BUSINESS MANAGEMENT

Unit 1: What’s been changing lately?

Unit 2: Organization and Managers?
Unit 3: Business environment?
Unit 4: How management is being evolving?
Unit 5: Human being in management?
Unit 6: Organizational Culture?
Unit 7: Organizational structure?
Unit 8: Functional management?

Managers: people who “run” the show

Management: Discipline + people
Organization: The thing that is “run” by managers
Business: How we make money from the show

Organization?
The manner of being organized.
Any unified, consolidated group of elements.
Traditional organizations: Group of people with a common goal.
Current organizations: Set of capabilities at the service of owners and/or
society.
When a business’ opportunity? Customers
Who must afford the risk? Investors.
Who must deal with the uncertainty? Capabilities.
Mission is why we exist.
Strategic initiatives is what we need to do. We need a plan, an objective.
Vision is what we want to be.
Core Values what we believe in.
Globalization: Process by which the world is getting more unified, and refers to
political engagement, economic integration, technological connectivity, personal
contact, etc.; in way that causes and consequences can not be fully explained
locally.
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Globalization is not new, is just speeding up and will stay around in/for the
foreseeable future.
Peter Ferdinand Drucker
“The root cause of nearly every (business)crises is not that things are being
done poorly.
It is not even that the wrong things are being done.
Indeed, in most cases, the right things are being done- but fruitlessly.
How can this apparent paradox be explained?”
“The assumptions on which organizations has been built and is run no longer fit
reality.”

CHAPTER ONE
1-2 BASIC MANAGEMENT FUNCTIONS
Managements involve four functions of planning and decision making,
organizing, leading and controlling that don’t have a specific order to follow due
to the fact that most managers engage in more that one activity at a time.
Planning and Decision Making: Setting your goals and deciding how’s the best
way to achieve them. This help managers know how to allocate their time and
resources, something that will help them to achieve their goal.
Organizing: Determining how best to group activities and resources. Organize
people to carry out the plan.
Controlling: Monitoring, analyze and correcting activities to facilitate your goal
and to ensure that its going to the right place.
Leading: Motivating members to give the best to the organization. ” We have
good people. They just need a leader who can guide and inspire them.”

Top managers:
- Executives who manage the overall organization
- Create the organization’s goals, overall strategy, and operating policies.
Middle managers:
- Implement the policies and plans developed by top managers
-Supervise and coordinate the activities of lower-level managers
First-line managers:
-Supervise and coordinate the activities of operating employees.
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- Spend a large proportion of their time supervising the work of their

subordinates

Different fundamental management skills:

Technical Skills are necessary to accomplish or understand the specific kind of
work done in an organization. This is very important for first-line managers due
to the fact that they are constantly training their subordinates and answering
questions.
Interpersonal Skills: Managers spend a lot of time interacting with people so
they also need the ability to communicate with, understand, and motivate
individuals and groups. A manager claims the organizational ladder.
Conceptual skills: Some managers need the mental capacity to understand the
overall workings of the organization and its environment, it allows them to think
strategically, to see “the big picture”.
Diagnostic skills: Visualize the most appropriate responde to a situation. A
manager can diagnose and analyze a problem in the organization by studying
its symptoms and then developing a solution.
Communciation skills: refers to the manager’s abilities to both effectively convey
ideas and information to theirs and effectively receive ideas and information
from others. This enable a manager to coordinate work with peers and
colleagues so that they work well together.
Decision-making skills: Ability to recognize and define problems and
opportunities and to then select an appropriate course of action to solve
problems and capitalize on opportunities. No manager makes the right decision
all the time but most of the time.
Time management Skills: refer to the manager’s ability to prioritize work, to
work efficiently, and to delegate work appropriately. Managers face many
different pressures and challenges

The art of management:

Even though managers may try to be scientific as often as possible, they must
frequently make decisions and solve problems on the basis of intuition,
experience, instinct, and personal insights.
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1-4 The science of Management:

- Management theories are use to build organizations and guide them toward
their goals.
- Understanding the historical context of management provides a sense of
heritage and can help managers to avoid the mistakes of others.
For example, a company maintains an extensive archival library of its old
banking documents and records, and even employs a full-time corporate
historian.

Scientific Management:

Taylor, one of the earliest advocates of scientific management, discovered a

phenomenon called: soldiering- employees working at a pace slower than their
capabilities. He determined what each worker should be producing, and then he
designed the most efficient way of doing each part of the overall task. Next, he
implemented a piecework pay system, he began increasing the pay of each
worker who met and exceeded the target level of output set of his or her job.

Administrative Management: focuses on managing the total organization. A

contributor was Henry Fayol. He was the first to identify the specific managerial
functions of planning, organizing, leading, and controlling.

