CHAPTER 7

Management, Leadership, and the Internal Organization

Chapter Summary: Key Concepts

What Is Management?

Management The achievement of organizational objectives through the

use of people and other resources. The skills and principles
of management apply in both profit and not-for-profit
organizations.

The management hierarchy The management hierarchy has three levels: top, middle,
and supervisory management. Top management sets the
long-term direction, vision, and values of the organization.
Middle managers focus on specific operations, products, or
customer groups and implement strategic plans.
Supervisory managers are responsible for assigning
nonmanagerial employees to specific jobs and evaluating
performance.

Skills needed for managerial Successful managers should possess technical, human,
success and conceptual skills. Technical skills include the ability to
understand and use the knowledge and tools of a specific
discipline or activity. Human skills are the interpersonal
skills managers need to motivate and lead employees to
accomplish identified objectives. Conceptual skills, needed
especially by top managers, involve the ability to see the
big picture by acquiring, analyzing, and interpreting
information.

Managerial functions Managers in any organization must perform the essential

functions of planning, organizing, directing, and
controlling. Planning is the process of anticipating future
events and conditions and determining courses of action for
achieving organizational objectives. Organizing is the
process of blending human and material resources through
a formal structure of tasks and authority. Guiding and
motivating employees to accomplish organizational
objectives is called directing. Controlling is the function of
evaluating an organization’s performance against its
objective.

Setting a Vision and Ethical Standards for the Firm

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 Management, Leadership, and the Internal Organization 7–2

Vision A perception of marketplace needs and the methods by

which an organization can satisfy them. It serves as the
target for a firm’s actions, helping direct the company
toward opportunities and differentiating it from
competitors.

Ethical standards These values are set by top managers, who must focus on
the organization’s long-term success, not merely short-term
profits or personal gain.

Importance of Planning

Types of planning The four types of plans used by contemporary

organizations are strategic, tactical, operational, and
contingency plans. Strategic plans set primary objectives
and strategies for how to allocate resources to achieve
them. Tactical plans involve implementing the activities
specified by the strategic plan. Operational plans create
detailed standards that guide implementation of tactical
plans. Contingency planning allows a firm to quickly
resume operations and communications with the public
after a crisis.

Planning at different Top managers specialize in organizational objectives and

organizational levels long-term plans. Middle managers focus on short-term
plans, and develop the organization’s policies and
procedures. Supervisory managers set daily and weekly
plans, rules, and specific activities for each department.
Contingency planning is led by top management, but all
levels of management participate.

The Strategic Planning Process

Defining the organization’s mission The mission statement is a written explanation of an

organization’s business intentions and aims.

Assessing your competitive position The firm must evaluate its current and potential position in
the marketplace. SWOT analysis is often used in this phase
of strategic planning to assess the strengths, weaknesses,
opportunities, and threats.

Setting objectives for the Objectives are guideposts by which managers define the
organization organization’s desired performance in such areas as new
product development, sales, customer service, growth,
environmental and social responsibility, and employee
satisfaction.

Creating strategies for competitive Organizations can combine unique abilities and

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 Management, Leadership, and the Internal Organization 7–3

differentiation resources such as product innovation, technology, and

employee motivation to achieve the unique blend that sets it
apart from its competitors.

Implementing the strategy Managers, often middle managers and supervisors, put the
plan into action. Generally, when top managers empower
middle management, the company reaps the benefits.

Monitoring and adapting The final step in the strategic planning process is to
strategic plans monitor and adapt plans when the actual performance fails
to meet goals. Monitoring involves securing feedback
about performance. Managers might compare actual sales
against forecasts or compile information from surveys.

Managers as Decision Makers

Programmed and nonprogrammed A programmed decision involves simple, common, and

decisions frequently occurring problems for which solutions have
already been determined. A nonprogrammed decision
involves a complex and unique problem or opportunity
with important consequences for the organization.

How managers make decisions This process begins when someone recognizes a problem or
opportunity and develops possible courses of action. Next,
is the evaluation of alternatives, followed by the selection
and implementation of one of the alternatives. The last step
is an assessment of the outcome.

Managers as Leaders

Leadership The ability to inspire and direct others to attain

organizational goals.

Leadership styles The way a person uses power to lead others. Leaders may
utilize autocratic, democratic, or free-rein styles.

Which leadership style is best? No single leadership style is best for every situation. In a
crises for example, an autocratic method might be best.

Corporate culture The system of principles, beliefs, and values. The

leadership style of its managers, the way it communicates,
and the overall work environment influence a firm’s
corporate culture. A corporate culture is typically shaped by
the leaders who founded the company, and by those who
have succeeded them.

