CH-5-8 Entrepreneurship and New Venture Management – Fundamentals of Management : Book Guide

This Document Contains Chapters 5 to 8 Chapter 5 Entrepreneurship and new venture management END-OF-CHAPTER Questions for Review 1. Describe the similarities and differences between entrepreneurial firms and large firms in terms of their job creation and innovation. Since 1990, entrepreneurial firms and large firms have both added new jobs to the economy. Large firms have eliminated jobs, but at the same time, they have acted as entrepreneurs in moving into new products and markets, creating new jobs. Both entrepreneurial and large firms are innovative and have developed new products. 2. What characteristics make an industry attractive to entrepreneurs? Based on these characteristics, which industries are most attractive to entrepreneurs? Many entrepreneurs are starting their businesses with limited resources, and therefore, attractive industries are those in which a small start-up investment is sufficient. Another attractive characteristic is an industry in which a few large firms dominate, because that typically creates market niches that entrepreneurs can successfully fill. Yet another attractive quality is the low economies of scale, highly specialized skills, and customization required by some crafts and trades. These trades are often uneconomical for large firms, but can be profitable for small ones. Thus, services, retailing, and construction are popular choices for entrepreneurs, while manufacturing tends to be dominated by large firms. 3. Describe recent trends in new business start-ups. The Internet aids small businesses in reaching a wider market inexpensively, as well as creating opportunities for new types of firms, such as Web design firms or app development firms. Workers opting to leave their jobs at large firms for self-employment is another important trend, as is increased entrepreneurial opportunities for women and minorities. Small business failure rates have been declining recently, encouraging entrepreneurship. 4. What are the different sources of advice for entrepreneurs? What type of information would an entrepreneur be likely to get from each source? What are the drawbacks or limitations for each source? Entrepreneurs may get advice from advisory boards, management consultants, the SBA, and networking with peers. Advice can cover a variety of topics, from marketing to financing to human resources. The advice obtained from advisory boards is only as good as the members of the board. The same holds true for management consultants, who also may charge high fees. The SBA provides advice for free, but again, quality varies depending on the expertise of the volunteer advisors. Networking can be one of the most effective sources of advice because the advice is practical and relevant. 5. What are the basic reasons small businesses succeed, and what are the basic reasons they fail? One common reason for new business success is a combination of hard work, drive, and dedication on the part of the entrepreneur. Market demand, managerial competence, and luck are also important. Reasons for failure include inexperienced or incompetent management, lack of dedication, weak control systems, and insufficient capitalization. Questions for Analysis 1. Entrepreneurs and small businesses play a variety of important roles in society. If these roles are so important, do you think that the government should do more to encourage the development of small business? Why or why not? This is an opinion question, with no absolutely right or wrong answer. Instead, the quality of an answer depends on how well it is justified. At present, the government already has numerous programs in place to help new businesses. This chapter, for example, noted such programs as the SBA and SCORE. In addition, most state and local governments also have new business development programs. The real issue, then, is whether current programs are sufficient or if more are needed. 2. Consider the four major reasons for new business failure. What actions can entrepreneurs take to minimize or avoid each cause of failure? Incompetence or inexperience can be counteracted by business training and education, as well as by experience working in that type of business. Neglect can be avoided by a more serious time commitment. Weak control systems are avoidable if owners pay closer attention to potential and developing problems. Insufficient capital or overly optimistic financial projections can be solved if entrepreneurs work with experts to determine a realistic budget and to obtain the necessary funds in advance. 3. The U.S. automotive industry is well established, with several large and many small competitors. Describe the unexploited niches in the U.S. auto industry and tell how entrepreneurs could offer products that fill those niches. Students’ answers will vary. They might point out that there are few automobiles for very modest prices, such as the $10,000 range. They might also note the sameness of the sedans, SUVs, and trucks that most Americans buy. There might be an opportunity for a completely different type of vehicle, or for the revival of old favorites, such as the station wagon. 4. List five entrepreneur-owned businesses in your community. In which industry does each business compete? Based on the industry, how do you rate each business’s long-term chances for success? Explain your answers. Students will choose different companies, of course. They should correctly identify the industry. It is possible that they will identify a variety of success factors such as economies of scale and the existence of unfilled market niches. 5. Using the information about managing a small business presented in this chapter, analyze whether you would like to work in a small business—either as an employee or as a founder. Given your personality, background, and experience, does working in or starting a new business appeal to you? What are the reasons for your opinion? This makes an excellent outside-of-class assignment. There will likely be a wide variety of answers. (For a more detailed look at this question, see the Diagnostic Skills and the Interpersonal Skills exercises for this chapter. They are especially useful for students who are interested in exploring an entrepreneurial career.) Building Effective Diagnostic Skills Exercise a. Purpose This exercise asks students to increase their diagnostic skills by investigating the personal characteristics that increase the chances of entrepreneurship. b. Format This exercise is designed to be completed by individual students outside of class. A classroom discussion of the follow-up questions could be held and would require about 10 minutes. c. Follow-up (1) Choose one of the categories of individuals and explain why this this type of person might be more likely to become a business owner. (Note to the instructor: Categories include having a family member who is an entrepreneur; being an immigrant or child of an immigrant; being a parent; being Jewish or Protestant; holding a professional degree; or experiencing a recent life-changing event.) Individuals who are related to an entrepreneur have different perceptions and values related to entrepreneurship, as well as a trusted source of advice on starting a business. Immigrants tend to become entrepreneurs because they are excluded from many traditional occupations by lack of formal education and job experience, or by language, racial, or cultural barriers. Parents choose entrepreneurship in order to give themselves a flexible schedule. The reasons for the impact of religion on entrepreneurship (in which Catholics are the least likely to choose self-employment) are not clear, although the fact that Jews are discriminated against in many societies may provide a partial explanation. Professionals, such as dentists and lawyers, become entrepreneurs if they choose to go into private practice. Life-changing events cause radical adjustments in many areas of life, and one frequent change is a switch to self-employment. (2) Being sure to choose a category other than the one that you discussed for question 1, select one of these categories that applies to you. In your opinion, does that factor make it more likely that you’ll become an entrepreneur? Why or why not? If none of the categories above is true of yourself, tell whether that fact itself makes it less likely that you’ll become an entrepreneur. Clearly, students’ answers will vary. The students should elaborate on the reasons behind their opinions. Building Effective Conceptual Skills a. Purpose This exercise encourages students to think through the factors that lead to small business success and to apply those ideas to their situation. b. Format The conceptual skills exercise is a two-step activity with Step 1 done individually and Step 2 in groups. The entire exercise will take about 20 minutes. c. Follow-up Follow-Up (1) Form a small group of four or five classmates and discuss your respective lists. Look for instances of in which the same type of business appears either on (1) both of your lists or (2) one of your lists and one of a classmate’s lists. Also look for cases in which the same business appears on one or more than one list with either similar or dissimilar prospects for success. Differences in students’ interests and knowledge of local market conditions will lead to different answers to this question. (2) At this point, how important do you regard personal interest as a factor in small-business success? Students might point out that without personal interest, entrepreneurs are unlikely to invest the significant amount of time and energy that a small business requires. However, personal interest alone isn’t enough to create a viable enterprise. (3) How important do you regard market potential as a factor in small-business success? Market potential is critical to small business success. Without