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MANAGEMENT

1. Eight-step decision making

1.1 Classify:

Is it is an everyday problem or will it require a new solution?

1.2 Define:

Write down a precise definition of the problem.

1.3 Specify:

Write down exactly what the results of your decision must be for it to be successful.

1.4 Dream:

Make the ideal decision. Do not be limited by budgets and time limits.

1.5 Compromise:

Adapt to your limitations and find a realistic and effective course of action.

1.6 Implement:

Decide who is responsible for what, set deadlines, make sure everyone is informed.

1.7 Review:

Get reports and assets how effective the decision is in terms of achieving its objectives.

1.8 Adapt:

As you receive information, introduce changes to improve the effectiveness of the decision.

Planning (setting objectives / strategies)

Organisation

Integration (communicating, motivating)

Measuring

Development

2. Manager as a decision maker

2.1 Rationality

Manager is fully objective and logical rational:

• problem clarity;

• goal orientation;

• known options;

• clear preferences;

• constant preferences;

• no time or cost constraints;

• maximum payoff.

2.2 Bonded rationality

Managers try to behave rationally within the parameters of a simple model, satisficing decisions

rather than maximising one.

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2.3 Intuition

Managers use experience and accumulated judgement unconscious but complementary.

3. Decision making conditions

Certainty (100 %).

Risk (50 – 75 %).

Uncertainty (0 %).

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THE DECISION-MAKING PROCESS

1. Types of problems and decision

1.1 Well structured problems and programmed decisions

Server in a restaurant: pay to have clothing cleaned?

Late delivery of your product: reduction?

(routine or repetitive) (definitive approach)

How? Procedure: example: buying phones.

Rule: disciplinary action-fairly applied.

My sales representatives need new computers.

Price

Manufacturer and model

Warranties

Support

Reliability

Repair record

Reliability 10

Service 8

Warranty period 5

On-site service first year 5

Price 4

Case style 3

AST IBM

Compaq NEC

Fujitsu Sharp

HP Texas Instrument

AST IBM

Compaq NEC

Fujitsu Sharp

HP Texas Instrument

AST IBM

Compaq NEC

� Fujitsu Sharp

HP Texas Instrument

Fujitsu

Evaluation of decision

effectiveness

Identification of a

problem

Identification of

decision criteria

Allocation of weights

to criteria

Development of

alternatives

Selection of an

alternative

Analysis of

alternatives

Implement of the

alternative

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Policy (guideline): customer should be satisfied / be competitive.

1.2 Ill structured problems and non programmed decisions

Selection of architect for hotel: get tenders.

Close a money losing restaurant: weight alternatives.

(unique) (no cut and dried solution)

2. Decision making style

2.1 Type

Problem avoider: ignores information.

Problem solver: tries to solve when they rise.

Problem Seeker: seeks out or anticipate problems pro-active.

2.2 Approach

Rational / logical: clearly defined problem.

Intuitive / creative: can deal with ambiguity.

2.3 Style

Directive: low tolerance of ambiguity, rational thinking.

Analytical: high tolerance of ambiguity, rational thinking.

Conceptual: high tolerance of ambiguity, intuitive thinking.

Behavioural: low tolerance of ambiguity, intuitive thinking.

High

Tolerance for ambiguity

Low

Rational Intuitive

Way of thinking

Analytic

Conceptual

Directive

Behavioural

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THE CONCEPTUAL FRAMEWORK OF A FIRM

Strategic

Level

Management

Level

Operational

Level

Production Marketing Personnel Research Development

1. Functions of different management levels

Feedback

Stakeholders: distributors, government, competitors, shareholders, investors, customers, supplies,

banks, transporters, community.

Strategic:

• Identify the stakeholder requirements;

• Define the corporate aims and objectives;

• Evaluate global opportunities;

• Organise the business structure;

• Control the corporate performance.

Management:

• Set the Strategic Business Unit objectives and

allocate resources;

• Control the SBU programme;

• Organise opportunity analysis and research;

• Control international marketing planning.

