber Photo: Heider Almeida/iStockphoto.
Chapter 1
Greg Epperson/iStockphoto Page 2: Brad Swonetz/Redux Pic- tures Page 3: (top) Watner Bros /Photofest Page 5: Daniel Acker/ Bloomberg/Getty Images, Inc. Page 7: Masterfi le Page 12: (top) Ramin Talale/Bloomberg/Getty Images, Inc. Page 12: (bottom) Photo by Jonathan Gayman, provided courtesy of Ernst & Young Page 20: Timothy A. Clary/AFP/Getty Images, Inc. Page 21: Robert Nicholas/Getty Images, Inc. Page 22: Radius Images/ Getty Images, Inc. Page 24: Reproduced with permission from Grand Central Publishing, a division of Hachette Book Group, Inc. Page 29: Michael Nagle/Getty Images, Inc.
Chapter 2
Page 30: sculpies/iStockphoto Page 31: (top) Buena Vista/ Photofest Page 35: Don Bayley/iStockphoto Page 36: Cristian Baitg/iStockphoto Page 39: Courtesy Life is good Company Page 40: ©AP/Wide World Photos Page 41: ©Corbis Page 42: Bettmann/©Corbis Page 43: (center) Courtesy Chris Argyris, James Bryant Conant Professor of Education & Organizational Behavior (Emeritus) at Harvard University Page 48: Tony Avelar/ Bloomberg/Getty Images, Inc. Page 49: Reproduced with per- mission from Little Brown and Company, a division of Hachette Book Group, Inc. Page 53: Mario Fourmy/REA/Redux Pictures
Chapter 3
Page 54: TIMOTHY A. CLARY/AFP/Getty Images, Inc. Page 55: (top) Warner Bros./Photofest Page 56: Schalk van Zuydam/©AP/ Wide World Photos Page 57: Masterfi le Page 60: Andrew Hol- brooke/Corbis Page 68: Photo by Judy Beedle Photography, courtesy Mad Gab’s Inc. Page 70: Richard Drew/©AP/Wide World Photos Page 73: Jodi Hilton/Th e New York Times/Redux Pictures Page 75: Daniel LYNCH/Financial Times-REA/Redux Pictures Page 76: Julie Jacobson/©AP/Wide World Photos Page 79: ©Blake Fitch Page 78: ©2009 Muhammad Yunus. Reprinted by permission of PublicAff airs, a member of the Perseus Books Group. Page 83: Kai Nedden/laif/Redux Pictures
Chapter 4
Page 84: UPI/Hugo Infante/Chilean Government/HO/ Landov LLC Page 85: (top) DreamWorks/Photofest Page 89: Steven Day/©AP/Wide World Photos Page 96: Cover by Ben Wiseman. Reproduced with permission. Page 97: NATALIA KOLESNIKOVA/AFP/Getty Images, Inc. Page 98: STR/AFP/ Getty Images, Inc. Page 100: John Bazemore/©AP/Wide World Photos Page 103: Christopher Steer/iStockphoto Page 105: (top) Matthew Staver/Landov LLC Page 109: Photo by Mary Knox Merrill/The Christian Science Monitor/Getty Images, Inc.
Chapter 5
Page 110: GO TAKAYAMA/AFP/Getty Images, Inc. Page 111: (top) Fox 2000 Pictures/Photofest Page 114: Reprinted by permis- sion of Harvard Business School Press. ANALYTICS AT WORK by Th omas Davenport. Boston, MA, 2010. Copyright © 2010 by the Harvard Business School Publishing Corporation, all rights reserved. Page 119: JIM WILSON/Th e New York Times/Redux Pictures Page 120: Yves Logghe/AP/Wide World Photos Page 121: Allison Michael Orenstein/Getty Images, Inc. Page 124: Tokyo Electric Power Co/©AP/Wide World Photos Page 125: budget- stockphoto/iStockphoto Page 126: Mario Fourmy/Redux Pictures Page 131: Emily Harris/Bloomberg/Getty Images, Inc.
Chapter 6
Page 132: Yuriko Nakao/Landov LLC Page 133: (top) Paramount Pictures/Photofest Page 136: Stockbyte/Getty Images, Inc. Page 137: Courtesy Dancing Deer Baking Company, Inc. Page 141: Charlie Neuman/SDU-T/ZUMA Press/NewsCom Page 142: Andrew Harrer/Bloomberg/Getty Images, Inc. Page 151: Mas- terfi le Page 155: Electronic Arts/dapd/AP/Wide World Photos
Chapter 7
Page 156: Jason Lee/Reuters/Landov LLC Page 157: (top) Walt Disney Pictures/Photofest Page 177: Qilai Shen/Bloomberg/Getty Images, Inc. Page 159: Mark Lennihan/AP/Wide World Photos Page 162: YM YIK/EPA/Landov LLC Page 164: BEHIND THE CLOUD by Marc Benioff & Carlyle Adler, a Jossey-Bass imprint. Reproduced with permission of John Wiley & Sons. Page 172: Kai Nedden/laif/Redux Pictures Page 173: DNY59/iStockphoto
Chapter 8
Page 178: Mark Lennihan/AP/Wide World Photos Page 182: Reuters/Chip East/Landov LLC Page 179: (top) Blue Wolf/Pho- tofest Page 192: THE TRUTH ABOUT MIDDLE MANAGERS by Paul Osterman. Reproduced with permission of Harvard Busi- ness School Publishing. Page 195: Tom Grill/Getty Images, Inc. Page 196: Chris Hondros/Getty Images, Inc. Page 199: Karen Moskowitz/Getty Images, Inc. Page 200: Mango Productions/ Corbis Page 203: Pascale Sittler/REA/Redux Pictures
Chapter 9
Page 204: Photo by Annalise Blum, courtesy of Border Green Energy Team and Salinee Tavaranan Page 205: (top) Dream- works/Photofest Page 206: Brad Swonetz/Redux Pictures Page 207: Reuters/MIke Cassese/Landov LLC Page 209: Ariel Skel- ley/Getty Images, Inc. Page 210: Glen Argov/Landov LLC Page 211: CJG- Technology/Alamy Page 214: Courtesy Border Green Energy Team Page 215: Khalik Senosi/AP/Wide World Pho- tos Page 217: Book cover from CHANGE BY DESIGN BY TIM BROWN. Copyright ©2009 by Tim Brown. Reprinted by permis- sion of HarperCollins Publishers Page 223: Jose F. Moreno/©AP/ Wide World Photos Page 229: Kyodo/AP/Wide World Photos
Photo Credits
PC-1
PhotoCredit.indd Page PC-1 8/16/11 5:27 PM user f-400PhotoCredit.indd Page PC-1 8/16/11 5:27 PM user f-400 F-400F-400
Photo CreditsPC-2
Chapter 10
Page 230: Dagmar Heymans/iStockphoto Page 231: (top) Para- mount Pictures/Photofest Page 234: Jacquelyn Martin/©AP/ Wide World Photos Page 236: Mark Wilson/Getty Images, Inc. Page 238: Ethan Miller/Getty Images, Inc. Page 239: (top) Jin Lee/Bloomberg/Getty Images, Inc. Page 242: Reprinted with per- mission of John Wiley & Sons, Inc. Page 245: Marc Romanelli/ Getty Images, Inc. Page 248: Charly Kurz/laif/Redux Pictures Page 249: enis izgi/iStockphoto Page 250: Ben Hider/Getty Images, Inc. Page 255: Elena Dorfman/Redux Pictures
Chapter 11
Page 256: Flip Schulke/©Corbis Page 257: (top) Universal Pic- tures/Photofest Page 260: Book cover from POWER: WHY SOME PEOPLE HAVE IT- AND OTHERS DON’T by Jeff rey Pfeff er. Copyright ©2010 by Jeff rey Pfeff er. Reprinted by permission of HarperCollins Publishers Page 261: Photo by Mr. James Kriegs- man, courtesy of Lorraine Monroe Leadership Institute. Page 272: Rolls Press/Popperfoto/Getty Images Page 274: REUTERS/ John Gress/Landov LLC Page 275: Anderson Ross/Blend/Getty Images, Inc. Page 276: Ravi Tahilramani/iStockphoto Page 281: Th e News & Observer, Jim Bounds/AP/Wide World Photos
Chapter 12
Page 282: Michel Gaillard/REA/Redux Pictures Page 283: (top) Columbia Pictures/Photofest Page 286: Cover design by Anna Christian. Reproduced courtesy of Susan Bulkeley Butler and Purdue University Press. Page 288: Chris Jackson/Getty Images, Inc. Page 293: Joe Kohen/Wireimage/Getty Images, Inc. Page 295: Troels Graugaard/iStockphoto Page 298: David Burton/ Alamy Page 305: Paul Sakuma/©AP/Wide World Photos
Chapter 13
Page 306: Alessia Pierdomenico/Reuters/Corbis Page 307: (top) Disney/Pixar/Photofest Page 311: HopeLab/©AP/Wide World Photos Page 317: Image Source/Getty Images, Inc. Page 320: (top) Photo by Greg Miller, courtesy Bob Evans Farms, Inc. Page 321: Digital Vision/Getty Images, Inc. Page 324: SHNS photo by Cliff Grassmick/Daily Camera/NewsCom Page 326: DRIVE by Daniel Pink, Penguin Group USA, Inc. Copyright 2009. Page 329: Tom Gannam/©AP/Wide World Photos
Chapter 14
Page 330: Gary W. Green, Orlando Sentinel/MCT/Getty Images, Inc. Page 331: (top) ABC/Photofest Page 334: Quiet Noise Creative/ Getty Images, Inc. Page 335: Buzz Bailey/Getty Images, Inc. Page 340: Tom Pennington/Getty Images, Inc. Page 341: EMMANUEL DUNAND/AFP/Getty Images, Inc. Page 349: Christian Petersen/ Getty Images, Inc. Page 351: Photo by Teri Stratford. Book jacket cover ©2008 by Crown Business, a division of Random House, Inc., from CROWDSOURCING: WHY THE POWER OF THE CROWD IS DRIVING THE FUTURE OF BUSINESS by Jeff Howe. Used by permission of Crown Business, a division of Random House, Inc. Page 357: Buena Vista Pictures/Photofest
Chapter 15
Page 358: Tetra Images/SuperStock Page 359: (top) 20th Century Fox/Photofest Page 364: Kevin Mazur/WireImage/Getty Images, Inc. Page 362: Marilynn K. Yee/Redux Pictures Page 374: Col- laboration: How Leaders Avoid the Traps, Create Unity, and Reap Big Results by Morten T. Hansen. Harvard Business Press, 2009.