it, even the most dedicated entrepreneur will not succeed. However, personal interest creates energy and enthusiasm, which is also a necessary component of success. Students will probably agree that both personal interest and market potential are absolutely vital. Skills Self-Assessment Instrument An Entrepreneurial Quiz a. Purpose This assessment is designed to measure the students’ readiness to start their own businesses based on their own self-reported perceptions. b. Format Students should respond individually and privately to the items in this self-assessment, although class or small-group discussion should follow to expand upon the points illustrated in the assessment. c. Interpretation Student responses fall into three columns. If a student’s responses tend to fall in the first column, he or she is probably ready to start a business. If the marks tend to fall in the first two columns, the student may not be ready to go it alone and should seek a partner who has strengths in those areas where the student is weak. If most of the marks fall into the third column, the student is likely to prefer working for others rather than being self-employed. Experiential Exercise Negotiating a Franchise Agreement a. Purpose This exercise expands students’ understanding of the importance of negotiation skills for franchisees and franchisers. b. Format Individual students perform the first two steps, and the last step is done in small groups. Class discussion should be used for the follow-up questions. c. Follow-up (1) Did doing both step 1 and step 2 in advance help or hinder your negotiations? Students’ answers will vary, but you can point out to students that successful negotiations are most likely when both parties understand their own position, as well as the position of the other party. (2) Can a franchising agreement be so one-sided as to damage the interests of both parties? How so? When one party in a negotiation imposes that party’s will on the other party, the result is likely to be dissatisfaction for both parties. For example, consider what would happen in this negotiation situation if the franchiser (the restaurant owner) negotiated terms that would ensure that most of the ventures’ profits would return to the franchiser, leaving the franchisee with little profit. In the short run, such an arrangement would seem to benefit the franchiser, while it would clearly not be advantageous for the franchisee. However, in the long run, even the franchiser would suffer, because the franchisee could become unhappy, make a lot of complaints, try to turn other franchisees against the franchiser, perform substandard work and damage the franchiser’s reputation, and eventually leave the franchise agreement, requiring the franchiser to expend time and money in finding another franchisee. management at work the creative imprint of bigfoot Michael Gleissner is your typical serial entrepreneur. After making his money by founding and eventually a couple of e-commerce businesses, the Germany-born Gleissner bought Bigfoot Entertainment and is in the process of turning the company into a major player in the global independent films business. This vignette describes how Gleissner launched Bigfoot and expanded it to various aspects of filmmaking. Management Update: According to Wikipedia, Michael Gleissner calls himself a(n) “entrepreneur, film producer, director, screenwriter, actor, photographer, and musician.” Interestingly, on Bigfoot’s website, Gleissner’s name is not found in a list of the firm’s top eight executives. This leaves us to believe that Gleissner’s approach is to launch an entrepreneurial venture and leave its management in the hands of others. 1. In what ways is Bigfoot innovative? In what ways does it deal with big business? In what industries does it operate? Prior to Bigfoot’s entry, independent filmmaking was a disorganized and fragmented business. Bigfoot was innovative in that it sought to capitalize on the opportunity to support independent filmmaking and profit from it. While it is an entrepreneurial venture, Bigfoot deals with big business when it involves itself in various activities related to filmmaking. For example, it likely dealt with big business to build its studio in the Philippines, as well as in investing in Carmike Cinemas in the U.S. At the end of the case, it is clear that Bigfoot operates in more than the film industry. It is in education (through its film school), property development, and other related areas. 2. What niches does Bigfoot serve in established markets? What new markets does it target? Can you think of any other niches or new markets that it should consider in the future? Bigfoot competes in the independent film niche of the motion picture industry. It targets those markets that are supportive of small, independent films as opposed to studio-produced big blockbusters. Given that the Internet-based entertainment segment is growing rapidly via streaming, perhaps Bigfoot can enter the made-for-Internet movie business. 3. Does Bigfoot have any first-mover advantages? If so, what are these advantages, and how important do you think they are now and will be in the future? Bigfoot was the first-mover in independent filmmaking in that it was the first to bring order to a haphazard segment of the motion picture business. It likely allowed Bigfoot to establish relationships with independent filmmakers and film festivals that is likely to help it in the long run. Most importantly, being a first mover helped Bigfoot establish its credibility in the business. 4. In what ways does Bigfoot rely on distinctive competencies? In what ways is experience in international management among these competencies? In what ways do you expect this particular competency to become even more important in the future? It is clear that Michael Gleissner views the filmmaking business in international terms. In addition, he views the business as an integrated whole starting with the script all the way to exhibiting the film in theatres. This view of the business is Bigfoot’s distinctive competency and allowed the company to become a low cost player. Given the escalating costs of movie making, it is likely that this distinctive competency become even more important in the future. You Make the Call 1. What ingredients (no pun intended!) led Hamdi Ulukaya’s success with Chobani? Ulukaya’s motivation came from his displeasure at the yogurt made the non-Greek way. To him, these yogurts tasted weak and watery. He argued that if he didn’t like the yogurts sold in American grocery stores, there was every likelihood that others would too. He saw an opportunity and capitalized on it. Of course, luck played a part because it so happened that a yogurt plant was for sale. Finally, using a combination of personal savings (from a prior business) and a timely loan from the SBA, he had the financial ingredients to launch his business. 2. What are the distinctive competencies illustrated by Ulukaya? Growing up in a dairy farm in Turkey, chances are Ulukaya was very familiar with milk and milk processing. He also had with him his mother’s recipe for Greek yogurt. He probably identified a niche area (Greek yogurt) in an established market and was able to move fairly quickly to capitalize on the opportunity. 3. Comment on the role that globalization has played in Chobani’s success. Students have to understand that Ulukaya came over to the U.S. from Turkey to study English. He probably sensed that there were people who because of exposure to Europe had tasted European-style yogurt. He, thus, saw an opportunity and an unserved market that happened to come by because of globalization. 4. If Ulukaya were to ask you what strategy he should adopt going forward, what advice would you give him? At the end of the case, it is clear that Dannon and Yoplait pose a threat because they have entered the Greek yogurt market. These are companies with much more resources than Chobani. Chobani was a first mover but it has to cement its first mover advantage by establishing its brand name and distinctiveness. Chapter 6 Organization structure and design END-OF-CHAPTER Questions for Review 1. What is job specialization? What are its advantages and disadvantages? Job specialization is the breaking down of a job into smaller component parts. The benefits of job specialization include: (1) worker proficiency on simpler tasks; (2) no lost transfer time associated with workers changing tasks; (3) utilization of specialized efficient machinery; and (4) reduced training costs. The limitations include: (1) potentially boring and dissatisfying jobs and (2) no expected time saved or efficiency obtained. 2. What is departmentalization? What are its most common forms? Departmentalization occurs when workers with similar jobs are grouped together within the organization in some logical fashion to increase efficiency. Large organizations cannot be managed by a single individual; therefore, people are grouped in a logical fashion according to an overall plan and are managed more easily. Functional departmentalization groups individuals according to the function they perform or the type of the work they do, such as grouping all individuals involved in marketing into one unit and all those involved in accounting into another. Product departmentalization groups everyone working on the same product into the same unit. For example, automakers typically have units with titles such as Autos and Trucks. Customer departments are formed when every individual working with a specific group of customers is located in the same unit. Dell uses customer departmentalization to form units including Government, Education, and Personal User. Location departmentalization groups everyone working in the same region. A company with three divisions based on east, central, and west locations is using location as the basis of its departmentalization. 