PRINCIPLES PRACTICES OF MANAGEMENT Copyright 2004 Prentice Hall

PRINCIPLES & PRACTICES OF MANAGEMENT Copyright © 2004 Prentice Hall, Inc. All rights reserved. 1

Organizations • Organization Ø A systematic arrangement of people brought together to accomplish some specific purpose; applies to all organizations—for-profit as well as not-for-profit organizations. Ø Where managers work (manage) • Common characteristics Ø Goals Ø Structure Ø People Copyright © 2004 Prentice Hall, Inc. All rights reserved. 2

Common Characteristics of Organizations EXHIBIT 1. 1 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 3

People Differences • Operatives Ø People who work directly on a job or task and have no responsibility for overseeing the work of others • Managers Ø Individuals in an organization who direct the activities of others Copyright © 2004 Prentice Hall, Inc. All rights reserved. 4

Organizational Levels EXHIBIT 1. 2 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 5

Identifying Managers • First-line managers Ø Supervisors responsible for directing the day-to-day activities of operative employees • Middle managers Ø Individuals at levels of management between the firstline manager and top management • Top managers Ø Individuals who are responsible for making decisions about the direction of the organization and establishing policies that affect all organizational members Copyright © 2004 Prentice Hall, Inc. All rights reserved. 6

Management Defined • Management Ø The process of getting things done, effectively and efficiently, through and with other people Ø Efficiency v Means doing the thing correctly; refers to the relationship between inputs and outputs; seeks to minimize resource costs Ø Effectiveness v Means doing the right things; goal attainment Copyright © 2004 Prentice Hall, Inc. All rights reserved. 7

Efficiency and Effectiveness EXHIBIT 1. 3 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 8

Management Process Activities Management process: planning, organizing, leading, and controlling Copyright © 2004 Prentice Hall, Inc. All rights reserved. EXHIBIT 1. 4 9

Management Process • Planning Ø Includes defining goals, establishing strategy, and developing plans to coordinate activities • Organizing Ø Includes determining what tasks to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made Copyright © 2004 Prentice Hall, Inc. All rights reserved. 10

Management Process • Leading Ø Includes motivating employees, directing the activities of others, selecting the most effective communication channel, and resolving conflicts • Controlling Ø The process of monitoring performance, comparing it with goals, and correcting any significant deviations Copyright © 2004 Prentice Hall, Inc. All rights reserved. 11

Mintzberg’s Managerial Roles • Interpersonal Ø Figurehead Ø Leader Ø Liaison • Informational • Decisional Ø Entrepreneur Ø Disturbance hander Ø Resource allocator Ø Negotiator Ø Monitor Ø Disseminator Ø Spokesperson Source: Adapted from The Nature of Managerial Work (paperback) by H. Mintzberg, Table 2, pp. 92– 93. Copyright © 1973 Addison Wesley Longman. Reprinted by permission of Addison Wesley Longman. Copyright © 2004 Prentice Hall, Inc. All rights reserved. EXHIBIT 1. 5 12

Is The Manager’s Job Universal? • Level in the organization Ø Do managers manage differently based on where they are in the organization? • Profit versus not-for-profit Ø Is managing in a commercial enterprise different than managing in a non-commercial organization? • Size of organization Ø Does the size of an organization affect how managers function in the organization? • Management concepts and national borders Ø Is management the same in all economic, cultural, social and political systems? Copyright © 2004 Prentice Hall, Inc. All rights reserved. 13

Distribution of Time per Activity by Organizational Level Source: Adapted from T. A. Mahoney, T. H. Jerdee, and S. J. Carroll, “The Job(s) of Management, ” Industrial Relations 4, No. 2 (1965), p. 103. Copyright © 2004 Prentice Hall, Inc. All rights reserved. EXHIBIT 1. 6 14

