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This Document Contains Chapters 1 to 3 Chapter 1 Managers and Entrepreneurs CHAPTER OBJECTIVES 1. Define the term management and explain the managerial significance of the terms effectiveness and efficiency. 2. Identify and summarize five major sources of change for today’s managers. 3. Distinguish between managerial functions and skills and identify the eight basic managerial functions. 4. Demonstrate your knowledge of Wilson’s three managerial skill categories and explain the practical significance of his research findings. 5. Explain how managers learn to manage. 6. Challenge two myths about small businesses and describe entrepreneurs. OPENING CASE What is the secret to Zappos.com’s success? A. Core values developed with suggestions and feedback from employees. From the initial list of 37, the following were selected as the final ten: 1. Deliver WOW through service 2. Embrace and drive change 3. Create fun and a little weirdness 4. Be adventurous, creative and open-minded 5. Pursue growth and learning 6. Build open and honest relationships with communication 7. Build a positive team and family spirit 8. Do more with less 9. Be passionate and determined 10. Be humble B. Be humble is the core value identified as affecting hiring decisions the most. C. Zappos philosophy – willing to make short-term sacrifices (including lost revenue or profits) if we believe that the long-term benefits are worth it. Protecting the company culture and sticking to core values is a long-term benefit. Ask students what they think about Zappos’ core values. Can they agree on ten core values for the class? LECTURE OUTLINE Managers need vision, authenticity, and persistence to handle these four key realities of managing today: 1. The only certainty today is change. Challenging goals motivate people to strive for improvement and overcome obstacles and resistance to change. 2. Speed, teamwork, and flexibility are the orders of the day, from both strategic and operational standpoints. 3. Managers at all levels need to stay close to the customer. Product/service quality is the driving force in the battle to stay competitive. 4. Without continuous improvement and lifelong learning, there can be no true economic progress for individuals and organizations alike. Effective management is the key to a better world, but mismanagement squanders our resources and jeopardizes our well-being. I. MANAGEMENT DEFINED Management is the process of working with and through others to achieve organizational objectives in a changing environment. Central to this process is the effective and efficient use of limited resources. The key phrases in this definition make up the headings in this section. A. Working with and Through Others 1. Management is a social process. 2. In interviews with 62 executives from across the United States and Europe, managers are often derailed because of their inability to work effectively with and through others. More specifically – they did not live up to their peers’ and superiors’ high expectations. B. Achieving Organizational Objectives 1. Organizations are usually more successful when they are driven by challenging, yet achievable, objectives. 2. Organizational objectives always require collective action. 3. Organizational objectives also serve later as measuring sticks for performance. 4. Without organizational objectives the management process would be aimless and wasteful. C. Balancing Effectiveness and Efficiency 1. Effectiveness entails promptly achieving a stated organizational objective. 2. Efficiency enters the picture when the resources required to achieve an objective are weighed against what was actually accomplished. 3. Managers are responsible for balancing effectiveness and efficiency. (See Figure 1.2.) D. Making the Most of Limited Resources 1. We live in a world of scarcity. 2. There is concern about running out of nonrenewable energy and material resources as well as the lopsided use of those resources, particularly the high relative consumption in the United States. 3. Our planet is becoming increasingly crowded. With this population growth, developed and industrialized nations will experience increasing pressure to share resources more equitably. 4. In productive organizations, managers are the trustees of limited resources, and it is their job to see that the basic factors of production are used efficiently and effectively. E. Coping with a Changing Environment • Successful managers anticipate and adjust to changing circumstances. • There are five overarching sources of change: 1. Globalization a) Companies have had to become global players just to survive, let alone prosper. b) Offshoring, the controversial practice of sending jobs to low-wage countries, has moved from the long-standing practice of hiring to manual labor in other countries to filling higher-skilled jobs by well-educated workers outside the United States. c) Today’s model manager is one who is comfortable transacting business in multiple languages and cultures. 2. The Evolution of Product Quality a) The fix-it approach to quality b) The inspect-it-in approach to quality c) The build-it-in approach to quality d) The design-it-in approach to quality 3. Environmentalism and Sustainability a) Green has gone mainstream and the argument over jobs vs. the environment has become obsolete. b) Sustainability – meeting today’s needs without sacrificing future generations’ needs. c) Corporate leaders are seeing opportunities in sustainability and environmental clean-up that will translate to jobs and profits. d) Researchers recently found 80 percent higher stock market valuations for multinational corporations adhering to strict environmental standards. 4. An Ethical Reawakening a) Discrimination, illegal campaign contributions, accounting fraud, price fixing, and insider trading are just a few of the many headlines bringing renewed focus on ethical business practices. b) Traditional values such as honesty are being reemphasized in managerial decision making and conduct. c) Because of closer public scrutiny, ethical questions can no longer be shoved aside as irrelevant. d) Top ethical problems in the workplace include lying, stealing, sexual harassment and drug & alcohol abuse. 