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•Pacesetters

At Xerox, Anne Mulcahy’s high-performance leadership isbased on valuing people.

•Management Tips

New workplace survival skills

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Social responsibility beginswith building a greatworkplace

•Self-Assessment

21st-Century Manager

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New Balance

SCHERMERHORN REVISED

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Our New Workplace

For most people,a day at work is an experience full of

opportunities and rewards. What about you? Do you view work,

or the prospect of working, as a source of learning and experience, or just

a means to a paycheck? And what about the future? What is your ideal

job? Are your skills and competencies competitive? Will you be able to

balance career demands with personal responsibilities? What about other

people; do you understand their needs and aspirations? 1

This is no time

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As you ponder these

and related questions,

take time to browse

Fortune magazine’s online

list of “100 Best Companies to

Work For.”

The Container Store is one example,

built with an idea (help people streamline their lives

by selling them great containers at good prices) and a set of values (respect all

those who contribute to making the company a success).2 CEO Kip Tindell

says: “We are so proud to foster a place where people enjoy getting up and

coming to work every morning, working alongside great people—

truly making a difference every single day.”

The Container Store seems to walk the talk. It’s known for

treating its employees well—training, good pay, equal treatment,

and the opportunity for input.

Wouldn’t you like to work in this type of environment? And if you

were to start your own company someday, shouldn’t this respect for

people be part of your business model?

MODU LE G U I DE

What to Expect from Employees of the Future

• More loyal to themselves than toemployers

• Change jobs often during a career• Like more time off for personal

affairs and community service• Use more flexible work approaches,

including working remotely fromhome

• Value employers that nurture qualityof life and personal development

• High expectations for ethics andmorality by employers

• Failures of ethics and corporate governance aretroublesome.

• Globalization and job migration are changing the worldof work.

• Diversity and discrimination are continuing social priorities.• Talent and intellectual capital drive high-performance

organizations.• Career success requires skills and a capacity for

self-management.

• Mission statements express the purposes oforganizations.

• Organizations are open systems that interact with theirenvironments.

• Organizations create value for customers and clients.• Productivity is a measure of organizational performance.• Organizations are changing as society changes.

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1.2 What are organizations like aswork settings?

1.1 What issues and concernscomplicate the new workplace?

for complacency

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1.1 What Issues and Concerns Complicatethe New Workplace?

4 | MODULE 1 Our New Workplace


You might already have noticed that this text may differ from others you’ve read. I’m go-ing to ask you a lot of questions, and try to expose you to different viewpoints and possi-bilities. This process of active inquiry begins with recognition that we live and work at atime of great changes, ones that are likely to increase, not decrease, in number, intensity,and complexity in the future.

Are you ready to meet the challenges ahead? Are you informed about the issues andconcerns that complicate our new workplace? Are you willing to admit that this is notime for complacency?

• Failures of Ethics and Corporate Governance Are TroublesomeWe have recently been exposed to sensational ethical failures in business, including theWorldCom and Enron debacles. If you don’t follow and think about these cases, youshould. When Enron collapsed, the results were devastating. Loyal employees who hadinvested their retirement savings in company stock saw the value fall to virtually zero.Outside stockholders suffered large losses on their investments. How would you recoverif this happened to you?

In response, our society is becoming much stricter in expecting businesses, other so-cial institutions, and the people who run and work in them to operate with high moralstandards.3 The U.S. government has even passed legislation, the Sarbanes-Oxley Act of2002, to make it easier to prosecute corporate executives for financial misconduct.4 Butexternal regulation can only do so much. At the end of the day, we depend on individualpeople, working at all levels of organizations, to act ethically.

Ethics is a code of moral principles that sets standards of conduct for what is “good”and “right” as opposed to “bad” or “wrong.” Given all the scandals, you might be cynicalabout ethical behavior in organizations. But even though ethical failures get most of the

publicity, there is still a lot of good happening inthe world of work. Look around. You should findthat many people and organizations exemplify anew ethical reawakening, one that places highvalue on personal integrity and ethical leadership.

You should find concerns for sustainable develop-ment and protection of the natural environment,product safety and fair practices, and protection ofhuman rights in all aspects of society, includingemployment.5 And you should find organizationsdeclaring their values, such as this example fromthe Johnson & Johnson credo.6

We are responsible to the communities in which welive and work and to the world community as well.We must be good citizens—support good works andcharities and bear our fair share of taxes. We mustencourage civic improvements and better health andeducation. We must maintain in good order theproperty we are privileged to use, protecting the en-vironment and natural resources.

One of the positive results from the recent rashof business ethics failures is renewed attention onthe role of corporate governance, the active over-sight of management decisions, corporate strategy,and financial reporting by boards of directors.7

Typical responsibilities of corporate and nonprofitboard members include overseeing decisions on

Ethics set moral standards of whatis “good” and “right” behavior.

