This Document Contains Chapters 13 to 15 Chapter 13 Managing work groups and teams END-OF-CHAPTER Questions for Review 1. What is a group? Describe the several different types of groups and indicate the similarities and differences among them. What is the difference between a group and a team? A group is two or more people who work together to accomplish a goal. Functional groups are created by the organization to perform a particular function for an indefinite period of time. Task groups are created to work on a specific task for a stated period of time. Informal or interest groups are created by their members for a purpose that may or may not be relevant to their company, with an unspecified time horizon. The functional and task group are both created by the organization, while the informal group develops on its own. The task group functions for a short period, and the other two may have indefinite time horizons. A team is a type of group, and its additional characteristics include the fact that a team is a work-related group and that the members of a team typically can act with little or no supervision. 2. Identify the stages of group development. Do all teams develop through all the stages discussed in this chapter? Why or why not? How might the management of a mature team differ from the management of teams that are not yet mature? The stages of group development are (1) forming—bringing members together and getting them acquainted; (2) storming—developing group identity, structure and leadership, often through conflicts; (3) norming—accepting and codifying role structures and behavioral norms; and (4) performing—moving beyond group formation to begin accomplishing the group’s purpose. Groups typically move through all the stages in the order given, and groups that try to “short cut” the group development process will often have unresolved issues that will persistently re-surface. The management of mature teams can focus more on performance than on effective development, which means a focus on tasks, rather than on relationships, structures, and culture. For example, while members of a developing group may want or need to spend time getting to know their fellow members through “ice-breaker” activities, members of mature groups may resent being forced to spend time on such activities. 3. Describe the development of a role within a group. Tell how each role leads to the next. Roles begin with expectations, based on the role that the group members want the individual to adopt. Members communicate their expectations through their actions and words, which make up the sent role. The individual recognizes the cues that are being sent to him or her, and forms an understanding of the message, which is called the perceived role. When the individual understands expectations, he or she begins to behave in ways that fulfill that role, creating the enacted role. 4. Identify two examples of informal leaders. Can a person be a formal and an informal leader at the same time? Examples of informal leaders might include such persons as the most experienced secretary in a work group, an intelligent and articulate student who serves as a spokesperson for the class, or a neighbor who organizes social events. Formal leadership is conferred by one’s position within the organization while informal leadership is granted to individuals who are admired and respected by others. Clearly then, one person can be both a formal and an informal leader. An example would be a tenured professor who has a formal leadership role in his or her department or college and who is admired and respected by students and colleagues, serving as an informal role model. 5. Describe the causes of conflict in organizations. What can a manager do to control conflict? To resolve and eliminate conflict? Three causes of conflict include (1) interpersonal conflict—between two or more individuals; (2) intergroup conflict—between two or more groups, such as functional, product, or regional groups; and (3) conflict between the organization and the environment—competition, lawsuits, consumer relations, and so on. Coordination can control conflict, examples of which include managers using rules, liaison persons, task forces, and integrating departments. Other effective tools would be expansion of the resource base, a focus on superordinate goals, and the pairing of compatible personnel. To resolve and eliminate conflict, the manager should use confrontation and interpersonal problem solving to work out a mutually agreeable solution, if the conflicting parties can use reason and fairness. When the parties are not able to be reasonable and fair, the manager should decide upon a fair compromise and then enforce it. The manager should not use avoidance or smoothing, both of which tend to cover up evidence of conflict, but do not resolve the underlying issues, creating more resentment and conflict in the long run. Questions for Analysis 1. Individuals join groups for a variety of reasons. Most groups contain members who joined for different reasons. What is likely to be the result when members join a group for different reasons? What can a group leader do to reduce the negative impact of a conflict in reasons for joining the group? When members have different reasons for joining a group, conflict over goals, norms, structures, roles, and tasks is likely. Conflict control and conflict resolution tactics are suggested in the chapter, including expanding the resource base, improving coordination, compromising, and interpersonal problem solving. 2. Consider the case of a developed group, where all members have been socialized. What are the benefits to the individuals of norm conformity? What are the benefits of not conforming to the group’s norms? What are the benefits to an organization of conformity? What are the benefits to an organization of nonconformity? Individuals who conform to group norms experience positive outcomes such as acceptance and better personal relationships. Nonconformance may lead to efforts by the other group members to enforce conformance, including exclusion from group activities. Therefore, the benefit to individuals of not conforming would primarily be the chance to express their individuality. Organizations with conforming members experience less conflict and more focus on group tasks, rather than on issues related to conformity. However, organizations with nonconforming members can benefit from the innovative thinking that may result. 3. Do you think teams are a valuable new management technique that will endure, or are they just a fad that will be replaced with something else in the near future? Students will argue both sides of this issue. Those who feel teams are just a phase may list other techniques that have come and gone. Students who think teams will be around for a while may argue that workers have wanted a say in the workplace for a long time, and that they are ready to accept responsibility for their own work. 4. Think of several groups of which you have been a member. Why did you join each? Did each group progress through the stages of development discussed in this chapter? If not, why do you think it did not? Student responses will vary, and not everyone will have been a group member through all of the stages. An example of what a student may say follows: “The first group I joined at college was Alpha Kappa Psi, a professional business fraternity. I joined because a lot of upper-class students I knew were in the fraternity. My best friend, Nancy, introduced me to the group and informed me of the professional and social activities. It seemed as if the members were students with interests much like mine. The pledge class went through the stages discussed in the text. We almost immediately needed to elect class officers. This forced us through the stages quickly as we needed to get to know one another in a week in order to choose leaders from within the group.” 