5. The Internet and Social Media Revolution a) From a Department of Defense research project during the 1960s, the Internet has grown to a global network of servers and personal and organizational computers. Internet users were almost 2 billion by mid-2010. b) Social media is comprised of user generated content and includes Facebook, YouTube and Twitter. Web 2.0 and social networking are other labels given to this evolving technical movement. c) The implications of this instantaneous global interconnectedness are profound and truly revolutionary. Legal, ethical, security, and privacy issues, however, remain largely unresolved. II. WHAT DO MANAGERS DO? There are two approaches to analyzing management processes. Managerial functions are general administrative duties that need to be carried out in virtually all productive organizations. Managerial skills are specific observable behaviors that effective managers exhibit. A. Managerial Functions • This is the most popular approach to describing what managers do. • Henri Fayol developed the functional approach in 1916 with five functions: Planning, Organizing, Command, Coordination, and Control. • This list has been updated and revised over the years. Eight functions are described in this text: 1. Planning—the formulation of future courses of action 2. Decision making—choosing among alternative courses of action 3. Organizing—considering the structural issues in an organization 4. Staffing—recruiting, training, and developing people 5. Communicating—both giving and receiving direction and feedback 6. Motivating—encouraging people to move toward common goals by satisfying needs and meeting expectations 7. Leading—serving as a role model and adapting to the demands of the situation 8. Controlling—making sure things stay on track B. Managerial Skills • Clark L. Wilson conducted 30 years of research involving tens of thousands of managers, creating a clear picture of what it takes to be a manager. • It takes three skill categories—technical, teambuilding and drive—that branch into the 12 specific managerial skills listed in Figure 1.4. • According to Wilson’s research, about one-third of managers at all levels do not achieve an appropriate balance of these skills and are thus ineffective. C. Some Managerial Facts of Life (with No Sugar Coating) Managing is a tough and demanding job, both challenging and rewarding. According to AMA research, even though a majority of managers feel more overwhelmed at work today than two years ago, 63 percent also feel enthusiasm for their jobs. • Managers experience a hectic pace. The average manager is not a reflective planner; instead, brevity, fragmentation, and verbal communication are the norm. • Managers lose their right to do many things. There are privileges associated with management, but managers also pay a price. According to one management expert, managers lose their right to do any of the following: 1. Lose your temper. 2. Be one of the gang. 3. Bring your personal problems to work. 4. Vent your frustrations and express your opinion at work. 5. Resist change. 6. Pass the buck on tough assignments. 7. Get even with your adversaries. 8. Play favorites. 9. Put your self-interests first. 10. Ask others to do what you wouldn’t do. 11. Expect to be immediately recognized and rewarded for doing a good job. III. LEARNING TO MANAGE A. How Do Managers Learn to Manage? • A survey of 3,600 Honeywell managers asked them to explain how they learned to manage. The distribution of sources was as follows: 1. Job assignments: 50 percent 2. Relationships: 30 percent 3. Formal training and education: 20 percent • Many indicated that they learned about management in the “school of hard knocks.” A study of British managers provided this list of hard knocks learning experiences: 1. Making a big mistake 2. Being overstretched by a difficult assignment 3. Feeling threatened 4. Being stuck in an impasse or dilemma 5. Suffering an injustice at work 6. Losing out to someone else 7. Being personally attacked B. How Can Future Managers Learn to Manage? • Students can learn to manage by integrating theory and practice and observing role models. (See Figure 1.6.) • Theory provides a sound conceptual foundation. • Practice provides an opportunity to test knowledge. • What really matters is your integration of theory and practice. IV. SMALL-BUSINESS MANAGEMENT Small businesses have been called the “engine” of the U.S. economy. Small business is defined as an independently owned and managed profit-seeking enterprise with fewer than 100 employees. • Businesses with fewer than 500 employees make up 99.7 percent of all businesses and employ 50 percent of the civilian workforce. • They accounted for 74% of net new jobs in 2007. • About 60 percent of small businesses are “micro-businesses” with fewer than five employees, typically operating out of the owner’s home. A. Exploding Myths About Small Businesses 1. The 80-Percent-Failure-Rate Myth • One study indicates that in fact only 18 percent of small businesses fail during their first eight years. • It turns out that the old studies defined business failure too broadly, including those who died, sold their business, or retired. 2. The Low-Wage-Jobs Myth • Although small businesses do pay less on average than big companies do and are about half as likely to offer health benefits, they are not low-wage havens. B. Career Opportunities in Small Business • Table 1.3 lists five small-business career options. • A franchise is a license to sell another company’s products and/or to use another company’s name in business. Examples: McDonalds, Subway, Dunkin Donuts. • Success in the small-business sector depends on the right combination of ideas, money, talent, hard work, luck, and opportunity. C. Entrepreneurship 1. “Entrepreneurship is the process by which individuals—either on their own or inside organizations—pursue opportunities without regard to the resources they currently control.” • Entrepreneurs look beyond current resource constraints when they envision new possibilities. • Entrepreneurs are risk takers—and all they want is a chance. 