The behavioral Management Perspective: Emphasis on individual attitudes,

behaviors, and group of processes and recognized the importance of behavioral
processes in the workplace.

The System perspective:

Open systems: Are systems that interact with their environment

Closed systems: Do not interact with their environment.

CHAPTER 2:
The economic dimension of an organization’s general environment is the health
and vitality of the economic system in which the organization operates.
Important factors for business like general economic growth, inflation, interest
rates, and unemployment. All this factors affect an organization depending on
the economy situation.

The technological dimension: Made up of the methods available for converting

resources into products or services.
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The political-legal dimension: consist of the relationship between business and

government. Legal system defines what an organization can do and cannot do.

The task environment: most organizations tend to focus attention on their task
environment, like customer, competitors, suppliers, strategic partners, and
regulators.

Competitors: Are other organizations that compete with it for resources. The
most obvious resources that competitors view for are customer dollars.
Customers: The ones that pay to acquiare an organization’s products or
services.
Suppliers: The ones that provide resources for other organizations.
Regulators: are elements of the task environment that have the potential to
control, legislate , or otherwise influence an organization’s policies and
practices. Created by the government to protect the public from certain
business practices or to protect organizations from one another. Another
regulator is the interest group.
Strategic Partners: Two or more companies that work together. It helps
companies get from other companies the expertise they lack. It also help spread
risk and open new market opportunities. Indeed, most strategic partnerships are
actually among international firms.

The Internal environment: It consists of their owners, boards of directors,

employees, and physical work environment.
Owners: The people who have legal property rights to that business.
Board of directors: a governing body that is elected by the stockholders and
charged with overseeing a firm’s general management to ensure that it is run to
best serve the stockholders’ interest.
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Employees: A major element of its internal environment. Something interesting

is the changing nature of the work face, its very diverse in terms of gender, age,
and other dimension.
Physical Work environment: Somethign important is the actual physical
environments. Employee safety and health regulations have caused many
organizations to pay more attention to their internal environment.
Ethics: An individual’s personal beliefs about whether a behavior, action, or
decision is right or wrong.
Ethical behavior: Behavior that conforms to generally accepted social norms
Unethical behavior: Behavior that does not conform to generally accepted social
norms
Ethical leadership: Expected to help set the tone for the rest of the organization
and to establish both norms and a culture that reinforce the importance of
ethical behavior.
Corporate governance: Expected to ensure that the business is being properly
managed and that the decisions made by its senior management are in the best
interest of shareholders and other stakeholders.
Ethics and information technology: Ethics is behavior, values, etc.

Formal organizational dimensions: managing social responsibility needs some

factors like legal compliance, ethical compliance, and philanthropic giving.

Social responsibility: The set of obligations that an organization has to protect

and enhance the societal context in which it functions.
Share holders:

Formal organizational dimensions: Formal and planned activities on the part of

the organization.
Legal compliance: is the extent to which the organization conforms to local,
state, federal, and international laws.
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Ethical compliance: is the extent to which the organization’s members follow

basic ethical standards behavior.
Philanthropic giving: is the awarding of funds or gifts to charities or other worthy
causes.
Whistle-blowing: is an employee’s disclosure of illegal or unethical conduct by
others within the organization.

International business activities:

Exporting: making a product in the firm’s domestic marketplace and selling it in
another country.
Importing: bringing a good, service, or capital into the home country from
abroad.
Licensing: arrangement whereby a firm allows another company to use its
brand name, trademark, technology, or other assets. In return, the license pays
a royalty, usually based on sales.
Strategic alliance: Two or more firms jointly cooperate for mutual gain.
Joint venture: A special type of strategic alliance in which the partners share in
the ownership of an operation on an equity basis.
Direct investment: Commitment to internationalization is direct investment.
Occurs when a firm headquartered in one country builds or purchase operating
facilities or subsidiaries in a foreign country.

Trends in international business

- Business in war-torn countries such as Germany and Japan had to rebuild
from scratch.
- Although these countries took many years to recover, they eventually did so,
and their economic systems WWE subsequently poised for growth.
- US firms are no longer isolated from global competition or the global market.
They are finding that international operations are an increasingly important
element of their sales and profits.
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Also, all business nowadays must be concerned with the competitive situations
in lands far from home and with how companies from distinct lands are
competiting in their homelands.

Controls on international trade:

Tariffs: a tax on goods shipped across national boundaries
quota: a limit placed on the number or value of goods that can be traded.
export restraint agreements: accords to voluntarily limit the volume or value of
goods exported to or imported from one another.
“buy national” legislation: gives preference to domestic producers through
consent or price restrictions.

General agreement on tariffs and trade:

A trade agreement intended to promote international trade by reducing trade
barriers and making
Economic community: a set of countries that agree to markedly reduce or
eliminate trade barriers among member nations.
Purpose of goals: Provide guidance and a unified direction for people in the
organization.
Affect other aspects of planing: goal setting affects good planning and good
planning facilities goal setting.
Source of motivation for employees: Employees work harder if attainment is
likely to result in reward.