5. Describe a case of interpersonal conflict that you have observed in an organization. Describe a case of intergroup conflict that you have observed. (If you have not observed any, interview a worker or manager to obtain examples.) In each case, was the conflict beneficial or harmful to the organization, and why? Clearly, students’ responses will vary, depending on the situations they describe. They should realize the difference between interpersonal and intergroup conflict, and also that conflict may be either harmful or beneficial. Building Effective Conceptual Skills Exercise a. Purpose This conceptual exercise gives students a chance to think about the factors that lead to team effectiveness. b. Format The conceptual skills exercise can be done individually or in groups. It requires about 15–20 minutes to complete. c. Follow-up (1) Use the Internet to identify an example of a real-life team. Choose one that (a) is not part of a normal for-profit business and (b) you can argue is highly effective. (2) Determine the reasons for the team’s effectiveness. (Hint: You might look for websites sponsored by that group, look at online news sources for current articles, or enter the group’s name as a search term in a search engine.) Consider team characteristics and activities, such as role structures, norms, cohesiveness, and conflict management. Students’ answer will differ, depending on the team they choose. For example, if they focus on a team that met to produce a class project, reasons for effectiveness might include the cohesiveness the students felt as they faced a common challenge and the interpersonal attraction that team members felt for each other. (3) What can a manager learn from the characteristics and activities of this particular team? How might the factors that contribute to this team’s success be adopted in a business setting? Although teams vary in the reasons for their effectiveness, the principles underlying the effective management of teams can be used in any setting. Building Effective Communication Skills Exercise a. Purpose This in-class demonstration shows the value of communication in fostering teamwork. b. Format This exercise should be done by the entire class and will take about 20-30 minutes. c. . Follow-Up The object of this game is to think of as many people as possible who have these letters as the initials of their first and last name. The person must be famous or well-known to the students, must be an actual person (not an animated character or an animal), and can be either living or dead. So for example, the initials MM could stand for Mickey Mantle or Marilyn Monroe or Marilyn Manson, but not for Mickey Mouse. For the first (individual) round of the game, display the following page to the students, covering the second two columns so that only the first column is visible. On the second time, display only the second column. The third time, display only the third. After the second round, let the students with the highest scores suggest ways to improve the scores. There are some additional suggestions below, which you can make if the students fail to mention them. a. Play the Name Game that your professor will explain to you. In round 1, work out your answers individually and then report your individual score to the class. b. For round 2, you’ll join a group of 3 to 5 students. Work out your answers together and write your group answers on a single sheet of paper. Now allow each group member to look at the answer sheet. If you can do so without being overheard by other groups, have each member whisper the answers on the sheet to the group. Report your group score to the class. c. . Your professor will then ask the highest-performing individuals and groups to share their methods with the class. At this point, your professor will make some suggestions. Be sure to consider at least two strategies for improving your score. Suggestions include: 1. thinking of categories of names such as baseball players, presidents, or movie stars 2. choosing a common name that begins with that letter and then finding examples, so that JS would suggest the last name Smith, for example 3. thinking of other similar names once one is discovered, so that if JB suggested James Brown, then trying to remember others named James, for example d. Now play round 3, working together in the same small group in which you participated in round 2. Report your group scores to the class. e. Did average group scores improve upon the average individual scores? Why or why not? f. Did average group scores improve after methods for improvement were discussed at the end of round 2? Why or why not? Typically, the average group will score higher than the average individual because of the positive impact of sharing ideas and the synergy created by the team. Methods of improvement will typically make only a small improvement in scores, if any. g. What has this game taught you about teamwork and effectiveness? Share your thoughts with the class. If the typical results, as described in answer to Questions 5 and 6, are obtained, then students will realize that teamwork is effective in improving performance when the task relies on information sharing and creativity. In fact, effective teamwork does more to improve scores than does instruction in how to do the task. The implication for managers is that, depending on the nature of the task, teamwork facilitation and training may have a larger positive impact than does task-related training. Skills Self-Assessment Instrument Using Teams a. Purpose The purpose of this self-assessment is to help students identify their feelings about the effective use of teams in work organizations. b. Format Students should respond to the items individually, but small group or class discussion should follow to elaborate and enrich the reasoning underlying the instrument. c. Interpretation Since all of the statements are false, students should have low scores (20 or lower). Those who have very high scores (30 or higher) should be encouraged to examine the work of Hackman to see the research evidence for themselves. Experiential Exercise Team Size and Performance a. Purpose The purpose of this exercise is to demonstrate the importance of choosing the right size for a team. b. Format Students perform this exercise as a member of a group of 4. c. Follow-up (1) Which of the three trials happened the most quickly? Which was the slowest? Which seemed to go the most smoothly for the sorter? Which seemed to be the most challenging for the sorter? Explain. Students will probably find that trials with one helper help more than the other situations. (2) What was the impact of the help? Were three helpers better than one? It is possible that three helpers give conflicting advice, thereby making the whole process less efficient. However, if students are aware of the importance of proper group working, they will ensure that the three helpers and the sorter work to improve efficiency. (3) What types of help were effective, and what types were ineffective? Student responses will vary. (4) In what ways is this exercise similar to the situation in a business organization? In what ways is it dissimilar? What lessons might managers learn from this exercise? The similarity is in performing a routine task as a group. In organizations, teams perform many routine tasks. The stakes may be higher in organizational tasks, as compared to sorting cards in a classroom. Managers learn the importance of setting group norms and the role of communication in group work. MANAGEMENT AT WORK ON THE ONE HAND (OR MAYBE ON THE OTHER HAND) The case describes the increasing incidence of what are called “wrong site surgeries,” errors where surgery is performed on sites other than that intended. Since surgeries are performed by a team of medical professionals, the problem appears to be in how the team functions. Discussion Starter: A recent book by a Harvard surgeon, Dr. Atul Gawande, called The Checklist Manifesto: How to Get Things Right, strongly promotes the use of checklist not just in surgeries but in everyday life and work. How many students use the checklist approach? Does this approach work equally well in team-oriented projects? 