2. A Trait Profile for Entrepreneurs • Table 1.4 contrasts trait profiles for entrepreneurs and general administrators. • Some characteristics of entrepreneurs are high achievement, a focus on future possibilities, and comfort with ambiguity and risk taking. 3. Entrepreneurship Has Its Limits • A common stumbling block arises when organizations outgrow entrepreneurs’ ability to manage them. • Entrepreneurs generally feel stifled by cumbersome and slow-paced bureaucracies. • Successful entrepreneurs face a tough dilemma: either grow with the company or have the courage to step aside and turn the reins over to professional managers and administrators. Chapter 2 The Evolution of Management Thought CHAPTER OBJECTIVES • Identify two key assumptions supporting the universal process approach and briefly describe Henri Fayol’s contribution. • Discuss Frederick W. Taylor’s approach to improving the practice of industrial management. • Identify at least four key quality improvement ideas from W. Edwards Deming and the other quality advocates. • Describe the general aim of the human relations movement and explain the circumstances in which it arose. • Explain the significance of applying open-system thinking to management. • Explain the practical significance of adopting a contingency perspective. • Describe what “management by best seller” involves and explain what managers can do to avoid it. OPENING CASE What are Zildjian’s Secrets to Success? Craigie Zildjian is head of The Zildjian Company, the world’s largest cymbal maker and the oldest continuously family-run business in the U.S. (founded in 1623 in Turkey, now located in Norwell, MA). Her perspective on their recipe for success: • Guided by core values: o Continuous quality improvement o Innovation o Craftsmanship o Customer collaboration o Empowering employees o Avoiding complacency o Reinvesting in the company • Risky R&D (research and development) also help Zildjian maintain a competitive edge with 65% of the world cymbal market. Introducing the first titanium-coated cymbal and expanding their plant are two examples of how they are taking risks and betting on the future. • Careful listening is part of the corporate strategy. This includes bringing in artists (musicians) to meet with the R&D manager and marketing staff. An excellent example of how Zildjian collaborates with their customers. Ask students to compare much younger companies they are familiar with (they are likely to mention Apple or Google) with the nearly 400 year old Zildjian Company. What are the similarities and differences? What can these young companies learn from the history and success of such an old company? LECTURE OUTLINE Historians and managers alike believe that one needs to know where management has been if one is to understand where it is going. Various approaches in the evolution of management thought are discussed relative to the lessons each can teach today’s managers. V. THE PRACTICE AND STUDY OF MANAGEMENT The systematic study of management is relatively new, essentially a product of the twentieth century. The actual practice of management has been around for thousands of years. • The pyramids of Egypt stand as tangible evidence of the ancient world’s ability to manage. • Those ancient managers faced many of the same general problems managers face today such as planning, staffing, managing resources, keeping records, monitoring progress and taking corrective action when needed. A. Information Overload • In early cultures, management was learned by word of mouth and by trial and error. • There was no systematically recorded body of management knowledge. • Thanks to modern print and electronic media there is a wealth of information on management available for students of management. • So much information exists today that it is difficult or impossible to keep abreast of it all. B. An Interdisciplinary Field Scholars from many fields—including psychology, sociology, cultural anthropology, mathematics, philosophy, statistics, political science, economics, logistics, computer science, ergonomics, history, and various fields of engineering—have, at one time or another, been interested in management. • Administrators in the areas of business, government, religious organizations, health care, and education have also contributed. • Each group has offered its own perspective, with new questions and assumptions, new research techniques, different technical jargon, and new conceptual frameworks. C. No Universally Accepted Theory of Management • There is no single theory of management that is universally accepted today. • This chapter covers five approaches to management, which provide the main headings for the chapter. VI. THE UNIVERSAL PROCESS APPROACH The universal process approach is the oldest and one of the most popular approaches to management thought. It is also called the universalist or functional approach. Early writers emphasized the specialization of labor, the chain of command, and authority. There are two main assumptions: • Although the purpose of organizations may vary, a core management process remains the same across all organizations. • This process can be reduced to a set of separate functions and related principles. A. Henri Fayol’s Universal Management Process Henri Fayol published his classic book, Administration Industrielle et Générale, in 1916. It was not translated into English until 1949. Fayol’s work had a permanent impact on twentieth-century management thinking. Fayol divided the manager’s job into five functions (as mentioned in Ch. 1): (1) Planning (2) Organizing (3) Command (4) Coordination (5) Control His 14 universal principles of management (listed and explained in Table 2.1 in the text) were intended to show managers how to carry out their functional duties. These principles are (1) Division of work (2) Authority (3) Discipline (4) Unity of command (5) Unity of direction (6) Subordination of individual interests to the general interest (7) Remuneration (8) Centralization (9) Scalar chain (10) Order (11) Equity (12) Stability and tenure of personnel (13) Initiative (14) Esprit de corps These functions and principles have withstood the test of time because of their widespread applicability. B. Lessons from the Universal Process Approach • The complex management process can be separated into interdependent areas of responsibility, or functions. • Management is a continuous process beginning with planning and ending with controlling. • There is a concern that this rigid approach may make management seem more rational and orderly than it really is. • The functional approach is useful because it specifies what managers should do. VII. THE OPERATIONAL APPROACH The term operational approach is a convenient description of the production-oriented area of management dedicated to improving efficiency and cutting waste. It has also been called scientific management, management science, operations research, production management, and operations management. Its underlying purpose is “to make person-machine systems work as efficiently as possible.” A. Frederick W. Taylor’s Scientific Management • Taylor was born in 1856 and was a self-made man. • As a factory manager, Taylor was appalled at the industry’s unsystematic practices. • In his pursuit to find a better way he sought what he termed a “mental revolution” in the practice of industrial management. • Scientific management is the development of performance standards on the basis of systematic observation and experimentation. • Experiment was Taylor’s trademark. Taylor focused on four areas: • Standardization • Time and task study • Systematic selection and training • Pay incentives B. Taylor’s Followers Frank and Lillian Gilbreth were inspired by Taylor to turn motion study into an exact science. • Using motion pictures, they studied and streamlined work motions, paving the way for work simplification by cataloguing 17 different hand motions (called therbligs) • They are best known today as the parents in the humorous book and movie Cheaper by the Dozen, which 2 of their 12 children wrote about living in a household where scientific management was applied. Henry L. Gantt refined production control and cost control techniques. • Variations of Gantt’s work-scheduling charts are still used today. (See Chapter 6.) • Gantt also emphasized the importance of the human factor and urged management to concentrate on service rather than profits. C. The Quality Advocates Today’s managers recognize the strategic importance of quality. In the 1980s, Americans began to realize that quality was the reason for Japan’s dominance in world markets. As a result, the following quality advocates began to be listened to: • Walter A. Shewhart introduced statistical quality control in 1931. • Kaoru Ishikawa was a professor at the University of Tokyo who advocated quality before World War II. o He founded JUSE (the Union of Japanese Scientists and Engineers). o He focused on prevention and introduced the idea of both internal and external customers. o He introduced fishbone diagrams, which are still used as a problem-solving tool. (See Chapter 8.) • W. Edwards Deming introduced concepts such as employee participation and continuous improvement in Japan. His 1986 book, Out of the Crisis, became a bible for Deming disciples. (See Chapter 16 for more.) • Joseph M. Juran also had a strong influence on Japanese managers. o The Juran Institute helped strongly establish the concept of the internal customer. o Teamwork, partnerships with suppliers, problem solving, and brainstorming are all Juran trademarks. o Juran also introduced Pareto analysis, a technique for separating major problems from minor ones (his 80/20 rule is further discussed in Chapter 6 under the heading of “Priorities”). • Armand V. Feigenbaum developed the concept of total quality control while a doctoral student at MIT. o His 1951 book focused on quality improvement throughout an organization. o He felt that the customer is the one who ultimately determines quality. • Philip B. Crosby wrote the 1979 best-seller Quality Is Free, which promoted the concept of zero defects, or doing it right the first time. D. Lessons from the Operational Approach • Scientific management was a revolutionary approach, producing dramatic results in the context of the haphazard industrial practices at the time. • It created a much-needed emphasis on promoting production efficiency and combating waste. • Even though Taylor’s work is often considered “dehumanizing” today, Taylor actually improved working conditions by reducing fatigue and redesigning machines to fit people. • Operations management tends to be broader in scope and application than scientific management. Operations management is defined as developing tools and procedures to efficiently transform raw materials, technology, and human talent into useful goods and services. VIII. THE BEHAVIORAL APPROACH This approach recognizes the importance of people in management and reflects the belief that successful management depends on the ability to understand and work with a variety of people. A. The Human Relations Movement The human relations movement was a concerted effort among theorists and practitioners to make managers more sensitive to employee needs. It was supported by three very different historical influences. (1) The Threat of Unionization: The movement was a union-avoidance tactic, with the idea that satisfied employees would be less likely to join unions. (2) The Hawthorne Studies: Practical behavioral research studies such as these made management aware of the psychological and sociological dynamics of the workplace. One outcome – researchers determined that productivity was much less affected by changes in work conditions than by the attitudes of the workers themselves. (3) The Philosophy of Industrial Humanism: A convincing rationale for treating employees better and recognition that people were important to productivity. There were three primary proponents: • Elton Mayo focused on emotional factors. He encouraged work that fostered personal and subjective satisfaction. • Mary Parker Follett encouraged managers to motivate performance rather than demand it. She recognized that employees are a complex collection of emotions, beliefts, attitudes and habits. Cooperation, a spirit of unity, and self-control were keys to productivity. • Douglas McGregor created the Theory X/Y philosophy, with Theory X as the traditional assumptions (which he characterized as pessimistic, stifling and outdated) and Theory Y stating that employees are energetic and creative if given the opportunity. B. Organizational Behavior 1. Organizational behavior is a modern approach to management that attempts to determine the causes of human work behavior and translates the results into effective management techniques. 