N E W S L I N E

Corporate governance is over-sight of a company’s managementby a board of directors.

Social responsibility begins with building a great workplace In a book entitled TheTransparent Leader, former CEO of Dial Corporation, Herb Baum, arguesthat integrity is a major key to leadership success. He also believes thatthe responsibility to set the tone for leadership integrity begins at the top.He tries to walk the talk—no reserved parking place, straight talking, open

door, honest communication, carefullistening, and hiring good people. Believingthat most CEOs are overpaid, he once gavehis annual bonus to the firm’s lowest paidworkers. He also tells the story of an ethicalrole model—a rival CEO, Reuben Mark ofColgate Palmolive. Mark called him one dayto say that a newly hired executive hadbrought with him to Colgate a disk containingDial’s new marketing campaign. Rather thanread it, he returned the disk to Baum—an actBaum called “the clearest case of leadingwith honor and transparency I’ve witnessedin my career.”

Reflect: What acts of personal integrity have you encountered inyour work and student activities? Can you think of any situation where youdisappointed yourself by failing to display integrity?

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What Issues and Concerns Complicate the New Workplace? | 5


Globalization is the worldwide in-terdependence of resource flows,product markets, and businesscompetition.

Global outsourcing involvescontracting for work that is per-formed by workers in othercountries.

hiring, firing, and compensating senior executives, assessing strategies and their imple-mentation, and verifying financial records.

Because weak corporate governance undoubtedly contributes to ethics failures in or-ganizations, there is more emphasis today on holding boards accountable for what hap-pens in the organizations they oversee. Former board members of bankrupted World-Com, Inc., found this out the hard way. They paid personal fines of $18 million forfailing to spot fraudulent behavior by the firm’s top managers.8

• Globalization and Job Migration Are Changing the World of Work

Do you know where your favorite athletic shoes or the parts for your computer and cellphone were manufactured? Can you go to the store and buy a toy or piece of apparelthat is really “Made in America”? And whom do you speak with when calling a servicecenter with computer problems, trying to track a missing package, or seeking informa-tion on retail store locations? Don’t be surprised if the person serving you is on thephone from India, the Philippines, Ireland, or even Ghana.

Welcome to the global economy of the twenty-first century.9 Japanese managementconsultant Kenichi Ohmae calls this a “borderless world,” suggesting the disappearance ofnational boundaries in world business.10 Take the example of Hewlett-Packard.11 It oper-ates in 178 countries and most of its 140,000� employees work outside of the UnitedStates. It is the largest technology company in Europe, the Middle East, and Russia. Al-though headquartered in Palo-Alto, California, is HP an American company any more?

What we are talking about is globalization, the worldwide interdependence of resourceflows, product markets, and business competition.12 In the global economy, businessessell goods and services to customers around the world. They also search the world to buythe things they need for the lowest price. Many businesses actively engage in global out-sourcing by hiring workers and contracting for supplies and services in other countries.The firms save money and gain efficiency by manufacturing things and getting jobsdone in countries with lower costs of labor. Doesn’t it make perfect business sense forOhio-based Rocky Boots to outsource when a shoe that costs $12 to make in the UnitedStates can be made in China for 40 cents?13 Or is there more to the story?

One controversial side effect to global outsourcing is job migration, the shifting of jobsfrom one country to another. At present, the U.S. economy is a net loser to job migra-tion. In one three-month period, global outsourcing caused 3 out of every 10 layoffs.14

By contrast, countries like China, India, Philippines, and Russia are net gainers. Andthey aren’t just sources of unskilled labor; they are now able to offer highly trainedworkers—engineers, scientists, accountants—for as little as one-fifth the cost of anequivalent U.S. worker.

Politicians and policymakers regularly debate how to best deal with the high costs ofjob migration, as local workers lose their jobs and their communities lose economic vi-tality. One side looks for new government policies tostop job migration by protecting the jobs of U.S.workers. The other side calls for patience, believingthat the national economy will strengthen in thelong run as it readjusts and creates new jobs for U.S.workers. Which side are you on?

• Diversity and Discrimination Are Continuing Social Priorities

In 1987, the Hudson Institute, a public policy researchcenter, published the report Workforce 2000: Work andWorkers for the 21st Century. It created an immediate stir in business circles, among gov-ernment policymakers, and in the public eye.15 The report called attention to the slowgrowth of the U.S. workforce, as well as its changing demographics—fewer youngerworkers and more older ones, as well as more women, minorities, and immigrants.16

A follow-up report, Workforce 2020, provided “a wake-up call for Americanworkers, corporations, educators, parents and government officials.” 17 It focused on

Job migration occurs when globaloutsourcing shifts from one countryto another.