Kinds of organizational plans:

Strategic: A goal set by and for an organization’s top management. Focuses on
broad, general issues.
Tactical: A goal set by and for an organization’s middle managers. Focus on
actions needed to achieve strategic plan.
Operational: A goal set by and for an organization’s lower-level managers.
Short-term issues tied to tactical plan
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Strategy: A comprehensive plan for accomplishing an organization’s goals.

Strategic management: A comprehensive and ongoing management process
aimed at formulating and implementing effective strategies; a way of
approaching business opportunities and challenges.
Effective strategies: A strategy that promotes a superior alignment between the
organization and its environment and the achievement of strategic goals.
Distinctive competence: An organizational strength possessed by only a small
number of competing firms.
Scope: When applied to strategy, it specifies the range of
markets in which an organization will compete
Resource deployment: how a organization distributes its resources across the
areas in which it competes.
3-1 TYPES OF STRATEGIC ALTERNATIVES
Business-level strategy: the set of strategic alternatives from which an
organization chooses as it conducts business in a particular industry or market.
Corporate-level strategy: the set of strategic alternatives from which an
organization chooses as it manages its operations simultaneously across
several industries and several markets.
Strategy formulation: the set of processes involved in creating or determining an
organization’s strategies; it focuses on the content of strategies
Strategy implementation: the methods by which strategies are operationalized
or executed within the organization; it focuses on the processes through which
strategies are achieved.

3-3
SWOT analysis: the best strategies accomplish an organization’s mission by
(1) exploiting an organization’s opportunities and strengths while (2) neutralizing
its threats and (3) avoiding its weaknesses.
SWOT: strengths, weaknesses, opportunities, and threats.
Exercise: Develop a SWOT analysis for Disney opening a new park in Europe.
Strengths: Globally, Disney is well known.
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Weaknesses: segmented market.

Opportunities: Europe (americanization)
Threats:

Organizational strengths are skills and capabilities that enable an organization

to create and implement its strategies.
A distinctive competence: a strength possessed by only a small number of
competitions firms. This firms often obtain a competitive advantage and attain
above-normal economic performance.
Organizational weaknesses are skills and capabilities that do not enable an
organization to choose and implement strategies that support its mission.
Organizational opportunities are areas that may generate higher performance
Organizational threats are areas that increase the difficulty of an organization
performing at a high level.

3-4: BUSINESS-LEVEL STRATEGIES

Differentiation strategy: seeks to distinguish itself from competitors through the
quality of its products or services.
Overall cost leadership strategy: attempts to gain a competitive advantage by
reducing its costs below the costs of competing firms.
Focus strategy: concentrates on a specific regional market, product line, or
group of buyers.

STRATEGIES BASED ON THE PRODUCT LIFE CYCLE:

The product life cycle is a model that shows how sales volume changes over
the life of products. Understanding the four stages in the product life cycle helps
managers recognize that strategies need to evolve over time.
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Introduction: demand is high, managers focus on getting products “out the door”
without sacrificing quality.
Growth: More firms begin producing the product, and sales continue to grow.
Maturity: Overall demand growth fir the product begins to slow downhill
Decline:

CORPORATE-LEVEL STRATEGIES:
Diversification describes the number of different business that an organization is
engaged in and the extent to which these businesses are related to one
another.
A single-product strategy: manufactures just one product and sells it in a single
geographic market. It has a strength that the firm is likely to be very successful
in manufacturing and marketing the product. The weakness is that if the product
is not accepted by the market or is replaced by a new one, the firm will suffer.
Related diversification: A strategy in which an organization operates in several
businesses that are somehow linked with one another. It has three advantages:
It reduces an organization’s dependence on any of its business activities and
thus reduce economic risk. Second, by managing several businesses at the
same time, an organization will reduced the costs because it will be decided
with the other businesses. Third, allows an organization to exploit its strengths
and capabilitities in more than one b sines. When they do this successfully, they
capitalize on synergies, which are complementary effects that exist among their
businesses.

Unrelated diversification: a startegy in which an organization operates multiple

businesses that are not logically associated with one another. It has two
advantages. Advantages:

MANAGING DIVERSIFICATION:
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Portfolio management techniques: are methods that diversified organizations

use to determine which businesses to engage in and how to manage these
businesses to maximize corporate performance.
BCG matrix: provides a framework for evaluating the relative performance of
businesses in which a diversified organization operates. It use two factors: the
growth rate of a particular market and the organization’s share of that market.
The matrix classifies types of businesses as dogs (small share fo market that is
not expected to grow), cash cows (large share of market that is not expected to
grow substantially), question marks (small share of a fast-growing market,
future uncertain) and stars (large share of a rapidly growing market).