3. Distinguish between centralization and decentralization, and comment on their relative advantages and disadvantages. In a centralized organization, decisions are made at the top level of the organization and passed down to workers at lower levels. Power and authority are concentrated at the top of the organization. Advantages of centralization include speed and ease of decision making and strong control of actions, strategy, and risk. Disadvantages include the fact that top managers may be out of touch with needs at the lower levels, the burden of heavy vertical communication, and the possible lack of motivation and initiative by lower-level workers. In a decentralized organization, the workers who make the decisions are those who will be responsible for implementing them. Thus, power and authority are distributed throughout all levels of the hierarchy. The advantages and disadvantages of decentralization are opposite those for centralization, described above. 4. Describe the basic forms of organization design. What are the advantages and disadvantages of each? The U-form design is a functional approach that breaks the firm into specialties such as marketing, production, and accounting. This design is simple and clear, but it may not be adequate for controlling a large, complex organization. H-form designs combine a set of smaller unrelated businesses to form a holding company. Holding companies are very flexible and may be able to reduce overhead expenses. H-form firms, however, can be difficult to manage because management may lack expertise in each unrelated industry. M-form organizations are based on multiple businesses operating in related areas. This allows some activities to be decentralized and others to be centralized. The M-form provides a good balance of competition between units and cooperation over shared resources. The matrix design combines the functional department by creating product groups or temporary departments. Matrix designs allow firms to experience “the best of both worlds.” This design allows specialization, while also enhancing horizontal communication and giving management enhanced control. However, matrix designs may be confusing for workers who must report to two superiors. 5. Compare and contrast the matrix organization and the team organization, citing their similarities and differences. The matrix organization and the team organization are both attempts to improve the flexibility of an organization’s structure. Both form groups of workers as required by the various projects they undertake. However, the primary difference is that the team organization does away with functional structure altogether. This is shown by the fact that, in the matrix organization, workers are assigned to both a functional and a project supervisor. In the team organization, workers are assigned to a team leader. Questions for Analysis 1. How is specialization applied in such settings as a hospital, restaurant, school, and church? Service organizations can take advantage of specialization to become more efficient. For example, in the hospital, it is possible to have one person who only changes bed linens, while another sweeps and mops the floor. In a church, some people are in charge of seating the congregation and others help collect funds for the church. In schools, the registration process can be broken down into several parts, with individuals helping with registration forms, course selection, and ID pictures. A restaurant can have one person cooking burgers, while another prepares the buns and condiments. 2. Learn how your school or business is organized. Analyze the advantages and disadvantages of this form of departmentalization, and then comment on how well or how poorly other forms of departmentalization might work. Clearly, answers will vary depending on your school’s organization. However, in most institutions, academic units are organized by discipline, such as English, Chemistry, and Finance, to create functional departmentalization. However, there are probably elements of other forms of departmentalization as well. For example, many universities have separate colleges for graduate and undergraduate education, a form of customer departmentalization. If your school has satellite campuses in other parts of the city or state, with separate teaching and administrative staff, that is a form of regional departmentalization. 3. Identify five ways in which electronic coordination affects your daily life. Students should be able to easily find several examples of electronic coordination, including work or school related email, electronic contact and schedule information, web-based interfaces with work or school, electronic access to library information, and so on. Electronic coordination may be implemented on a variety of different types of hardware, including cell phones, personal computers, and personal digital assistants. 4. Each of the organization designs is appropriate for some firms but not for others. Describe the characteristics that a firm using the U-form should have. Then do the same for the H-form, the M-form, and the matrix design. For each item, explain the relationship between that set of characteristics and the choice of organization design. The U-form organization structure is best suited for organizations that use functional departmentalization, such as small or new firms or firms that manufacture a single product. The H-form is most appropriate for firms pursuing unrelated diversification, where each unit may act without coordinating with the other units. The M-form is best for firms pursuing related diversification because it enhances coordination between the units. Matrix designs work well for organizations that work on discrete projects, such as engineering, consulting, or accounting firms. Firms using the matrix design need functional expertise, but they also need flexibility and coordination across functions. 5. What are the benefits of using the learning organization approach to design? Now consider that, to learn, organizations must be willing to tolerate many mistakes, because it is only through the effort of understanding mistakes that learning can occur. With this statement in mind, what are some of the potential problems with the use of the learning organization approach? Benefits include a well-trained and satisfied workforce, flexibility, improved quality and efficiency, and continuous improvement. However, managers must balance the competing demands of learning and perfection. In order to facilitate learning, managers must tolerate mistakes. But too many mistakes can lead to a breakdown in performance and distract attention from goal achievement. Intel managers have developed a unique approach to handling this problem. They first develop the optimal plant design, a process that involves lots of mistakes and lots of opportunities for learning. Then, they “copy exactly” that plant design as they build future plants. In other words, once the design is perfected, it is then reproduced over and over again. This achieves a balance between learning and efficiency. Building Effective Conceptual Skills Exercise a. Purpose This exercise develops students’ conceptual skills by asking them to analyze a firm’s structure and then draw an appropriate organization chart. b. Format This exercise is best done outside of class, either individually or in a small group. It should take about 30 minutes to complete. c. Follow-up (1) Alone or with a partner, go online to research a publicly traded U.S. firm in which you’re interested. Focus on information that will help you understand the company’s structure. If you research Ford Motor Company, for example, you should look for information about different types of vehicles, different regions where Ford products are sold, and different functions that the company performs. (Hint: The firm’s annual report is usually available online and contains a great deal of helpful information, particularly in the section that contains an editorial message from the chairman or CEO and in the section that summarizes financial information. “Segment” data also points to divisional structure in many cases.) (2) Draw an organization chart based on your research. (3) Share your results with another group or with the class as a whole. Be prepared to explain and justify the decisions that you made in determining the firm’s structure. Clearly, answers will vary. Ask students whether they consider the design to be a U-form, H-form, M-form, matrix, or some other design. Investigate the reasons behind their choices. Building Effective Diagnostic Skills Exercise a. Purpose This exercise helps build the student’s diagnostic skills using the example of the decision whether to centralize or decentralize an organization. b. Format Students consider two scenarios, one whether a successful organization is deciding to decentralize the firm and the second where the decision is to centralize. The exercise task is to examine barriers to both centralization and decentralization. In addition, students are asked to deliberate on which implementation is likely to be easier and in what kind of organization would they like to work in. c. Follow-up There are no follow-up activities in this exercise. Skills Self-Assessment Instrument Delegation Aptitude Survey a. Purpose The purpose of this self-assessment is to help students gain insight into the process of and the attitudes important to delegation. b. Format Students complete the Delegation Aptitude Survey given in the exercise individually and compute their score. They then work in small groups and compare their scores . c. Interpretation The maximum score is 100 and the minimum score is 20. No score is right or wrong, and most individuals fall somewhere in the middle of the scale. Experiential Exercise a. Purpose The purpose of this exercise is to give you insights into how managers must make decisions within the context of creating an