1. Explain a surgical team as a kind of functional group. What features does it share with most functional groups? What features distinguish it from most functional groups? A functional group is defined as “a permanent group created by the organization to accomplish a number of organizational purposes with an unspecified time horizon.” As the case indicates, a surgical team consists of a surgeon, an anesthetist, and an operating nurse and they are tasked with performing the surgery. They are similar to functional groups because they are a team of people who perform specific functions to accomplish a goal. They are not similar to a typical functional group because team members constantly change, in that the same three principal team members (surgeon, anesthetist, and operating nurse) rotate among various surgery teams. 2. Explain a surgical team in terms of its role structures. What factors might lead to role ambiguity? To role conflict? To role overload? A surgery team of a surgeon, anesthetist, and operating nurse have clearly identified roles. Here, the surgeon performs the operation and leads the team, the anesthetist is responsible for pain management and patient safety, and the operating nurse provides “comprehensive care, assistance, and pain management at every stage of the operation.” It appears that in many surgical teams, there is role ambiguity with respect to the anesthetist and the nurse. They are not sure if the prevailing atmosphere in a surgery allows them to intervene when they have concerns about what is happening. While surgeons are clear about this, anesthetists and nurses are not. Role overload could be a problem because as the “captain of the ship,” the surgeon is expected to perform very many roles. 3. Explain a surgical team in terms of its behavioral norms. How might norm variation and norm conformity contribute to either effective or ineffective communications? Implicit in a surgical team are behavioral norms. Thus, both the surgeon and the anesthetist have more advanced training than the nurse and are also senior to the nurse in terms of their standing in the organization. This implies that the nurse has to defer to the others when it comes to medical expertise. As long as the three professionals conform to the behavioral norms established for them, the surgery is likely to proceed successfully. Problems happen when norm variations occur, such as, for example, when a very senior anesthetist and a very senior operating nurse (who likely have worked on many surgeries together) work on a team with an inexperienced surgeon who may also be new to the particular hospital. Such a team may have trouble communicating. 4. How do various strategies for improving surgical-team communications reflect a desire to achieve cohesiveness? Is increased cohesiveness always a desirable goal? Why or why not? At the end of the day, a surgical team is judged on the success of their work. In order to increase the probability of success, communication is critical. While cohesiveness helps in communication, cohesiveness as such is not the ultimate goal because these are temporary teams tasked with specific goals. YOU MAKE THE CALL Managing By Clowning Around 1. What role do groups play at Cirque du Soleil? Collaborative creativity is key to the success of Cirque du Soleil. Teamwork is central to foster this creativity and it is no surprise that this is number one in Lyn Heward’s (former president of the company’s Creative Content Division) 9-point guide to creative transformation. In short, groups (or teams) enable Cirque du Soleil to provide the integrative cultural experience for the audience. 2. How easy or difficult would it be for a traditional organization to adopt the team-based methods used at Cirque du Soleil? Teamwork is at the heart of everything that Cirque du Soleil does and it appears that the company has fostered teamwork all along. A traditional organization that has all through its history encouraged individuality may find it difficult to adopt the team methods of Cirque du Soleil. It also helps that Cirque du Soleil is in the creative business. 3. If for some reason Cirque du Soleil decided to move away from team-based decision making, what difficulties might it encounter? If teamwork is an essential fabric of Cirque du Soleil’s corporate culture, then moving away from it could cause a cultural shock to members of the organization. Since its employees embrace teamwork, making them work as individuals may reduce their creativity and also hurt their chances of hiring really creative people. 4. How do organizations like Cirque du Soleil most likely manage conflict? Since the case does not talk about how Cirque du Soleil manages conflict, we can only speculate. Perhaps conflict is minimized because of the team-oriented corporate culture and via careful hiring. It is also likely that conflicts are resolved at the team level, close to the source of occurrence. Chapter 14 Basic Elements of Control END-OF-CHAPTER Questions for Review 1. What is the purpose of organizational control? Why is it important? The purpose of control is to let the organization know how well it is doing by comparing where performance is, relative to a standard of where it should be. Control helps the organization fulfill its goals by adapting to change, reducing the compounding of errors, coping with complexity, and minimizing costs. 2. What are the different levels of control? What are the relationships between the different levels? At the lowest level, operational and financial controls address issues about transformation processes and use of financial resources. At the mid-level, structural control helps monitor each element of the organization’s structure. At the highest level, strategic control ensures that the organization effectively meets its strategic goals. Effective strategic control enables effective structural control, which enables effective operational and financial control. 3. Describe how a budget is created in most organizations. How does a budget help a manager with financial control? Typically, operating units submit budget requests to divisional managers, who in turn submit requests to a high-level budget committee. The committee, which consists of the CEO, controller, and other high-level finance managers, approves requests and formulates an organization-wide budget. For operational and divisional managers, budgets serve as an indicator of the organization’s strategic intent. These managers also use budgets to monitor and correct deviations in their use of resources. Top-level managers use budgets to control performance of each division and unit in the firm. 4. Describe the differences between bureaucratic and decentralized control. What are the advantages and disadvantages of each? Bureaucratic control works to ensure employee compliance with directives through rules and hierarchy, top-down decision making, and limited participation from lower level employees. Bureaucratic control is directed at maintaining a minimum level of acceptable performance by individual workers. Decentralized control works to ensure employee commitment to organizational goals by the use of group norms and culture, a flat structure, and a lot of participation from lower level employees. Decentralized control is directed at achieving superior performance above the acceptable minimum and it focuses on group performance. Bureaucratic control is quicker and simpler to develop and gives clear-cut guidance to managers, but it can be rigid, it doesn’t reward excellence, and employees may be frustrated by too many rules and lack of participation. Decentralized control gives opportunities for participation, rewards excellence and creativity, and encourages teamwork. However, decentralized control can be ambiguous and expensive, and can take a great deal of time to develop. 