Implementation:

• Set and achieve the budgets;

• Manage the functions (marketing, production,

research & development, logistics);

• Carry out marketing campaigns, manage

advertising agents and distributors.

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2. Strategic management

2.1 Levels of management

• Corporate level: seeks to determine what business a corporation should be in;

• Business level: each SBU determines how a corporation should compete in each of it’s

business;

• SBU: operated according to the following concepts:

� The organisation is managed as a “portfolio” of businesses, each with a clearly defined

product, market segment, strategy;

� Each unit develops a strategy tailored to it’s capabilities and competitive needs;

� Total portfolio is managed to serve the interests of the organisation as a whole;

• Functional level: asks the question “how do we serve the business level strategy?”

2.2 Corporate level strategic management process

Eight steps process:

2.2.1 Identify the organisation is current mission, objectives and strategies

• Mission statements;

• Company business focus.

2.2.2 Analyse the external environment

• Define management’s available options;

• Find out what the competitors are doing;

• Determine the labour supply.

2.2.3 Identify opportunities and threats

• Threats for one are opportunities for another.

2.2.4 Analyse the organisation’s resources

• Look inside the organisation;

• Resources? Skills? New products?

• Core competencies, exceptional skills / resources etc;

• Assess capital / technical expertise / skilled workforce, etc.

2.2.5 Identify strengths and weakness

• Corporate culture plays a big part;

• Encourage risk taking / innovation / reward performance.

2.2.6 Formulate strategies

• Set of strategies that will give a company a competitive advantage over its rivals.

2.2.7 Implement strategies

• No plans can succeed unless implemented properly;

• Top management leadership / motivated middle and lower management.

2.2.8 Evaluate results

• Effectiveness?

• Adjustments?

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4

2 3

1

5

6 7 8

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GRAND STRATEGIES

1. Stability

• Absence of significant changes.

2. Growth

• Direct expansion / merger / acquisition / diversification. (Starbucks, Ciba-Geigy, AOL, Time

Warner, Diago).

3. Retrenchment = Downsize

• Downsizing (Daimler, Chrysler).

4. Combination

• PepsiCo (sold Pizza Hut, KFC, Talco Bell).

Corporate

Growth

Strategies

Corporate

Stability

Strategies

Corporate

Stability

Strategies

Corporate

Retrenchment

Strategies

Abundant

Environmental

Opportunities

Abundant

Environmental

Opportunities

Abundant

Environmental

Opportunities

Abundant

Environmental

Opportunities

Fir

m

Sta

tus

Environmental

Status

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BUSINESS LEVEL STRATEGY

1. Competitive advantage

• Distinctive edge that sets a company apart (e.g. organisational capabilities / assets /

resources);

• Not sufficient to achieve, but also to maintain.

2. TQM = Total Quality Management

• Focuses on quality and continual improvement;

• Differentiate from customers / develop a loyal customer base;

• Constant improvement in quality and reliability.

3. Industry analysis

• Profitable (e.g. pharmaceutical);

• Lose money in glamour industry (e.g. PC, Cable TV);

• Make money in dull businesses (e.g. fire trucks);

• Five competitive forces:

� Threat of new entrants;

� Threat of substitutes;

� Bargaining power of buyers + suppliers;

� Existing rivalry.

Industry

competitors

Intensity

of rivalry

Threat

of new entrants

Threat

of substitutes

Bargaining

power of suppliers

Bargaining

power of buyers

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4. Competitive strategy

4. 1. Cost leadership strategy

• Lowest cost producers;

• Searches efficiency in production, marketing, etc;

• Overheads kept to a minimum.

4. 2. Differentiation strategy

• Seeks to be unique;

• High quality / extraordinary service / innovative design / technical capability / positive brand;

• Justifies price premium (Sony, BMW).

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CORPORATE PORTFOLIO MIX

• Boston Consulting Group Matrix: to determine which businesses offer high potential; which a

drain on resources are.

• High market share: leader in it is field.