Importance of Managerial Roles in Small and Large Businesses Source: Adapted from J. G. P. Paolillo, “The Manager’s Self Assessments of Managerial Roles: Small vs. Large Firms, ” American Journals of Small Business, January–March 1984, pp. 61– 62. Copyright © 2004 Prentice Hall, Inc. All rights reserved. EXHIBIT 1. 7 15

General Skills for Managers • Conceptual skills Ø A manager’s mental ability to coordinate all of the organization’s interests and activities • Interpersonal skills Ø A manager’s ability to work with, understand, mentor, and motivate others, both individually and in groups • Technical skills Ø A manager’s ability to use the tools, procedures, and techniques of a specialized field • Political skills Ø A manager’s ability to build a power base and establish the right connections Copyright © 2004 Prentice Hall, Inc. All rights reserved. 16

Specific Skills for Managers • Behaviors related to a manager’s effectiveness: Ø Controlling the organization’s environment and its resources. Ø Organizing and coordinating. Ø Handling information. Ø Providing for growth and development. Ø Motivating employees and handling conflicts. Ø Strategic problem solving. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 17

Management Charter Initiative Competencies for Middle Managers 1. Initiate and implement change and improvement in services, products, and systems 6. Develop teams, individuals, and self to enhance performance 2. Monitor maintain, and improve service and product delivery 7. Plan, allocate, and evaluate work carried out by teams, individuals and self 3. Monitor and control the use of resources 4. Secure effective resource allocation for activities and projects 5. Recruit and select personnel 8. Create, maintain, and enhance effective working relationships 9. Seek, evaluate, and organize information for action 10. Exchange information to solve problems and make decisions EXHIBIT 1. 8 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 18

How Much Importance Does The Marketplace Put On Managers? • Good (effective) managerial skills are a scarce commodity. Ø Managerial compensation packages are one measure of the value that organizations place on them. Ø Management compensation reflects the market forces of supply and demand. v Management superstars, like superstar athletes in professional sports, are wooed with signing bonuses, interest-free loans, performance incentive packages, and guaranteed contracts. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 19

Why Study Management? • We all have a vested interest in improving the way organizations are managed. Ø Better organizations are, in part, the result of good management. • You will eventually either manage or be managed Ø Gaining an understanding of the management process provides the foundation for developing management skills and insight into the behavior of individuals and the organizations. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 20

How Does Management Relate To Other Disciplines? Sociology Political Science Psychology Management Economics Philosophy Anthropology Copyright © 2004 Prentice Hall, Inc. All rights reserved. 21

Copyright © 2004 Prentice Hall, Inc. All rights reserved. 22

The Pre-modern Era • Ancient massive construction projects Ø Egyptian pyramids Ø Great Wall of China • Michelangelo the manager Copyright © 2004 Prentice Hall, Inc. All rights reserved. 23

Adam Smith’s Contribution To The Field Of Management • Wrote the Wealth of Nations (1776) Ø Advocated the economic advantages that organizations and society would reap from the division of labor: v Increased productivity by increasing each worker’s skill and dexterity. v Time saved that is commonly lost in changing tasks. v The creation of labor-saving inventions and machinery. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 24

The Industrial Revolution’s Influence On Management Practices • Industrial revolution Ø Machine power began to substitute for human power v Lead to mass production of economical goods Ø Improved and less costly transportation systems became available v Created larger markets for goods. Ø Larger organizations developed to serve larger markets v Created the need formalized management practices. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 25

Classical Contributions • Classical approach Ø The term used to describe the hypotheses of the scientific management theorists and the general administrative theorists. v Scientific management theorists – Fredrick W. Taylor, Frank and Lillian Gilbreth, and Henry Gantt v General administrative theorists – Henri Fayol and Max Weber Copyright © 2004 Prentice Hall, Inc. All rights reserved. 26

Scientific Management • Frederick W. Taylor Ø The Principles of Scientific Management (1911) v Advocated the use of the scientific method to define the “one best way” for a job to be done Ø Believed that increased efficiency could be achieved by selecting the right people for the job and training them to do it precisely in the one best way. Ø To motivate workers, he favored incentive wage plans. Ø Separated managerial work from operative work. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 27