5. Why do some people resist control? How can managers help overcome this resistance? One reason that individuals resist control is due to overcontrol—the attempt by the organization to control too many things. Individuals also resist when the focus of control is inappropriate or when they fear too much accountability. There are several ways managers can overcome resistance to change. If you start with a good control system and accurate controls, workers are less likely to resist the system. People are more likely to accept controls if they participate in their design and implementation. Many forms of checks and balances can be instituted to ensure there will be less resistance to change. Questions for Analysis 1. How can a manager determine whether his or her firm needs improvement in control? If improvement is needed, how can the manager tell what type of control needs improvement (operations, financial, structural, or strategic)? Describe some steps a manager can take to improve each of these types of control. Symptoms of poor control may include excessive costs or waste of other resources, too many errors or defects, an inability to adapt in response to changes, and lack of managerial capability in the face of organizational complexity. Operations control would help in improving the transformation process, such as more training for workers to reduce product defects or a new system for obtaining customer satisfaction feedback. Financial control is best for control of resources. This would include budgets, financial statements, and audits. Structural control is needed when the various elements of the firm cannot work together effectively. The performance appraisal system, the goal-setting system, and data sharing on the information system are all examples of structural control. Strategic control is required for issues related to long-term goals, and includes top leadership capability and growth and profitability targets. 2. One company uses strict performance standards. Another has standards that are more flexible. What are the advantages and disadvantages of each system? A strict system is simple to develop and implement, gives clear-cut output, and has an appearance of fairness, yet it can be overly rigid and easily becomes outdated or irrelevant when changes occur. A more flexible system is easily adapted to changing circumstances and can accommodate complex situations more readily. However, a flexible system requires constant updating, may appear to be less fair, and can be confusing and difficult to implement. 3. Are the differences in bureaucratic control and decentralized control related to differences in organization structure? If so, how? If not, why not? (The terms do sound similar to those used in discussing the organizing process.) Bureaucratic control suggests strict rules, formal controls, and a rigid hierarchy, which is consistent with the mechanistic form of organizational structure. In tall organizations, bureaucratic control is a top-down process with limited participation by subordinates. Bureaucratic control does not seem to necessitate the technical competence dimension of the bureaucratic form of organization. So, while similar, they are not the same. Decentralized control is more like the organic organization, with group norms used for formalization, a flat structure with shared information, and a participative informal environment. 4. Many organizations today are involving lower-level employees in control. Give at least two examples of specific actions that a lower-level worker could do to help his or her organization better adapt to environmental change. Then do the same for limiting the accumulation of error, coping with organizational complexity, and minimizing costs. Clearly, students’ answers will vary, but they may note lower-level workers can monitor environmental change by seeking customers’ opinions or speaking to workers in similar jobs at competing firms. Lower-level workers can be critically important in limiting the accumulation of error, because many of the errors may originate at the lowest level and lower-level workers may be more aware of the impact of errors on customers. Lower-level employees can help the firm cope with complexity by aiding managers in the development and implementation of sophisticated control systems. Cost minimization is crucial at the lower levels of the firm, as employees can work to reduce waste, defects, wasted time, and other items that contribute to high expenses. 5. Describe ways that the top management team, midlevel managers, and operating employees can participate in each step of the control process. Do all participate equally in each step, or are some steps better suited for personnel at one level? Explain your answer. The top management team will probably be most involved in issues of strategic control because this team sets the organization’s long-term goals and then must monitor goal achievement. Middle managers would typically have the highest involvement in structural control, as they are responsible for ensuring that all elements of the organization work together effectively. Lower-level employees are probably most active in operational control, due to their expertise in the organization’s transformation processes. All managers have responsibility for financial control at their level in the firm. Building Effective Time-Management Skills Exercise a. Purpose This exercise provides students practice in using time-management skills to prioritize tasks related to control. b. Format This time-management skills exercise is best performed on an individual basis. It should take 20–30 minutes to complete. c. Follow-up (1) Prioritize the work that needs to be done by sorting the information in your assistant’s list into three categories: very timely, moderately timely, and less timely. Very timely tasks include the disgruntled employee and the big customer with a complaint. Moderately timely tasks include meeting with your boss, seeing the shop steward, the change in delivery schedule, and the chamber of commerce meeting. Less timely tasks include the upcoming OSHA inspection, and interviewing for a new supervisor. (2) Are importance and timeliness the same thing? No, some tasks need to be done immediately but are not very critical (important), while others are very critical but can be delayed for some time. Timely but not important tasks include a meeting scheduled for today about a routine problem. Important but not timely tasks include setting aside time for long-range strategic planning. (3) What additional information do you need before you can begin to prioritize all of these demands on your time? It’s not clear how urgent some of the problems are. For example, is the disgruntled employee acting irrationally, making threats, or carrying a weapon? Any of these would increase that task’s importance. Is the change in delivery schedule a routine matter or a change that might disrupt the entire firm’s supply chain? What is the subject of the meeting with your boss? (4) How would your approach differ if your assistant were in the office? The assistant could handle some of the routine tasks, such as responding to the chamber of commerce’s request. The assistant also could be used to gather additional information, such as asking your boss about the subject of the meeting. Building Effective Technical Skills Exercise a. Purpose This exercise improves students’ technical skills by asking them to prepare a personal budget and then analyze its effectiveness. b. Format This exercise should be done by individual students outside of class, and will take at least 30 minutes to complete, although motivated students may spend more time. c. Follow-up (1) Prepare lists of your estimated expenditures and income for one month. Remember: You’re dealing with budgeted amounts, not the amounts that you actually spend and take in. You’re also dealing with figures that represent a typical month or