• High market growth: at least 10 % annual growth.

• Cash Cows:

� Low growth; high market share;

� Generate large amounts of cash;

� Future growth is limited.

• Stars:

� High growth; high market share;

� In a fast growing market with a dominant share;

� May or may not produce positive cash flow depending on need of additional investment.

• Question Marks:

� High growth; low market share;

� Speculative and entails high risk;

� In an attractive industry but small % of market share;

• Dogs:

� Low growth; low market share;

� Do not produce much cash; nor do they require any;

� No promise of improved performance.

• Strategy:

� Milk cows;

� Develop Stars (till they turn to cows);

� Decide which Question Marks to develop into Stars;

� Get rid of Dogs (invest such funds to develop Question Marks / Stars).

High Market share Low

High

Anticipated

Growth Rate

Low

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THE BENEFITS OF PLANNING

1. Planning encourages

• Proactivity in new and old markets;

• A systematic process of analysis;

• Clear statement of objectives and policies;

• More focused thinking;

• Quick and decisive reaction to environment changes;

• Co-ordination of strategies;

• Familiar product or service offers in each market;

• Company-wide performance and quality standards;

• Increased managerial ownership and loyalty;

• Reduced internal company conflict;

• Standardised information transfer systems;

• Integrated short-term action and control.

2. Planning tools and techniques

• Assessing the organisation’s environment:

� Environmental scanning;

� Forecasting;

� Benchmarking.

2.1 Environmental scanning

2.1.1 Environmental scanning

• To anticipate and interpret changes in the environment;

• Life insurance in 70’;

• Traditional restaurant in France.

2.1.2 Competitive intelligence

• Who / What / Why / How will it affect the company;

• Analysis of competitor’s products;

• Where? / Newspapers / Co. reports / Want ads …

• Legal? Ethical?

• Global scanning.

2.1.3 Scenario

• A consistent of the future;

• Increase in minimum wage;

• Optimistic to pessimistic scenarios.

2.2 Forecasting (predictions of outcome)

2.2.1 Revenue forecasting

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• Why? To predict staffing needs / costs;

• Where? Historical revenue figures;

• Forecast: adjusted for environmental scanning.

2.2.2 Technical forecasting

• Tries to predict changes in technologies and timeframe for implementation (hotel booking);

• Music LP’s, CDs, MP3;

• Medicine, biotechnology.

2.2.3 Techniques quantitative, qualitative

• Quantitative forecasting: applies mathematical rules to a series past data to predict outcomes;

• Qualitative forecasting: uses the judgement and opinion of knowledgeable individuals to

predict outcomes;

• CFAR: Collaborative Forecasting And Replenishment;

• Internet link for manufacturers and retailers to exchange information and data and arrive at a

more accurate forecast.

3. Benchmarking

• The search for best practice among competitors or non-competitors that lead to their superior

performance;

• Improve quality by analysing and copying the methods of leaders in various fields;

• Examples: Xerox (Japan), Hotels (Asia), Ads (France).

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ORGANISATIONAL STRUCTURE AND DESIGN

1. Organising

• The process of organising an organisation’s structure;

• Undergone lots of change in the last few years.

2. Organisational structure

• Formal framework by which job tasks are divided, grouped and co-ordinated;

• Challenge for managers to design a structure that allows employees to effectively and

efficiently work while accomplishing organisational goals and objectives.

3. Organisational design

• Six key elements:

� Work specialisation;

� Departmentalisation;

� Chain of command;

� Span of control;

� Centralisation / decentralisation;

� Formalisation.

3.1 Work specialisation

• Adam Smith / Henry Ford: specialisation of individual tasks or division of labour;

• The degree to which tasks are divided into separate jobs;

• Problems: boredom, fatigue, low productivity, poor quality of work, increased absenteeism,

high job turnover;

• Variety of jobs to complete a whole job.