organizational design. b. Format Students think through a set of decisions under various scenarios in starting and running a chocolate company. They work individually first and then in small groups. c. Follow-up (1) How clear (or how ambiguous) were the decisions about organizational design? Student responses may vary. Some may argue that in the initial stages of the company, the decisions were clear but the ambiguity increased as the organization grew. (2) What are your thoughts about starting out too large to maintain stability, as opposed to starting small and then growing? Student responses may vary and some entrepreneurial minded students see no problems in starting out on a grand scale while others may see the logic of starting small and growing over time. (3) What basic factors did you consider in choosing a design? Factors such as job specialization (and its variants) as well as issues in departmentalization are likely to come up. MANAGEMENT AT WORK Strategic alliances in the airlines industry have become commonplace. The three largest are the Star Alliance, OneWorld, and SkyTeam. These alliances allow airlines to use codesharing, whereby you can buy a ticket from airline A to a destination not served by it and travel on airline B. The one most affected by consolidation in the industry is American Airlines, now the third largest in the industry. •Management Update: American Airlines (operating as AMR) reported losses in each of fiscal 2009, 2010, 2011, 2012, and 2013. Its market capitalization was $28.14 billion in late May 2014. 1. Take a situational view of organizational design. What roles have technology and environment played in the development of alliances and virtual organizations in the airline industry? In what ways does the corporate-level strategy of joining an alliance affect an airline’s organizational functions? Without the advances in Internet technology, airlines would find it difficult to implement code sharing, which is what drives airline alliances. The competitive environment also has had an impact, so if one set of airlines form an alliance, they are likely to get a competitive advantage and so would lead to others imitating them. Joining an alliance does have an impact on an airline’s functions. For example, the reservation function has to factor in the fact that tickets need to be sold to destinations not currently flown to by the airline, and this information has to be passed on to the one (in the alliance) that does. In addition, significantly more activity sharing has to be done if a member of an alliance. 2. In what ways might the divisional (M-form) designs of most airlines lend themselves to the requirements of alliance membership? In what ways might they be compatible with the organizational needs of the alliance themselves? The divisional (or M-form) design is based on multiple businesses in related operating areas operating within a larger organizational framework. Thus, for example, an airline can have a division that runs flights, one in hotels, one in car rentals, etc. Having such a design is useful in joining an alliance because it can be clearly stipulated that the alliance is for a specific division and does not encompass the entire company. In addition, having the airline division join an alliance (while the other divisions of the company are not in the alliance) also helps operationally because alliance members are clear in terms of what the contributions of each member are. 3. According to one industry analyst, “in a scale business …size does matter.” What does he mean by “a scale business.” Why is the airline industry “a scale business”? Once you’ve thought about these two questions, how would you describe the “specific opportunity” which, as virtual organizations, airline alliances are designed to exploit? A “scale business” refers to a business where large capital investments need to be made and where economies of scale are important for competitive advantage. The airline industry is a scale business because of the huge fixed costs of operating the business. There is a cost to run a flight and a large part of this cost is fixed. Filling up the seats, then, helps in this business because more filled seats means more revenue to get back the fixed costs and turn a profit. Alliances, however, come with a cost and very often these costs outweigh the gains. The advantage of virtual alliances is that costs can be minimized and gains maximized. 4. Have you ever been on a flight that involved a code sharing arrangement? Did you notice then – or do you realize now –that there were advantages to the practice of code sharing? Based on what you know about airline travel, list a few possible advantages of code sharing for passengers. While student responses will vary, here is an example scenario: Let’s say that you are in the U.S. as a student but originally from Christchurch, New Zealand. As a reward for doing well in school, your parents have suggested that prior to coming home to Christchurch for the 2012 summer vacation, you should spend a couple of days in London for the Olympics. You can book a flight for your entire travel by going to the United Airlines website. You would use United to fly (assuming that you go to an east coast university) to London and Air New Zealand to fly to Christchurch. Because United has a code sharing agreement with Air New Zealand (through the Star Alliance), you could make a single booking and add to your frequent flyer miles. YOU MAKE THE CALL Authority & Function at A&F 1. If you were hired to advise Michael Jeffries on A&F’s current organizational design, what weaknesses and potential threats would you identify? What strengths and opportunities? A&F has a functional or the U-form structure. The advantage of this structure is to develop functional experts and get economies of scale in functional activities. However, it’s key weakness is that it doesn’t allow people to work independently on distinct businesses. 2. What kind of organization design do you think would be best suited to Jeffries’ managerial style? Michael Jeffries was responsible for transforming A&F into the success it is today. A functional structure with its centralized management style seems to be the design of choice for Jeffries, who obviously wants total control. While a functional structure suits Jeffries management style, it is doubtful if this structure suits the company. 3. What differences might you expect to see between the organizational designs of such traditional retailers as A&F and American Eagle and those at online retailers such as Amazon.com and eBay? Amazon. Com sells a lot of different category of items, from books to electronics. It is possible that it has a M-form structure for each product category with a significant amount of centralization in logistics, etc. A similar structure is likely to be at eBay. Interestingly, though, A&F has a functional structure although it is a related diversified firm. 4. Assuming that you wanted a career in retailing, would you want to work for A&F? Why or why not? As this is a question based on personal preference, student responses would vary. Those who want to and like job specialization would obviously prefer to work at a company such as A&F with its functional structure. Those who want a well-rounded experience would not.. Chapter 7 Organization change and innovation END-OF-CHAPTER Questions for Review 1. What forces or kinds of events lead to organization change? Identify each force or event as the primary determinant of a planned or a reactive change. Both internal and external forces encourage change. External forces in the general and task environments may change, encouraging the organization to change. The task environment is most closely linked to the organization, and, therefore, any change in it will have a strong and immediate effect. Internal forces can also affect the organization. Generally, there is no way to know whether internal or external forces will result in planned or reactive change, but management should try to anticipate changes so that it can plan to deal with them rather than having to respond in a piecemeal manner. Thus, whether an event or (external/internal) forces trigger planned or reactive change depends upon the specific organization. For example, watchmaker Swatch foresaw the decline in demand for high-priced, hand-built watches and thus responded to that decline with a planned change. Traditional Swiss watchmakers failed to foresee the decline and, therefore, had to respond with a reactive change. 2. Compare planned and reactive change. What are the advantages of planned change, as compared to reactive change? Planned change has the advantage of a systematic and logical process for planning and implementation of a change. The process allows time for thorough investigation into causes, for careful consideration of alternatives, for solicitation of feedback, and for orderly implementation of the chosen alternative. 3. Identify the primary reasons that people resist change and then summarize the primary methods managers can use to overcome this resistance. People resist change for a number of reasons, including uncertainty, threatened self-interest, different perceptions, and feelings of loss. To overcome resistance to change, one of the most powerful techniques is participation, which empowers employees to make decisions about the change and how it will be implemented. When individuals have participated in planning a change, they are much less likely to resist the change. Other activities include education and communication, facilitation, and force-field analysis. 