a reasonable minimum. For example, if you estimate that you spend $200 a month on groceries, you need to ask yourself whether that’s a reasonable amount to spend on groceries for a month. If it’s not, perhaps a more typical or reasonable figure is, say, $125. First, estimate your necessary monthly expenses for tuition, rent, car payments, child care, food, utilities, and so on. Then estimate your income from all sources, such as wages, allowance, loans, and funds borrowed on credit cards. Calculate both totals. (2) Now write down all of your actual expenses and all your actual income over the last month. If you do not have exact figures, estimate as closely as you can. Calculate both totals. (3) Compare your estimates to your actual expenses and actual income. Are there any discrepancies? If so, what caused them? In completing this exercise, students become familiar with the steps in the budget process, from estimation of future expenses to measurement of actual expenses to comparison of the two. Most students will experience discrepancies and the reasons may include unexpected events or poor initial estimates. (4) Did you expect to have a surplus or a deficit for the month? Did you actually have a deficit or a surplus? What can you do to make up any deficit or manage any surplus? Most often, an unexpected surplus or deficit occurs, although hopefully, the discrepancy is relatively minor. For small deviations, no or little action may be necessary. Large surpluses may be saved or “blown.” Point out to students that large deficits are the most problematic. Their suggestions may either increase revenues, such as asking parents for more allowance or taking out a loan, or they may reduce expenses, such as finding a roommate or dropping out of school. (5) Do you regularly use a personal budget? If yes, how is it helpful? If no, how might it be helpful? Most people use a budget of some sort, but they vary considerably in terms of their detail and specificity. Some people, for example, write detailed budgets that indicate how much they can spend each week on groceries, transportation, and so forth. Others have a more general idea of how much money they need for various expenses, but do not commit it to writing. Students’ opinion about the usefulness of budgets will vary, of course. Clearly, budgets are most useful when they are accurate and when they are used consistently. Skills Self-Assessment Instrument Understanding Control a. Purpose The purpose of this self-assessment is to help students gain an understanding of their personal views about control and approaches to control. b. Format Students should complete the assessment individually, but class discussion should be used to enrich the appreciation of the concepts involved. c. Interpretation The odd-numbered items are false and the even-numbered ones true. Discussion should focus on learning why the answers are what they are. Experiential Exercise Control Systems at State U a. Purpose The purpose of this exercise is to provide students with an opportunity to practice analyzing an organization’s need for controls. b. Format This exercise is done in small groups. There are three steps in this exercise. In Step 1, the group should read the short case. In Step 2, the group should complete the University Control Matrix. In Step 3, using the completed Matrix, the group should discuss its response to the three listed questions. c. Follow-up There are no follow-up questions for this exercise. MANAGEMENT AT WORK USING CONTROL AT JPMORGAN Jamie Dimon, the CEO of JP Morgan Chase, the U.S. bank with the largest market capitalization, helped his firm survive the mortgage crisis by establishing control systems. He is using control systems as the primary vehicle to achieve his strategic plans. The case cites a number of instances where strict controls generate additional profits. Management Update: JP Morgan Chase had a market capitalization of $206.35 billion in late May 2014, and revenues and profits of $96.381 billion and $16.593 billion respectively for fiscal 2013. 1. In what way is Jamie Dimon’s approach to management pretty much what you’d expect of a top-level manager in the financial industry? In what ways is it different from what you’d expect? A top-level manager in the financial industry occupies a fiduciary position—a position of trust because people have put their money in the organization. The action of the manager, therefore, has to keep this mind and focus on efficiency and proper use of resources. Dimon approaches his job using this perspective. On the other hand, he is also running a company that has to report to investors so he does things like acquisitions, etc. to grow the bank. 2. Under what circumstances might Dimon need to change his approach to organizational control? It is hard to think of situations where Dimon’s control measures need to change. He has to draw the line between establishing control and micromanaging. 3. Explain how Dimon has practiced each of the following levels of control at JP Morgan Chase: (a) financial, (b) structural, and (c) strategic. Then focus on operations control: What steps has Dimon taken to exercise each form of operations control—preliminary, screening, and postaction? Dimon increased the number of ATMs that allowed the company to increase its operations. He demanded detailed financial reports that allowed him to see how each unit was doing. Structurally, he brought the IT function in-house and from a strategic point-of-view he is looking for acquisitions after streamlining the company. 4. What aspects of Dimon’s approach to control were important in steering JP Morgan Chase through the subprime crisis that crippled or toppled other financial institutions? Hi decision to pull the plug on subprime loans may have cost the company some profits but it significantly minimized the losses. It was all enabled by a system that saw a lower level employee alerting Dimon about the problem early on and Dimon acting on it. 5. Under what circumstances might Dimon need to change his approach to organizational control? It is hard to think of situations where Dimon’s control measures need to change. He has to draw the line between establishing control and micromanaging. YOU MAKE THE CALL Shifting Gears in the Auto Industry 1. Identify as many examples and uses of control as you can that are especially relevant for an automobile manufacturer. To encourage students to generate examples, it is important to get them to look at various functions that an auto manufacturer performs. For example, in developing and launching new models, an auto manufacturer has to have targets for launch time and costs. Various controls have be identified in the area of quality. Finally, in terms of its finances, it has to have controls that measure profits, market share, etc. 2. Sergio Marchionne’s education and early training was in accounting. In what ways might this have helped him in turning around first Fiat and then Chrysler? Accountants are training in the budgeting process as well as in variance controls. What Fiat and Chrysler needed, to a large extent, was financial control. Marchionne, with his accounting background, was well suited for this job. By instilling financial discipline, Marchionne helped in the turnaround. 3. As planned, the Fiat 500 was launched in the U.S. market in 2014. Read recent reviews and sales data online and see if the car seems to be performing as well as projected. If not, what control actions might be necessary? Based on http://www.fiat500usa.com/2014/02/fiat-500-sales-for-january-2014.html it appears that the sales of the Fiat 500 are off to a robust start in 2014. The company reported sales of 3,222 units in January, a significant uptick from monthly sales of previous models. 