• Women are 47% of the U.S. workforceand hold 50.3% of managerial jobs.

• African-Americans are 13.8% of theworkforce and hold 6.5% of manage-rial jobs.

• Hispanics are 11.1% of the workforceand hold 5% of managerial jobs.

• Women hold 14.7% of board seats atFortune 500 companies; women ofcolor hold 3.4%.

• For each $1 earned by men, womenearn 76 cents; African-Americanwomen earn 64 cents; Hispanicwomen earn 52 cents.

STAY INFORMED

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Workforce diversity describesdifference among workers in gender,race, age, ethnic culture, able-bodiness, religious affiliation, andsexual orientation.

The glass ceiling effect is an in-visible barrier limiting career ad-vancement of women andminorities.

Prejudice is the display of nega-tive, irrational attitudes towardwomen or minorities.

Discrimination actively denieswomen and minorities the full bene-fits of organizational membership.

workforce diversity, which describes the composition of a workforce in terms of differ-ences among the members, such as gender, age, race, ethnicity, religion, sexual orienta-tion, and able-bodiness.18

U.S. laws strictly prohibit the use of demographic characteristics in human resourcemanagement decisions, such as hiring, promotion, and firing.19 But laws are one thing,actions are yet another. One study revealed that resumes with names like “Brett” received50 percent more responses from potential employers than ones with identical credentialsbut with names such as “Kareem.”20 And, do you ever wonder why women and minori-ties hold few top jobs in large companies? 21 One explanation is a subtle form of discrim-ination known as the glass ceiling effect. It occurs when an invisible barrier or “ceiling”prevents members of diverse populations from advancing to high levels of responsibilityin organizations.22

There is little doubt that women and minorities still face special work and career chal-lenges in our society at large. Although progress is being made, diversity bias still existsin too many of our work settings.23 This bias begins with prejudice, the holding of nega-tive, irrational attitudes regarding people who are different from us. Prejudice becomesactive discrimination, like that revealed in the resume study, when people in organizationstreat minority members unfairly and deny them full membership benefits.

Scholar Judith Rosener suggests that employment discrimination of any form comesat a high cost—not just to the individuals involved, but also to society. The organiza-tion’s loss for any discriminatory practices, she says, is “undervalued and underutilizedhuman capital.”24

• Talent and Intellectual Capital Drive High-Performance Organizations

A values statement on the website of Herman Miller, the innovative manufacturer of de-signer furniture, reads: “Our greatest assets as a corporation are the gifts, talents and abil-ities of our employee-owners. . . . When we as a corporation invest in developing people;we are investing in our future.”

We shouldn’t find prejudice and discrimination at Herman Miller. Rather, we shouldfind a work environment that respects all employees, raises their confidence, and inspiresthem to achieve high performance and find self-fulfillment. Hopefully, this also describesthe organization in which you work, will work and, perhaps, even will someday lead.

After studying high-performing companies, management scholars Charles O’Reillyand Jeffrey Pfeffer conclude that they do better because they get extraordinary resultsfrom the people working for them. “These companies have won the war for talent,” theysay, “not just by being great places to work—although they are that—but by figuring outhow to get the best out of all of their people, every day.”25

O’Reilly and Pfeffer are talking about an organization’s intellectual capital, the col-lective brainpower or shared knowledge of its workforce.26 For you, intellectual capitalcan be a personal asset—a package of brains, skills, and capabilities that differentiatesyou from others and that makes you valuable to potential employers. And as you thinkabout it, consider the two foundations of intellectual capital—competency andcommitment.27

Competency represents our talents or job-relevant capabilities; commitment repre-sents our willingness to work hard in applying them to important tasks. Obviously both

are essential; one without the other is notenough to meet anyone’s career needs or anyorganization’s performance requirements. MaxDePree, former CEO of Herman Miller, puts

it this way: “We talk about the difference between being successful and being excep-tional. Being successful is meeting goals in a good way—being exceptional is reachingyour potential.”28

When it comes to human potential, the new workplace is well into the informationage dominated by knowledge workers. These are persons whose minds, not just theirphysical capabilities, are critical assets.29 But things are not standing still. Futurist DanielPink says that we are already moving into a new conceptual age in which intellectual capi-

Intellectual capital is the col-lective brainpower or shared knowl-edge of a workforce.

Knowledge workers use theirminds and intellects as critical as-sets to employers.

Intellectual Capital �Competency � Commitment

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What Issues and Concerns Complicate the New Workplace? | 7


In a free-agent economy peoplechange jobs more often, and manywork on independent contracts witha shifting mix of employers.

tal rests with people who are both “high concept” (creative and good with ideas) and“high touch” (joyful and good with relationships).30 He says the future will belong tothose of us with “whole mind” competencies, ones that combine left-brain analyticalthinking with right-brain intuitive thinking.