2. This is an interdisciplinary approach with psychology predominating. C. Lessons from the Behavioral Approach • Primarily, the behavioral approach makes it clear to present and future managers that people are the key to productivity. • Negatively, traditional human relations doctrine has been criticized as vague and simplistic. Supportive supervision and good human relations does not guarantee higher morale and productivity. IX. THE SYSTEMS APPROACH A system is a collection of parts operating interdependently to achieve a common purpose. This approach requires a completely different style of thinking. The traditionalists said that the whole can be explained in terms of its parts. Systems theorists assume that the whole is greater than the sum of its parts. The difference is traditional analytic thinking (outside-in) versus synthetic thinking (inside-out). Systems theorists propound synthetic thinking because management is not practiced in a vacuum. Many organizational and environmental variables affect each other. A. Chester I. Barnard’s Early Systems Perspective • Barnard wrote the classic The Functions of the Executive in 1938. • In it, he characterized all organizations as cooperative systems. • “A cooperative system is a complex of physical, biological, personal, and social components which are in a specific systematic relationship by reason of the cooperation of two or more persons for at least one definite end.” • Barnard felt that an organization did not exist if three principal elements—willingness to serve, common purpose, and communication—were not present and working interdependently (see Figure 2.4). B. General Systems Theory General systems theory is an interdisciplinary area of study based on the assumption that everything is part of a larger, interdependent arrangement. Ludwig von Bertalanffy, a biologist, was the founder of general systems theory. 1. Levels of Systems • Identifying hierarchies of systems, ranging from very specific to very general, has helped make general systems theory more concrete. • See the seven-level scheme of living systems in Figure 2.5. 2. Closed versus Open Systems • A closed system is a self-sufficient entity. • An open system depends on the surrounding environment for survival. • Systems can be categorized as open or closed by evaluating the amount of interaction they have with the outside environment. • Organizations are, by their very nature, open systems. C. New Directions in Systems Thinking • Organizational Learning and Knowledge Management Organizational learning portrays the organization as a living and thinking open system. • Like the human mind, organizations rely on feedback to adjust to changing environmental conditions, and they learn from experience. • Organizations engage in complex mental processes such as anticipating, perceiving, envisioning, problem solving, and remembering. • When organizational learning becomes a strategic initiative to identify and fully exploit valuable ideas from both inside and outside the organization, a knowledge management program exists. More is said about knowledge management and how it relates to decision making in Chapter 8. • Chaos Theory and Complex Adaptive Systems • Chaos theory was developed in the 1960s and 1970s by mathematicians Edward Lorenz and James Yorke. • The challenge for those in the emerging field known as complex adaptive systems theory is the notion that every complex system has rules that govern the seemingly random patterns and that those rules can be discovered in a seemingly chaotic system. • With this theory, managers are challenged to be more flexible and adaptive than in the past. • Chaos theory and complex adaptive systems theory are launching pads for new and better management models, not final answers. • Lessons from the Systems Approach • Managers have a greater appreciation for the importance of seeing the whole picture. • The systems approach also works to integrate various management theories. • Critics say the systems approach is short on verifiable facts and practical advice. VI. THE CONTINGENCY APPROACH The contingency approach is an effort to determine, through research, which managerial practices and techniques are appropriate in specific situations. • Different situations require different managerial responses. • This approach is particularly appropriate in intercultural situations. • In real-life management, the success of any given technique is dictated by the situation. A. Contingency Characteristics Contingency thinking is viewed as a workable compromise between the systems approach and a purely situational perspective. (Figure 2.6 illustrates this.) The contingency approach is (1) An open-system perspective (2) A practical research orientation (3) A multivariate approach • Bivariate analysis looks for simple one-to-one causal relationships. • Multivariate analysis is a research technique used to determine how a combination of variables interacts to cause a particular outcome. B. Lessons from the Contingency Approach • The contingency approach is a helpful addition to management thought because it emphasizes situational appropriateness. • Contingency thinking is a practical extension of the systems approach. • Critics say contingency theory creates the impression that the organization is a captive of its environment, making attempts to manage it useless. • The contingency approach is not yet fully developed. Its final impact remains to be seen. VII. THE ERA OF MANAGEMENT BY BEST