4. What automobile industry events in 2014 might lead to greater revenue and profit projections for Chrysler? The recovery for the industry started in 2013 and it appears that the demand for 2014 would be greater than that of 2013. Expanding sales in China, increased demand for replacement cars in the U.S., and a slight recovery in Europe portend a good year for automakers. Value Line reports that the U.S. can expect a 3% increase in cars sold compared to 2013. Chrysler, like other automakers, is likely to take advantage of these tailwinds to report better financial performance in 2014. Chapter 15 Managing operations, quality, and productivity END-OF-CHAPTER Questions for Review 1. What is the relationship of operations management to overall organizational strategy? Where do productivity and quality fit into that relationship? Operations management should be fully integrated with the strategy of the organization. It is not possible to separate operations from the overall business goals and directions. If a firm desires to become a cost leader in the industry, operations management will be needed to develop and maintain a technological system and method of production that will provide cost leadership. Productivity and quality likewise need to be integrated into the strategic plan. Efficiency and effectiveness in the production process lead to the strategic advantage most businesses need to be successful. 2. Describe three basic decisions that must be addressed in the design of operations systems. For each decision, what information do managers need to make that decision? Determining product-service mix involves choosing which products and services the firm will offer. To make product-service mix decisions, the firm must consider its ability to supply the products and services, the market’s demand for them, and data about expenses and revenues. Capacity decisions determine the quantity of products and services offered, and rely on information about capability, demand, and profitability. Facilities decisions select the location and layout of the firm’s physical facilities. Location is determined by investigating the firm’s needs as well as cost information, while layout decisions are made based on the production processes that will be occurring in the facility. 3. What are some approaches to facilities layout? How do they differ from one another? How are they similar? One common layout is the product layout, which is best for processes that produce large quantities of a single product. It resembles the classic “assembly line” formation, with sequential performance of work at fixed stations while work-in-process flows past each station. The process layout is best when a facility produces multiple products that rely on the performance of the same processes, but in different sequences. For example, a doctor’s clinic may have a check-in desk, a screening area, examination rooms, a laboratory, a pharmacy, an X-ray room, a check-out desk, and so on. Some patients will use all of these areas; others just a few, and the order of the processes will also differ to some extent. The fixed-position layout has a stationary product and each process is brought to the product’s location. This layout is used for example, in the manufacture of large ships or airplanes, where welders, electricians, painters, and others work in sequence on a single, large product. The cellular layout is best for groups of related products that follow similar paths through the various processes. An auto factory may use a cellular layout, for example, to build all of the brake subassemblies for each model of car in one area and another area may be used for producing dashboards. The brakes and dashboards are then delivered to other areas where each model of vehicle is assembled. 4. What is TQM? What are the major characteristics of TQM? Total quality management is an organizationwide commitment to making quality a top priority for the firm. Typically, TQM implementations include employee involvement at all levels, new technology, and improvements in materials and methods. TQM tools are benchmarking against excellent firms, outsourcing where appropriate, increased speed in every process, implementation of ISO 9000 or other objective quality standards, and the use of statistical quality control techniques. 5. What is productivity? Identify various levels and forms of productivity. Productivity is an economic measure of efficiency that summarizes what is produced relative to the resources used to produce the product. There are several levels of productivity that focus on different levels of analysis to calculate or define productivity. • Aggregate productivity is the total level of productivity achieved by a country. • Industry productivity is the total productivity achieved by all the firms in a particular industry. • Company productivity is an individual company’s productivity. • Unit productivity is the achievement of a unit or department within an organization. • Individual productivity is the productivity level attained by a single person. In addition, there are two forms of productivity calculations. Total factor productivity is a ratio of outputs to inputs (resources). It serves as an overall indicator of how well an organization uses all of its resources to create its products and services. Partial productivity ratios use only one category of input (e.g., labor) instead of all of them. Questions for Analysis 1. Is operations management linked most closely to corporate-level, business-level, or functional strategies? Why or in what way? Operations management is related to all of these, but it is most closely linked to functional strategies, particularly those associated with the production function. The primary function of the production process is transformation. To some extent, the production function in a manufacturing organization is identical to operations management, yet there are ties to corporate image in terms of quality and to business-level strategies for cost, product, and durability. 2. “Automation is bad for the economy, because machines will eventually replace almost all human workers, creating high unemployment and poverty.” Do you agree or disagree? Explain your answer. It is clear that some workers, particularly those with low-tech skills, are being replaced by automated equipment. However, increasing use of automation creates demand for workers who can manufacture, install, use, and repair the automation equipment. Those jobs tend to require more skills and have higher pay. In the short run, however, some displacement of workers will occur. 3. Some quality gurus claim that high-quality products or services are those that are error-free. Others claim that high quality exists when customers’ needs are satisfied. Still others claim that high-quality products or services must be innovative. Do you subscribe to one of these views? If not, how would you define quality? Explain how the choice of a quality definition affects managers’ behavior. This question asks students to consider their own personal definition of quality, which can involve a number of different elements. Answers will vary. Students should be able to describe the relationships between a definition of quality and managerial action. For example, if a firm desires error-free quality, actions will focus on measuring and improving the firm’s defect rate. If customer satisfaction is the quality standard, then actions will focus on measuring and improving satisfaction ratings. 