3.2 Departmentalisation

• Once specified into specialised jobs, have to be regrouped so that common tasks can be co-

ordinated;

• The basis on which jobs are grouped in order to accomplish organisational goals:

� Functional departmentalisation: grouped by functions performed;

� Product departmentalisation: grouping jobs by product times;

� Geographical departmentalisation: grouping jobs on the basis of territory or geography;

� Process departmentalisation: grouping jobs on the basis of products or customer flow;

� Customer departmentalisation: based on common customer (e.g. office supplies: retail,

wholesale, government, departments;

� Cross functional team: a hybrid grouping of individuals who are experts in various

specialities or functions and who work together;

� Large cos. combine most or all forms of departmentalisation;

� Hotels?

3.3 Chain of command

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• An unbroken line of authority that extends from the upper levels of the organisation to the

lowest levels and clarifies who reports to whom;

• Authority: the rights inherent in a managerial position to give orders and expect orders to be

obeyed;

• Responsibility: the obligation or expectation to perform;

• Unity of command: helps preserve the chain of command. The management principle that a

subordinate should have one and only one superior to whom to he or she is directly

responsible;

• Today: less relevant because of:

Advances in I.T. / computers / access to information;

Empowering employees;

Popularity of self managed or cross functional teams;

Matrix structures.

3.4 Span of control

• The number of subordinates a manager can supervise efficiently and effectively;

• More training and experience subordinates tasks, complexity, physical proximity of subs,

degree of standardisation of companies’ MIS, organisation’s culture, preferred style of

management;

• Determines how many levels;

• Wider or larger the span of control the more efficient is the organisation;

• Trend: larger spans to reduce costs / cut overheads / speed up decision making / increase

flexibility / get closer to customers / empower employees. However, employee training

important.

3.5 Centralisation and decentralisation

• Centralisation: the degree to which decision making is concentrated in the upper levels of the

organisation;

• Decentralisation: the handing down of decision making authority to lower levels in an

organisation;

• Trends: towards decentralisation, decision is taken “closer to the action”.

3.6 Formalisation

• The degree to which jobs within an organisation are standardised and the extent to which

employee behaviour is guided by rules and procedures.

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CONTINGENCY APPROACH TO

ORGANISATIONAL DESIGN

Appropriate structure depends on four contingency variables:

Organisations: a) strategy, b) size, c) technology, d) environmental uncertainty.

Two types of Organisations: Mechanistic and Organic.

1. Mechanistic

An organisational structure that’s characterised by high specialisation, extensive

departmentalisation, narrow spans of control, high formalisation, a limited information network,

and little participation in decision making by low-level employees:

• Tend to be efficiency machines well oiled by rules, regulations, routinization and similar

controls;

• Minimises the impact of differing personalities, human judgements and ambiguity because

these are inefficient and inconsistent.

2. Organic

An organisational structure that is highly adaptive and flexible with little work specialisation,

minimal formalisation, and little direct supervision of employees:

• Flexibility allows it to change rapidly as needs require.

3. What type of structure? Examine contingency factors for each

3.1 Strategy and structure

• Structure generally follows changes in strategy of organisation;

• Innovation: pursuit of meaningful and unique innovations;

• Cost minimisation: pursuit of tightly controlled costs;

• Imitation: minimise risks and maximise profits by copying markets leaders;

• Organic structure: innovators;

• Mechanistic structure: cost minimisers, seek efficiency, stability and tight controls;

• Both: imitators use mechanistic St. with organic sub-units to pursue new directions.

3.2 Size and structure

• The larger the organisation, the more mechanistic the structure.

3.3 Technology and structure

• Structure depends on the type of technology used by firms;

• Unit production: unit or small batch procedures that manufacture custom products (e.g. tailor

made suits / turbines for hydro-electric plants);

• Mass production: large batch or mass production (e.g. refrigerators / cars);

• Process production: continuous process production (e.g. oil and chemical refineries);

• Organic: unit and process production most effective;

• Mechanistic: mass production.