Taylor’s Four Principles of Management • Develop a science for each element of an individual’s work, which replaces the old rule-of-thumb method. • Scientifically select and then train, teach, and develop the worker. (Previously, workers chose their own work and trained themselves as best they could. ) • Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed. • Divide work and responsibility almost equally between management and workers. Management takes over all work for which it is better fitted than the workers. (Previously, almost all the work and the greater part of the responsibility were thrown upon the workers). EXHIBIT HM– 1 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 28

Scientific Management Contributors • Frank and Lillian Gilbreth Ø Bricklaying efficiency improvements Ø Time and motion studies (therbligs) • Henry Gantt Ø Incentive compensation systems Ø Gantt chart for scheduling work operations Copyright © 2004 Prentice Hall, Inc. All rights reserved. 29

Administrative Management • General administrative theorists Ø Writers who developed general theories of what managers do and what constitutes good management practice Ø Henri Fayol (France) v Fourteen Principles of Management: Fundamental or universal principles of management practice Ø Max Weber (Germany) v Bureaucracy: Ideal type of organization characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships Copyright © 2004 Prentice Hall, Inc. All rights reserved. 30

Fayol’s Fourteen Principles of Management • Division of work • Centralization • Authority • Scalar chain • Discipline • Order • Unity of command • Equity • Unity of direction • Stability of tenure of personnel • Subordination of the individual • Remuneration • Initiative • Esprit de corps EXHIBIT HM– 2 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 31

Weber’s Ideal Bureaucracy • Division of Labor • Authority Hierarchy • Formal Selection • Formal Rules and Regulations • Impersonality • Career Orientation EXHIBIT HM– 3 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 32

Human Resources Approach • Robert Owen Ø Claimed that a concern for employees was profitable for management and would relieve human misery. • Hugo Munsterberg Ø Created the field of industrial psychology—the scientific study of individuals at work to maximize their productivity and adjustment. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 33

Human Resources Approach • Mary Parker Follett Ø Recognized that organizations could be viewed from the perspective of individual and group behavior. • Chester Barnard Ø Saw organizations as social systems that require human cooperation. Ø Expressed his views in his book The Functions of the Executive (1938). Copyright © 2004 Prentice Hall, Inc. All rights reserved. 34

Hawthorne Studies • A series of studies done during the 1920 s and 1930 s that provided new insights into group norms and behaviors Ø Hawthorne effect v Social norms or standards of the group are the key determinants of individual work behavior. • Changed the prevalent view of the time that people were no different than machines. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 35

Human Relations Movement • Based on a belief in the importance of employee satisfaction—a satisfied worker was believed to be a productive worker. • Advocates were concerned with making management practices more humane. Ø Dale Carnegie Ø Abraham Maslow Ø Douglas Mc. Gregor Copyright © 2004 Prentice Hall, Inc. All rights reserved. 36

The Quantitative Approach • Operations research (management science) Ø Evolved out of the development of mathematical and statistical solutions to military problems during World War II. Ø Involves the use of statistics, optimization models, information models, and computer simulations to improve management decision making for planning and control. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 37

Social Events That Shaped Management Approaches • Classical approach Ø Desire for increased efficiency of labor intensive operations • Human resources approach Ø The backlash to the overly mechanistic view of employees held by the classicists. Ø The Great Depression. • The quantitative approaches Ø World War II Copyright © 2004 Prentice Hall, Inc. All rights reserved. 38

The Process Approach • Management theory jungle (Harold Koontz) Ø The diversity of approaches to the study of management—functions, quantitative emphasis, human relations approaches—each offer something to management theory, but many are only managerial tools. • Planning, leading, and controlling activities are circular and continuous functions of management. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 39