4. In a brief sentence or just a phrase, describe each of the OD techniques. OD techniques include the following: (1) diagnostic activities—quizzing workers and examining archives to determine the causes of problems, (2) team building—fostering good interpersonal relations and participation, (3) survey feedback—using surveys to measure perceptions, (4) education—training in “people” skills, (5) intergroup activities—working to improve the relationship between two or more groups, (6) third-party peacemaking—resolving a conflict between others through intervention by an outside party, (7) technostructural activities—changing the organization design and/or the prevailing technology; (8) process consultation—improving interpersonal processes with the observation and recommendations of an expert, (9) life and career planning—helping employees form personal and career goals, (10) coaching and counseling—recommending performance improvements to workers and managers, and (11) planning and goal setting—teaching the mechanics of the decision-making process. 5. Consider the following list of products. Categorize each along all three dimensions of innovation, if possible (radical versus incremental, technical versus managerial, and product versus process). Explain your answers. • Teaching college courses by digitally recording the instructor and then making the digital file available online • The rise in popularity of virtual organizations (discussed in Chapter 6) • Checking the security of packages on airlines with the type of magnetic resonance imaging (MRI) scanning devices that are common in healthcare • Smartphone devices such as the iPhone • Robotic arms that can perform surgery that is too precise for a human surgeon’s hands • Hybrid automobiles, which run on both batteries and gasoline • Using video games to teach soldiers how to plan and execute battles Online college courses—a radical, technical, product and process innovation. Virtual organizations—a radical, technical and managerial, process innovation. MRI scanning of packages—an incremental, technical, process innovation. An all-purpose communication device—an incremental, technical, product innovation. Robotic surgery—an incremental, technical, process innovation. Hybrid automobiles—an incremental, technical, product innovation. Military training via video games—an incremental, technical and managerial, process innovation. Questions for Analysis 1. What symptoms should a manager should look for in determining whether an organization needs to change? What symptoms indicate that an organization has been through too much change? Poor performance, defined broadly, is the best indicator of the need to change. Poor performance might be manifested in declining profitability, falling sales, negative customer feedback, dissatisfied employees, and so on. An organization that has changed too much or too quickly will find high resistance to further change, inefficiency, and chaotic or incomplete organizational systems and processes, among other signs. 2. Assume that you are the manager of an organization that has a routine way of performing a task and now faces a major change in how it performs that task. Using the Lewin model, tell what steps you would take to implement the change. Using the comprehensive approach, tell what steps you would take. For each step, give specific examples of actions you would take at that step. Lewin states that organizations must unfreeze, or accustom employees to the need for change, before beginning the change. So students should focus first on convincing employees that change is needed. This might involve showing negative performance results to employees. Next, the change should be implemented. Finally, the organization must be “refrozen” in its new configuration. This might involve working to fix any remaining problems related to the change and reassuring workers that the change is now complete. 3. Think back to a time when a professor announced a change that you, the student, did not want to adopt. What were the reasons for your resistance to change? Was the professor able to overcome your resistance? If so, tell what he or she did. If not, tell what he or she could have done that might have been successful. Students’ answers will vary, but most will probably mention uncertainty about exactly what the change would involve, threatened self-interests, and different perceptions, especially in the gap between the perceptions of the teacher and the students. Professors that were successful in overcoming resistance probably asked students to participate in making decisions related to the change, explained the change carefully, answered students’ questions thoughtfully, and announced the change well in advance. Professors who were unsuccessful in overcoming resistance should consider one or more of those tactics in the future. 4. Some people resist change, while others welcome it enthusiastically. To deal with the first group, one needs to overcome resistance to change; to deal with the second, one needs to overcome resistance to stability. What advice can you give a manager facing the latter situation? The people who resist stability are searching for something new, different, or better all the time. Some resistance to stability is appropriate and useful to move a business forward. However, people must possess enough stability to reduce the need to always be seeking change. To allow this stability, individuals should be encouraged to look at the good in the present. Although stability may not appear to be motivating, individuals may not be seeing the value in the way things are at present. 5. Can a change made in one area of an organization—in technology, for instance—not to lead to change in other areas? If you think that change in one area must lead to change in other areas, describe an example of an organization change to illustrate your point. If you think that change can occur in just one area without causing change in other areas, describe an example of an organization change that illustrates your point. Students’ opinions will vary. For example, if the student feels that change in one area must lead to changes in other areas, they may tell about a time when their employer redesigned jobs and then had to train workers in the newly required skills. Building Effective Decision-Making Skills Exercise a. Purpose Decision-making skills are developed in this exercise through an analysis of an actual innovative product and a discussion of the commercialization of that innovation. b. Format The students must use the Internet, so the exercise is best done outside of class. It could be done by an individual or a small group and can be completed in about 20–30 minutes. c. Follow-Up 1. Use the Internet to locate information about at least five promising new technologies. (Hint: The web sites of publications that report technology news such as TechWeb, are good sources, as are the web sites of innovative companies likes 3M. Or search the term “technology venture capital” to locate firms that invest in new technologies and then find out what you can learn about their clients.) Then choose the new technology that interests you the most. 2. Next, describe the current status of your chosen technology in the innovation process. Explain how you arrived at your decision about where to place the technology in the innovation process. Students should not have trouble finding information about an innovation. They should be able to use information from “The Innovation Process” section of the text to correctly identify the current phase of the innovation process. 3. Finally, discuss the kinds of advice and expertise that this idea and its company need to grow into a successful start-up. Correct answers to this question will depend on the students’ answers to Question 2. For example, if the current phase of the idea is innovation development, then managers need to refine the idea through further study, experimentation, testing, and so on. Scientific or technical expertise would be most helpful. Building Effective Diagnostic Skills Exercise a. Purpose: This exercise aids students in understanding how managers approach making decisions related to organization change. b. Format: The diagnostic skills exercise can be performed individually or in groups. It should take about 15–30 minutes to complete. c. Follow-up (1) Rank-order your four alternatives in terms of their probable success. Make any necessary assumptions. (2) Identify alternatives other than the four that you first identified. (3) Can more than one alternative be pursued simultaneously? Which ones? (4) Develop an overall strategy for trying to save the hotel while also protecting your own interests. Students’ answers will vary considerably, depending upon which alternative they prefer and on the assumptions they make. However, all students should see that significant changes must occur in the near future and will involve the owners, franchisers, employees, and managers. You can point out to students that, in many decisions, there are often additional opportunities to implement alternatives simultaneously, using the best features of each. Finally, students should realize that, in the face of a difficult situation, protecting one’s self-interests may involve seeking another job, even while continuing to work toward a happy resolution at the current job. Skills Self-Assessment Instrument Innovation and Learning Styles Scale a. Purpose: The innovation and learning styles scale (developed by David Kolb) is designed to help students assess their preferred mode of learning. b. Format: Students should respond individually and privately to the items in this self-assessment, although class or small-group discussion should follow to expand upon the points illustrated in the assessment. c. Interpretation Add scores for 1a, 2d, 3b, and 4b. This is your Accommodator Score. Add scores for 1b, 2a, 3d, and 4d. This is your Diverger Score. Add scores for 1c, 2c, 3c, and 4a. This is your Converger Score. Add scores for 1d, 2b, 3a, and 4c. This is your Assimilator Score. While everyone uses each of the four styles at times, whichever score is higher is your preferred mode. Experiential Exercise Team Innovation a. Purpose