GE Business Screen: A method of evaluating businesses along two dimension:

industry attractiveness and competitive position; in general, the more attractive
the industry and the more competitive the position, the more an organization
should invest in a business.

TACTICAL PLANS:
An organized sequence of steps designed to execute strategic plans.
Tactics must specify resources and time frames.
Successfully implementation depends on the astute use of resources, effective
decision making and correct steps to ensure that the right things are done at the
right time and in the right way.
Also, for executing tasting plans the manager needs to evaluate every possible
course of action in light of the goal it is intended to reach. Then, they need to
make sure each decision-maker has the information and resources necessary
to get the job done.

OPERATIONAL PLANNING:
Single-use plans: developed to carry out a course of action that is not likely to
be repeated in the future.
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Program: A single-use plan for a large set of activities. It might consist of

identifying procedures for introducing a new product line, opening a new facility,
or changing
Projects: A single-use plan of less scope and complexity than a program.
Standing plans: developed for activities that recur regularly over a period of
time.
Policies: A standing plan that specifies the organization’s general response to a
designated problem or situation.
Standard operating producedures (SOP): a standard plan that outlines the steps
to be followed in particular circumstances:
Rules and regulations: Describe exactly how specific activities re to be carried
out.
3-7
Contingency planning: the determination of alternative courses of action to be
taken if an intended plan is unexpectedly disrupted or rendered inappropriate.
Crisis management: The set of procedures the organization uses in the event of
a disaster or other unexpected calamity. Some parts may be orderly and
systematic while other parts might be more fluid and develop as events unfold.

Decision making: Is the act of choosing one alternative from among a set of
alternatives. The process is to recognize and define the nature of a decision
situation, identifying alternatives, choosing the best(effectiveness) alternative,
and putting it into practice.
Steps in the rational decision-making process:
1. Recognizing and defining the decision situation.
2. Identifying alternatives
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3. Evaluating alternatives
4. Selecting the best alternative
5. Implementing the chosen alternative
6. Following up and evaluating the results.
Types of decisions:
1. Programmed decisions: A decision that is relatively structured or recurs
with some frequency.
2. Nonprogrammed decisions: A decision that is relatively unstructured and
occurs much less often than a programmed decision.
Decision-making conditions:
State of certainty: the decision maker knows with reasonable certainty what the
alternatives are and what conditions are associated with each alternative.
State of risk: the availability of each alternative and its potential payoffs and
costs are all associated with probability estimates. Decision making under
conditions of risk is accompanied by moderate ambiguity and the chances of a
bad decision.
State of uncertainty: the decision maker does not know all the alternatives, the
risks associated with each, or the likely consequences of each alternative. To
make effective decisions in these circumstances, managers must acquire as
much relevant information as possible.
Evidence-based management:
A commitment to finding and using the theory and data available at the time to
make decisions. Especially persuasive when EBM is used to question the
outcomes of decisions based on strongly held beliefs.
Principles:
1. Face the hard facts and build a culture in which people are encourage to
tell the truth.
2. Be commiteted to “fact-based” decisions making, which means being
committed to getting the best evidence and using it to guide actions.
3. Look for the risks and drawbacks in what people recommend.
The administrative model: argues that decision makers use incomplete and
imperfect information, are constrained by bounded rationality, and tend to
“satisface” when making decisions.

 The classical model explains how managers can at least attempt to be

more rational and logical in their approaches to decisions.
 The administrative model can be used by managers to develop a better
understanding of their inherent biases and limitations.
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Political forces in decision making:

Coalition:” an informal alliance of individuals or groups formed to achieve a
common goal. The common goal is often a preferred decision alternative. The
impact can be either positive or negative.
Intuition: An innate belief about something without conscious consideration.
Escalation of commitment: When a decision maker stays with a decision even
when it appears to be wrong.
Risk propensity and decision making:
Managers who are willing to take risks are more likely to achieve big successes
with their decisions: they are also more likely to incur greater losses.
Ethics and decision-making:

 Interacting group or team: a decision-making group or team in which

members openly discuss, argue about, and agree on the best alternative.
 Delphi group: a group arrives at consensus of expert opinion.
 Nominal group: a structured technique used to generate creative and
innovative alternatives or ideas.
Disadvantages of group and team decision making:
A situation that accrues when a group or team’s desire for consensus and
cohesiveness overwhelms its desire to reach the possible decision.
Agreeing with the decision because it is easier, not necessarily the right or best
decision.

CHAPTER 6
Efficiency: doing things right. Getting the most output from the least amount of
input.
Effectiveness: doing the right things. Attaining organizational goals.
Industry groups:

 Services: require few sources, and are the fastest-growing segment

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 Financial and insurance: often individuals affiliated with national

companies.
 Wholesaling: buys from manufactures and sells to producers or retailers.
 Retailing: products manufactured by other firms, sold directly to
consumers
 Transportation: taxis, uber. Etc.
 Construction: relatively small, local projects
 Manufacturing: cost of equipment and start up high.

