MGMT 321Principles of Management

Pre-final Examination Review

Principles of Management

Management“How to plan, organize, lead and control resources (manpower, money, material and information) in order to achieve organizational goals efficiently and effectively”

Henri FayolGeneral Industrial Management - 1917

Performance

• The business of business is the creation of customer-defined value

• Efficiency:

Are we using resources productively to achieve the goal (minimize input and maximize output)?

• Effectiveness:

Is the goal appropriate? How much of it are we achieving? (aiming at correct targets)

Planning

Planning is the process of identifying and selecting appropriate goals and courses of action.

1. Selecting goals (Vision, Mission, Values, Objectives)

2. Deciding actions (Strategy)3. Allocating resources, assigning

responsibility, setting timetables, measuring results, etc.

Organizing

Establishing a structure of relationships that enables people to work together effectively and efficiently to achieve organizational goals

Leading

• Defining and communicating clear and compelling vision, mission and values, setting effective goals, then empowering, equipping, training, motivating and holding people accountable to achieve the goals

• Using the four “Ps” (position, power, personality and persuasion) to inspire and energize people to achieve goals efficiently and effectively

Controlling

• Evaluating individual and organizational performance and taking actions to improve them

• The “C” and “A” in Plan, Do, Check, Act (PDCA)• You use Key Performance Indicators (KPIs) to

control

• Peter Drucker: “What gets measured gets done.”• Olson: “Be careful what you measure.”

Building Sustainable Competitive Advantage

• Increase quality• Increase efficiency• Increase speed, flexibility and innovation• Increase responsiveness to customers• Find waste and transform it into value --

decreasing cost• Improve continuously through PDCA• Build organizational capabilities difficult for

competitors to duplicate• Run scared (never, ever get complacent)

Evolution of Management Thought

Job Specialization/Division of Labor

18th century economist Adam Smith observed that manufacturing went much faster when each worker specialized in one step instead of doing all steps himself.

Scientific Management

Defined by Frederick W. Taylor in late1800’s:

Focused on the process by breaking it down into steps, optimizing each step through time-and-motion studies, reassembling it, codifying it into Standard Operating Procedures (SOPs), and then finding workers whose skills best matched the new process. Result: greatly enhanced efficiency and productivity. Side effects: management abuse and worker depersonalization/boredom.

Administrative Management

Propounded by Max Weber and based on the concept of bureaucracy – a formal system of organization and administration designed to maximize efficiency, effectiveness and control

Henri Fayol’s 14 Principles

SWEPT IT ALL UP INTO ONE SYSTEM• Division of Labor (but Fayol warned against its failings)• Authority and Responsibility (flip sides of the

management coin)• Unity of command (reporting to more than one boss

leads to confusion)• Unity of Direction (a single plan that everyone follows)• Equity (fair and impartial treatment of employees)• Order (a logical structure optimizes organizational

performance and provides opportunity for advancement)

Fayol’s Principles

• Line of Authority (clear chain of command)• Centralization (power centralized at the top)• But with worker Initiative (fostering creativity,

innovation and independent action)• Discipline (organization can’t function without

respectful employees)• Subordination of Interest (interest of

organization supersedes interest of individual)

Fayol’s Principles

• Uniform Remuneration (an equitable and uniform payment system motivates high employee performance)

• Stability of Tenure (long-term employment supports skill development)

• Esprit de Corps (comradeship and shared enthusiasm foster devotion to organizational success)

Theories X and Y

Propounded by Douglas McGregor:Theory X: Workers are lazy, will do as little as possible, and must be closely supervised and controlled through reward and punishment.Theory Y: Workers want to do a good job; make the job stimulating, empower them, and they will deliver

Example: NUMMIGM: theory X Toyota: theory Y

Management EvolutionSummary

• From process to people

• From rigid to flexible and adaptive

• From tall to flat

• From internal focus to external focus

• From totalitarian to team

• From command to consensus fostered by communication, collaboration and distributed leadership

Values, Attitudes, Cultures

Corporate Chemistry

• Question: Why should we pay attention to it?

• Answer: To get things done efficiently and effectively.

Personality Traits

• To some degree, personality traits determine the way managers think and feel. This can affect their approach to managing, their actions and their behaviors.

• Traits effective in one situation may be ineffective in another. Be flexible! If you are selecting someone for a particular task, be observant and match the right person to the right job!