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Chapter 16
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Chapter 17
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Chapter 18
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Cases
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PhotoCredit.indd Page PC-2 8/16/11 5:27 PM user f-400PhotoCredit.indd Page PC-2 8/16/11 5:27 PM user f-400 F-400F-400
A Abraham, F. Murray, 383
Adams, Barry, 68
Adams, Hunter “Patch,” 179
Alderfer, Clayton, 309–310
Alexander, Pam, 360
Allen, Joan, 423
Allen, Paul, C-29
Amabile, Teresa M., 224
Amelio, Gil, C-19
Aniston, Jennifer, 257
Anthony, Carmelo, C-12
Argyris, Chris, 38, 43
Armstrong, Tim, 373
Aziza, Bruno, C-25
B Bafunno, Norm, C-33
Bailard, Th omas, 374
Baker, Simon, 359
Ban-Ki-moon, 76
Barnett, Alan, C-22
Barr, Anthony J., C-22
Bartz, Carol, 48, 178, 186
Bass, Bill, 394
Baum, Herb, 21
Bedford, Bruce, C-22
Beller, Michael J., C-22
Benioff , Marc, 164
Bennis, Warren, 258
Beyer, Jon, 223
Bezos, Jeff , 89, 109, 206, 217, 341, C-8–C-9, C-11
Blakely, Sara, 293
Boyd, Danah, C-30
Brandenburger, Adam M., 163
Branson, Richard, 287, 288, 325
Bridges, Jeff , 157
Briggs, Katherine, 291
Briggs-Myers, Isabel, 291
Brooks, Mike, 36
Brown, Rob, 383
Brown, Tim, 217
Bullock, Sandra, 55
Burke, James, 217
Burnett, Iris, 424
Burns, Edward, 111
Burns, Tom, 198
Burns, Ursula, 12, 385
Butcher, Charlie, 324
Butler, Susan Bulkeley, 286
Butterfi eld, Stewart, 426
Byham, William C., 359
Byrne, John A., 5, 6
C Carr, Nicholas, 96
Carroll, Archie, 62, 69
Carter, Shawn, 364
Cartwright, Stacey, C-4
Castellano, José, C-5
Cathy, Dan T., 141
Cathy, Truett, 141
Catmull, Ed, C-28, C-29
Cavanaugh, Gerald, 98
Cella, James, C-23
Chambers, John, 405
Chang, Kat, 403
Chappell, Tom, 210
Cherry, Trent, 349
Chouinard, Yvon, 83, 172, C-6–C-7
Christen, Pat, 311
Clark, Maxine, 182
Cohen, David, C-20
Cohen, Herman, 68
Cohen, Marshal, 83, C-6
Collins, Jim, 50
Conger, Jay, 363–364
Connery, Sean, 383
Connolly, Agnes, 68
Cook, Tim, C-19
Coulombe, Joe, C-2–C-3
D Damon, Matt, 423
Davenport, Th omas, 114
Davis, Steven A., 320
Deming, W. Edwards, 49
Denson, Charlie, C-17
DePree, Max, 25, 277
DeSio, Tony, 427
Devine, Denise, 424
Donaldson, Th omas, 61
Donna, Rose, 431
Donovan, Denis, 233
Dorsey, Jack, C-30
Dowling, Michael, C-12
Dowling, Steve, 414
Downey, Robert, Jr., 230
Dreyfus, Richard, 31
Drucker, Peter, 166
Dumper, Audrey, C-3
E Eckhardt, Aaron, 257
Eddington, Sir Rod, 219
Edwards, Patricia, C-10, C-11
Enrico, Roger, 97
Erker, Scott, 199
F Fake, Caterina, 426
Farley, James D., 126
Fassak, John C-14, C-15
Faulk, Woody, 141
Fayol, Henri, 32, 36
Ferguson, Roger W., Jr., 159
Fiedler, Fred, 265–266
Fitzpatrick, Jayne, C-14
Follett, Mary Parker, 38–39
Ford, Henry, 32, 158
Ford, William Clay, Jr., 196, C-33
Fox, Matthew, 331
Friedman, Th omas, 417
Fritz, Justin, 4, 5
Frost, Tom, C-7
Fry, Art, 215
G Geff en, David, C-28, C-29
Geithner, Timothy, 88–89
George, Richard, C-2
Gladwell, Malcolm, 49
Goleman, Daniel, 16, 273, 300, 301
Goodnight, James, C-22, C-23
Gordhamer, Soren, C-31
Graves, Earl, 426
Greenfi eld, Michelle and Geoff , 434
Greenleaf, Robert, 277
Gumpel, Tom, C-26
H Haas, Robert, 60
Haeckel, Stephen, 158
Hall, Edward T., 393–394
Handy, Charles, 23–24
Hanks, Tom, 133, 205
Hansen, Morton, 374
Harris, Jeanne, 114
Harvey, Stu, C-23
Hastings, Reed, 207, C-20, C-21
Hawkins, William “Trip,” C-12
Hayward, Tony, 124
Heasley, Linda, 362
Hedlund, Garrett, 157
Heigl, Katherine, 111
Helwig, Jane T., C-22
Herlick, Richard, 371
Herzberg, Frederick, 312–313
Hickey, John, C-17
Hillary, Edmund, 98
Hirshberg, Gary, 73
Hofstede, Geert, 394–396
Hoke, John R, III, C-17
Holmes, Deborah K., 11–12, 13
Hopper, Grace, 258
House, Robert, 267–268, 397
Howard, Terrence, 31
Howe, Jeff , 351
Hsieh, Tony, 2, 24, 206, 207, C-11
Hu, Mu, C-22
Huizenga, H. Wayne, 425
Hurley, James, C-5
I Iger, Bob, C-28
Immelt, Jeff rey, 171
Isla, Pablo, C-3–C-5
J Jacobs, Bert and John, 39
Jacques, Elliot, 118
Jain, Dipak C., 214
Janis, Irving, 351
Name Index
NI-1
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Name IndexNI-2
Jobs, Steve, 229, C-13, C-18–C-19,
C-28, C-29
Johnson, Lonnie, 100
Johnson, Tory, 375
Jordan, Michael, C-16
Jung, Carl, 291
K Kane, Louis, C-26
Kanno, Noro, 110
Kanter, Rosabeth Moss, 259, 275, 405
Kaplan, Robert S., 150–151
Karp, Jeff rey, C-12
Katz, Robert L., 15–16
Katzenberg, Jeff rey, C-28, C-29
Kelly, Gary, 276
Kennedy, John F., 351
Kernaghan, Charles, C-16
King, Martin Luther, Jr., 256, 272
Kirkpatrik, David, 142
Kirsch, Vanessa, 79
Knight, Phil, C-17
Kochan, Th omas, 384
Koff , Art, 424
Kohlberg, Lawrence, 66
Kotter, John, 14
Kranernkdijk, Stef, 75
Kristof, Nicolas, 396
Kroes, Neelie, 409
Kumar, Nirmalya, C-5
L Lafl ey, A.G., 5, 6
Laskawy, Philip A., 11, 13
Lasseter, John, C-28, C-29
Lauren, Ralph, 169
Ledbetter, Lilly, 236
Lentz, Jim, 134, C-33
LePlae, Robert, C-36, C-37
Levinson, Sara, 274
Lewin, Kurt, 221
Locke, Edwin A., 321
Losey, Michael R., 389
Lowe, Challis M., 297
Lowe, Mitch, C-21
Lucas, George, C-28
Lynch, William, C-9
M Mackey, John, 70
Madoff , Bernie, 20, 54
Madonna, C-4
Marciante, Joe P., 36
Mark, Reuben, 21
Marks, Alan, C-17
Marsh, Kristina, 7
Martin, Stephen, 375
Martin, Wiliam, C-37
Martinez, Angel, 219
Maslow, Abraham, 38, 41–42, 308–309
Mastroangelo, Andrew, C-14
Mayo, Elton, 38, 40
Mays, Jayma, 85
McAdams, Rachel, 85
McAlinden, Sean, C-33
McClaughlin, Paul P., 324
McClelland, David, 310–311
McDonald, Robert A., 12
McGregor, Douglas, 38, 42, 142
McKinstry, Nancy, 376
McMillon, Doug, 389
McNabb, Donovan, C-12
Meisinger, Susan, 233
Melchionda, Gabrielle, 68–69
Merlino, Nell, 424
Michaels, Paul, 186
Middleton, Kate, C-4
Minoura, Teruyuki, C-32
Mintzberg, Henry, 10–11, 13, 17
Moayyad, Shirin, 406
Monroe, Lorraine, 261, 277
Moorman, Mark, C-23
Morales, Evo, 410
Morison, Robert, 114
Mulally, Alan, 196, C-33
Murray, Brian, C-9
Mycoskie, Blake, 431, C-27
N Nalebuff , Barry J., 163
Nasseri, Mehran, 205
Nayar, Vineet, 373–374
Neath, Gavin, 77
Nelson, Candace, C-37
Nelson, Craig T., 307
Newsham, Margaret, 68
Nitsch, Judith, 120
Nooyi, Indra, 97
Nordstrom, Jaime, C-11
Nordstrom, Pete, C-10
Norton, David P., 150–151
Novak, David, 325
Nueno, José Luis, C-5
O Obama, Barack, 159
Oher, Michael, 55
Ohmae, Kenichi, 19
Ohno, Taiichi, C-32
Olivan, Javier, C-25
Omidyar, Pam, 311
Ortega Gaona, Amancio, C-5
Osterman, Paul, 192
Ouellette, Lynne, 324
Overton, Rick, 310
Owyang, Jeremiah, C-30
P Parker, Mark, C-17
Patel, Dev, 3
Patel, Dilip, C-5
Pattison, Grant, 389
Perez, Bill, C-17
Perman, Stacy, 430
Peters, Tom, 369
Pfeff er, Jeff rey, 50, 78–79, 260
Piette, Daniel, C-4
Pincus, Marc, 119
Pink, Daniel H., 326
Porter, Michael, 168–171, 173
Postman, Joel, C-31
Prahalad, C. K., 216
Prakesh, Anoop, C-35
Presley, Elvis, 123
R Ransler, Chip, 431
Ratner, Jeff , C-24
Rauch, Doug, C-3
Reynolds, Brian, C-13
Riccitiello, John, C-13
Riggio, Leonard, C-9
Riha, Jim, C-22
Rivoli, Pietra, 404
Roddick, Anita, 425, 428–429
Rodgers, T. J., 127
Rokeach, Milton, 57
Rosener, Judith, 23
Rosenfeld, Irene, 374
Rowling, J.K., 306, 308
Rust, Edward B., Jr., 16–17
S Sacks, David, C-31
Sall, James, C-22
Sandberg, Sheryl, 233, C-24–C-25
Sanderson, Catherine, 377
Sardone, Deborah, 430
Saverin, Eduardo, 283
Schacht, Henry, 134
Schackart, Ralph, C-28, C-29
Schiavo, Beth, 7
Schmidt, Eric, 217
Schwartz, Barry, C-2
Scoble, Robert, C-31
Scott, David Meerman, C-8
Seator, Laine, 309, 310
Segura, David, 386
Selanikio, Joel, 431
Shaich, Ron, C-26, C-27
Shapira, Adrianne, C-11
Shawn, Wallace, 307
Simon, Herbert, 96
Sinha, Manoj, 431
Smith, Adam, 32
Smith, Alvy Ray, C-28, C-29
Snyder, Guy, C-36
Snyder, Harry and Esther, 430, C-36
Snyder, Rich, C-36, C-37
Solca, Luca, C-5
Somers, Julie, C-27
Spector, Robert, C-11
Spencer, Rod, 433–434
Spielberg, Steven, C-28, C-29
Spindler, Michael, C-18–C-19
Stalker, George, 198
Stone, Biz, C-30
Strand, Nat, 403
Streep, Meryl, 359
Sullenberger, Chesley, 89–90
Sullivan, Todd, C-35
Sunjata, Daniel, 359
Sutton, Robert, 50
Swasey, Steve, C-20
Szaky, Tom, 223
T Tator, Robin, 223
Tavaranan, Saline, 204, 214
Taylor, Frederick, 32–33
Teerlink, Richard, C-34, C-35
Th omas, David (Harvard professor), 385
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Name Index NI-3
Th omas, David (Wendy’s founder), 426
Th omas, R. Roosevelt, 23, 384,
388–389
Th ompson, Clive, C-30
Th ompson, Don, 120
Toyoda, Akio, 105, 132
Toyoda, Kiichiro, C-32
Tuohy, Leigh Anne, 55
Tutu, Desmond, 56
U Urzua, Luis, 84, 86, 104
V Vaghefi , M. Reza, C-32
Valestro, Buddy, 422
Van der Veer, Jeroen, 125
Van Fleet, Carl, C-36–C-37
Vroom, Victor, 318, 319
W Wada, Yoshida, 366
Walton, Sam, 364, 389
Weber, Max, 32, 34–35, 198
Weiner, Jeff , C-25
Welch, Jack, 127, 220, 222–223
Wexner, Lex, 409
Wilde, Olivia, 157
Wiliams, Evan, C-30
Winfrey, Oprah, 293
Winklevoss, Cameron, 283
Winklevoss, Tyler, 283
Wise, John, C-22
Witt, Alicia, 31
Wooden, John, 261–262, 330
Woods, Tiger, C-12
Wozniak, Steve, C-18
Wright, Jennnifer, 424
Wright, Ryan, 76
WuDunn, Sheryl, 396
Y Yanofsky, Neal, C-27
Youn, Andrew, 214–215
Yunus, Muhammad, 78
Z Zennstrom, Niklas, 151
Ziemer, Jim, C-35
Zollinger, Cindy, 7–8
Zuckerberg, Mark, 283, 376, C-24
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A Absenteeism, 299
Accommodation, 352, 353
Accountability, 6
Achievement, as need, 310, 428
Acquired needs, 310
Active listening, 371–372
Affi liation, as need, 310, 311
Affi rmative action, 234, 388–389
After-action review, 135
Age discrimination, 235
Age Discrimination in Employment Act, 235
Agenda setting, 14
Agreeableness, as Big Five personality trait,
290, 291
Ambition, 283, 301
Americans with Disabilities Act, 235
Amoral managers, 69
Analytics, 45
Anchoring and adjustment heuristic, 103
Angel investors, 440
Antitrust laws, 409
Armed confl icts, 415
ASP (application service provisioning), 164
Assertiveness, as project GLOBE cultural
dimension, 397
Assessment centers, 240
Asset management, 149, 150
Attitudes, 297–298
Attribution, 287
Authoritarianism, 292
Autocratic leaders, 263
Automakers, 158, 161, 163, 187–188, 407
Autonomous work groups, 337