4. How can a service organization use techniques from operations management? Give specific examples from your college or university (or another provider of educational services). Clearly, answers will vary. Here’s one example: “At my university, a new classroom building was recently built. University administrators chose the building site, decided upon an optimal size, and then designed the layout of the building to include classrooms of different sizes, as well as meeting rooms, a lounge area, and a student computer lab.” 5. Think of a firm that, in your opinion, provides a high-quality service or product. What attributes of the product or service give you the perception of high quality? Do you think that everyone would agree with your judgment? Why or why not? Students’ answers will vary, but they should identify attributes such as reliability, ease of operation, performance to expectations, and desirable features. Students should recognize that individuals’ perceptions of quality may differ. For example, one person may prefer a car stereo that allows the user to select many different options and settings, while another prefers one that is simple and therefore is safer to operate while driving. Building Effective Communication Skills Exercise a. Purpose This exercise gives students practice in composing business letters related to issues of quality and customer satisfaction. b. Format This exercise may be done in class or outside of class by individual students or small groups, and will take about 30 minutes to complete. c. Follow-up (1) Write an answer to the customer’s letter that assumes that you now have the parts available. The students should prepare a letter that apologizes for the mistake and offers a solution that is acceptable to the customer. This may either be an exact fulfillment of the original demand or it may be an innovative but equally acceptable alternative solution. (2) How would your answer differ if ABC Autos were not a valued customer? Students may be tempted to give a less valued customer less attention and support. To some extent, this is a reality of real businesses—for example, when first-class air travelers wait in a shorter line than do economy travelers. However, you can point out to students the hazards of this approach, because many small customers may in fact have more power than do a few large customers, and alienating one small customer may lead to alienating the rest. (3) How would your answer differ if you found out that the parts were in the original shipment but had been stolen by one of your delivery personnel? The letter should probably not differ much or at all from the response the students prepared to question 1. You can discuss with the class the reasons why it would not be prudent to admit that the shipment was stolen—lawsuits from the accused, shock and loss of trust from customers, and so on. (4) How would your answer differ if you found out that the owner of ABC Autos made a mistake and that the order had been filled correctly? This is a difficult task because students have to decide whether it’s worth the risk of losing a customer to point out that the mistake was on his or her part. And if the students choose the riskier approach, they must then handle the delicate job of tactfully pointing out a mistake. Many students will decide not to change their letter at all. (5) New review your answers to the previous questions. What are the important components of an effective response to a customer’s quality complaint (setting the tone, expressing an apology, suggesting a solution, and so on)? How did you use these components in your various responses? The purpose of this question is to help students realize that, despite the circumstances of a customer’s complaint, the responsibility for apologizing and satisfying the unhappy customer remains the same. Building Effective Diagnostic Skills Exercise a. Purpose Students will use this exercise to learn about the relationship between quality, price, and expectations, for both services and products. b. Format The diagnostic skills exercise is best completed by students working individually. It should take about 15–20 minutes. c. Follow-up (1) Assess the extent to which the quality you associated with each was a function of price and your expectations. Answers will vary, but most students will agree that high-priced products and services generate an expectation of high quality. Also, expectations may be raised by factors other than price, such as positive word-of-mouth or alluring advertising. When expectations are high, perceived quality must also be high to generate satisfaction. When expectations are low, perceived quality may also be low without creating dissatisfaction. (2) Could the quality of each be improved without greatly affecting price? If so, how? Students will develop a variety of ideas in answer to this question. For example, Wal-Mart cashiers are trained to read a customer’s name from their check or credit card, and to say, “Thank you, Mrs. Smith,” at the end of a transaction. This doesn’t add appreciably to the cost, but many customers appreciate the personalized service. (3) Can high-quality service offset only adequate or even poor product quality? Can outstanding product quality offset only adequate or even poor-quality service? Most students should see that of the two, product quality is the more important for most consumers and most purchases. This may be due to the time element. The service part of the purchase is transitory; poor service will end soon and can be forgotten. On the other hand, the product part of the purchase is more durable, and unsatisfactory products will still be causing dissatisfaction years later. For example, a customer may persist in attempts to buy a high-quality camera, even though the retail clerk is unhelpful or rude, because he or she anticipates many years of satisfied use of the camera, long after the rude clerk is forgotten. Skills Self-Assessment Instrument Defining Quality and Productivity a. Purpose This self-assessment helps students develop an awareness of their ideas about and approaches to quality. b. Format Students should complete the self-assessment instrument individually, but class discussion should follow to further enrich their understanding of the different dimensions of quality. c. Interpretation Discussion should focus on students’ opinions as expressed in the assessment, but students need to be reminded that the American Society for Quality Control defines quality as the total set of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs of customers. Experiential Exercise Preparing the Fishbone Chart a. Purpose This exercise will help students learn to use the fishbone technique, a popular tool of Japanese quality circles. b. Format Allow 45 minutes. Step 1, individual activity, should be completed before class; Step 2, small-group activity, should require 25 minutes; while Step 3, class discussion, should require 20 minutes. The instructor may wish to revise the problem statements to address local or current issues. For the class presentation, the students might share their fishbone diagrams by drawing them on the board or reading them. However, if time is critical, the presentation might be limited to the definition of the major cause of the problem and the suggestions for corrective action. c. Follow-up The fishbone chart is a procedure for identifying possible causes of a problem. It provides students with procedural knowledge that can be used to improve the operations of any organization. Procedure Step 1: Instruct students to study the steps of the fishbone technique. Step 2: Divide the class into small groups. Give each group one of the following problems to analyze, using the Fishbone Worksheet. 1. Student parking on campus is inadequate. 2. Computer equipment available for student use is inadequate. 3. Required business courses are not offered at different, more flexible times. 4. There are too few upper-division business elective courses offered. 5. There are not enough sections of required business courses to meet student demand. 6. Some business courses have too many students in them to facilitate optimum learning. 7. Faculty are not available for student consultation/assistance. 8. There is inadequate opportunity for students to receive good course counseling. 9. Students have inadequate communication skills (both written and oral). 