The Big Five Personality Traits

• Extraversion: positive, sociable, outgoing and friendly

• Agreeableness: likable, affectionate, care about others

• Openness: has broad interests, original, a daring risk-taker

• Conscientiousness: careful, scrupulous, persevering

• Negative Affectivity: judgmental, critical of self and others – but can be effective

Other Important Traits

• Internal Locus of Control: I’m in charge of my fate• External Locus of Control: Outside forces are in

charge of my fate• Need for Achievement: I am driven to meet internal

standards of high performance• Self-Esteem: I feel good about myself (high) or I doubt

my abilities (low)• Need for Affiliation: I want to be liked and accepted

(herd instinct)• Need for Power: I want to control and influence others

to get things done

Organizational Culture

Shared sets of beliefs, expectations, values, norms and work routines

• “The Toyota Way”, “The GE Way”, The J&J Way”, “The GM Way”, “The Ford Way”

• A strong culture can be either effective (Toyota) or ineffective (GM)

• Often established and maintained by founding families who hire people like themselves

• Sometimes reinforced by initial success and not re-examined

Ethics and Social Responsibility

Ethics

The inner principles, values and beliefs that guide you in analyzing a situation and deciding the appropriate way to behave.

Your internal moral compass

Ethics and StakeholdersStakeholders

People and groups who supply a company’s resources or reason for being and, therefore, have a “stake” in the company: customers, employees, suppliers, stockholders, et al

When the law does not specify how to weigh the interests of one stakeholder against those of another, a manager must make an ethical decision.

Toyota’s philosophy “make every decision as if a customer is standing next to you” implies a customer-first stakeholder hierarchy, much as the Johnson & Johnson Credo (textbook p.138) does.

You cannot prosper unless your business partners prosper too

Stakeholder Versus Stockholder

Most companies assert a customer-first philosophy. Far fewer actually practice it.

In order to satisfy customers better than your competitors, you must maximize efficiency and effectiveness. This, in turn, maximizes the chance for success and the benefits for all stakeholders – including stockholders.

Many business-people overlook this obvious pyramidal principle, focusing instead on stockholder satisfaction to the detriment of other stakeholders and – over the long term – the company.

Olson’s Rule

A corporation’s reputation and the trust it builds with its stakeholders – particularly customers -- are its most important assets.

Reputation and trust are built slowly and arduously over time by the seemingly insignificant decisions made every day by employees. Both can be destroyed instantly.

Even as a junior manager, you will be in charge of some portion of this vital building task. Make ethical decisions. If your company’s culture won’t allow you to do so, quit because you are on a sinking ship!

Social Responsibility

Every society has an implied social contract with the companies doing business within it. Certain minimum norms of corporate behavior are expected.

Part of this unwritten agreement is Corporate Social Responsibility (CSR) – the way a company views its duty to make decisions that protect and promote the welfare of stakeholders and society as a whole.

Corporate Social ResponsibilityObstructionist Approach

Company behaves unethically and illegallyDefensive Approach

Company behaves in the letter but not the spirit of the law

Accommodative ApproachCompany behaves legally and ethically, trying to balance interests of various stakeholders

Proactive ApproachCompany actively embraces CSR, using resources to promote the interests of all stakeholders

CSR

Currently, CSR is essentially a defensive strategy that should be carried out in an accommodative way in order to protect the reputation and long-term interests of the company.

But public opinion about CSR is evolving and should be carefully monitored and adjusted to by corporate management.

Managing Diverse Employees

Diversity

Differences among people in age, gender, race, ethnicity, religion, sexual orientation, socioeconomic background and capabilities/disabilities

Diversity As An Asset

Diversity is a Business Asset• Variety of backgrounds and viewpoints

enhances understanding, creativity and innovation while improving decision-making

• Also provides a more attuned “match” between employees and an increasingly diverse marketplace

• Can increase retention of valued employees• Customers and business partners expect a

corporation to be diverse

Perception

Perception: The process through which people select, organize and interpret what they see, hear, touch, smell and taste in order to distil meaning and make decisions.

Can be affected by your internal “filters.” Smart managers work to become aware of their filters and factor offsets for them into their decision-making. Question both the situation and yourself!

Discrimination – whether overt or unintentional -- is unproductive unethical, illegal and just plain dumb!

How to Manage Diversity

• Secure top-management support.• Provide on-going training to build awareness of personal

“filters”, diversity’s benefits and respect for differences.• Institute and enforce strong “zero-tolerance” anti-

discrimination policies.• Reward employees for promoting/supporting diversity

(you get the behavior you reward).• Pay close attention to employee performance appraisal

and promotion processes (what gets measured gets done).

• Incorporate respect for diversity into the corporate culture.