The exercise is a skill builder that focuses on giving practice to students on innovation as a team activity. b. Format For this small-group activity, students will need to design and construct a new product using the materials given to them. c. Follow-up (1) How much influence did the selection of materials have on your design? What, if anything, does this suggest to you about organization resources and their effect on innovation? (2) Explain the process your group used to come up with the design. Describe how many people participated, how they participated, how any disagreements were resolved, and so on. What, if anything, does this suggest to you about some of the potential advantages as well as the challenges of team-based innovation in organizations? (3) Describe the various roles played by members of your group. For example, did anyone function primarily as a “voice of caution”? Did anyone serve as a devil’s advocate? Did anyone work as a facilitator, smoothing over feelings and resolving conflicts? Were some members better at design, or at implementation? What, if anything, does this to you regarding the various roles that individuals take in the innovation process in organizations? Discussion of all these three questions will vary depending upon student experiences as they go through this creative process. MANAGEMENT AT WORK THE SCIENCE OF THE DEAL 1. You’re an up-and-coming assistant to a manager at Roche Group. Your boss is being transferred to the company’s newly acquired research facilities at the former Genentech headquarters in San Francisco. She’s asked you to compile a brief report on Genentech’s overall approach to product innovation. What will you say in your report? (Hint: Structure your report according to the three forms of innovation discussed in the text: radical versus incremental, technical versus managerial, and product versus process). The key to Genentech’s overall approach to innovation is to eschew the “not invented here” syndrome. The company actively seeks partnerships to fill those areas where its pipeline is weak. The company also believes in partnerships where the two work together and share the science and partner in development. In its partnerships it emphasizes radical, technical, and product innovations. 2. Ex-Roche chairman Franz Humer committed the parent company to sustaining Genentech’s “innovative culture,” and his successor, Severin Schwan, has stated that he intends to “keep the two respective research and early development organizations as independent units”; merging the two R&D units he says, “would kill innovation” at Genentech. Schwan needs suggestions on how best to follow through on both Humer’s commitment and his own. It is no surprise that your boss has asked you to furnish her with two or three ideas that she might pass on to the CEO. What will your suggestions be? Genentech’s innovative culture embraces looking outside the company for new drugs. They encourage both in-licensing and out-licensing ventures with outside partners. In short, they are not wedded to the “not invented here” syndrome. That’s what Schwan needs to do to continue Genentech’s innovative culture. 3. Despite the commitments made by its CEOs, Roche Group is an immense company. It employs more than 80,000 people in 150 countries and posted revenues of $48 billion in 2012. There will undoubtedly changes at Genentech. Generally speaking, what sort of changes might you expect in the following areas – organization structure and design, technology and operations, and people, attitude, and behaviors? While student responses will vary, it is important for them to know that in the past Genentech was an independent U.S. company while now it is a division of the much larger, Switzerland-based Roche Group. Structurally, there are likely to be additional reporting layers in Genentech in order for the corporate office at Roche to monitor them. While Genentech thrived on partnerships in the past, they may be forced to look inward for help in technology and operations. Most importantly, its culture could be affected by both being part of a larger company and reporting to non-U.S. managers. YOU MAKE THE CALL Cultivating Innovation at IKEA IKEA is the brainchild of the Swedish entrepreneur, Ingvar Kamprad. To its many admirers, IKEA is the cult-like furniture store featuring inexpensive products with minimalist European design. The main reason for the company’s striking world-wide success is its relentless focus on innovation – both in terms of products as well as processes. Discussion Starter: Ask students if they had shopped at IKEA? If so, have them share with the class what they perceive to be the major differences between IKEA and the typical furniture store. 1. You’re an IKEA store manager, and corporate headquarters has instructed you to change the layout of your store. The change must be “dramatic,” but the details are up to you. What steps will you take to ensure that you’ll be successful? The chapter defines a planned change as “change that is designed and implemented in an orderly and timely fashion in anticipation of future events.” Nevertheless, this is change and so you (as the store manager) have to anticipate resistance to change from employees and customers. This is a good question to allow students to use Kurt Lewin’s change model and have students identify typical change resistors, etc. 2. There’s an IKEA TV ad that features a discarded lamp, forsaken on a rainy night in some American city. A man looks at the camera and says in a sympathetic Swedish accent, “Many of you feel bad for this lamp,” and then, after a well-timed pause, “That’s because you’re crazy.” What’s the message of the commercial? IKEA wants consumers, typically their American consumers, to stop thinking of furniture as durable goods that they buy and keep forever. This commercial stresses the importance of “letting go” and think about replacing the “old’ product with a new one. Rather than feel sorry about the old lamp, the commercial urges people (albeit subtly) to discard the old and buy a new replacement. The chapter defines a planned change as “change that is designed and implemented in an orderly and timely fashion in anticipation of future events.” Nevertheless, this is change and so you (as the store manager) have to anticipate resistance to change from employees and customers. This is a good question to allow students to use Kurt Lewin’s change model and have students identify typical change resistors, etc. 3. One IKEA executive says that the current global economic situation has “pushed innovation” at the company. In fact, he says, “This is a great time to be more innovative.” Explain what he means. IKEA competes on design and its low prices. As the case states, IKEA prices are typically 20-50 percent lower than competing stores. Product design and development starts with the price point. As the global economic situation affects people’s buying power, IKEA has to continually innovate to push down prices. It is indeed a great time for the company to be innovative. 4. Would you want to manage an IKEA store? Why or why not? Answers may vary depending upon student preferences. Some may like to work for an innovative company that constantly rethinks the way it does business, while others may opt for a safer employer. Chapter 8 Managing Human Resources in Organizations END-OF-CHAPTER Questions for Review 1. Describe the steps in the process of human resource planning. Explain the relationships between the steps. The first step is job analysis, in which the content and requirements of each of the organization’s jobs is defined. Then human resource managers must forecast the organization’s labor needs and supply in each job by looking at internal and external information. Finally, the demand and supply of workers in each job must be matched, which can involve increasing or decreasing the number of workers. 2. Describe the common selection methods. Which method or methods are the best predictors of future job performance? Which are the worst? Why? Common selection methods include application blanks, in which applicants provide factual information about their background and experiences. Tests may range from skills-based to personality tests. Interviews are another technique. Assessment centers provide realistic tasks for the applicant to complete under observation. The best predictors include assessment centers and tests, if the assessments are related to future job requirements. Application blanks are only able to obtain limited information. Interviews are often the worst indicators of job performance because of interviewer biases and lack of relation to job requirements. 3. Compare training and development, noting any similarities and differences. What are some of the commonly used training methods? Training and development both involve teaching skills to employees. However, training focuses on operational or technical employees and on their current job needs. Development is typically offered to managers and professionals and often is more future-oriented. 4. Define wages and benefits. List different benefits that organizations can offer. What three decisions must managers make to determine compensation and benefits? Explain each decision. Wages are one type of compensation and refer to the hourly compensation paid to operating employees. Benefits include everything of value that organizations use to reward employees, except compensation. Benefits could include such things as leave time, insurance, pensions, dependent care, free meals or use of gym facilities, and paid parking, and it may also include unusual or innovative rewards. The wage-level decision asks a firm to choose whether to offer compensation that is above, at, or below the average wages for that industry and region. The wage-structure decision requires choices about the relative worth of different tasks to the organization. Individual wage decisions are made for each person. They are influenced by the firm’s wage-level and wage-structure decisions, as well as an evaluation of an individual’s experience, qualifications, and merit. 