• Career Success Requires a Skill and a Capacity for Self-Management

No matter how you look at it, the future poses a complex setting for career success. And ifcurrent trends continue it will be more and more of a free-agent economy. Like professionalathletes, many of us will be changing jobs more often and even working on flexible con-tracts with a shifting mix of employers over time.31 British scholar and consultant CharlesHandy uses the analogy of the shamrock organization to describe the implications.32

Each leaf in the shamrock organization represents a different group of workers.The first leaf is a core group of permanent, full-time employees with critical skills,who follow standard career paths. The second leaf consists of workers hired on short-and long-term contracts. They provide the organiza-tion with specialized skills and talents that supportthe needs of the core workers. The third leaf is agroup of temporary part-timers, hired as theneeds of the business grow and let go whenbusiness falls.

As you might guess, today’s college gradu-ates must be prepared to succeed in thesecond and third leaves of Handy’s Sham-rock organization, not just the first. Andto achieve success, Handy advises everyone to maintain aportfolio of skills that is always up-to-date and attractiveto potential employers, regardless of where in the shamrock your goals may center.

Former IBM CEO Lou Gerstner describes a similar concept. He says we must set a goalof “lifetime employability” and we must accept personal responsibility for its achievement.This places a premium on your capacity for self-management, realistically assessing yourselfand actively managing your personal development. It means exercising initiative, acceptingresponsibility for accomplishments and failures, and continually seeking new learning op-portunities and experiences.

The fact is that what happens from this pointforward in your career is largely up to you.Would you agree that there is no better timethan the present to start taking charge? Pictureyourself in an interview situation. The personsitting across the table asks the question, “Whatcan you do for us?” How do you reply?

A good answer to the interviewer’s questiondescribes your “personal brand”—a unique andtimely package of skills and capabilities of realvalue to a potential employer. Management con-sultant Tom Peters advises that your brandshould be “remarkable, measurable, distin-guished, and distinctive” relative to the competi-tion—others who want the same career opportu-nities that you do.33

Have you thought about what employers want,and about your brand? Does your personal portfo-lio include new workplace survival skills like thoseshown in Management Tips?34

Self-management is the abilityto understand oneself, exercise ini-tiative, accept responsibility, andlearn from experience.

Full-timecore

workers

The Shamrockorganization

Part-timetemporaries

Independentcontractors

A shamrock organization oper-ates with a core group of full-timelong-term workers supported by oth-ers who work on contracts and part-time.

M A N A G E M E N T T I P S

New workplace survival skills

• Mastery: You must be good at something, to contribute something of valueto your employer.

• Contacts: You must get to know the people who can help you get thingsdone.

• Entrepreneurship: You must be willing to take risks, spot opportunities,and step out to engage them.

• Love of technology: You must embrace technology, and be willing and ableto fully utilize IT.

• Marketing: You must create a positive impression, and communicate wellyour successes and progress.

• Passion for renewal: You must learn and change continuously, to updateyourself for the future.

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STU DY G U I DE

Be Sure You Can . . .

• describe how corporate governanceinfluences ethics in organizations

• explain how globalization and job migrationare changing the economy

• differentiate prejudice, discrimination, andthe glass ceiling effect

• state the intellectual capital equation

• discuss career opportunities in theShamrock organization

• explain the importance of self-managementto career success in the new economy

Define the Terms

Corporate governance

Discrimination

Ethics

Free-agent economy

Glass ceiling effect

Global outsourcing

Globalization

Intellectual capital

Job migration

Knowledge workers

Prejudice

Self-management

Shamrock organization

Workforce diversity

Reflect/React

1. To what extent are current concerns for ethics inbusiness, globalization, and changing careersaddressed in your courses and curriculum?

2. How can people of color can avoid being hurt byprejudice, discrimination, and the glass ceilingeffect in their careers?

3. In what ways can the capacity for self-management help you to prosper in a free-agenteconomy?

1.1 What issues and concerns complicate the new workplace?

8 | Study Guide


Rapid Review

• Society increasingly expects organizations andtheir members to perform with high ethicalstandards and in socially responsible ways.

• Globalization is bringing increased use of globaloutsourcing by businesses and concern for theadverse effects of job migration.

• Organizations operate with diverse workforces andeach member should be respected for her or histalents and capabilities.

• Work in the new economy is increasinglyknowledge-based, relying on people with thecapacity to bring valuable intellectual capital tothe workplace.

• Careers in the new economy are becoming moreflexible, requiring personal initiative to build andmaintain skill portfolios that are always up-to-dateand valued by employers.

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What Are Organizations Like as Work Settings? | 9


An organization is a collection ofpeople working together in a divisionof labor to achieve a commonpurpose.