10. Some courses have too much theory without opportunity for real-world application. Step 3: Have representatives from each group present the group’s fishbone analysis. THE FISHBONE WORKSHEET (PAGE 1) __________________________________ *From Exercises in Management, 3rd Edition, by Gene E. Burton; Copyright © 1990 by Houghton Mifflin Company. Used with permission. THE FISHBONE WORKSHEET (PAGE 2) The major causes: ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Possible corrective actions: _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ The group’s proposal: __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ MANAGEMENT AT WORK AMAZON REKINDLES ITS FLAIR FOR TECHNOLOGY Amazon.com is an Internet retailing phenomenon. It has revolutionized the industry ever since its inception in 1995. As the case describes, Amazon uses a variety of operations techniques to allow their customers to order on the Internet and deliver the products to their doorstep. It has made good use of its software expertise to automate a number of processes, so much so, that it offers software consulting to other organizations. The case also describes Amazon’s newest product, Kindle, that enables users to read books electronically. Management Update: Professor Michael Rappa of North Carolina State University runs a website called “Digital Enterprise (http://digitalenterprise.org/mrappa.html) . This site offers a very useful overview of various Internet business models (including that of Amazon) and provides a state-of-the-art commentary on the digital industry. 1. Describe Amazon’s product-service mix. Which areas of Amazon’s operations are characteristic of a manufacturing organization? Which areas are characteristic of a service organization? How do both areas relate to the marketing of Kindle and Kindle-related products? Amazon sells a diversified range of products such as books, toys, music, electronics and software, and household goods. They have to serve their customers who shop online at Amazon. Amazon has to manage its inventory as manufacturing firms do. While it “drop-ships” some items directly from manufacturers, it carries certain items in its warehouses. In addition, Amazon, like other manufacturing companies has to pack products to be delivered to customers. Because Amazon interacts with its customers on the web, like any service firm, it has to make the interaction customer-friendly. Kindle is a hardware product that uses software to enable users to read books, etc. online. It has to make manufacturing-related decisions that relate to the physical product that is Kindle and also make service-type decisions with respect to the various services it provides to Kindle users. 2. Describe the role of technology in both Amazon’s manufacturing and service operations. Technology plays a critical role in all of the activities conducted by Amazon. It uses Internet technology exclusively since it does not have a brick-and-mortar presence. Automation plays a key role at Amazon’s facilities. Workers use menu-driven computer programs to access and monitor customer orders. Automated chutes and bins move goods within their distribution facilities. Software plays a key role in several aspects of Amazon’s operations, from supply chain to customer interface. 3. Discuss the nature of Amazon’s supply chain in terms of control, purchasing management, and inventory management. At what points in the supply chain does Amazon outsource or contract activities to outside parties? How does Amazon’s supply chain management affect its revenues and costs? Amazon’s seven distribution centers stock thousands of popular items, but many of the goods that end-consumers buy through Amazon are in fact “drop shipped” directly from manufacturers. Thus, Amazon can offer a wide range of products without incurring high inventory costs. Software allows Amazon to determine which items to carry in their distribution centers and which should be drop-shipped. 4. Log on to Amazon.com and select an item that comes from Amazon itself rather than from a drop shipper. What kind of purchasing decisions were necessary to make this product available at Amazon’s price? What kind of inventory control decisions were necessary? When Amazon decides to stock a particular item in its own warehouse it has to negotiate with suppliers to supply it at a price that fits with the company’s overall pricing practice. For example, if Amazon’s policy is to offer New York Times’ bestselling books at 30 percent off the cover price, it has to negotiate its acquisition price to reflect this. It also has to forecast accurately in order to have it in inventory. 5. What facets of Amazon’s operations allow it to create and control quality, both as a manufacturing organization and as a service organization? What facets of its operations allow Amazon to control productivity (again, both as a manufacturing organization and as a service organization)? Give two or three examples of ways in which Amazon’s operations contribute to high productivity. The key to the success of Amazon is offering an easy interface for customers and by delivering the right products at the right price at the right time. Amazon’s “one-click” web interface allows customers to buy products with a single mouse click. It allows customers to post online reviews for other to see. In addition, the customer’s web page can be customized to maximize the possibility of selling additional products. YOU MAKE THE CALL Orchestrating Outcomes 1. Explain the “Orpheus Process” as a system of operations management. In what ways is it important to the orchestra’s productivity, competitiveness, and overall organizational performance? The book defines operations management as “the total system of managerial activities used by an organization to transform resource inputs into products, services, or both. In the case of Orpheus, the inputs are the talents of various musicians. The “Orpheus Process” consists of five elements—choosing leaders, developing strategies, developing the product, perfecting the product, and delivering the product—designed to improve the orchestra’s productivity and make it competitive. 2. How would you explain “quality” in an orchestral performance? In what ways are the eight dimensions of quality in Table 15.2 useful in explaining the quality of a concert? In what ways are they not useful (or at least difficult to apply)? The book defines quality as “the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.” Quality in an orchestral performance is hard to measure, but the case, in particular the five “Orpheus Process” elements, gives some hints to do it. The goal of the final performance for Orpheus is to reflect “a unified vision.” They measure quality also in terms of the satisfaction level reached by their musicians. Of the eight dimensions of quality listed in the table, at least four—performance, conformance, aesthetics, and perceived quality—are useful in explaining the quality of a concert. The others are less useful here. 3. Discuss the importance of quality in Orpheus’s operations in terms of competition, productivity, and costs. Orpheus is competing with other orchestras for musicians. The fact that musicians are more empowered at Orpheus means they are more competitive in recruiting and holding on to talented musicians. Also, empowerment allows the musicians to be more productive. Thus, Orpheus’s operations is critical to its competitiveness as an orchestra. 4. In what ways does the “Orpheus Process” reflect the basic elements of total quality management, particularly strategic commitment, employee involvement, and methods? The five elements of the “Orpheus Process” exhibit the basic elements of TQM. There is strategic commitment, both the piece that is going to be played, as well as to the entire process of conducting a symphony without a conductor. Employee involvement is the glue that holds the whole thing together, whether it is in empowering them to make decisions important to them or in the way disagreements are handled in a democratic manner. The orchestra’s methods also indicate TQM in action. Solution Manual for Fundamentals of Management Ricky W. Griffin 9781285849041, 9780357039168
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