Job specialization:
The degree to which the overall task of the organization is broken down and
divided into smaller component parts.
Benefits:

 Workers can become proficient at a task

 Transfer time between tasks is decreased.
 Specialized equipment can be more easily developed
 Employee replacement becomes easier.

Limitations:

 Workers who perform highly specialized jobs quickly become bored and
dissatisfied.
 Anticipated benefits of specialisation do not always occur.

Alternatives to specialization:

 Rotation: systematically moving employees from one job to another

 Enlargement: increases the total number of tasks workers perform.
 Job enrichment: attempts to increase both the number of tasks a worker
does and the control the worker has over the job.
Job characteristics:

 Skill variety: the number of things does in a job

 Task identity: the extent to which the worker does a complete or
identifiable portion of the total job
 Task significance: the perceived importance of the task
 Autonomy: the degree of control the worker has over how the work is
performed
 Feedback: the extent to which the worker knows how well the job is
being performed.
Grouping jobs:
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 Work teams: an alternative to job specialisation that allows an entire

group to design the work system it will use to perform an interrelated set
of tasks
 Departmentalization: the process of grouping jobs according ton some
logical arrangement.
Functional departmentalization:
Advantages:

 Each department can be staffed by experts in that functional area

 Supervision is facilitated because an individual manager needs to be
familiar only with a relatively narrow set of skills
 Coordinating activities inside each department is easier.

Disadvantages:

 Decisions making tends to become slower and more bureaucratic

 Employees may begin to concentrate too narrowly on their own function
and lose sight of the total organizational system
 Accountability and performance become increasingly difficult to monitor.

Product departmentalization:
Advantages:

 All activities associated with one product or product group can be easily
integrated and coordinated
 The speed and effectiveness of decision making are enhanced
 The performance of individual products or product groups can be
assessed more easily and objectively.
Disadvantages:

 Managers in each department may focus on their own product or product

group to the exclusion of the rest of the organization
 Administrative cost rise because each department must have its own
functional-area specialists.
Customer departmentalization:
Grouping activities to respond and interact with specific customers or customer
groups.
Advantages:

 Skilled specialists can deal with unique customers or customer groups.

Disadvantages:
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 A fairly large administrative staff is required to integrate activities of

various departments.
Location departmentalization:
Advantages:

 Skilled specialists can deal with unique customers or customer groups

Disadvantages:

 A fairly large administrative staff is required to integrate activities of

various departments
Establishing reporting relationships:

 Chain of command: a clear and distinct line of authority among the

positions in an organization
 Unity of command: each person within an organization must have a clear
reporting relationship to one and only one boss
 Scalar principle: there must be a clear and unbroken line authority that
extends from the lowest to the highest position in the organization.
 Span of management: the number of people who report to a particular
manager.
Tall organisations:

 Are more expensive because of the larger number of managers involved

 Foster more communication problems because of the increased number
of people throug whom information must pass
Flat organizations:

 Lead to higher levels of employee morale and productivity

 Create more administrative responsibility because there are fewer
managers.
 Create more supervisory responsibility because there are more
subordinates reporting to each manager.
Chapter 9:

The psychological contract: the overall set of expectations held by an individual

with respect to what he or she will contribute to the organization and what the
organization will provide in return.
Contributions from the individual:

 Effort
 Ability
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 Loyalty
 Skills
 Time
 Competencies

Inducements from the organization:

 Pay
 Job security
 Benefits
 Career opportunities
 Status
 Promotion opportunities

The person job fit:

The extent to which the contributions made by the individual match the
inducements offered by the organization.
- Each employee has a specific set of needs to be fulfilled and a set of job-
related behaviours to contribute.
- The degree to which the organization can take advantage of those
behaviors and, in turn, fulfill an employee’s needs will determine the level
of person-job fit.
The nature of individual differences:

 Personal attributes that vary from one person to another

 May be physical, psychological, or emotional
 Must consider the situation in which behavior occurs

The “big five” personality traits:

 Agreeableness: a person’s ability to get along with others

 Conscientiousness: a person’s ability to manage multiple tasks and
consistently meet deadlines
 Neuroticism: extent to which a person experiences anxiety and is poised,
calm, resilient and secure
 Extraversion: a person’s comfort level with relationships
 Openness: a person’s rigidity of beliefs and range of interests.