In the article “The Company of the Future,” University of California Professor and for-mer U.S. Secretary of Labor Robert Reich says: “Everybody works for somebody orsomething—be it a Board of Directors, a pension fund, a venture capitalist, or a tradi-tional boss. Sooner or later you’re going to have to decide who you want to work for.”35

Are you ready to make this decision? Do you understand the nature of organizations wellenough to evaluate them when making career choices?

• Mission Statements Express the Purposes of OrganizationsAny organization, large or small, public or private, can be described as a collection ofpeople working together to achieve a common purpose.36 Think about the implicationsof this definition. It applies to virtually all of our social institutions—banks, hospitals,large and small businesses, multinational corporations, government agencies, churches,voluntary associations, and more. And importantly, it also suggests that all organizationsplay unique roles in society, enabling their members to accomplish far more by workingtogether collectively than alone.

When things work right, the power of collective action energizes the organizationalpurpose, its reason for existence as a social institution. Just as with people, a clear andcompelling purpose sets a good direction for an organization and its members. In fact,researchers believe that organizations gain strength and perform better when their pur-poses are clearly tied to quality products and customer satisfaction.37

Google’s stated purpose is: “To organize the world’s information and make it univer-sally accessible.”38 Do you believe it is well stated? Could this sense of purpose be one ofthe reasons why Google has been successful and is constantly innovating to stay so? Andby the way, can you think of an organization that doesn’t seem to have a clear purpose,or that doesn’t act consistent with its stated purpose?

You can learn a lot about an organization from its mission statement, which typicallydescribes not only the purpose but also goals, values, and even priorities.39 Consider, forexample, the excerpts from the unique three-part mission statement of Ben & Jerry’sHomemade, Inc.40 The statement shows a firm that is publicly committed not only tomaking the highest quality ice creams, but also to respecting its employees, protectingthe natural environment, and being a good citizen of society. It’s quite a statement, butalso a lot to live up to.

1.2 What Are Organizations Like as Work Settings?

Product MissionTo make, distribute, and sell the finestquality all natural ice cream . . . promotingbusiness practices that respect the earthand the environment.

Economic MissionTo increase value for our stakeholders andexpand opportunities for development andcareer growth for our employees.

Social MissionTo initiate innovative ways to improve thequality of life locally, nationally, andinternationally.

Ben & Jerry’s Mission Statement

An open system transforms re-source inputs from the environmentinto product outputs.

The organizational purpose isusually to provide society with usefulgoods or services.

• Organizations Are Open Systems that Interact with Their Environments

You can see in Ben & Jerry’s mission statement a clear linkage between the firm and itsexternal environment. This illustrates how organizations act as open systems in a contin-uous input–transformation–output cycle (see Figure 1.1). They interact with their

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A value chain is a sequence ofactivities through which organiza-tions transform inputs into outputs.

environments to obtain resources (e.g., people, technology, information, money, andsupplies) that are transformed through work activities into goods and services for theircustomers and clients. Google, Ben & Jerry’s, your college or university, and the localbookstore can all be described in this manner.

This concept also helps explain why there is so much emphasis today on customer-driven organizations. These are organizations that try hard to focus their resources, ener-

gies, and goals on continuallysatisfying the needs of theircustomers and clients. Lookagain at Figure 1.1 and youshould recognize the logic. Canyou see how customers hold thekeys to the long-term prosper-ity and survival of a business,like an auto manufacturer?Their willingness to buy prod-

ucts or use services provides the revenues needed to obtain resources and keep the cyclein motion. And as soon as the customers balk or start to complain, someone should belistening. This feedback is a warning that the organization needs to change and do thingsbetter in the future.

• Organizations Create Value for Customers and ClientsThe sequence of activities through which organizations actually create value for theircustomers and clients is called the value chain. The process of value creation begins withobtaining resources. It continues as the organization combines and transforms these re-sources to create finished goods or services. Thevalue chain ends when customers and clients arewell served.

Organizational success can be evaluated froma value creation perspective. If it adds value to theoriginal cost of resource inputs, then a business or-ganization earns a profit. It is able to sell its prod-ucts for more than the cost of making them. If itadds value to the original cost of resource inputs, anonprofit organization adds wealth to society. It isable to provide a public service, such as communityfire protection, that is worth more than its cost.