5. What are the potential benefits of diversity? How can individuals and organizations more effectively manage diversity? Diversity conveys a number of benefits, including higher productivity and lower turnover and absenteeism, leading to lower costs. Diverse organizations are seen as good employers and will better understand different market segments. Finally, diverse organizations tend to be more creative and innovative. Managers need to understand the nature of diversity and try to appreciate the perspectives of others. Managers should display tolerance with behavior of people from other cultures and they must also have excellent communication that can be understood by all members of the organization. Organizations should establish policies that favorably affect how people are treated and how employees perceive the organization’s approach to diversity. Diverse organizations must also be flexible and should consider diversity training to better enable members of an organization to function in a diverse workplace. Questions for Analysis 1. The Family and Medical Leave Act of 1993 is seen as providing much-needed flexibility and security for families and workers. Others think that it places an unnecessary burden on business. Yet another opinion is that the act hurts women, who are more likely to ask for leave, and shuffles them off to a low-paid “mommy track” career path. In your opinion, what are the likely consequences of the act? You can adopt one of the viewpoints expressed above or develop another. Explain your answer. Some students will describe the benefits to workers, organizations, and society that come with the provision of leave to workers experiencing family or medical emergencies. Other students will argue that organizations should not bear the costs associated with the leave—that workers themselves or society as a whole should do so instead. Still others are likely to focus on the differential use of the act by men and women, which tends to put female workers at a disadvantage in their careers. 2. How do you know a selection device is valid? What are the possible consequences of using invalid selection methods? How can an organization ensure that its selection methods are valid? The information gained from a selection device must be able to predict future job success, which is known as validation. There are two forms of validation: (1) predictive validation—collecting information from employees or applicants and correlating it with actual job performance, and (2) content validation—assessing actual job skills (determined by a job analysis) in a “work-sample testing” of applicants to measure their skill level. The use of invalid selection methods tends to exclude applicants who would be high performers if hired and to cause the organization to instead hire workers who do not have the characteristics necessary for success. Validity can best be achieved by ensuring that all predictors used for selection are performance based. 3. Consider a job that you have held or with which you are familiar. Describe how you think an organization could best provide an RJP for that position. What types of information and experiences should be conveyed to applicants? What techniques should be used to convey the information and experiences? Students will offer a variety of answers to this question. Their responses should include a description of the most important skills, traits, or experiences that a qualified applicant should have and an explanation of how those characteristics can be tested and observed through the use of a simulated job task or situation. For example, an applicant for a management consulting position might be required, in a short period of time and under pressure, to perform a financial and strategic analysis of a case study and present his or her conclusions to a mock “board of directors.” 4. How would managing nonunionized workers differ from managing workers who have elected to be in a union? Which would be easier? Why? Managing unionized workers may be simpler for managers in some respects because procedures for handling problems would be well-defined and recognized by both management and workers. On the other hand, management may not be as flexible in handling problem or unique situations because union rules may restrict management actions to some extent. 5. In what ways would managing temporary employees be easier than managing traditional permanent employees? In what ways would it be more difficult? What differences would likely exist in your own behavior if you were in a contingent or temporary job versus a traditional permanent job? With temporary workers, management does not have to be as concerned about long-range issues, such as building loyalty, creating teamwork, development and training, and establishing an effective long-term working relationship. In addition, if the temporary worker is not effective, management can simply request a replacement. With permanent workers, managers must be more concerned about long-range issues and they must work to establish a relationship that will endure and be effective over a longer period of time. Temporary workers would typically have less loyalty, teamwork, initiative, motivation, and job-specific skills, as compared to permanent employees. They may exhibit less organizational citizenship, instead asking, “What’s in it for me?” in response to every management request. However, temporary workers may also bring fresh enthusiasm and new ideas to jobs that permanent workers find routine. Temps may be willing to work harder than permanent employees, knowing that their commitment is only for the short term. Building Effective Decision-Making Skills Exercise a. Purpose This decision-making exercise is designed to provide students with practice in data analysis and choice, in issues related to career planning. b. Format This exercise should be performed by individual students outside of class and should take about 30 minutes to complete. Questions 6 and 7 may be used as the basis of an in-class discussion. c. Follow-up (1) Access a summary of the Department of Labor’s National Compensation Survey at http://stats.bls.gov/ncs/ocs/sp/ncbl0449.pdf (if the page has been moved, search by the survey title). Find the detailed data related to the occupation that you regard as your most likely career choice when you graduate. Then, locate detailed data about two other occupations that you might consider – one with a salary that’s higher than that of your number-one career choice and one with a salary that’s lower. (2) Next, record the hourly salary data for each of your three choices, and then use the hourly salary to project an expected annual income. (Hint: Full-time jobs require about 2,000 hours annually.) (3) Based purely on salary information, which occupation would be the “best” for you? Students’ answers will vary, depending on the occupations they choose and the information they find. The students will agree that, if salary is the only variable under consideration, higher salaries are preferable to lower ones. (4) Now, go to www.bls.gov/oco and access job descriptions for various occupations. Review the description for each of the three career choices that you’ve already investigated. (5) Based purely on job characteristics, which occupation would be the “best” for you? Again, answers will vary, based on the occupations chosen and the students’ preferences. Every student should be able to find an occupation that would be interesting and rewarding to them. (6) Is there a conflict between your answers to questions 3 and 5? If so, how do you plan to resolve it? For some students, the highest-paid occupation also has the most desirable other characteristics. However, some students will find that their most desired jobs are not the most highly paid. Students will have a variety of answers to the second part of the question, ranging from plans to accept lower pay for a more desirable job, to plans to “put up with” an undesirable job in order to achieve more pay. Creative solutions are possible, such as holding two jobs or working in a desirable field as a volunteer or part-time worker. It may be instructive for students to hear each others’ answers to this question because it may suggest new, creative solutions to them. (7) Are there any job characteristics that you desire strongly enough to sacrifice compensation in order to have them? What are they? What are the limits, if any, on your willingness to sacrifice pay? Opinions will vary. Every student, however, will identify some “floor” of acceptable pay and would refuse to accept any job, even the most desirable, if that minimum is not met. For some students the floor may be relatively high, while for others it would be barely enough to cover survival essentials. Building Effective Technical Skills a. Purpose This exercise will develop the students’ understanding of the issues that must be considered when selecting job candidates. b. Format This technical skills exercise is best performed individually and should take about 20–30 minutes. c. Follow-up (1) Identify the most basic skills that you think are necessary for someone to perform each job effectively. (2) Identify the general indicators or predictors of whether or not a given individual can perform each job. Answers will vary depending on the jobs selected. Depending on which skills are mentioned in question 1, question 2 answers might include prior job experiences, formal education, performance on skills assessments, and personality traits, among others. (3) Develop a brief set of interview questions that you might use to determine whether or not an applicant has the qualifications to perform each job. The questions will depend on the