SELLER: PROCEED WITH CAUTION Over the last 25 years or so, the field of management moved from the classroom into the mainstream. Peter Drucker launched this trend, becoming the first management guru who appealed to both academics and practicing managers. In 1982, the popularization of management shifted into high gear when Thomas J. Peters and Robert H. Waterman, Jr. published In Search of Excellence. Others followed (see Table 2.4), and the popular appeal of management grew. Certain academics worried that the instant gurus and their best sellers would encourage shoddy research and simplistic thinking. A. What’s Wrong with Management by Best Seller? Top managers will apply concepts learned in a book to an organization with no diagnosis or assessment to determine the real organizational problems. This is not the fault of the management books, which typically contain some really good ideas. Rather, it is the hurried and haphazard application of those ideas that causes the problems. B. How to Avoid the Quick-Fix Mentality In a follow-up study of the “excellent” companies outlined in Peters and Waterman’s In Search of Excellence, companies that satisfied all of the excellence criteria turned out to be no more effective than a random sample of Fortune 1000 companies. To avoid the quick-fix mentality, managers should 1. Remain current with literature in the field, particularly with journals that translate research into practice. 2. Ensure that concepts applied are based on science or, at least, some form of rigorous documentation, rather than purely on advocacy. 3. Be willing to examine and implement new concepts, but first do so using pilot tests with small units. 4. Be skeptical when solutions are offered; analyze them thoroughly. 5. Constantly anticipate the effects of current actions and events on future results. C. Putting What You Have Learned to Work To put this historical overview into proper perspective, this chapter provides a useful conceptual framework for students but generally does not carry over to the practice of management. Managers are pragmatists; they use whatever works, generally a “mixed bag” approach. Chapter 3 The Changing Environment of Management CHAPTER OBJECTIVES • Summarize the demographics of the new American workforce. • Explain why America’s education and workplace readiness situation is a crisis. • Define the term managing diversity, and explain why it is particularly important today. • Discuss how the changing political-legal environment is affecting the practice of management. • Discuss why business cycles and the global economy are vital economic considerations for modern managers. • Describe the three-step innovation process, and define the term intrapreneur. OPENING CASE The Changing Workplace: Looking Forward to the 2020 Workplace Employees in the 2020 workplace will use social media to communicate, connect and collaborate with one another around the world. To be successful in this virtual work environment employees will need to develop a new mindset to thrive that incorporates the following abilities: • Social participation • Thinking globally • Ubiquitous learning • Thinking big, acting fast, and constantly improving • Cross-cultural power Ask your students what other abilities they would add to the list. How prepared are they to thrive in this new workplace? LECTURE OUTLINE Present and future managers need to be aware of how things are changing in the world around them. The general environment of management includes social, political-legal, economic, and technological dimensions. Changes in each of these areas present managers with unique opportunities and challenges. Forward thinking managers who see the big picture and can handle change will have a competitive advantage. This chapter is designed to help students see the big picture and be better prepared to management constant change. I. THE SOCIAL ENVIRONMENT A. Demographics of the New Workforce • Demographics are statistical profiles of population characteristics. • Figure 3.1 shows selected demographic shifts reshaping the U.S. workforce from 2008-2018. • The U.S. workforce is getting larger, increasingly female, more racially and ethnically diverse, and older. B. America’s Education and Workplace Skills Crisis • “There’s a mismatch between what people can do and what the economy needs them to do.” • American kids are not receiving the world-class education needed to compete in the global labor market. • Data: 1/3 of 4th graders are proficient or better in reading, only 69% of high school students earn a diploma, we have a STEM crisis, the U.S. ranks 12th with 40.4% of adults age25-34 with an associate degree or higher – Canada is #1 with 55.8%. • Needed: On-the-Job Remedial Education in basic reading, writing, and math; English language instruction, general technical skills training and new hire readiness training. C. Myths About Older Workers • The U.S. workforce is getting older, both demographically and because people are deciding either not to retire or to retire later. • Older Americans tend to have a negative image in America’s youth-oriented culture. • There are five stubborn myths about older workers, all of which have been proved inaccurate by research: A. Myth: Older workers are less productive than the average worker. B. Myth: The costs of employee benefits outweigh any possible gain from hiring older workers. C. Myth: Older workers are prone to frequent absences because of age-related infirmities and above-average rates of sickness. D. Myth: Older workers have an unacceptably high rate of accidents at work. E. Myth: Older workers are unwilling to learn new jobs and inflexible about the hours they will work. • Enlightened employers view older workers as an underutilized and valuable resource. • Companies need to take proactive training steps to be all employees are treated fairly. • Older workers need to do their part to become more tech savvy and comfortable working with younger teammates. A. Nagging Inequalities in the Workplace A. Under the Glass Ceiling • Fifty-one percent of managers and professionals in the United States are now women. • On average, professional