Availability heuristic, 103
Avoidance, 352, 353. See also Withdrawal
behaviors
B B2B business strategies, 164
B2C business strategies, 164
Baby Boomers, 35, 209, 375
Balanced scorecard, 150
Bankruptcy, 161
Bay of Pigs invasion, 351
BCG Matrix, 171
Behavioral decision model, 95
Behavioral management, 38–43
Benchmarking, 125–126
Benefi t corporations, 431
Best practices, 126
Biculturalism, 388
Big Five personality traits, 290–291
Big Mac index, 412
Black Enterprise magazine, 426
Th e Blind Side (movie), 55
Boards of directors, 6, 321
Boards of trustees, 6
Bona fi de occupational qualifi cations, 234
Bossnapping, 294
Th e Bourne Ultimatum (movie), 423
Breakeven analysis, 149
Breakeven point, 149
Bribery, 415
Budgets, 121
Bureaucracies, 34–35, 198, 199, 216
Bureaucratic control, 142–143
Business model innovation, 213
Business plans, 438
Business strategy, 159–160
Business-to-business (B2B) strategies, 164
Business-to-customer (B2C) strategies, 164
Bus-stop analogy, 158
C Cake Boss (TV series), 422
Cash cows, in BCG Matrix, 171
Centralization, 195
Centralized communication networks, 346
Certain environments, 90–91
Change, planned
common managerial strategies, 222–224
resistance to, 224–225
three phases, 220–221
transformational vs. incremental, 219–220
Change leaders, 219, 224–225
Changing phase, planned change, 221
Channel richness, 367
Chapter 11 bankruptcy, 161
Character, individual, 55, 63, 65
Charismatic leaders, 272
Chief executive offi cers (CEOs)
pay issues, 173
as top managers, 5
what they do, 10
Chief fi nancial offi cers (CFOs),
as top managers, 5
Chief information offi cers (CIOs),
as top managers, 5
Chief operating offi cers (COOs),
as top managers, 5
Child labor, 402, 414
Chilean mine collapse, 84, 86
Chimneys (or silos) problem, 186
China
as car market, 123
and globalization, 19–20
Haier factories, 393
and Internet censorship, 151
and job migration, 20
manufacturing statistics, 407
Nike in, 404
nonverbal communication, 377
as outsourcing destination, 156, 162, 407, 414
PetroChina, 412
CitiVille game, 119
Civil wars, 415
Clan control, 143
Classical decision model, 95
Classical management approaches, 32–36
Classical view of corporate social
responsibility, 74
Cloud computing, 164
Code of ethics, 69–70
Coercive power, 259
Coff ee growers, 406
Cognitive dissonance, 298
Cognitive styles, 90
Cohesiveness, 344
Collaboration, 353, 374. See also Problem solving
Collaboration (Hansen), 374
Commercializing innovation, 215–216
Committees, 335
Communication. See also Networking
credible, 364
cross-cultural, 375–377, 391
defi ned, 361
eff ective, 362, 366–369
effi cient, 362–363
generational, 375
introduction, 360–364
key elements in process, 361
as “must have” managerial skill, 17
nonverbal, 368, 377
openness in, 374
persuasive, 363–364
role of proxemics, 373
sender vs. receiver, 361–362
skills quick-check, 360
team networks, 346
transparency, 374
ways to improve, 371–377
Communication channels, 367
Commutative justice, 59
Competition, 352–353
Competitive advantage, 159, 170
Competitive strategies model, 169–171
Complacency trap, 114
Compressed workweek, 199–200
Compromise, 352–353
Concentration, 160
Conceptual skills, 16
Concurrent controls, 141
Confi rmation error, 104
Confl ict resolution, 353
Confl icts
defi ned, 352
emotional, 352
managing in teams, 352–353
resolving, 353
substantive, 352
Confl icts of interest, 62
Conscientiousness, as Big Five personality trait,
290, 291
Consensus, 349, 350
Constructive feedback, 372
Constructive stress, 294
Contingency leadership perspective,
265–266
Contingency planning, 124
Contingency thinking, 48
Continuous improvement, 49, 146
Control charts, 146–147
Subject Index
SI-1
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Subject Index SI-2
Controlling. See also Leading; Locus of control;
Organizing; Planning; Span of control
defi ned, 13, 134
as function in management process, 11, 13,
134–135
in global corporations, 414–415
steps in process, 135–138
types of controls, 140–143
Cooperative strategies, 163
Co-opetition, 163
Copyrights. See Intellectual property
Core characteristics model, 313–314
Core competencies, 168
Core culture, 209
Core values, 209–210
Corporate culture. See Organizational culture
Corporate governance, 20–21
Corporate social responsibility
cases for and against, 74
classical view, 74
defi ned, 73
discretionary responsibility, 76
ethical responsibility, 76
global issues, 413
legal responsibility, 76
social performance audits, 75–76
socioeconomic view, 74
sustainability as goal, 76–79
Corporate strategy, 159
Corporate thieves, 136
Corporations, as form of small business
ownership, 439. See also Global
corporations
Corruption, 414, 415
Cost leadership strategies, 169–170
Cost-benefi t analysis, 95
CPM/PERT, 147–148
Cradle-to-grave manufacturing, 75
Creativity, 100–101
Credible communication, 364
Crime, corporate, 136
Crisis, 104–105
Critical path, 148
Critical thinking, 17, 157, 161
Cross-cultural communication, 375–377, 391
Cross-functional teams, 188, 335–336
Crowdsourcing, 164, 351
Cultural awareness, 403, 407
Cultural etiquette, 377
Cultural intelligence, 392–393
Cultural relativism, 61
Culture. See National cultures, Hofstede’s fi ve
dimensions; Organizational culture
Culture shock, 391
Currency risk, 415
Customer confi dence, violating, as unethical
behavior, 62
Customer structures, 188
D Debt fi nancing, 440
Decentralization, 195
Decentralized communication networks, 346
Decision making
behavioral model, 95
causes of errors in, 103–104
classical model, 95
in crisis, 104–105
environments for, 90–91
in groups, 102
role of creativity, 100–101
steps in process, 93–98
team methods, 349–350
Decisional roles, managerial, 13
Decision-making process
identifying problem, 94
evaluating alternative courses of action, 94–95
decide on preferred course of action, 95–96
implementing decision, 96–97
evaluating results, 97–98
case of Ajax Company, 93–98
defi ned, 93
steps in, 93–98
Decisions
defi ned, 88
optimizing, 95
programmed vs. nonprogrammed, 88
satisfi cing, 96
Decoded ( Jay-Z), 364
Deepwater Horizon oil spill, 76, 124
Defi cit principle, 42, 308
Delegation, 196–197
Democratic leaders, 263
Department heads. See First-line managers
Departmentalization, 185
Dependency, 6
Design thinkers, 217
Destructive stress, 294
Th e Devil Wears Prada (movie), 359
Diff erentiation strategies, 169, 170
Digital natives, 351
Discrimination, 23, 62, 234–235, 236
Disruptive behaviors, 345
Distributed leadership, 345
Distribution alliances, 163
Distributive justice, 59
Diversifi cation, 160
Diversity
among global cultures, 391–397
business case, 384
defi ned, 384
managing, 389
valuing, 382, 389
in workplace, 384–389
Diversity maturity, 383, 388
Divestiture, 161
Division of labor, 181
Divisional structures, 187, 188
Dogs, in BCG Matrix, 171
Downsizing, 161
Drive (Pink), 326
E E-business strategies, 163–164
Ecological fallacies, 396
E-commerce. See E-business strategies
Economic development, and international
business, 406
Economic order quantity, 148
Eff ective communication, 362, 366–369
Eff ective managers, 6–7
Eff ective teams, 339–340
Effi cient communication, 362–363
Electronic grapevine, 375
Electronic privacy, 376
Electronic waste, 125
E-mail, 375, 376
Emotional confl ict, 352
Emotional intelligence, 16, 273, 300–301
Emotional stability, as Big Five personality trait,
290, 291
Emotions, 300–301
Empathy, as foundation for emotional
intelligence, 16
Employee engagement, 299
Employee involvement teams, 336
Employees. See Workforce
Employment agreements, 36
Empowerment, 179, 197, 277
Engagement, 307, 314
Entrepreneurs
characteristics, 426–427, 428
common myths, 425
defi ned, 424
examples, 425–426
minorities as, 428–429
moms as, 424
as risk takers, 425
similarities, 426–427, 428
women as, 428–429
Entrepreneurship, 424, 428–429. See also Small
businesses
Environmental capital, 77
Equal employment opportunity (EEO), 234
Equal Pay Act, 235
Equity fi nancing, 440
Equity theory, 316–318
ERG theory, 309–310
Escalating commitment, 104
Ethical behavior
defi ned, 56
levels of moral development, 66
maintaining high standards of conduct, 65–70
moral leadership, 275–276
as values driven, 57–58
variations across cultures, 60–61
and views of moral reasoning, 58–60
in workplace, 56–63
Ethical dilemmas, 61–62
Ethical frameworks, 65–66
Ethical imperialism, 61
Ethics
and China’s outsourcing factories, 156, 162
defi ned, 20–21, 56
formal codes, 69–70
global challenges, 414
rationalizing unethical behavior, 63
Ethics training, 67
Ethnic subcultures, 386
Ethnocentrism, 377, 385
Evidence-based management, 50
E-waste, 125
Existence needs, 309
Expectancy theory, 318–320
Expert power, 260
Exporting, 407
External control, 142
Extinction, 324
Extraversion, as Big Five personality trait, 290, 291
F Fair Pay Act, 236
Fair trade, 394
Family and Medical Leave Act, 235
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Subject IndexSI-3
Family business feuds, 436
Family-owned businesses, 435–436
FarmVille game, 119
Feedback, 361, 372
Feedback controls, 141
Feedforward controls, 140
Filtering, 369
Financial budgets, 121
Finding Forrester (movie), 383
First-line managers, 4–5
First-mover advantage, 425
Fixed budgets, 121
Flexibility, 428
Flexible budgets, 121
Flexible working hours, 200
Focused cost leadership strategy, 170
Focused diff erentiation strategy, 170
Force-coercion strategy, 222–223
Forecasting, 123
Foreign Corrupt Practices Act (FCPA), 414
Foreign subsidiaries, 408
Formal structures, 181
Formal teams, 334–335
Forrest Gump (movie), 133
Framing error, 104
Franchising, 407, 426, 427
Free-agent economy, 23–24
Frustration-regression principle, 310
Functional chimneys (or silos) problem, 186
Functional plans, 119
Functional strategy, 160
Functional structures, 185–186
Fundamental attribution error, 287
Future orientation, as project GLOBE cultural
dimension, 397
G Gantt charts, 46, 147
Gender, and leadership, 274–275
Gender egalitarianism, as project GLOBE
cultural dimension, 397
Gender similarities hypothesis, 274
Gender subcultures, 386
General partnerships, 439