ResourcesAcquired

fromEnvironment

ResourcesReceived and

Organizedfor Use

People andTechnology

Create Goodsand Services

Goods andServices

Distributedas FinalProducts

Customersand ClientsAre Served

The organization’s value chain

Cost of handling customer serviceinquiries:

• $9.50—in person

• $2.50—by personal e-mail

• $1.10—by interactive voice response

• $ .50—through website

• $ .25—by automated e-mail response

STAYINFORMED

Resource inputs

The environmentsupplies

Product outputs

PeopleMoneyMaterialsTechnologyInformation

Work-activites turn

resourcesinto outputs

Finished goodsand/or services

Consumer feedback

The environmentconsumes

Transformation process

The organizationcreates

As open systems, organizations continually interact with their external environments to obtain resourceinputs, transform those inputs through work activities into goods and services, and deliver finishedproducts to their customers. Feedback from customers indicates how well they are doing.

Figure 1.1 How do organizations as open systems interact with their external environments?

Customer-driven organiza-tions focus their resources, ener-gies, and goals on satisfying theneeds of customers.

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What Are Organizations Like as Work Settings? | 11


Productivity is the quantity andquality of work performance, with re-source utilization considered.

Performance efficiency is aninput measure of resource cost as-sociated with goal accomplishment.

Performance effectiveness isan output measure of task or goalaccomplishment.

Goalattainment

High

Low

Effective but not efficient• Goals achieved• Resources wasted

Neither effective nor efficient• Goals not achieved• Resources wasted

Effective and efficient• Goals achieved• No wasted resources• High productivity

Efficient but not effective• Goals not achieved• No wasted resources

Resource utilizationGoodPoor

Performance effectiveness indicates the degree to which goals are accomplished, typically quantity andquality goals. Performance efficiency indicates the cost of resources used. True productivity requiresboth performance effectiveness (goals achieved) and performance efficiency (no wasted resources).

Figure 1.2 What is the relationship of performance effectiveness,performance efficiency, and productivity?

Of course, the value chain works well only when all parts of the organization,people and processes, work well together.41 In fact, one of the ways consultants andmanagers try to improve organizations is to carefully describe the parts of the valuecreation process, analyze each part, examine relationships among the parts, and thenmake changes to streamline the value chain for better performance.

• Productivity Is a Measure of Organizational Performance

To rate the overall performance of organizations it is common to use some measure ofproductivity—the quantity and quality of work accomplished relative to resources used.In simplest terms you can think of this as a ratio: outputs/inputs. At Southwest Airlines,for example, productivity is measured and tracked year-to-year in such terms as operat-ing profit per passenger, expenses per passenger, and average monthly passengers peremployee.42

The performance of organizations can also be described in terms of efficiency andeffectiveness, as shown in Figure 1.2. Performance efficiency is an input measure ofthe cost of resources consumed. A common efficiency measure is cost of labor; othersinclude equipment utilization, facilities maintenance, and supplies or materials ex-penses. Performance effectiveness is an output measure of goal accomplishment. It in-dicates the extent to which things are done right, ideally in terms of both quantityand quality of work performed.

You can see from the figure that true productivity results from a combination of per-formance efficiency and performance effectiveness. But one of the realities of organiza-tional life is that efficiency and effectiveness get involved in trade-offs; sometimes organi-zations emphasize one over the other.

Have you ever considered, for example, why so much customer service is now han-dled electronically? The answer is efficiency, the drive to reduce business costs by replac-ing personal contact with computer assistance.43 You see examples of this everywhere—from self-checkouts at the grocery store, to ATM machines, to online order tracking.

All of this added efficiency is often great for us, the customers, as well as for the or-ganization. But you have to admit that it can sometimes go too far, hurting effectivenessthrough customer dissatisfaction. How do you react when those highly efficient, com-puter-assisted or automated transactions fail to meet your service needs? And what aboutthose times when a voice mail menu of options is not only tedious, but doesn’t offer thechoices you need?

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• Organizations Are Changing as Society ChangesWhen interviewed by Business Week, consultant Tom Peterswas asked to describe how organizations would operate inthe future. He responded this way:44

. . .we will be working with an eclectic mix of contract team-mates from around the globe, many of whom we’ll never meetface-to-face. Every project will call for a new team, composedof specially tailored skills. . . . Every player on this team willbe evaluated—pass-by-pass, at-bat by at-bat, for the qualityand uniqueness and timeliness and passion of her or hiscontribution.

Predicting the future is never easy. But Peters was righton; the future is now. As most everyone realizes, organiza-tions are already asking people to work together in new anddifferent ways. And if you compare what is taking placewith what might be considered traditional practices in thepast, you may be surprised.

Exciting trends are unfolding. In the new workplacethere is less command and control, and more freedom andself-direction. There is more emphasis on respecting peopleas valuable assets to be nurtured and developed, not as coststo be controlled. In executive boardrooms, managementconversations, and the business literature, themes of“respect,” “participation,” “empowerment,” “involvement,”“teamwork,” and “ethical behavior” are common when or-ganization and management practices are being discussed.