women earn 77 cents compared to one male dollar. • Women still don’t have access to the jobs at the top of the managerial ladder due to the glass ceiling, a term popularized in the 1980s to describe a barrier so subtle that it is transparent, yet so strong that it prevents women and minorities from moving up in the management hierarchy. • In 2010, just 3 percent of the Fortune 500 companies were headed by women. However, this is not unique to the U.S. in Canada only 4 percent of their 500 largest companies have female CEOs and of the 100 biggest companies on the London Stock Exchange only 4 are lead by female CEOs. • One result of this is that many of the sharpest female executives are leaving the corporate ranks to start their own businesses, siphoning off this talent from larger corporations. B. Continuing Pressure for Equal Opportunity • Racial inequality in the workplace is underscored by the fact that the unemployment rate for African Americans is generally twice as high as that for whites during both good and bad economic times. • Currently, women, African Americans, Hispanics, Native Americans, the physically challenged, and other minorities are overrepresented both in low-level, low-paying jobs and in unemployment lines. • EEO and affirmative action are discussed in Chapter 10. C. Part-Timer Promises and Problems • Contingent workers are a category that includes a diverse array of part-timers, temporary workers, one-call employees, and independent contractors. Also referred to as “just-in-time” or “flexible” workers, these people do not have a long-term implicit contract with an employer. • This group is appealing to employers because they are less expensive (being paid lower salaries and often enjoying no benefits) and because they can be let go in tough times without the repercussions of layoffs. • The downside is that members of this group may have lower levels of job involvement. • There is concern that growth in this area may lead to a permanent underclass of employees characterized by lower pay and lack of benefits. D. Managing Diversity The United States is becoming ever more racially and ethnically diverse. • Population figures from 2008 show that 12.5 percent were born outside the U.S • America is gradually becoming a country of minorities. By 2050, whites are projected to represent 53 percent of the population, blacks 13.2 percent, Asians 8.9 percent, and Hispanics 24.3 percent. • With a population growth rate seven times greater than that of any other group, Hispanics/Latinos passed African Americans in 2003 to become the country’s largest minority. • An estimated 12 million undocumented people are living in the U.S. illegally, with half from Mexico. • Progressive organizations are taking steps to better accommodate and more fully utilize America’s more diverse workforce. • Managing diversity is the process of creating an organizational culture that enables all employees, including women and minorities, to realize their full potential. E. More than EEO • Managing diversity builds on equal employment opportunity (EEO) and affirmative action programs (discussed in Chapter 10). • Comprehensive diversity programs are needed to create more flexible organizations where everyone has a fair chance to succeed. • Diversity programs are both ethical and practical—a nation cannot waste any of its human potential and remain globally competitive. F. Promising Beginnings. A number of diversity programs are in use today, including: • Teaching English as a second language • Creating mentor programs • Providing immigration assistance • Fostering the development of support groups for minorities • Training minorities for managerial positions • Training managers to value and skillfully manage diversity • Encouraging employees to contribute to and attend cultural celebrations and events in the community • Creating, publicizing and enforcing discrimination & harassment policies The scope of managing diversity is limited only by management’s depth of commitment and imagination. Ask your students what extra steps they think a company, their executives and employees can take to broaden their knowledge and embrace diversity in the workplace. II. THE POLITICAL-LEGAL ENVIRONMENT Politics is the art (or science) of public influence and control. The political system tries to balance competing interests in a generally acceptable manner. Two key pressure points for managers in this area are the politicization of management and increased personal legal accountability. A. The Politicization of Management Today’s managers often find themselves embroiled in issues with clearly political overtones. • Issues management (IM) is defined as the ongoing organizational process of identifying, evaluating, and responding to relevant and important social and political issues. o IM serves as an early warning system for potential environmental issues. It also serves as a firm’s coordinating and integrating force. o IM is more important than ever with immediate access to social media malicious news can spread fast. o IM’s main contribution to management is its emphasis on systematic preparedness for social and political action. • General Political Responses The three general political responses for management are plotted on a continuum in Figure 3.2. o The middle of the continuum is managers who are politically inactive, or neutral. They simply watch and wait. o Managers on the extreme left of the continuum actively defend the status quo. o Managers on the right end try to improve performance and avoid attacks by identifying and responding constructively to emerging political-legal issues. o In recent years, more managers are becoming proactive about political issues. • Specific Political Strategies There are four major strategies that managers can employ: o Campaign financing—unions, companies and political action committees (PACs) contribute to a candidate’s campaign or party for political influence. o Lobbying o Coalition building o Indirect lobbying—including grassroots lobbying and advocacy advertising, the controversial practice of promoting a point of view along with a product