The myers-Briggs framework

 Myers’s-Briggs type indicator:

- A questionnaire used to differentiate personalities on the dimensions fo
the myers-Briggs framework.
- Useful to determine communication styles and interaction preferences;
has questionable reliability and validity.
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Locus of control: the degree to which an individual believes that his or her
behavior has a direct impact on the consequences of that behavior

 Internal: individuals believe they are in control of their lives

 External: individuals believe that external forces dictate what happens to
them.
Self-efficacy: an individuals beliefs about his. Or her capabilities to perform a
task. High self-efficacy individuals believe they can perform well, while low self-
efficacy individuals doubt their ability to perform.
Authoritarianism: the extent to which an individual believes that power and
status differences are appropriate within hierarchical social systems like
organizations.
Machiavellians: behavior directed at gaining power and controlling the behavior
of others.
Self-esteem: the extent to which a [erson believes he or she is a worthwhile and
deserving individual.
Risk propensity: the degree to which an individual is willing to take chances and
make risky decisions.
Emotional intelligence: the extent to which people are self-aware, manage their
emotions, motivate themselves, express empathy for others, and possess social
skills.
Attitudes and individual behavior:
Attitudes: Complexes of beliefs and feelings that people have about specific
ideas, situations, or other people.
Cognitive dissonance: caused when an individual has conflicting attitudes.
Affective component: reflects feelings and emotions an individual has toward a
situation:how we feel.
Cognitive component: derived from knowledge an individual has about a
situation; why we feel that way.
Intentional component: reflects how an individual expects to behave toward or
in the situation; how we intend to behave.
Work-related attitudes:
Job satisfaction: is influenced by personal, group, and organizational factors.

 Satisfied employees are absent from work less often, make positive
contributions, and stay with the organization.
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 Dissatisfied employees are absent from work more often, may

experience stress that disrupts coworkers, and are continually looking for
another job.
Organizational commitment:

 An attitude that reflects and individual’s identification with and attachment

to the organization itself.
 Employee commitment strengthens with an individual’s age, years with
the organization, sense of job security, and participation in decision
making.
 Committed employees have highly reliable habits, plan a longer tenure
with the organization, and muster more effort in performance.
Affect and mood in organizations:

 Positive: a tendency to be relatively upbeat and optimistic, have an

overall sense of well-being, see things in a positive light, and seem to be
in a good mood.
 Negative: the opposite.

Basic perception process:

 Perception: the set of processes by which an individual becomes aware

of an interprets information about the environment.
 Selective perception: the process of screening out information that we
are uncomfortable with or that contradicts our beliefs. If selective
perception causes someone to ignore important information, it can
become quite detrimental.
 Stereotyping: the process of categorizing or labeling people on the basis
of a single attribute. Stereotyping may cost the organization valuable
talent, violate federal anti-bias laws, and is unethical.
 Attribution: The process of categorizing or labeling people on the basis fo
a single attribute.
Stress: an individual’s response to a strong stimulus, which is called a stressor.
The creative individual:
Creativity: the ability of an individual to generate new ideas or to conceive of
new perspectives on existing ideas.
The creative individual: Background experiences and creativity.
Personal traits and creativity: personal traits of openness, an attraction to
complexity, high levels of energy, independence, autonomy, strong self-
confidence, and a strong belief in his or her own creativity.
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Cognitive abilities and creativity : highly intelligent, both divergent and

convergent thinkers.
The creative process:
Preparation: formal education and training are used to “ get up to speed”.
Experiences on the job provide additional knowledge and ideas.
Incubation: it is a period of conscious concentration during which knowledge
and ideas mature and develop. Is helped by pauses in rational thought.
Insight: a spontaneous breakthrough in which the creative person achieves a
new understanding of some problem or situation.
Verification: determines the validity or truthfulness of the insight. Tests are
conducted and prototypes are built to see if the insight leads to the expected
results.
Enhancing creativity in organizations:
- Make creativity part of the organization’s culture.
- Set goals for revenues from creative products and services.
- Reward creative success; refrain from punishing creative failures.
Performance behaviors:
Workplace behavior: a pattern of action by the members of an organization that
directly or indirectly influences organizational effectiveness.
Performance behaviors: the goal set of work-related behaviors that an
organization expects an individual to display.
Withdrawal behaviors:
Absenteeism: when an individual does not show up for work. Cause may be
legitimate or feigned.
Turnover: when people quit their jobs or may be due to work-related or personal
reasons.
Dysfunctional behaviors:
Those that detract from, rather than contribute to, organizational performance.
CHAPTER 10:
The Importance of Employee Motivation in the Workplace
Motivation: The set of forces that cause people to behave in
certain ways
Determinants of individual performance
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− Motivation
− Ability
− Work environment
Historical Perspectives on Motivation
Traditional approach:
− Frederick Taylor assumed people were motivated by
money.
Human relations approach:

 People want to feel useful and important

 Strong social needs

Human resource approach:

 Contributions are valuable to individuals and organizations.