Generation X, 35, 209
Generational subcultures, 35, 209, 375, 386–387
Geographical structures, 188
Glass ceiling, 387, 429
Glass-ceiling eff ect, 22
Global corporations. See also International
business
controversial actions, 413–414
defi ned, 412
ethical challenges, 413
leadership in, 416–417
organizing in, 416
planning and controlling, 414–415
Global economy, 405
Global sourcing, 20, 406–407
Global strategic alliances, 408
Globalization
defi ned, 19, 405
impact on international business, 404–410
impact on workplace, 19–20
T-shirt example, 404–405
Globalization gap, 413
Globalization strategies, 162
GLOBE. See Project GLOBE
Goal setting, 127
Goal-setting theory, 320–321
Governance, 6
Green innovation, 214
Greenfi eld ventures, 408
Greenhouse gases, 103
Group decision making, 102
Groupthink, 350–351
Growth needs, 309
Growth strategies, 160
H Half the Sky (Kristof and WuDunn), 396
Harry Potter books, 306, 308
Hawthorne eff ect, defi ned, 40
Hawthorne studies, 38, 40
Hersey-Blanchard situational leadership
model, 267
Heuristics, 103
Hierarchy of human needs, 41–42, 308–309
Hierarchy of objectives, 115
High-context cultures, 393
Higher-order needs, 308, 309
High-performance organizations, 50
Hot, Flat, and Crowded 2.0 (Friedman), 417
Human capital, 233
Human relations leaders, 263
Human resource management (HRM)
careers in, 233
defi ned, 232–233
major responsibilities, 233
role of government legislation, 234–236
strategic, 233
Human skills, 15–16
Humane orientation, as project GLOBE cultural
dimension, 397
Hygiene factor, 312
I Immoral managers, 69
Importing, 407
Impression management, 287–288
Improvement objectives, 144
Inclusivity, 385
Th e Incredibles (movie), 307
Incremental change, 220
India
and globalization, 19–20
Slumdog Millionaire, 3
Tata Group, 404, 412
Individual character, 55, 63, 65
Individualism view of ethical behavior, 58, 59
Individualism-collectivism, cultural value
diff erences, 395
Informal groups, 335
Informal structures
defi ned, 182
pros and cons, 183
social network analysis, 182
Information competency, 87
Informational roles, managerial, 13
In-group collectivism, as project GLOBE cultural
dimension, 397
Initial public off erings (IPOs), 440
Innovation
commercializing, 215–216
defi ned, 213
green, 214
organizational characteristics, 216–217
reverse, 215–216
types, 213–215
Input standards, 136
Insourcing, 405
Institutional collectivism, as project GLOBE
cultural dimension, 397
Instrumental values, 57–58
Instrumentality, 318, 319
Integrity, 276, 277
Intellectual capital, 24
Intellectual property, 409–410
Interactional justice, 59
Interactive leadership, 275
Internal control, 142
International business. See also Global
corporations
defi ned, 405
direct investments in foreign operations, 408
and economic development, 406
impact of globalization, 404–410
legal problems, 409–410
political complications, 409–410
reasons for going global, 406
Internet
impact of Web on human mind, 96
online privacy issues, 142, 376
small business on, 433–434
Web-based business models, 163
Interpersonal roles, managerial, 13
Intrapreneurs, 427
Intuitive feelers, 90
Intuitive thinking, 89, 90
Inventory analysis, 46
Inventory controls, 148–149
Iron Man 2 (movie), 231
ISO 14001 standard, 78
J Japan
earthquake and tsunami, 76, 91, 110, 149, 191
and just-in-time scheduling, 148
as power distance culture, 395
professional women in workplace, 395–396
proxemics in, 394
and total quality management, 49
Jay-Z, 364
Job burnout, 294
Job design, 313
Job discrimination, 234–235
Job enrichment, 313
Job migration, 20
Job satisfaction. See also Quality of work life (QWL)
defi ned, 298–299
relationship to job performance, 300
and work behavior, 299
Job sharing, 200
Joint ventures, 408
Justice view of ethical behavior, 58, 59
Just-in-time scheduling ( JIT), 148–149
K Kawamata-cho, Japan, 110
Knowledge workers, 25, 87
L Lack-of-participation error, 96–97
Laissez faire leaders, 263
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Subject Index SI-4
Law of contingent reinforcement, 325
Law of eff ect, 323
Law of immediate reinforcement, 325
Leader-member exchange theory (LMX), 268–269
Leaders
autocratic, 263
and change, 219–225
charismatic, 272
eff ective, 262
interactive, 275
symbolic, 210–211
Leadership
defi ned, 258
Fiedler’s contingency model, 265–266
and gender, 274–275
Hersey-Blanchard situational model, 267
moral, 275–276
as “must have” managerial skill, 17
and path-goal theory, 267–268
relationship to power, 259
substitutes for, 268
visionary, 262
Leadership styles, 262–263
Leading. See also Controlling; Organizing;
Planning
defi ned, 12
as function in management process, 11, 12,
258–259
in global corporations, 416–417
Learning, lifelong, 16–17
Learning styles, 31, 43
Legitimate power, 259
Leverage, 149, 150
Licensing, 407
Lifelong learning, 16–17
Lilly Ledbetter Fair Pay Act, 236
Limited liability corporations (LLCs), 439
Limited liability partnerships (LLPs), 439
Limited partnerships, 439
Linear programming, 46
Liquidation, 161
Liquidity, 149, 150
LMX (leader-member exchange) theory, 268–269
Locus of control, 292, 428
Long-range plans, 118
Lose-lose confl icts, 352
Lost (TV series), 331
Love Happens (movie), 257
Low-context cultures, 393
Lower-order needs, 308, 309
M Machiavellianism, 292
Maintenance activities, 345
Management
behavioral, 38–43
classical approaches, 32–36
evidence-based, 50
functions in process, 11–13, 112, 134–135, 180,
258–259
value-based, 210–211
Management by exception, 138
Management process, 11, 12–13, 112, 134–135,
180, 258–259
Management science, 45–46
Managers
accountability, 6
background, 4–8
as change leaders, 219–225
characteristics of best, 8
as coaches, 8
common change strategies, 222–224
defi ned, 4
eff ective, 6–7
essential skills, 15–16, 17
fi rst-line, 4–5
functions in management process, 11–13, 112,
134–135, 180, 258–259
middle, 5
moral, 69
as problem solvers, 86–88
role in ethical workplace, 57
role of agenda setting, 14
role of networking, 14
sets of roles, 13
skills survey, 199
span of control, 181, 194, 195
top, 5
types, 4–6
what they do, 10–17
Managing by objectives (MBO), 143–144, 321
Market control, 143
Masculinity-femininity, cultural value
diff erences, 395–396
Mathematical forecasting, 46
Matrix structures, 188–189
Mechanistic designs, 198, 199
Membership composition, 340–341
Microcredit, 424
Middle managers, 5, 192
Millennials, 35, 375
Minorities. See also Workforce diversity
and diversity bias, 387–388
as entrepreneurs, 428–429
Mission, 167
Mixed messages, 368
MNCs (multinational corporations). See Global
corporations
Mompreneurs, 424
Monochronic cultures, 393
Mood contagion, 301
Moods, 301
Moral absolutism, 61
Moral leadership, 275–276
Moral managers, 69
Moral rights view of ethical behavior, 58, 60
Most favored nation status, 410
Motion study, 33
Motivation. See also Needs
acquired needs, 310–311
defi ned, 308
equity theory, 316–318
and ERG theory, 309–310
expectancy theory, 318–320
as foundation for emotional intelligence, 16
needs hierarchy, 308–309
two-factor theory, 312
Movies. See also Television shows
Th e Blind Side, 55
Th e Bourne Ultimatum, 423
Th e Devil Wears Prada, 359
Finding Forrester, 383
Forrest Gump, 133
Th e Incredibles, 307
Iron Man 2, 231
Love Happens, 257
Mr. Holland’s Opus, 31
Patch Adams, 179
Red Eye, 85
Slumdog Millionaire, 3
Th e Social Network, 283
Th e Terminal, 205
Tron: Legacy, 157
27 Dresses, 111
Mr. Holland’s Opus (movie), 31
Mt. Everest, 98
Multicultural organization, 385
Multinational corporations (MNCs). See Global
corporations
Myers-Briggs Type Indicator, 291–292
N National cultures, Hofstede’s fi ve dimensions
individualism collectivism, 395
masculinity-femininity, 395–396
power distance, 395
time orientation, 396
uncertainty avoidance, 395
National subcultures, 386
Nationalization, 410, 415
Natural capital, 77
Necessity-based entrepreneurship, 428–429
Needs
achievement-based, 310
acquired, 310
affi liation-based, 310, 311
defi ned, 41, 308
existence-type, 309
growth-type, 309
hierarchy, 41–42, 308–309
higher-order, 308, 309
lower-order, 308, 309
power-based, 310, 311
relatedness-type, 309
Negative reinforcement, 324
Network models, 46
Network structures, 190–192
Networking, 14, 359, 363. See also Social
networking
No-compete clauses, 36
Noise, 366
Nondisclosure agreements, 36
Nonmonetary budgets, 121
Nonprofi t organizations, 4, 6
Nonprogrammed decisions, 88
Nontariff barriers, 410
Nonverbal communication, 368, 377
Norms, 344
O Objectives. See also Managing by
objectives (MBO)
defi ned, 113
improvement type, 144
operating, 167, 168
personal development type, 144
Observable culture, 208–209
Occupational subcultures, 386
Offi ce romances, 121
Open systems, 46–47
Open-book management, 374
Openness, in communication, 374
Openness to experience, as Big Five personality
trait, 290, 291
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SI-5 Subject Index
Operant conditioning, 323
Operating budgets, 121
Operating objectives, 167, 168
Operational plans, 119
Operations management, 46
Operations research, 45–46
Opportunities and threats. See SWOT analysis
Optimizing decision, 95
Organic designs, 198
Organization charts, 181
Organization structures
defi ned, 181
formal vs. informal, 182–183
types, 185–192
Organizational citizenship behaviors, 299
Organizational culture, 206–211
Organizational design
defi ned, 194
trends, 194–200
Organizational subcultures, 385–387
Organizations
benefi ts of teams, 332–333
describing structure, 181–183
design trends, 194–200
formal teams in, 334–335
informal groups in, 335
information fl ows in, 87–88
mechanistic vs. organic design, 198–199
as open systems, 46–47
and social responsibility, 73–79
stakeholders, 72
types of managers, 4–6
types of strategies, 159–160
types of structures, 185–192
Organizing. See also Controlling; Leading;
Planning
defi ned, 11, 180
as function in management process,
11–12, 180
in global corporations, 416
Outliers (Gladwell), 49
Output standards, 136
Outsourcing
Chinese factories, 156, 162
defi ned, 405
role of China, 407, 414
and social responsibility, 413