Many forces drive these and other organizational transi-tions. Look at the Exhibit: Key Transitions in Organizations.45 Take the time to readthrough it twice. The first time, think about how different organizations probably werewhen your parents started their careers. Could these differences have affected theirprogress, satisfactions, and lives overall? On the second reading, think about what the

transitions mean for you, for your future. What arethe opportunities and the potential risks? And, areyou well prepared for them?

Things are different in our new century andpost-9/11 world; sometimes they can be downrightscary. New York Times columnist and authorThomas Friedman spends a lot of time thinkingand writing about world events and globalization.46

He recognizes the challenges ahead, and believes wecan flourish in the future. But, he says, you and I,and our children, must be “strategic optimists” whohave the “right imagination and the right motiva-tion.” And he says we have to be willing to wake upevery day and not just imagine that things can bebetter, but be willing to act on that imagination.

As we now move together to explore manage-ment through the pages of this book, there’s nodoubt that the new workplace is here. And it isshaping up to be very different from those of thepast. But it’s also still a work in progress. Imaginewhat it can be in the future.

P A C E S E T T E R S

At Xerox, Anne Mulcahy’shigh-performance leadership isbased on valuing people.

When faced with a crisis—basically to change dramatically or go out ofbusiness—the Xerox Corporation Board of Directors turned to an experiencedinsider for leadership. Their choice was Anne Mulcahy, a company veteranwho had worked her way to the top over a 27-year career. Her charismaticand hands-on style of leadership focused on communicating with customersand employees. Facing what she considered an “unsustainable businessmodel,” one of her first steps was to fly around the world to personally visitemployees in all Xerox locations. Her goals were to communicate face-to-face the realities associated with the company’s problems, yet still raisemorale and motivation by refocusing attention away from past failures andtoward future possibilities. Considered one of the most respected andpowerful women in the world of business, Mulcahy says: “People have to feelengaged, motivated and feel they are making a contribution to somethingthat is important.”

Key Transitions in Organizations

Less “command-and-control” Traditional top-down waysare proving inadequate. The old “do as I say” bosses aregiving way to new “how I can help you” ones.

Belief in human capital The new economy rewards highinvolvement and participatory work settings. The goals areto rally knowledge, experience, and commitment of allworkers.

Commitment to teamwork Today’s organizations are lessvertical and more horizontal in focus. They are moredriven by teamwork, pooling talents for creative problemsolving.

Emphasis on technology Changes in computer andinformation technology bring continuous opportunities.Technology keeps changing the ways organizations operateand people work.

New workforce expectations A new generation of workers ismore informal and less tolerant of hierarchy. The newgeneration tends to value performance merit over statusand seniority.

Concern for work–life balance As society changes, life getsmore complicated for individuals and families.Organizations gain by actively helping people balancework and personal affairs.

E X H I B I T

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STU DY G U I DE

Be Sure You Can . . .

• explain the significance of organizationalpurpose and mission statements

• describe how organizations operate as opensystems

• identify the components in a typical valuechain

• describe how organizations measureproductivity

• differentiate performance effectiveness andperformance efficiency

• list several ways in which organizations arechanging today

Define the Terms

Customer-drivenorganization

Open system

Organization

Organizational purpose

Performanceeffectiveness

Performance efficiency

Productivity

Value chain

Reflect/React

1. At what point or points in the value chain doorganizations have the greatest potential to findproductivity improvements?

2. Why is it that people and organizations can oftenemphasize performance efficiency and lose sightof performance effectiveness?

3. How might your future be affected by each of theseveral ways in which organizations are changingtoday?

1.2 What are organizations like as work settings?

Study Guide | 13


Rapid Review

• An organization is a collection of people workingtogether to achieve a common purpose, thereason for its existence.

• A mission statement expresses the purpose andreflects the underlying values of an organization.

• As open systems, organizations interact with theirexternal environments while obtaining resourceinputs and transforming them into productoutputs.

• The organization’s value chain is the sequence ofactivities that acquire resources, receive andorganize them, and eventually transform them intoproducts for distribution to customers.

• As a measure of organizational performance,productivity describes the quantity and quality ofwork outputs with resource costs taken intoaccount.

• Organizations should operate with bothperformance effectiveness (accomplishing goals),and performance efficiency (operating with thelowest costs).

• Key trends and transitions in today’s organizationsinclude less command and control, moreteamwork, intense use of technology, greaterspeed, and respect for people.