or service B. Increased Personal Legal Accountability • Managers who make illegal decisions stand a good chance of being held personally accountable in a court of law. • SarbOx (Sarbanes-Oxley Act) implemented in 2002 to increase accountability and impose stiffer penalties, including felony charges and prison time for securities fraud, to deter fraud. • Managers are also being held personally responsible for the illegal actions of their companies. C. Political-Legal Implications for Management Managers will be forced to become more politically astute, whether they like it or not. On the legal side, managers are working to curb the skyrocketing costs of litigation. • In a survey of large-company CEOs, 24 percent said litigation costs were their primary economic concern. • One approach to address this problem is a legal audit, which is a review of all aspects of a firm’s operations to pinpoint possible liabilities and other legal problems. • Alternative dispute resolution, which involves allowing a neutral third party to review the dispute and resolve the problem without going to court, is also helping to cut courtroom expenses. III. THE ECONOMIC ENVIRONMENT There is a close relationship between economics and management. Economics is the study of how scarce resources are used to create wealth and how that wealth is distributed. There are three aspects of the economic environment that deserve special attention for managers: jobs, business cycles, and the global economy. A. The Job Outlook in Today’s Service Economy, Where Education Matters • According to the U.S. Bureau of Labor Statistics, the service economy is expected to generate 14.5 million new jobs between 2008 and 2018. With employment in management, business, and financial occupations projected to increase 11% by 2018. • Fields expected to experience job growth include scientific & technical, healthcare, finance, insurance, and construction. • The traditional notion of the service sector as a low-wage haven is no longer valid. • Education and networking skills are essential in getting a high-paying job today. B. Coping with Business Cycles The business cycle is the up-and-down movement of an economy’s ability to generate wealth; it has a predictable structure but variable timing. • Cycle-sensitive decisions that depend on the ebb and flow of the business cycle (Figure 3.3) include ordering inventory, borrowing funds, increasing staff, and spending capital for land, equipment, and energy. Timing is everything when it comes to making good cycle-sensitive decisions. • Benefiting from Economic Forecasts Economic forecasting has come under fire lately for some widely publicized bad calls. To help address this issue, a pair of widely respected forecasting experts recommend a consensus approach—surveying a wide variety of economic forecasts, factoring in track records, and taking an average or consensus. C. The Challenge of a Global Economy The global economy is impacting just about everyone both at home and at work. A Single Global Marketplace • The new global economy must be viewed as the world moving from trade among countries to a single economy, one marketplace. • The North American Free Trade Agreement (NAFTA), the 27-nation European Union, and the 153-nation World Trade Organization (WTO) represent steps toward that single global marketplace. • The size of the global economy has expanded dramatically as a consequence of political and economic changes. Globalization Is Personal It affects where we work, how much we’re paid, what we buy, and how much we pay. Two personal aspects of the global economy are • Working for a foreign-owned company • Meeting world standards— o Global economic trends – higher quality, lower wages o Companies need to balance quality and costs to be globally competitive IV. THE TECHNOLOGICAL ENVIRONMENT • Some people blame technology for environmental destruction and cultural fragmentation. Others view technology as the key to economic and social progress. • Table 3.1 shows technologies that are likely to affect our lives significantly in the future. • Technology is defined as all the tools and ideas available for extending the natural physical and mental reach of humankind. • Technology is facilitating the evolution of the industrial age into the information age, just as it once enabled the agricultural age to evolve into the industrial age. • Organizations that use appropriate information technologies to get the right information to the right people at the right time will enjoy a competitive advantage. • There are two aspects of technology that have important implications for managers: the innovation process and intrapreneurship. A. The Innovation Process The innovation process is defined as the systematic development and practical application of a new idea. • A Three-Step Process o Conceptualization o Product technology, development of a working prototype o Production technology, involving the development of a profitable production process • Innovation lag is the time it takes for a new idea to be translated into satisfied demand. The trend is toward shorter innovation lags. • Shortening innovation lag should be a high priority for modern managers. Two sound management practices, goal setting and empowerment, create the sense of urgency necessary for speedier innovation. • Concurrent engineering, or parallel design, is a team approach to product design. Research, design, finance, and marketing specialists work together on new products from the beginning of the design process. B. Promoting Innovation Through Intrapreneurship An intrapreneur is an employee who takes personal “hands-on responsibility” for pushing any type of innovative idea, product, or process through the organization. • Today’s large companies need to foster a supportive climate for intrapreneurs if they want to maintain a competitive edge. • An organization can foster intrapreneurship if it o Focuses on results and teamwork o Rewards innovation and risk taking o Tolerates and learns from mistakes o Remains flexible and change-oriented Instructor Manual for Management Robert Kreitner, Charlene Cassidy 9781111221362