strategic alliances for, 163
Overworked employees, 195
P Participatory planning, 126–127
Partnerships, 439
Patch Adams (movie), 179
Patents. See Intellectual property
Path-goal theory, 267–268
Pay discrimination, 235, 236
Pearl Harbor, 351
Perceived negative inequity, 317
Perceived positive inequity, 317
Perception
as cause of attribution errors, 287
defi ned, 284
distortions, 285–286
selective, 285
Performance norms, 344
Performance objectives, writing, 144
Performance opportunities, 87
Performance orientation, as project GLOBE
cultural dimension, 397
Performance threats, 87
Personal development objectives, 144
Personal power, 260–261
Personal wellness, 295
Personality
Big Five traits, 290–291
defi ned, 290
Personality testing, 295
Persuasive communication, 363–364
Pittsburgh Pirates mascot, 211
Planned change
common managerial strategies, 222–224
resistance to, 224–225
three phases, 220–221
transformational vs. incremental,
219–220
Planning. See also Controlling; Leading;
Organizing
alternative future conditions, 124–125
benefi ts, 113, 114–116
for contingencies, 124
defi ned, 11, 112
as function in management process,
11, 112
in global corporations, 414–415
participatory, 126–127
steps in process, 113
tools and techniques, 123–127
Plans
budgets as, 121
defi ned, 113
organizational policies and procedures,
119–120
short-range vs. long-range, 118
for small businesses, 438
strategic vs. operational, 118–119
types, 118–121
Policies, 119
Political risk, 415
Political-risk analysis, 415
Polychronic cultures, 393
Portfolio planning, 171
Positive reinforcement, 324, 325
Power
defi ned, 259
as need, 310, 311
personal vs. social, 311
Power (Pfeff er), 260
Power distance, 395, 397
Pregnancy discrimination, 235, 236
Prejudice, 23
Presentation skills, 366, 367
Presidents, as top managers, 5
Privacy, 142, 236, 376
Problem solving, 86–87. See also Collaboration
Procedural justice, 59
Procedures, 120
Process innovation, 213
Product innovation, 213
Product structures, 187–188
Professionalism, 17, 231
Profi tability, 149, 150
Programmed decisions, 88
Progression principle, 308
Progressive principle, 41
Project GLOBE, 397
Project management, 147–148
Project teams, 335
Projection, 286
Projects, 147
Protectionism, 410, 413
Proxemics, 373, 393–394
3 Ps of organizational performance, 73
Punishment, 324, 325–326
Pyramid, upside-down, 8
Q Quality circles, 336
Quality control, 146–147
Quality of work life (QWL), 7
Quantitative analysis, 45–46
Question marks, in BCG Matrix, 171
Queuing theory, 46
R Rational persuasion strategy, 223–224
Red Eye (movie), 85
Referent power, 261
Refreezing, 221
Reinforcement theory, 323–326
Relatedness needs, 309
Representativeness heuristic, 103
Resiliency, 133, 138
Restricted communication networks, 346
Restructuring, 161
Retrenchment strategy, 161
Reverse innovation, 215–216
Reward power, 259
Risk environments, 91
Risk taking, 423, 425, 427
S Saas (software as a service) business
model, 164
Satisfi cing decisions, 96
Satisfi er factor, 312
Saudi Arabia, 392
Scalar chain principle, 36
Scenario planning, 124–125
Scientifi c management, 32–33
Scientifi c method, 50
Selective perception, 285
Self-awareness, as foundation for emotional
intelligence, 16
Self-confi dence, 85, 101, 428
Self-control, 142
Self-effi cacy, 319
Self-fulfi lling prophecies, 42
Self-management, 3, 17, 25
Self-managing teams, 337–338
Self-monitoring, 292–293
Self-regulation, as foundation for emotional
intelligence, 16
Self-reliance, 428
Self-serving bias, 287
Sensation feelers, 90
Sensation thinkers, 90
Servant leadership, 277
Sexual harassment, 62
Th e Shallows (Carr), 96
Shamrock organizations, 23–24
Shaping, 325
Shared power strategy, 224
Short-range plans, 118
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Subject Index SI-6
Silos (or chimneys) problem, 186
Six sigma, 147
Skills
technical vs. human, 15–16
writing and communication, 17, 360, 366
Skunkworks, 216
Slumdog Millionaire (movie), 3
Small businesses
business plans for, 438
defi ned, 433
economic advantages, 433–434
failure, 436–437
family-owned, 435–436
forms of ownership, 439
Internet-based, 433–434
life-cycle stages, 434–435
start-up assistance, 437–438
statistics, 433
ways of fi nancing, 440
Smartphones, 10, 282
Smoothing. See Accommodation
Social businesses, 79
Social capital, 14, 360
Social entrepreneurs, 79, 430
Social entrepreneurship, 214–215
Social innovation, 214–215
Social loafi ng, 333, 334
Social media strategies, 164
Th e Social Network (movie), 283
Social network analysis, 182
Social networking, 305, 375
Social responsibility. See Corporate social
responsibility
Social responsibility audits, 75–76
Social skills, as foundation for emotional
intelligence, 16
Socialization, 207–208
Socioeconomic view of corporate social
responsibility, 74
Sole proprietorships, 439
Span of control, 181, 194, 195
Spirituality, workplace, 211
Spotlight questions, 67, 98
Stakeholders, 72
Strategic alliances, 163, 408
Strategic control, 174
Strategic human resource management, 233
Strategic intent, 158
Strategic leadership, 172–173
Strategic management, 166–167
Strategic plans, 118–119
Strategies
business, 159–160
for consolidation, 161
cooperative, 163
corporate, 159
defi ned, 158–159
e-business, 163–164
formulating, 166–168
functional, 160
global, 162
for growth, 160
implementing, 166–172
Porter’s fi ve forces model, 168–169
types, 158–164
Strategy formulation, 166–168
Strengths and weaknesses. See SWOT
analysis
Stress
constructive vs. destructive, 294
defi ned, 293–294
managing, 295
Stretch goals, 127
Strong cultures, 207
Subcultures, organizational, 385–387
Subscription Web sites, 163
Subsidiaries, foreign, 408
Substantive confl ict, 352
Substitutes for leadership, 268
Subsystems, 47
Succession plans, family-owned businesses, 436
Succession problems, family-owned
businesses, 436
Supervisors. See First-line managers
Supplier alliances, 163
Supply chain
green example, 75
strategic alliances, 163
Sustainability
cradle-to-grave manufacturing example, 75
defi ned, 77
as social responsibility goal, 76–79
UN role, 76, 77
Sustainable businesses, 77
Sustainable competitive advantage, 159
Sustainable development, 77
Sustainable innovation, 214
Sweatshops, 414
SWOT analysis, 167–168
Symbolic leaders, 210–211
Synergy, 332
Systematic thinking, 89
T Tactical plans, 119
Tariff s, 410
Task activities, 345
Task forces, 335
Team building, 348–349
Team contributions, 331, 343
Team leaders. See First-line managers
Team process, 342
Team structures, 189–190
Teams and teamwork
background, 332–337
benefi ts to organizations, 332–333
building blocks, 339–353
cohesiveness, 344
communication networks, 346
decision-making methods, 349–350
defi ned, 332
eff ective, 339–340
impact of social loafi ng on performance, 333
Lost as example, 331
membership composition, 340–341
as “must have” managerial skill, 17
stages of development, 342–343
task and maintenance roles, 345
Technical skills, 15
Telecommuting, 200
Television shows. See also Movies
Th e Amazing Race, 403
Cake Boss, 422
Lost, 331
Th e Terminal (movie), 205
Terminal values, 57–58
Terrorism, 415
Text messages, 358, 375
Th e Amazing Race (TV series), 403
Th ematic Apperception Test (TAT), 310
Th eory X, 38, 42
Th eory Y, 38, 42, 142
Th reats. See SWOT analysis
Time management, 111, 115–116
Time orientation, cultural value
diff erences, 396
Tolerance for ambiguity, 205, 225, 428
Top managers, 5
Total quality management (TQM), 49, 146
TQM. See Total quality management (TQM)
Trade barriers, 410
Trademarks. See Intellectual property
Training, ethics, 67
Transactional leadership, 272
Transformational change, 219–220
Transformational leadership, 272–273
Transnational corporations, 412
Transnational fi rms, 162
Transparency, in communication, 374
Triple bottom line, 73
Tron: Legacy (movie), 157
T-shirts, 404–405
Turnover, 299
27 Dresses (movie), 111
Type A personality, 293–294
U Uncertain environments, 91
Uncertainty, 205
Uncertainty avoidance, 395, 397
Underground bosses, 375
Unfreezing, 220–221
Unit managers. See First-line managers
Unity of command principle, 36
Universal Declaration of Human Rights, United
Nations, 60
Upside-down pyramid, 8
US Airways Flight 1549, 89–90
Utilitarian view of ethical behavior, 58–59
V Valence, 318, 319
Value-based management, 210–211
Values, 57–58, 209–210
Venture capital, 429
Venture capitalists, 440
Vertical integration, 160
Vice presidents, as top managers, 5
Virtual organizations, 191–192
Virtual teams, 336–337
Virtuous circle, 74
Vision, 118, 261
Visionary leadership, 262
Vroom-Jago model, 269–270
W Weaknesses. See SWOT analysis
Web-based business models, 163
Wellness, personal, 295
Whistleblowers, 68
Win-lose confl icts, 352–353
Win-win confl icts, 353
Withdrawal behaviors, 299. See also
Avoidance
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Subject IndexSI-7
Women. See also Workforce diversity
as board members, 321
and diversity bias, 387–388
as entrepreneurs, 424, 428–429
and leadership, 274–275
leadership statistics, 286
as mompreneurs, 424
multicultural, 7
Working Mother magazine, 7
Women Count (Butler), 286
Workforce
alternative work schedules, 199–200
employee morale worldwide, 392
job satisfaction, 298–299
Mommy drain, 200
overworking, 195
survey of leaders and top managers, 275
work-life issues, 209, 230, 424
Workforce diversity, 22–23, 384–389
Working Mother magazine, 7, 200
Work-life issues, 209, 230, 424
Workplace
China’s outsourcing factories, 156, 162
Chinese factories, 414
diversity in, 22–23, 384–389
ethics and ethical behavior in, 56–63
impact of globalization, 19–20
impact of job migration, 19–20
in information age, 25, 376
in shamrock organizations, 23–25
Workplace privacy, 236
Workplace rage, 294
Workplace spirituality, 211
Writing skills, 366
Z Zero-based budgets, 121
Zone of indiff erence, 276
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A Abercrombie & Fitch, 206
Activision, C-12, C-13
Adidas, C-17
Aldi Group, C-3
Allstate, 7, 136
Amazon.com, 89, 109, 163, 206, 209, 213, 217, 341,
C-8–C-9, C-20, C-21
American Express, 7, 126
American Machine and Foundry Co.