answers to question 2. Most students will mention asking about prior jobs, education, skills, and traits. (4) How important is it for you, as a manager hiring an employee to perform a job, to possess the technical skills to do the job that you’re trying to fill? Most students will reply that it is not important to have the technical skills. Managers usually do not have the skills, and they are able to select candidates based on impartial assessments of those skills, such as prior experiences or test scores. However, managers need to be informed about which skills are needed; otherwise, they would not be able to select effectively. Skills Self-Assessment Instrument What Do Students Want from Their Jobs? a. Purpose The purpose of this skills assessment is to help students learn to understand how to motivate individuals with different values and perceptions. b. Format Students should respond individually to the items in this self-assessment. Small-group or class discussion should be used to discuss the results. c. Follow-up (1) How much variation do you see in the job value rankings in Column 1—that is, are students’ values quite different, moderately different, or very similar overall? Variations are likely to be present as student values may be different. (2) If there are significant differences between individuals, what impact might these differences have on the recruiting process? On the training process? On the performance evaluation and compensation process? If the values are different, then how such people are recruited, trained, evaluated and compensated may also be different. (3) How much variation do you see in the responses for Column 2—that is, does your group or class agree on how employers perceive college students? Responses will vary. (4) Is there a large difference between how you think employers perceive college students and your group’s or class’s reported job values? If there is a large difference, what difficulties might this create for job seekers and potential employers? How might these difficulties be reduced or eliminated? Answers may vary depending on student responses. Experiential Exercise Choosing a Compensation Strategy a. Purpose The goal of this exercise is to aid students in understanding the internal and external forces that affect compensation strategies in organizations. b. Format Have the students complete step one independently and then have them compare their answers, discussing the strengths and weaknesses of each choice. Follow-up questions can become the basis of group or class discussion, and questions 1 and 2 could be the basis of a written individual or group assignment. c. Follow-up (1) Are there other options that might be pursued? Students might find a variety of other options. For example, if the current faculty were made aware of the problem, they might be willing to voluntarily take on heavier teaching responsibilities in exchange for higher salaries. One university asked the most highly paid faculty, those with endowed chairs, to voluntarily offer to give up a portion of their pay to help fund salary increases for those faculty experiencing salary inequity. Some complied and some did not. This caused a split in the faculty and led to great resentment. There is no perfect option—every option will have some financial or other cost. (2) Assume that you chose Option 2 (hire the most qualified, pay market salaries, and deal with internal inequities later). How would you go about dealing with the internal equity problems? One idea is to find a nonfinancial way to compensate the more experienced professors, say, to offer sabbatical leave, or the most desirable classes and schedules, or increase their research or travel funding, etc. However, these funds may be out of the control of the decision maker in this exercise. The inequity problems will be most visible at the boundary between titles. For example, if an associate is hired at $70,000, then the full professors making less than that will be especially upset. Another idea, then, would be to try to find a way to accelerate the promotion schedule, which allows faculty to receive higher salaries over time. This idea, too, has drawbacks. Although some partial solutions exist, every answer will dissatisfy some. (3) Discuss with your instructor the extent to which this problem exists at your school. Without revealing specific details or names, a frank discussion of equity issues at your university could be enlightening to students. For example, are any younger faculty currently paid more than older, more experienced faculty? Ask students if they consider this to be fair, and why. If you have the information, you might also compare salary equity across departments or colleges within your school. Again, ask students to consider the fairness of your school’s compensation plan. When discussing fairness, you will probably find some students who assert that compensation should be based purely on employee-specific factors such as experience, training, education, contribution to the school, etc. Other students might take the position that external market forces should prevail. These students would find it acceptable to pay newer faculty more than more experienced faculty if inflation of wages had occurred over time. These students would also agree that faculty in some departments, perhaps finance or engineering, should be paid more, while faculty in departments such as physical education or humanities should be paid less. MANAGEMENT AT WORK THE TEMPTATIONS OF TEMPING The opening case describes how temporary labor has gained prominence in recent years. There are benefits to being a temporary worker, both for the employee as well as for the employer. The employee can try out the employer before making a commitment, and the employer gets the flexibility in changing times. However, temporary workers do not get the same benefits as regular workers do. Discussion Starter: Ask students if they have ever worked in a temporary job. If so, what attracted them to such a job? What were the drawbacks to holding a temporary job? It’s also useful to have students look at temporary jobs from the employer’s viewpoint. How do you motivate such employees? 1. You’re a senior manager at a growing business and you’re ready to add employees. Your HR manager has recommended a temp-to-perm policy. You know the advantages of this approach, but what might be some of the disadvantages? The major disadvantage is that the temp workers that you hire may not stick around at your company for long, particularly if they are employees who have chosen the temp route only because they cannot find a permanent job. The second disadvantage is the challenge of motivating temp employees, particularly when such employees are paid by the agency and not by your company and many of the benefits that you offer your employees may not be available to them. 2. Assume that you’re a prospective job seeker (which you may very well be). What do you personally see as the advantages and disadvantages of taking a temp-to-perm position? Under what circumstances are you most likely to take a temp-to-perm position? Student opinions may vary, but the likely reasons could be: the ability to try out a company and an industry before making a long-term commitment, ability to acquire skills and strengthen one’s resume to land a better job, achieving work-life balance, etc. Depending on the student’s age, gender, and financial situation, different conditions may be conducive to such jobs. 3. What sort of challenges are likely to confront a manager who supervises a mix of temporary and permanent employees? In what ways might these challenges differ if the temporary workers have been hired on a temp-to-perm basis rather than on a strictly temporary basis? Motivation is the key challenge facing such a manager because not all of the temporary employees may be willing to wait for their position to be made permanent and may be looking out for permanent opportunities elsewhere. In addition, such employees may not get all the benefits that permanent employees get and so they cannot be used to motivate them. YOU MAKE THE CALL No Company for Old-Fashioned Management 1. If you were an HR executive at Wegmans, would you focus more on internal recruiting or on external recruiting? Would your strategy for higher-level positions differ from your strategy for lower-level positions? How would current economic conditions influence your strategy? Wegmans would have to do external recruiting for entry-level positions. The current economy would come into play because the pool of candidates would be quite high and the company has to carefully sift through the applicant pool to find the right employees. However, given that lower-level employees have the knowledge and experience, it makes sense for Wegmans to do a lot of internal recruiting for middle and upper level positions. 2. As an HR executive at Wegmans, you need to hire a group of new employees as part of your management-trainee program—people who will be put on a track leading, ultimately, to positions as store managers. Briefly outline your program for developing these employees. As a store manager, a person has to be familiar with various departments (cheese, produce, etc.). So, a development program should rotate these trainees through the various departments in a store. In addition, their training should include knowledge of human resources and profit and loss management. 3. If you were an employee at Wegmans, how would you expect your annual performance appraisal to be conducted? Given the company’s customer-relations strategy, which appraisal methods do you think would be most appropriate? Customer feedback should be an important part of an employee’s appraisal, although it may be difficult to operationalize this to the level of an individual employee. Solution Manual for Fundamentals of Management Ricky W. Griffin 9781285849041, 9780357039168