The Systems Approach • Defines a system as a set of interrelated and interdependent parts arranged in a manner that produces a unified whole Ø Closed system : a system that is not influenced by and does not interact with its environment Ø Open system: a system that dynamically interacts with its environment Ø Stakeholders: any group that is affected by organizational decisions and policies Copyright © 2004 Prentice Hall, Inc. All rights reserved. 40

The Organization and its Environment EXHIBIT HM– 4 Copyright © 2004 Prentice Hall, Inc. All rights reserved. 41

The Contingency Approach • The situational approach to management that replaces more simplistic systems and integrates much of management theory • Four popular contingency variables Ø Organization size Ø Routineness of task technology Ø Environmental uncertainty Ø Individual differences Copyright © 2004 Prentice Hall, Inc. All rights reserved. 42

Three Waves of Social Change The Age of Agriculture The Age of Industrialization The Age of Information Copyright © 2004 Prentice Hall, Inc. All rights reserved. 43

Multinational Corporations The Global Marketplace The Global Village Transnational Corporations Border less Organizations Copyright © 2004 Prentice Hall, Inc. All rights reserved. 44

Stages of Going Global Stage I Export to Foreign Countries Stage III Hire Foreign Agents or Brokers Licensing. Franchising Contract Foreign Managers Copyright © 2004 Prentice Hall, Inc. All rights reserved. Joint Ventures Foreign Subsidiary 45

Globalization and the Practice of Management Parochialism Copyright © 2004 Prentice Hall, Inc. All rights reserved. Ethnocentrism 46

Individualism Power Distance Hofstede’s Dimensions of National Culture Quantity Versus Quality of Life Copyright © 2004 Prentice Hall, Inc. All rights reserved. Uncertainty Avoidance 47

Technology and the Organization • Production process • Customer service • Information access • Employee job skills • Level playing field Copyright © 2004 Prentice Hall, Inc. All rights reserved. 48

Technology and the Manager’s Job Formulating Plans Making Decisions Defining Jobs Monitoring Activities Copyright © 2004 Prentice Hall, Inc. All rights reserved. 49

Arguments for Social Responsibility u. Public expectations u. Long-run profits u. Ethical obligations u. Public relations image u. Better environment Copyright © 2004 Prentice Hall, Inc. All rights reserved. 50

Arguments for Social Responsibility u. Fewer government regulations u. Balance of responsibility and power u. Stockholder interests u. Possession of resources u. Prevention versus cures Copyright © 2004 Prentice Hall, Inc. All rights reserved. 51

Arguments Against Social Responsibility • Violation of profit maximization • Dilution of purpose • Costs outweigh benefits • Too much power • Lack of skills • Lack of accountability • Lack of broad public support Copyright © 2004 Prentice Hall, Inc. All rights reserved. 52

Social Responsibility Social Involvement in Business Social Obligation Social Responsiveness Copyright © 2004 Prentice Hall, Inc. All rights reserved. 53

The Question of Ethics Rights View Utilitarian View Theory of Justice View Copyright © 2004 Prentice Hall, Inc. All rights reserved. 54

Key Management Issues Entrepreneurial Spirit Copyright © 2004 Prentice Hall, Inc. All rights reserved. Sensitivity to Differences 55

Total Quality Management • Continuous improvement • Employee empowerment • Accurate measurement • Customer focus • Overall quality Copyright © 2004 Prentice Hall, Inc. All rights reserved. 56

Quantum Changes Rightsizing Outsourcing Work-Process Engineering Copyright © 2004 Prentice Hall, Inc. All rights reserved. 57

The Contingent Workforce Part-Time Workers Temporary Employees Copyright © 2004 Prentice Hall, Inc. All rights reserved. Contract Workers 58

How Companies Go Abroad? • Exporting - Selling goods through foreign sales agents and distributors. • Licensing - A situation where a firm grants a foreign firm the right to use intangible (or intellectual) property, such as patents. • Franchising - Granting of a right by a parent company to another firm to do business in a prescribed manner (Mc. Donalds). Copyright © 2004 Prentice Hall, Inc. All rights reserved. 59