(AMF), C-34
Amnesty International, 151
Anheuser-Busch, 404
Anthropologie, 206
AOL, 373
Apple Inc., 159, 160, 162, 163, 209, 213, 216,
229, 414, C-8, C-9, C-13, C-17, C-18–C-19,
C-20, C-21
Armour, 209
AutoNation, 425
Avon, 23
B Bailard Inc., 374
Barnes and Noble, C-9
Baskin-Robbins, C-15
Bath & Body Works, 409
Bellisio Foods, 76
Ben & Jerry’s, 404, 431
Blockbuster Video, 425, C-21
BMW, 163, 412
Bob Evans Farms, 320
Body Shop, 425, 429
Boeing, 121, 149, 196, 404
Border Green Energy Team (BGET), 214
Boston Consulting Group, 171, 295
BP, 76, 124, 412
Brickhouse, 216
Bristol Myers, 162
British Airways, 219, 287
Build-A-Bear Workshop, 182
Burger King, C-36
C C. O. Bigelow, 409
Cadbury, 274
Catalyst, 22, 384, 385
Caterpillar, 412
Center for Creative Leadership, 371
Chemical Bank, 67
Chick-fi l-A, 141
Chrysler, 123, 161, 187
Cisco Systems, 376, 405
Civco Medical Instruments, 150
Cleaning for a Reason, 430
Cleveland Orchestra, 135
Coca-Cola, 21, 158, 160, 170
Cognos, C-23
Coinstar, C-21
Colgate Palmolive, 21, 162
Cornerstone Research, 7–8
Count-Me-In, 424
Cummins Engine Company, 134
Cypress Semiconductor Corp., 127
D Daimler, 163
Danone. See Grameen Danone
DataDyne, 431
Dell, 149, 162
Deloitte, 7
Delta Air, 191
Desso, 75
Development Dimensions International, 199
Devine Foods, 424
Dial Corporation, 21
Disney, 208, 211, C-28, C-29
Domino’s Pizza, 375
Dow Corning, 7
DreamWorks, C-28, C-29
Dunkin’ Donuts, 177, C-14–C-15
E Eastman Kodak, 389
EBay, 161, 163, 213
EDS, 163
EHarmony.com, 163
Electronic Arts, 155, C-12–C-13
Epinions, 163
Equal Employment Opportunity Commission
(EEOC), 236, 387
Ernst & Young, 7, 11–12, 13
European Union, 409
Exxon/Mobil, 160, 413
F Facebook, 119, 142, 163, 164, 211, 213, 233, 236,
283, 288, 305, 336, 376, C-13, C-24–C-25
Fair Indigo, 394
Fedex, 209
Fiat, 123, 187
Flickr, 426
Ford Motor Co., 126, 196, 223–224, 300, 386,
405, C-33
Foxconn Technology Group, 156, 162
Frederick Douglas Academy, 261, 277
G Gap Inc., 69–70, C-4
Gazprom, 412
General Electric, 127, 136, 159, 171, 220, 222–223
General Mills, 7
General Motors, 93, 94–95, 123, 161, 187–188
C-32, C-33
Gillette, 162
Girl Scouts, 206
Goodyear, 236
Google, 151, 163, 209, 213, 216, 217, 233
Grameen Danone, 78
Green Mountain Coff ee Roasters, 406
GreenBox, 424
Groupon, 192, 207, 213
H Häagen-Dazs, 412
Haier, 393
Hallmark, C-29
Harley-Davidson, 421, C-34–C-35
Harris Interactive, 275, 276
HCL Industries, 373–374
Henri Bendel, 409
Herman Miller, 25, 277
Hewlett-Packard, 19, 162, 209, 412
Hitachi, 412
H&M, C-5
Hollister, 206
Home Depot, 233
Honda, 404
HopeLab, 311
HP. See Hewlett-Packard
Human Rights Campaign, 389
Hunch.com, 426
Husk Power Systems, 431
I IBM, 7, 135, 158, 159, 163, 412, C-18
IDEO, 216, 232
IKEA, 213, 405
InBev, 404
Inditex, C-4–C-5
Infosys, 163
In-N-Out Burger, 430, 443, C-36–C-37
Intel, 162, 409
International Labour Organization, 402
International Standards Organization, 78
International Trade Commission, C-34–C-35
ITunes Store, 163
Izod, 160
J Jaguar, 404
Johnson & Johnson, 217
K Kenexa, 35
KFC, 377
Kraft Foods, 374
L La Sanza, 409
Land Rover, 404
Life Is Good company, 39
Th e Limited, 362, 409
LinkedIn, C-25
L.L. Bean, 126
Long John Silver’s, 320
Lufthansa, 163
M Macy’s, C-10, C-11
Mad Gab’s Inc., 68–69
Mail Boxes Etc., 427
Marriott, 336
Organization Index
OI-1
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Organization IndexOI-2
Mars Inc., 186
Massmart, 389
Mazda Corporation, 366
McDonald’s, 120, 140, 141, 160, 162, 412, 415,
430, C-14, C-36
Medtronic, 4
Mercedes-Benz, 404
Merck, 209
Miami Dolphins, 425
Microsoft, 151, 198–199, 216, 414, C-19, C-29
Minority Business Development
Agency, 429
Mozilla, 209
N NASCAR, 349
National Foundation for Women Business
Owners (NFWBO), 429
NBA (National Basketball Association),
332–333
Nestlé, 412
Netfl ix, 163, 207, 213, 255, C-20–C-21
New Profi t Inc., 79
NFL Properties Inc., 274
Nike, 203, 213, 404, 406, C-16–C-17
Nintendo, C-12
Nissan, 404, 412
Nokia, 413
Nordstrom, 131, C-10–C-11
O Obvious Corporation, C-30
Odeo, C-30
Ogilvy Public Relations, 360
One Acre Fund, 215
Oracle, C-23, C-29
P Palmolive, 431
Panera Bread, 329, C-26–C-27
Patagonia Inc., 83, 172, 214, C-6–C-7
Pear Analytics, C-30
Peet’s Coff ee & Tea, 406
PepsiCo, 21, 97, 159, 160, 170, 377
Petrobas, 412
PetroChina, 412
Pixar, 357, C-19, C-28–C-29
PixArts, 427
Polaroid Corporation, 189
Polo Ralph Lauren, 169
PriceGrabber, 163
Priceline, 163
Procter & Gamble, 5, 12, 162, 164, 412
R Redbox, C-21
RetiredBrains.com, 424
Rockport Company, 219
Rocky Brands, 20, 36
Royal Dutch/Shell, 124–125
S Saks, C-10, C-11
Salesforce.com, 164, 213
Samsung, 412
Sandleman & Associates, C-27
SAP, C-23
SAS Institute, 281, C-22–C-23
7-Eleven, 126
Shell. See Royal Dutch/Shell
Shopzilla, 163
Sierra Nevada Brewing Company, 214
SiteQuest Technologies, C-23
Skype, 151, 336
Small Business Development Centers, 438
Society for Human Resource Management,
295, 389
Sony, 405, 412
Southwest Airlines, 213, 276
Spanx, 293
Sprinkles, C-37
S&S Sports Cards, 434
Star Alliance, 163
Starbucks, 406, C-14, C-15, C-27
State Farm, 16
Stonyfi eld Farm, 73
Sungard, C-23
T Tata Group, 404, 412
TerraCycle, 223
Tetley Tea, 404
Th ird Sun Solar Wind and Power, Ltd., 434
Th readless.com, 164
3M Corporation, 188, 215, 216
TIAA-CREF, 159
Tiny Speck (gaming studio), 426
Tom’s of Maine, 210, 336, 431
TOMS Shoes, 431, C-27
Total (French oil and gas producer), 412
Toyota, 105, 132, 134, 401, 404, 412, C-32–C-33
Trader Joe’s, 29, C-2–C-3
Transparency International, 415
Tropicana, 160
Twitter, 164, 211, 213, 288, 375, 381, C-30–C-31
U Unilever, 77, 162, 404, 431
United Airlines, 163
United Nations, 60, 76, 413
United Way, 309–310
UPS (United Parcel Service), 138, 188
U.S. Army, 135
U.S. Equal Employment Opportunity
Commission (EEOC), 236, 387
V Verizon, C-19
Victoria’s Secret, 409
Virgin Group, 287, 288, 325
VisionIT Inc., 386
Vodafone, 214
W Walmart, 103, 143, 160, 164, 169–170, 223, 364,
389, 412, C-3, C-6, C-15, C-16, C-21
Wendy’s, 426
Western Electric Company, 40
White Barn Candle Co., 409
Whole Foods, 70, 209
Wieden & Kennedy, C-16
Wii, C-12, C-13
Wolters Kluwer, 376
Women for Hire Inc., 375
World Trade Organization (WTO), 410
X Xerox, 12, 126, 385
Y Yahoo!, 48, 151, 163, 178, 186, 216, 426, C-24
Yammer, C-31
Yelp, 163
YouTube, 375
Yum! Brands, 320, 325
Z Zappos, 2, 24, 206, 207, 209, C-9, C-11
Zara International, 53, 126, C-4–C-5
Zynga, 119, 209, C-13
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1 Self-Management and Slumdog Millionaire
2 Learning Style and Mr. Holland’s Opus
3 Individual Character and Th e Blind Side
4 Self-Confi dence and Red Eye
5 Time Management and 27 Dresses
6 Resiliency and Forrest Gump
7 Critical Th inking and Tron: Legacy
8 Empowerment and Patch Adams
9 Tolerance for Ambiguity and Th e Terminal
10 Professionalism and Iron Man 2
11 Integrity and Love Happens
12 Ambition and Th e Social Network
13 Engagement and Th e Incredibles
14 Team Contributions and Lost
15 Communication/Networking and Th e Devil Wears Prada
16 Diversity Maturity and Finding Forrester
17 Cultural Awareness and Th e Amazing Race
18 Risk Taking and Th e Bourne Ultimatum
{ C H A P T E R O P E N E R S
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Chapter 1 Managers and the Management Process
Chapter 2 Management Learning
Chapter 3 Ethics and Social Responsibility
Chapter 4 Managers as Decision Makers
Chapter 5 Plans and Planning Techniques
Chapter 6 Controls and Control Systems
Chapter 7 Strategy and Strategic Management
Chapter 8 Organization Structure and Design
Chapter 9 Organizational Cultures, Innovation, and Change
Chapter 10 Human Resource Management
Chapter 11 Leadership
Chapter 12 Individual Behavior
Chapter 13 Motivation
Chapter 14 Teams and Teamwork
Chapter 15 Communication
Chapter 16 Diversity and Global Cultures
Chapter 17 Globalization and International Business
Chapter 18 Entrepreneurship and Small Business
{ B R I E F C O N T E N T S
Managers and Management
Planning and Controlling
Organizing
Leading
Environment
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{ S P E C I A L C H A P T E R F E AT U R E S
MANAGER’S LIBRARY Delivering Happiness by Tony Hsieh Th e Outliers by Malcolm Gladwell
Creating a World Without Poverty
by Muhammad Yunus
Th e Shallows by Nicholas Carr
Analytics at Work by
Th omas Davenport, et al.