The Needs Hierarchy Approach

Maslow’s hierarchy of needs suggests that people must satisfy five
groups of needs in order
Physiological: Attending to basic survival and biological
functions
Security: Seeking a safe physical and emotional environment
Belongingness: Experiencing love and affection
Esteem: Having a positive self-image/self-respect and
recognition and respect from others
Self-actualisation: Realising one’s potential for personal growth
and development

The Two-Factor Theory

Motivation becomes a two-stage process:
− Ensuring that deficient hygiene factors are not blocking
motivation
− Using job enrichment and redesign of jobs to increase
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motivational factors for employees

Criticisms of the two-factor theory
− Interview findings are subject to different explanations.
− Sample population was not representative.
− Subsequent research has not upheld theory.
Individual Human Needs
Need for achievement
− The desire to accomplish a goal or task more effectively
than in the past
Need for affiliation
− The desire for human companionship and acceptance
Need for power
− The desire to be influential in a group and to control one’s
Environment
Process Perspectives on Motivation
Process perspectives:
− Approaches to motivation that focus on why people choose
certain behavioural options to satisfy their needs and how
they evaluate their satisfaction after they have attained
those goals
Process perspectives on motivation:
− Expectancy theory
− Porter-Lawyer extension of expectancy theory
− Equity theory
− Goal-setting theory
Expectancy Theory
Expectancy theory:
− Suggests that motivation depends on two things—how much
we want something and how likely we think we are to get it.
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Theory assumes that:

− Behaviour is determined by personal and environmental forces.
− People make decisions about their own behaviour.
− Different people have different types of needs, desires, and
goals.
− People choose among alternatives of behaviours in selecting
one that that leads to a desired outcome.
Effort-to-performance expectancy
− The individual’s perception of the probability that effort
will lead to a high level of performance
Performance-to-outcome expectancy
− The individual’s perception of the probability that
performance will lead to a specific outcome,
consequence, or reward in an organizational setting
Valences
− An index of how much an individual values a particular
outcome. It is also the attractiveness of the outcome to
the individual.
Outcomes (Consequences)
− Attractive outcomes have positive valences and
unattractive outcomes have negative valences.
− Outcomes to which an individual is indifferent have zero
valences.
Reinforcement Perspectives on Motivation
Reinforcement theory:

 Approach to motivation that argues that behavior that

results in rewarding consequences is likely to be repeated, whereas behavior

that results in punishing consequences is less likely to be repeated

 Focuses on the role of rewards as they cause to change or remain the

same over time
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Kinds of Reinforcement in organisations

Positive reinforcement: A method of strengthening behaviour with rewards or
positive outcomes after a desired behaviour is performed
Avoidance: Used to strengthen behaviour by avoiding unpleasant
consequences that would result if the behaviour were not performed.
Punishment: Used to weaken undesired behaviours by using negative
outcomes or unpleasant consequences when the behaviour is performed.
Extinction: Used to weaken undesired behaviours by simply ignoring or not
reinforcing them
Empowerment and Participation

 Empowerment and participation

 Empowerment: The process of enabling workers to set their own work
goals, make decisions, and solve problems within their sphere of
responsibility and authority
 Participation: The process of giving employees a voice in making
decisions about their own work.

Alternative Forms of Work Arrangements

Variable work schedules:

 Compressed work schedule

 Working a full 40-hour week in fewer than the traditional five days

“Nine-eighty” schedule

 Working one full week (five days) and one compressed week (four days),
yielding one day off work every other week.
 Flexible work schedules: Work schedules that allow employees to select,
within broad parameters, the hours they work
 Job sharing: When two part-time employees share one full-time job
 Telecommuting: Allowing employees to spend part of their time working
offsite, usually at home

Merit Reward Systems

Merit pay:
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 Pay awarded to employees on the basis of the relative value of their

contributions to the organization
 The greater the contribution, the greater the reward

Merit pay plan

 Compensation plan that formally bases at least some meaningful portion

of compensation on merit.

Incentive Reward Systems

Monetary incentives

 Piece-rate incentive plan

 Reward system wherein the organization pays an employee a certain
amount of money for every unit he or she produces
Sales commissions plan

 Employee is paid a percentage of the employee’s sales to customers for

selling the firm’s products or services.
Nonmonetary Incentives

 Immediate, and one-time rewards

 Days off, additional paid vacation time, and special perks

Team and Group Reward Systems

Gainsharing programs

 Designed to share the cost savings from productivityimprovements with

employees
Scanlon plan

 Similar to gainsharing, but the distribution of gains is tilted much more

heavily toward employees
Profit-sharing plans

 Provide an annual bonus to all employees based on corporate profits

Executive Compensation
Standard forms of executive compensation

 Base salary
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 Incentive pay (bonuses)

Special forms of executive compensation

 Stock option plans

 Executive perks

Criticism of executive compensation

 Excessively large compensation amounts

 Compensation not tied to overall and long-term performance of the
organization
 Earnings gap between executive pay and typical employee pay.