Why Companies Go Abroad? • Foreign Direct Investment - Operations in one country controlled by entities in a foreign country. • Joint Ventures - Participation of two or more companies where contribution and risk are shared. • Wholly Owned Subsidiaries - A firm that is 100% owned by a foreign firm. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 60

The International Manager • Economic Environment ØEconomic System ØEconomic Development ØExchange Rates ØEconomic Integration & Free Trade Copyright © 2004 Prentice Hall, Inc. All rights reserved. 61

The International Manager • Political & Legal Environment ØTrade Barriers ØPolitical Risks ØLegal Systems • Sociocultural Environment ØCross-Cultural Challenges ØValues ØLanguage Copyright © 2004 Prentice Hall, Inc. All rights reserved. 62

The Management Team • Global Marketing - Must use marketing mix in all countries/regions where a firm is present. • Globalization of Production - Use resources around the globe to reduce transport costs. • Global Staffing - Use of local labor can profit businesses as they understand local rules/regulations better than individuals in other countries. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 63

The Global Manager • Cosmopolitan Managers - Must be comfortable anywhere in the world. ØEthnocentric ØPolycentric ØRegiocentric • Would your company choose you to be an international manager? Why not? Copyright © 2004 Prentice Hall, Inc. All rights reserved. 64

Process of International Management • Planning Issues - Process of setting goals and courses of action. • Organizing Issues - How the business will be organized to handle international portions of the business. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 65

Process of International Management • International Leadership - How are managers supposed to act in other countries? • Controlling Issues - Comparing standards to actual performance in many locations. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 66

The Meaning of Ethics • Ethics - The study of standards of conduct and moral judgement; also, the standards of right conduct. • Normative Judgement - A comparative evaluation stating or implying that something is good or bad, right or wrong, better or worse. • Morality - A society’s accepted norms of behavior. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 67

The Meaning of Ethics • Something may be legal but not right. • Individuals, many times, decide what is morally right and wrong. • The organization has the ability to shape decision making. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 68

How to Foster Ethics at Work • Emphasize top management’s commitment. • Publish a “code”. • Establish compliance mechanisms. • Involve personnel at all levels. • Measure results. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 69

Organizational Culture • What is it? – A characteristic set of values and ways of behaving that employees in an organization share. • Cultural Artifacts - Signs and symbols of corporate culture. • Patterns of Behavior - Ceremonial events, written and spoken comments, and actual behavior that contribute to corporate culture. • Values & Beliefs - Guiding standards that state what should be practiced. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 70

The Manager’s Influence • Clarify expectations. • Use signs & symbols. • Use stories. • Use rites & ceremonies. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 71

Responsible Managers • Social Responsibility – The extent to which companies should or do channel resources toward improving the quality of life for society. • Stakeholders - Any person or group that is important to the success of the corporation. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 72

Stakeholders Employees Stockholders Managers The Business Community Suppliers Customers Copyright © 2004 Prentice Hall, Inc. All rights reserved. 73

Managing Diversity • Planning & implementing organizational systems & practices to manage people to maximize advantages & minimize disadvantages. • Diverse - Describes a workforce comprised of two or more groups. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 74

Bases for Diversity • Racial and Ethnic Groups • Women • Older Workers • People with Disabilities • Sexual/Affectional Orientation Copyright © 2004 Prentice Hall, Inc. All rights reserved. 75

Barriers in Dealing with Diversity • Stereotyping - Attributing specific behavioral traits based on apparent membership in a group. • Prejudice - A bias that results from prejudging someone based on traits. • Ethnocentrism - A tendency to view members of one’s own group as the center of the universe, and better than other groups. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 76

Barriers in Dealing with Diversity • Discrimination - A behavioral bias towards or against a person based on the group to which the person belongs. • Tokenism - Symbolically appointing a small number of minority-group members to high profile positions instead of seeking full representation for that group. Copyright © 2004 Prentice Hall, Inc. All rights reserved. 77