Th e Facebook Eff ect by David Kirkpatrick
Behind the Cloud by Marc Benioff and
Carlye Adler
Th e Truth About Middle Managers by
Paul Osterman
Change by Design by Tim Brown
Th e Trophy Kids Grow Up by Ron Alsop
Power by Jeff rey Pfeff er
Women Count by Susan Bukeley Butler
Drive by Daniel Pink
Crowdsourcing by Jeff Howe
Collaboration by Morten Hansen
Half the Sky by Nicolas Kristof and
Sheryl WuDunn
Hot, Flat and Crowded 2.0 by
Th omas Friedman
In-N-Out Burger by Stacy Perman
ETHICS CHECK Coke’s secret formula a tempting target Employment agreements can be tricky
Committing to a green supply chain
Left to die on Mt. Everest
E-waste graveyards as easy way out
Privacy and censorship worries
Life and death at an outsourcing factory
Flattened into exhaustion
Facebook follies
Help wanted: saleswomen
When the boss asks too much
Personality test required
Information goldmine is equity dilemma
Social loafi ng is closer than you think
In France, bloggers beware
Fair trade fashion
Nationalism and protectionism
Entrepreneurship and philanthropy
ROLE MODELS Ursula Burns—Xerox Carol Bartz—Yahoo! Gary Hirshberg—Stonyfi eld Farms Indra Nooyi—Pepsi Don Th ompson—McDonald’s Patricia Karter—Dancing Deer Baking Roger W. Ferguson Jr.—TIAA/CREF Alan Mulally—Ford Tom Szaky—TerraCycle
Jim Goodnight—SAS Lorraine Monroe—Leadership Academy Richard Branson—Virgin Group Charlie Butcher—Butcher Company Jeff Bezos—Amazon Linda Heasley—Th e Limited David Segura—VisionIt Les Wexner—Limited Brands Michelle Greenfi eld—Th ird Sun
FACTS TO CONSIDER Employment contradictions in workforce diversity
Generations diff er when rating their bosses
Behavior of managers key to ethical
workplace
Greenhouse gas emissions as executive
priorities
Policies on offi ce romances vary widely
Beware of corporate thieves
CEO pay is heading high again
Bosses overestimate their management skills
Organization cultures face up to work-life
trends
HRM executives worry about performance
measurement
Workers report shortcomings of leaders
Trends show job satisfaction drifting lower
Unproductive meetings are major time
wasters
Europe turning to quotas to increase
female board members
Employees should worry about electronic
monitoring
Employee morale varies around the world
Corruption and bribes haunt global business
Minority entrepreneurs are on the move
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{ A C T I V E L E A R N I N G R E S O U R C E S
CASES FOR CRITICAL THINKING
• 1 Trader Joe’s • 2 Zara International • 3 Patagonia • 4 Amazon/Barnes & Noble • 5 Nordstrom/Zappos • 6 Electronic Arts/Zynga • 7 Dunkin’ Donuts • 8 Nike • 9 Apple
• 10 Netfl ix/Redbox • 11 SAS/Sungard • 12 Facebook/LinkedIn • 13 Panera/TOMS • 14 Pixar/DreamWorks • 15 Twitter/Yammer • 16 Toyota/Ford • 17 Harley Davidson • 18 In-N-Out Burger/Sprinkles
CLASS EXERCISESMy Best Manager Evidence-Based Management Quiz
Confronting Ethical Dilemmas
Lost at Sea
Th e Future Workplace
Stakeholder Maps
Strategic Scenarios
Organizational Metaphors
Force-Field Analysis
Upward Appraisal
Leading by Participation
Job Satisfaction Preferences
Why We Work
Understanding Team Dynamics
Communication and Teamwork
Dilemmas
Alligator River Story
American Football
Entrepreneurs Among Us
Personal Career Readiness
Managerial Assumptions
Terminal Values Survey
Intuitive Ability
Time Management Profi le
Internal/External Control
Handling Facts and Inferences
Empowering Others
Tolerance for Ambiguity
Performance Appraisal Assumptions
Least Preferred Co-Worker Scale
Feedback and Assertiveness
Stress Test
Two-Factor Profi le
Team Leader Skills
Diversity Awareness
Global Intelligence
Entrepreneurship Orientation
SELF-ASSESSMENTS
Managing Millennials
Management in Popular Culture
Organizational Commitment to
Sustainability
Crisis Management Realities
Personal Career Planning
After Meeting/Project Review
Contrasting Strategies
Network “U”
Organizational Culture Walk
Th e Future of Labor Unions
Diffi cult Personalities
CEO Pay
Superstars on the Team
How Words Count
Job Satisfaction Around the World
Globalization Pros and Cons
Community Entrepreneurs
TEAM PROJECTS
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- Copyright
- About the Author
- Preface
- Brief Contents
- Detailed Contents
- {1 Managers and the Management Process
- 1.1 What Does It Mean to Be a Manager?
- • Organizations have different types and levels of managers.
- • Accountability is a cornerstone of managerial performance.
- • Effective managers help others achieve high performance and satisfaction.
- • Managers must meet multiple changing expectations.
- 1.2 What Do Managers Do and What Skills Do They Use?
- • Managerial work is often intense and demanding.
- • Managers plan, organize, lead, and control
- • Managers enact informational, interpersonal, and decisional roles.
- • Managers pursue action agendas and engage in networking
- • Managers use a variety of technical, human, and conceptual skills.
- • Managers can and should learn from experience.
- 1.3 What Are Some Important Career Issues in the New Workplace?
- • Globalization and job migration are changing the world of work.
- • Failures of ethics and corporate governance are troublesome
- • Diversity and discrimination are continuing social priorities
- • Intellectual capital and self-management skills are essential for career success
- {2 Management Learning
- 2.1 What Are the Lessons of the Classical Management Approaches?
- • Taylor’s scientific management sought efficiency in job performance.
- • Weber’s bureaucratic organization is supposed to be efficient and fair.
- • Fayol’s administrative principles describe managerial duties and practices
- 2.2 What Are the Contributions of the Behavioral Management Approaches?
- • Follett viewed organizations as communities of cooperative action.
- • The Hawthorne studies focused attention on the human side of organizations
- • Maslow described a hierarchy of human needs with self-actualization at the top.
- • McGregor believed managerial assumptions create self-fulfilling prophecies.
- • Argyris suggests that workers treated as adults will be more productive.
- 2.3 What Are the Foundations of Modern Management Thinking?
- • Managers use quantitative analysis and tools to solve complex problems
- • Organizations are open systems that interact with their environments
- • Contingency thinking holds that there is no one best way to manage.
- • Quality management focuses attention on continuous improvement.
- • Evidence-based management seeks hard facts about what really works
- {3 Ethics and Social Responsibility
- 3.1 How Do Ethics and Ethical Behavior Play Out in the Workplace?
- • Ethical behavior is values driven.
- • What is considered ethical varies among moral reasoning approaches.
- • What is considered ethical can vary across cultures.
- • Ethical dilemmas arise as tests of personal ethics and values.
- • People have tendencies to rationalize unethical behaviors.
- 3.2 How Can We Maintain High Standards of Ethical Conduct?
- • Personal character and moral development influence ethical decision making.
- • Training in ethical decision making can improve ethical conduct.
- • Protection of whistleblowers can encourage ethical conduct.
- • Managers as positive role models can inspire ethical conduct.
- • Formal codes of ethics set standards for ethical conduct.
- 3.3 What Should We Know About the Social Responsibilities of Organizations?
- • Social responsibility is an organization’s obligation to best serve society.
- • Scholars argue cases for and against corporate social responsibility.
- • Social responsibility audits measure the social performance of organizations.
- • Sustainability is an important social responsibility goal.
- • Social business and social entrepreneurship point the way in social responsibility.
- {4 Managers as Decision Makers
- 4.1 How Do Managers Use Information to Solve Problems?
- • Managers deal with problems posing threats and offering opportunities.
- • Managers can be problem avoiders, problem solvers, or problem seekers
- • Managers make programmed and nonprogrammed decisions when solving problems.
- • Managers can use systematic and intuitive thinking
- • Managers use different cognitive styles to process information for decision making.
- • Managers make decisions under conditions of certainty, risk, and uncertainty.
- 4.2 What Are Five Steps in the Decision-Making Process?
- • Step 1 is to identify and define the problem.
- • Step 2 is to generate and evaluate alternative courses of action.
- • Step 3 is to decide on a preferred course of action.
- • Step 4 is to implement the decision.
- • Step 5 is to evaluate results.
- • Ethical reasoning is important at all steps in decision making.
- 4.3 What Are Some Current Issues in Managerial Decision Making?
- • Personal factors help drive creativity in decision making.
- • Group decision making has both advantages and disadvantages.
- • Judgmental heuristics and other biases and traps may cause decision-making errors.
- • Managers must be prepared for crisis decision making.
- {5 Plans and Planning Techniques
- 5.1 How and Why Do Managers Use the Planning Process?
- • Planning is one of the four functions of management.
- • Planning is the process of setting objectives and identifying how to achieve them.
- • Planning improves focus and action orientation.
- • Planning improves coordination and control.
- • Planning improves time management.
- 5.2 What Types of Plans Do Managers Use?
- • Managers use short-range and long-range plans.
- • Managers use strategic and operational plans.
- • Organizational policies and procedures are plans.
- • Budgets are plans that commit resources to activities.
- 5.3 What Are Some Useful Planning Tools and Techniques?
- • Forecasting tries to predict the future.
- • Contingency planning creates backup plans for when things go wrong.
- • Scenario planning crafts plans for alternative future conditions.
- • Benchmarking identifi es best practices used by others.
- • Participatory planning improves implementation capacities.
- • Goal setting helps align plans and activities throughout an organization.
- {6 Controls and Control Systems
- 6.1 How and Why Do Managers Use the Control Process?
- • Controlling is one of the four functions of management.
- • Control begins with objectives and standards.
- • Control measures actual performance.
- • Control compares results with objectives and standards.
- • Control takes corrective action as needed.
- 6.2 What Types of Controls Are Used by Managers?
- • Managers use feedforward, concurrent, and feedback controls.
- • Managers use both internal and external controls.
- • Managing by objectives is a way to integrate planning and controlling.
- 6.3 What Are Some Useful Control Tools and Techniques?
- • Quality control is a foundation of modern management.
- • Gantt charts and CPM/PERT are used in project management and control.
- • Inventory controls help save costs.
- • Breakeven analysis shows where revenues will equal costs.
- • Financial ratios measure key areas of financial performance.
- • Balanced scorecards help top managers exercise strategic control.
- {7 Strategy and Strategic Management
- 7.1 What Types of Strategies Are Used by Organizations?
- • Strategy is a comprehensive plan for achieving competitive advantage.
- • Organizations use corporate, business, and functional strategies.
- • Growth strategies focus on expansion.
- • Restructuring and divestiture strategies focus on consolidation.
- • Global strategies focus on international business initiatives.
- • Cooperative strategies focus on alliances and partnerships.
- • E-business strategies focus on using the Internet for business success.
- 7.2 How Do Managers Formulate and Implement Strategies?
- • The strategic management process formulates and implements strategies.
- • Strategy formulation begins with the organization’s mission and objectives.
- • SWOT analysis identifies strengths, weaknesses, opportunities, and threats.
- • Porter’s five forces model examines industry attractiveness.
- • Porter’s competitive strategies model examines business and product strategies.
- • Portfolio planning examines strategies across multiple businesses or products.
- • Strategic leadership ensures strategy implementation and control.
- {8 Organization Structure and Design
- 8.1 What Is Organizing as a Managerial Responsibility?
- • Organizing is one of the management functions.
- • Organization charts describe the formal structures of organizations.
- • Organizations also operate with informal structures.
- • Informal structures have good points and bad points.
- 8.2 What Are the Most Common Types of Organization Structures?
- • Functional structures group together people using similar skills.
- • Divisional structures group together people by products, customers, or locations.
- • Matrix structures combine the functional and divisional structures.
- • Team structures use many permanent and temporary teams.
- • Network structures extensively use strategic alliances and outsourcing.
- 8.3 What Are the Trends in Organizational Design?
- • Organizations are becoming flatter, with fewer levels of management.
- • Organizations are increasing decentralization.
- • Organizations are increasing delegation and empowerment.
- • Organizations are becoming more horizontal and adaptive.
- • Organizations are using more alternative work schedules.
- {9 Organizational Cultures, Innovation, and Change
- 9.1 What Is the Nature of Organizational Culture?
- • Organizational culture is the personality of the organization.
- • Organizational culture shapes behavior and influences performance.
- • The observable culture is what you see and hear as an employee or customer.
- • The core culture is found in the underlying values of the organization.
- • Value-based management supports a strong organizational culture.
- 9.2 How Do Organizations Support and Achieve Innovation?
- • Organizations pursue process, product, and business model innovations.
- • Green innovations pursue and support the goals of sustainability.
- • Social innovations seek solutions to important societal problems.
- • Commercializing innovation turns new ideas into salable products.
- • Innovative organizations share many common characteristics.
- 9.3 How Do Managers Lead the Processes of Organizational Change?
- • Organizations pursue both transformational and incremental changes.
- • Three phases of planned change are unfreezing, changing, and refreezing.
- • Managers use force-coercion, rational persuasion, and shared power change strategies.
- • Change leaders identify and deal positively with resistance to change.
- {10 Human Resource Management
- 10.1 What Are the Purpose and Legal Context of Human Resource Management?
- • Human resource management attracts, develops, and maintains a talented workforce.
- • Strategic human resource management aligns human capital with organizational strategies.
- • Government legislation is supposed to protect workers against employment discrimination.
- • Laws can’t guarantee that employment discrimination will never happen.
- 10.2 What Are the Essential Human Resource Management Practices?
- • Recruitment attracts qualified job applicants
- • Selection makes decisions to hire qualified job applicants.