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3.4 Environmental uncertainty and structure

• Scarce resources: more dynamic and complex (organic);

• Abundant resources: stable simple environment (mechanistic);

• Trend: restructuring to be lean fast and flexible to deal with global competition, accelerated

product innovation by competitors, increased demands from customers (organic).

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NEW CONCEPTS

1. Team based structures

• Made up of work groups or teams that performs the work;

• Insurance: one person looks after all the customers’ needs;

• Hotels? Housekeeping / room service.

2. Matrix structures

• Assigns specialists from different functional departments to work on one or more projects

being led by project mangers:

• Vertical and horizontal interaction (functional and product);

• Dual chain of command;

• Project managers usually have authority over functional members.

3. Project structure

Employees are permanently assigned to projects:

No department to return to after completion of assignment;

Consultancy companies;

Flexible and fluid organisational design;

Managers acts as facilitators, mentors and coaches.

4. Autonomous internal units

Used by some large organisations with numerous businesses:

• Autonomous de-centralised business units, each with it’s own products, clients, competitors,

goals and profits.

5. Boundary-less organisation

Design is not defined by or limited to the horizontal vertical or external boundaries imposed by pre-

defined structure:

• Replaces departments with empowered teams;

• Made possible by today’s technology.

6. Learning organisation

Describes an organisation’s mind set or philosophy:

• One which has developed the continuous capacity to adapt and change because all members

take an active role in identifying and resolving work-related issues;

• Share information and collaborate on work activities.

7. Technology

• Telecommuting;

• Virtual workplace.

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HUMAN RESOURCES / ORGANISATIONAL

BEHAVIOUR / MOTIVATION

“People are our most important Asset”.

The organisation’s human resources is a source of competitive advantage.

Requires a fundamental change in how management think about an organisation’s work force and

how they view the relationship.

High performance work practices: HR policies and practices that lead to high performance.

1. Resource management process

Activities necessary for staffing the organisation and sustaining high employee performance.

• Eight steps:

• HR planning;

• Recruitment;

• De-recruitment;

• Selection;

• Orientation;

• Training;

• Career development;

• Compensation and Benefits.

2. Orientation

• Introduction of a new employee into his or her job and organisation;

• Results in an outsider-insider transition.

3. Training

• Employee skills need to be altered and updated;

• Technical: computers, etc;

• Interpersonal: develop cooperation, teamwork, trust, sharing of experiences;

• Problem solving: participation activities to sharpen logic, reasoning and skills at defining

problems, assessing causes, developing alternatives and building creativity, analysing

alternatives and selecting solutions;

• Methods:

� On-the-job: rotation, work at different jobs;

� Off-the-job: lectures, films, videos, simulation exercises.

4. Career development

The sequence of positions occupied by a person during his lifetime:

• Individual responsible for his or her own career due to downsizing, de-layering, restructuring,

re-engineering.

5. Compensation and Benefits

Should reflect changing nature of work and workplace to keep motivated;

Different types of rewards and benefits.

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ORGANISATION BEHAVIOUR

Actions of people at work.

1. Goals of OB

• Explain and predict behaviour;

• Manager’s success depends on getting people to do a successful job.

2. Individual behaviour

• Attitudes;

• Personality;

• Perception;

• Learning;

• Motivation.

3. Group behaviour

• Norms;

• Roles;

• Team building;

• Conflict.

4. Motivation

The willingness to exert high levels of effort to reach organisational goals, conditioned by the

efforts ability to satisfy some norms:

• Effort: measure of intensity and drive;

• Need: an internal state that makes certain outcomes appear attractive.

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MOTIVATION THEORIES

• Maslow’s hierarchy;

• McGregor’s Theory X, Theory Y.

• Contemporary:

� Three-needs theory;

� Goal-setting theory;

� Re-inforcement theory;

� Designing motivating jobs;

� Equity theory;

� Expectancy theory.

1. Three-needs theory

• Need for achievement / power / affiliation:

� nAch: the drive to excel, to achieve in relation to a set of standards, to drive to succeed;

� nPow: the need to male others behave in a way they would not have otherwise have be;

� nAff: the desire for close and interpersonal relationships.