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1. The Sarbanes-Oxley Act of 2002, which makes it easier toprosecute corporate executives for financial misconduct, wasprompted by a lack of __________ displayed by some cor-porate leaders.(a) self-management (b) ethics (c) customer orientation(d) intellectual capital

2. __________ is the active oversight by boards of directors oftop management decisions in such areas as corporate strat-egy and financial reporting. (a) value chain analysis (b) productivity (c) outsourcing(d) corporate governance

3. When a manager denies promotion to a qualified workersimply because of a personal dislike for the fact that she isHispanic, this is an example of __________.(a) discrimination (b) workforce diversity (c) self-management (d) a free-agent economy

4. Information and technology would be considered ________in the open systems view of organizations.(a) inputs (b) outputs (c) transformations (d) feedback

5. If performance effectiveness means doing the “right things,”performance efficiency means doing these things ________.(a) at low cost (b) with high quality (c) in a timelymanner (d) with high job satisfaction

T E S T P R E P1MODU LE

6. When an apparel manufacturer buys its cloth in one coun-try, has designs made in another country, sews the garmentsin another country, and sells the finished product in yet othercountries, it is actively engaging in the practice of ________.(a) job migration (b) performance effectiveness (c) valuecreation (d) global outsourcing

7. The analogy of the __________ describes organizations thathire fewer full-time employees, and hire more part-timersand independent contractors.(a) open system (b) conceptual age (c) shamrock(d) information age

8. The intellectual capital equation states that: IntellectualCapital � __________ � commitment.(a) diversity (b) confidence (c) competency(d) communication

9. By reading an organization’s mission statement you shouldbe able to learn about the organization’s purpose and _____.(a) glass ceiling (b) values (c) productivity(d) governance

10. The first step in the value chain for most organizationswould be __________.(a) serving customers (b) acquiring resources (c) creatinggoods and services (d) distributing products for sale

Multiple Choice

14 | Test Prep


Take the complete set of Module 1 quizzes online!

Short Response

11. What is the difference between prejudice and discriminationin the workplace?

12. Why is job migration often associated with an increase inglobal outsourcing?

13. How is the emergence of a “free-agent economy” changingcareer and work opportunities?

14. Why isn’t any open system automatically a customer-drivenorganization?

Integration & Application

15. Choose an organization with which you are familiar—perhaps where you work, a place where you do business, ora voluntary organization.

Questions: What is the organization’s purpose? How wouldyou describe the organization as an open system? What are theelements in its value chain? Are there areas where you mightsuggest improvements in the chain? Does the organization op-erate consistent with a customer-driven orientation, and withwhat implications for its performance?

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Self-Assessment/Pathways | 15


Go online to read this case!New Balance: No Heroes, Just SneakersIn an era in which outsourcing is a dirty word to every one except

manufacturers, New Balance seems to have done what so many of itscompetitors couldn’t: maintain quality and price control while keeping much

of its manufacturing in the United States. To do so, they’ve invested inmanufacturing advances to cut costs and energy, and yet still pay their U.S.

workers more than the competition. New Balance has a sizeable culturalfollowing in the United States; can it beat Nike on its own track?

C A S E S N A P S H O T

P A T H W A Y S to WileyPLUS

MODU LE 1 Online Interactive Learning Resources

ExperientialExercises•Future Workplace •Organizational

Metaphors

Skill Builder •Diversity •Maturity

Team Project•Team Project

SELF-ASSESSMENT21st-Century Manager

INSTRUCTI ONS Use this scale to rate yourself on the followinglist of personal characteristics.

S � Strong, I am very confident with this one.G � Good, but I still have room to grow.W � Weak, I really need work on this one.U � Unsure, I just don’t know.

1 Resistance to stress: The ability to get work done evenunder stressful conditions.

2 Tolerance for uncertainty: The ability to get work doneeven under ambiguous and uncertain conditions.

3 Social objectivity: The ability to act free of racial, eth-nic, gender, and other prejudices or biases.

4 Inner work standards: The ability to personally set andwork to high performance standards.

5 Stamina: The ability to sustain long work hours.6 Adaptability: The ability to be flexible and adapt to

changes.7 Self-confidence: The ability to be consistently decisive

and display one’s personal presence.

8 Self-objectivity: The ability to evaluate personalstrengths and weaknesses and to understand one’s mo-tives and skills relative to a job.

9 Introspection: The ability to learn from experience,awareness, and self-study.

10 Entrepreneurism: The ability to address problems andtake advantage of opportunities for constructive change.

SCORING

Give yourself 1 point for each S, and 1/2 point for each G.Do not give yourself points for W and U responses. Totalyour points and enter the result here [PMF � ________].

INTERPRETATI ON

This assessment offers a self-described profile of your man-agement foundations (PMF). Are you a perfect 10, or some-thing less? There shouldn’t be too many 10s around. Asksomeone else to also assess you on this instrument. Youmay be surprised at the results, but the insights are wellworth thinking about. The items on the list are skills andpersonal characteristics that should be nurtured. Success asa twenty-first-century manager may well depend on a will-ingness to continually strengthen these basic managementfoundations throughout one’s career.

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