- • Socialization and orientation integrate new employees into the organization.
- • Training continually develops employee skills and capabilities.
- • Performance management appraises and rewards accomplishments.
- • Retention and career development provide career paths.
- 10.3 What Are Current Issues in Human Resource Management?
- • Today’s lifestyles increase demands for flexibility and work-life balance.
- • Organizations are using more independent contractors and part-time workers.
- • Compensation plans influence employee recruitment and retention.
- • Fringe benefits are an important part of employee compensation packages.
- • Labor relations and collective bargaining are closely governed by law.
- {11 Leadership
- 11.1 What Are the Foundations for Effective Leadership?
- • Leadership is one of the four functions of management.
- • Leaders use position power to achieve influence.
- • Leaders use personal power to achieve influence.
- • Leaders bring vision to leadership situations.
- • Leaders display different traits in the quest for leadership effectiveness.
- • Leaders display different styles in the quest for leadership effectiveness.
- 11.2 What Can We Learn from the Contingency Leadership Theories?
- • Fiedler’s contingency model matches leadership styles with situational differences.
- • The Hersey-Blanchard situational leadership model matches leadership styles with the maturity of followers.
- • House’s path-goal theory matches leadership styles with task and follower characteristics.
- • Leader-member exchange theory describes how leaders treat in-group and out-group followers.
- • The Vroom-Jago model describes a leader’s choice of alternative decision-making methods.
- 11.3 What Are Current Issues and Directions in Leadership Development?
- • Transformational leadership inspires enthusiasm and great performance.
- • Emotionally intelligent leadership handles emotions and relationships well.
- • Interactive leadership emphasizes communication, listening, and participation.
- • Moral leadership builds trust from a foundation of personal integrity.
- • Servant leadership is follower centered and empowering.
- {12 Individual Behavior
- 12.1 How Do Perceptions Influence Individual Behavior?
- • Perceptual distortions can obscure individual differences.
- • Perception can cause attribution errors as we explain events and problems.
- • Impression management is a way of influencing how others perceive us.
- 12.2 How Do Personalities Influence Individual Behavior?
- • The Big Five personality traits describe work-related individual differences.
- • The Myers-Briggs Type Indicator is a popular approach to personality assessment.
- • Self-monitoring and other personality traits influence work behavior.
- • People with Type A personalities tend to stress themselves.
- • Stress has consequences for work performance and personal health.
- 12.3 How Do Attitudes, Emotions, and Moods Influence Individual Behavior?
- • Attitudes predispose people to act in certain ways.
- • Job satisfaction is a positive attitude toward one’s job and work experiences.
- • Job satisfaction influences work behaviors.
- • Job satisfaction has a complex relationship with job performance.
- • Emotions and moods are positive and negative states of mind that influence behavior.
- {13 Motivation
- 13.1 How Do Human Needs Influence Motivation to Work?
- • Maslow described a hierarchy of needs topped by self-actualization.
- • Alderfer’s ERG theory deals with existence, relatedness, and growth needs.
- • McClelland identified acquired needs for achievement, power, and affiliation.
- • Herzberg’s two-factor theory focuses on higher-order need satisfaction.
- • The core characteristics model integrates motivation and job design.
- 13.2 How Do Thought Processes and Decisions Affect Motivation to Work?
- • Equity theory explains how social comparisons motivate individual behavior.
- • Expectancy theory considers Motivation = Expectancy X Instrumentality X Valence.
- • Goal-setting theory shows that well-chosen and well-set goals can be motivating.
- 13.3 How Does Reinforcement Influence Motivation to Work?
- • Operant conditioning influences behavior by controlling its consequences.
- • Positive reinforcement connects desirable behavior with pleasant consequences.
- • Punishment connects undesirable behavior with unpleasant consequences.
- {14 Teams and Teamwork
- 14.1 Why Is It Important to Understand Teams and Teamwork?
- • Teams offer synergy and other benefits to organizations and their members.
- • Teams often suffer from common performance problems.
- • Organizations are networks of formal teams and informal groups.
- • Organizations use committees, task forces, and cross-functional teams.
- • Virtual teams are increasingly common in organizations.
- • Self-managing teams are a form of job enrichment for groups.
- 14.2 What Are the Building Blocks for Successful Teamwork?
- • Teams need the right members and other inputs to be effective.
- • Teams need the right processes to be effective.
- • Teams move through different stages of development.
- • Team performance is affected by norms and cohesiveness.
- • Team performance is affected by task and maintenance roles.
- • Team performance is affected by use of communication networks.
- 14.3 How Can Managers Create and Lead High-Performance Teams?
- • Team building helps team members learn to better work together.
- • Team performance is affected by use of decision-making methods.
- • Team performance suffers when group think leads to bad decisions.
- • Team performance benefits from good conflict management.
- {15 Communication
- 15.1 What Is Communication and When Is It Effective?
- • Communication is a process of sending and receiving messages with meanings attached.
- • Communication is effective when the receiver understands the sender’s messages.
- • Communication is efficient when it is delivered at low cost to the sender.
- • Communication is persuasive when the receiver acts as the sender intends.
- 15.2 What Are the Major Barriers to Effective Communication?
- • Poor use of channels makes it hard to communicate effectively.
- • Poor written or oral expression makes it hard to communicate effectively.
- • Failure to spot nonverbal signals makes it hard to communicate effectively.
- • Status differences make it hard to communicate effectively.
- • Physical distractions make it hard to communicate effectively.
- 15.3 How Can We Improve Communication with People at Work?
- • Active listening helps people say what they really mean.
- • Constructive feedback is specific, timely, and relevant.
- • Office spaces can be designed to encourage interaction and communication.
- • Transparency and openness ensure that accurate and timely information is shared.
- • Appropriate use of technology can facilitate more and better communication.
- • Sensitivity and etiquette can improve cross-cultural communication.
- {16 Diversity and Global Cultures
- 16.1 What Should We Know About Diversity in the Workplace?
- • There is a business case for diversity.
- • Inclusive organizational cultures value and support diversity.
- • Organizational subcultures can create diversity challenges.
- • Minorities and women suffer diversity bias in many situations.
- • Managing diversity should be a top leadership priority.
- 16.2 What Should We Know About Diversity Among Global Cultures?
- • Culture shock comes from discomfort in cross-cultural situations.
- • Cultural intelligence is the capacity to adapt to foreign cultures.
- • The “silent” languages of cultures include context, time, and space.
- • Hofstede identifies five value differences among national cultures.
- • Country clusters show cultural differences.
- {17 Globalization and International Business
- 17.1 How Does Globalization Affect International Business?
- • Globalization involves the growing interdependence of the world’s economies.
- • Globalization creates a variety of international business opportunities.
- • International business is done by global sourcing, import/export, licensing,and franchising.
- • International business is done by joint ventures and wholly owned subsidiaries.
- • International business is complicated by different legal and political systems.
- 17.2 What Are Global Corporations and How Do They Work?
- • Global corporations or MNCs do substantial business in many countries.
- • The actions of global corporations can be controversial at home and abroad.
- • Managers of global corporations face a variety of ethical challenges.
- • Planning and controlling are complicated in global corporations.
- • Organizing can be difficult in global corporations.
- • Leading is challenging in global corporations.
- {18 Entrepreneurship and Small Business
- 18.1 What Is Entrepreneurship and Who Are Entrepreneurs?
- • Entrepreneurs are risk takers who spot and pursue opportunities.
- • Entrepreneurs often share similar backgrounds and experiences.
- • Entrepreneurs often share similar personality traits.
- • Women and minority entrepreneurs are growing in numbers.
- • Social entrepreneurs seek novel solutions to pressing social problems.
- 18.2 What Should We Know About Small Business and How to Start One?
- • Small businesses are mainstays of the economy.
- • Small businesses must master three life-cycle stages.
- • Family-owned businesses can face unique challenges.
- • Most small businesses fail within five years.
- • Assistance is available to help small businesses get started.
- • A small business should start with a sound business plan.
- • There are different forms of small business ownership.
- • There are different ways of financing a small business.
- Skill-Building Portfolio
- Self-Assessments
- 1. Personal Career Readiness
- 2. Managerial Assumptions
- 3. Terminal Values Survey
- 4. Intuitive Ability
- 5. Time Management Profile
- 6. Internal/External Control
- 7. Handling Facts and Inferences
- 8. Empowering Others
- 9. Tolerance for Ambiguity
- 10. Performance Appraisal Assumptions
- 11. Least-Preferred Co-Worker Scale
- 12. Stress Test
- 13. Two-Factor Profile
- 14. Team Leader Skills
- 15. Feedback and Assertiveness
- 16. Diversity Awareness
- 17. Global Intelligence
- 18. Entrepreneurship Orientation
- Class Exercises
- 1. My Best Manager
- 2. Evidence-Based Management Quiz
- 3. Confronting Ethical Dilemmas
- 4. Lost at Sea
- 5. The Future Workplace
- 6. Stakeholder Maps
- 7. Strategic Scenarios
- 8. Organizational Metaphors
- 9. Force-Field Analysis
- 10. Upward Appraisal
- 11. Leading by Participation
- 12. Job Satisfaction Preferences
- 13. Why We Work
- 14.Understanding Team Dynamics
- 15. Communication and Teamwork Dilemmas
- 16. Alligator River Story
- 17. American Football
- 18. Entrepreneurs Among Us
- Team Projects
- 1. Managing Millennials
- 2. Management in Popular Culture
- 3. Organizational Commitment to Sustainability
- 4. Crisis Management Realities
- 5. Personal Career Planning
- 6. After Meeting/Project Review
- 7. Contrasting Strategies
- 8. Network “U”
- 9. Organizational Culture Walk
- 10. The Future of Labor Unions
- 11. Leadership Believe-It-Or-Not
- 12. Difficult Personalities
- 13. CEO Pay
- 14. Superstars on the Team
- 15. How Words Count
- 16. Job Satisfaction Around the World
- 17. Globalization Pros and Cons
- 18. Community Entrepreneurs
- Cases for Critical Thinking
- Case 1: Trader Joe’s: Keeping a Cool Edge
- Case 2: Zara International: Fashion at the Speed of Light
- Case 3: Patagonia: Leading a Green Revolution
- Case 4: Amazon: One E-Store to Rule Them All/Sidebar: Barnes & Noble: Adapting to an Uncertain Future
- Case 5: Nordstrom: Planning a Better Inventory/Sidebar: Zappos: How Zappos Did it
- Case 6: Electronic Arts: Inside Fantasy Sports/Sidebar: Zynga: Building an Army of Social Games
- Case 7: Dunkin’ Donuts: Betting Dollars on Donuts
- Case 8: Nike: Spreading Out to Stay Together
- Case 9: Apple: People and Design Create the Future
- Case 10: Netflix: Making Movie Magic/Sidebar: Redbox: Will Customers Wait for New Releases?
- Case 11: SAS: Business Decisions at the Speed of Light/Sidebar: Sungard: Risky Business
- Case 12: Facebook: Social Networking Is Big Business/Sidebar: LinkedIn: Social Networking’s All Grown Up
- Case 13: Panera Bread Company: Staying Ahead of Long-Term Trends/Sidebar: TOMS: Get One, Give One
- Case 14: Pixar: Animated Geniuses/Sidebar: DreamWorks: DreamWorks Delights
- Case 15: Twitter: Redefining Communications/Sidebar: Yammer: Microblogging Goes Corporate
- Case 16: Toyota: Looking Far into the Future/Sidebar: Ford: The Assembly Line Goes Global
- Case 17: Harley-Davidson: Style and Strategy Have Global Reach
- Case 18: In-N-Out Burger: Building a Better Burger/Sidebar: Sprinkles: Leading a Sweet Trend
- Test Prep Answers
- Glossary
- Endnotes
- Photo Credits
- Name Index
- Subject Index
- Organization Index