1.1 High achievers

• Seek situations where they can take personal responsibility for finding solutions;

• Need rapid and unambiguous feedback on their performance in order to tell whether they are

improving;

• Set moderately challenging goals;

• Aren’t gamblers; they dislike succeeding by chance;

• Perform best when probability of success is 50-50;

• Dislike high odds (where success is left to chance) dislike low odds (too easy);

• Successful in entrepreneurial activities, running own businesses, managing a self-contained

division, sales positions;

• Does not necessarily mean that they are good managers.

1.2 Power seekers

• Desire to have an impact and to be influential;

• Enjoy being in charge;

• Prefer to be in competitive and status-oriented situations.

1.3 Affiliation seekers

• Desire to be liked and accepted by others;

• Strive for friendships, prefer co-operative situations;

• Desire relationships with a high degree of mutual understanding.

1.3 Managerial success

• Closely linked to nPow;

• Best managers have high nPow and low nAff;

• Employees can be trained for nAch.

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2. Goal setting theory

The proposition that specific goals increase performance and that difficult goal, when accepted,

result in higher performance than easy goals.

• Specific goals succeed better than “do your best”;

• Difficult goals will lead to higher performance (only if they are accepted);

• Employee participation in goal setting;

• Not always desirable, but may be effective if you think that you are going to encounter

resistance;

• Feedback necessary as it acts as a guide to behaviour;

• Self-generated feedback is most powerful;

• Purpose directs an individual’s action;

• Success of theory? Only if there is commitment, self-efficacy and national culture:

� Commitment: when goals are made public and self-set;

� Self-efficacy: an individual’s belief that he or she is capable of performing a task;

� National culture: works well in the US Europe?

3. Reinforcement theory

• Behaviour is a consequence of its consequences;

• Caused externally;

• Reinforcer: any consequence immediately following a response that increases the probability

that behaviour will be repeated;

• Positive reinforcement / Rewards work better;

• In an organisation, better to ignore than to punish bad behaviour.

4. Designing motivating jobs

• Job design: the way tasks are designed to form complete jobs;

• Job scope: the number of different tasks required in a job and the tasks and the frequency with

which the jobs are repeated;

• Job enlargement: the horizontal expansion of a job, an increase in the job scope (e.g. mail

sorter, deliver as well?). Conclusion: now I have 3 lousy jobs;

• Job enrichment / Job depth: the degree of control that employees have over their work (e.g.

empowered to do some tasks usually done by supervisors:

� Provide increased freedom, independence and responsibility;

� Can improve quality of work output. Conclusion: inconclusive.

Job Characteristics Model (JCM): conceptual framework for analysing and designing jobs,

identifies 5 primary job characteristics, their interrelationships and their impact on outcome

variables:

• Skill variety: the degree to which a job requires a variety of activities so that an employee can

use a number of skills and talents;

• Task identity: the degree to which a job requires completion of a whole and identifiable piece

of work;

• Task significance: the degree to which a job has a significant impact on the lives or work of

other people;

• Autonomy: a job provides substantial freedom, independence and discretion to the individual

in scheduling the work and determining the procedures to be used in carrying out;

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• Feedback: activities carried out by individuals obtaining direct and clear information about

the effectiveness of his or her performance.

5. Equity theory

The theory that an employee compares his job inputs-outcomes ratio with that of relevant others and

then corrects the inequality.

OUTCOME A < OUTCOME B → INEQUALITY (under rewarded)

OUTCOME A = OUTCOME B → EQUALITY

INPUT A > INPUT B → INEQUALITY (over rewarded)

Reaction?

• Distort others or own inputs / outcomes;

• Behave so as the others change their inputs / outcomes;

• Behave to change own inputs / outcomes;

• Choose a different comparison person;

• Quit the job.

6. Expectancy theory

The individual tends to act in a certain way based on the expectation that the act will be followed by

a given outcome and on the attractiveness of that outcome to the individual.