CHAPTER 14:
The purpose of control:
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 Control: the regulation of organizational activities in such a way as to

facilitate goal attainment.
 The purpose of control: provide organizations with indications of how well
they are performing in relation to their goals. Provide a mechanism for
adjusting performance to keep organizations moving in the right
direction.
Types of control:

 Physical resources: inventory management, quality control and

equipment control.
 Human Resources: selection and placement, training, and development,
performance appraisal, and compensation.
 Information resources: sales and marketing forecasts, environmental
analysis, public relations, production scheduling and economic
forecasting.
 Financial resources: managing capital funds and cash flow, collection
and payment of debts.
Levels of control:

 Operations control: focuses on the processes that the organization uses

to transform resources into products or services.
 Financial control
 Structural control: how the elements of the organization’s structure are
serving their intended purpose.
 Strategic control: how effectively the organization’s strategies are
succeeding in helping the organization meet its goals.
Responsibilities of control :

 Controller: a position in organizations that helps line managers with their

control activities.
 Operating employees: help maintain effective control. Resolve quality
issues, assembly line processes.
Steps in the control process:

 Control standard: a target against which subsequent performance will be

compared.
- Should be expressed in measurable terms
- Should be consistent with the organizational goals
- Should be identifiable indicators of performance.
 Measuring performance: must be valid indicators of performance. Is an
ongoing process
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 Comparing performance against standards: define what is a permissible

deviation from the performance standard and utilize the appropriate
timetable for measurement.
 Considering corrective action: maintain the status quo, correct the
deviation to bring operations into compliance with the standard.
Operations control:

 Preliminary control: attempts to monitor the quality or quantity of

financial, physical, human, and information resources before they
actually become part of the system.
 Screening control: relies heavily on feedback processes during the
transformation process. Effective way to promote employee participation
and catch problems early in the transformation process.
 Postaction control: monitors the outputs or results of the organization
after the transformation process in complete.
Financial control :

 Flow into the organization

 Are held by the organization as working capital and retained earnings
 Flow out the organization as payment of expenses.

Budgetary control: a plan expressed in numerical terms

 Budgets may be established at any organizational level

 Budgets are typically for one year or less
 Budgets may be expressed in financial terms, units of output, or other
quantifiable factors.
Purpose of budgets:

 Help coordinate resources and projects

 Help define the established standards for control
 Provide guidelines about resources and expectations
 Evaluate the performance of managers and organizational units.

Strengths:

 Effective operational controls

 Coordinations and communication between departments
 Establish records of organizational performance, which can enhance
planning.
Weaknesses:

 Can hamper operations applied too rigidly.

 Can be time-consuming
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 Can limit innovation.

Other tools for financial control:

 Financial statement: a profile of some aspect of an organization’s

financial circumstances
 Balance sheet: list of assets and liabilities of an organziation at a specific
point in time.
 Income statement: a summary of financial performance over a period of
time, usually one year.
Ratio analysis: the calculation of one or more financial ratios to asses some
aspect of the organization’s financial health.
- Liquidity ratios show how readily the firm’s assets can be converted to
cash
- Debt ratios reflect the firm’s ability to meet long-term financial obligations.
Financial audits:

 Audit: an independent appraisal of an organization’s accounting,

financial, and operational systems.
- External audits: financial appraisals conducted by experts who are not
employees of the organization
- Internal audits: appraisals conducted by employees of the organization.
Structural control:

 Bureaucratic control: a form of organizational control characterized by

formal and mechanistic structural arrangements.
- Goal: employee compliance
- Relies on rules, rigid hierarchy, minimal acceptable levels of
performance.
 Decentralized control: an approach to organizational control
characterized by informal and organic structural arrangements.
Integrating strategy and control :

 Strategic control: control aimed at ensuring that the organization is

maintaining an effective alignment with its environment and moving
toward achieving its strategic goals.
Characteristics of effective control :

 Integration with planning: the more control is linked to planning, the more
effective the control system.
 Flexibility: the control system must be flexible enough to accommodate
change
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 Accuracy: inaccurate information results in bad decision making and

inappropriate managerial actions.
 Timeliness: a control system should provide information as often as
necessary
 Objectivity: a control system must be free from bias and distortion.

Resistance to control:

 Overcontrol: trying to control too many details affects employee behavior

when employees perceive control attempts as unreasonable.
 Inappropriate focus: the control system may be too narrow, or it may
focus too much on quantifiable variables and leave no room for analysis
or interpretation.
 Rewards for inefficiency: can lead employees to behave in ways that are
not In the best interest of the organization.
 Too much accountability: efficient controls are resisted by poorly
performing employees.