Organizational Structures

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 Management, Leadership, and the Internal Organization 7–4

Organization A structured group of people working together to achieve

common goals. An organization features three key
elements: human interaction, goal-directed activities, and
structure.

Departmentalization The process of dividing work activities into units within the
organization. In this arrangement, employees specialize in
certain jobs—such as marketing, finance, or design.

Delegating work assignments Managerial process of assigning work to employees.

Delegation also involves a manager’s span of management
and whether decision-making authority is centralized or
decentralized.

Span of Management

Centralization and Decentralization

Types of organization structures There are four basic structural forms: line, line-and-staff,
committee, and matrix. The oldest and simplest is the line
organization. In the line-and-staff organization, staff
departments are developed to support and advise the line.
Committee organizations put authority and responsibility in
the hands of a group of individuals. The matrix structure
links employees from different parts of the organization to
work together on specific projects.

Business Vocabulary
controlling management
corporate culture mission statement
decision making objectives
delegation organization
departmentalization organizing
directing planning
empowerment SWOT analysis
leadership vision

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 Management, Leadership, and the Internal Organization 7–5

Application of Vocabulary
Select the term that best completes the statements below. Write that term in the space provided.

1. ______ is the achievement of organizational objectives through people and other resources.

2. The blending of human and material resources into a formal structure of tasks and authority is
achieved by the management function of ______.

3. ______ is the management function of guiding and motivating employees to accomplish the
organization’s objectives.

4. ______ is the management function of evaluating an organization’s performance to determine if

it is meeting its objectives.

5. ______ is the perception of marketplace needs and methods by which an organization can
satisfy them.

6. The management function concerned with anticipating the future and determining the best
courses of action to achieve organizational objectives is ______.

7. The written statement of an organization’s overall intentions and aims is called a ______.

8. A ______ is an organized method of assessing an organization’s internal strengths and

weaknesses and external opportunities and threats.

9. ______ specify end goals for an organization and serve as standards for evaluation of
performance in such areas as profitability, customer service, employee satisfaction, and social
responsibility.

10. ______ is the most far-reaching level of planning and is the process of determining the primary
objectives of the organization, adopting courses of action, and allocating the resources necessary
to achieve those objectives.

11. Planning and allocating resources for current and near-term activities required to implement
overall strategies is achieved through ______.

12. ______ use standards or schedules for implementing tactical plans.

13. ______ is the ability to direct and inspire people to attain organizational goals.

14. When organizations try to anticipate and meet emergencies, enabling them to resume
operations as quickly and smoothly as possible, they are engaged in ______.

15. ______ occurs when work activities are subdivided into units within the organization on the
basis of product, process, geography, function, or customer.

16. A ______ is the unique combination of a company’s abilities and approaches that makes it

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 Management, Leadership, and the Internal Organization 7–6

more successful than its competitors.

17. ______ is the act of assigning work activities to subordinates.

18. The ______ process involves recognizing and identifying a problem, developing and
evaluating alternatives, selecting and implementing an alternative, and doing a follow up.

19. A(n) ______ uses policies, procedures, and rules to implement a previously determined
response in a frequently occurring situation.

20. When a manager must develop a response to a new or unique situation with important
consequences for the organization, that manager is making a ______.

21. When a manager makes decisions without consulting others, the style in use is the ______
style.

22. Managers who involve subordinates in decision making are using the ______ style of
leadership.

23. The ______ style of leadership means that managers allow subordinates to make most
decisions.

24. ______ means that managers lead employees by sharing power, responsibility, and
decision-making authority with them.

25. The ______ is the number of employees one manager supervises.

26. A(n) ______ is a structured grouping of people working together to achieve common
objectives.

27. Retaining decision making at top management levels is known as ______.

28. When decision-making authority is pushed down to lower organization levels, ______ is in
use.

29. A(n) ______ is a graphic outline of authority and responsibility.

30. ______ is the highest level of the management hierarchy, made up of executives who develop
long-range plans and interact with the public and outside entities.

31. ______ is the level of management responsible for the details of assigning workers to specific
jobs and evaluating performance.

32. ______ is the level of management responsible for developing the plans and procedures to
implement the general plans of top management.

33. The ______ is the set of relationships in an organization that indicates who gives direction to
whom and who reports to whom.

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34. The oldest and simplest organization form, in which there is a clear flow of authority from the
chief executive to the subordinates, is the ______.

35. The most common modern organization form, which combines a line organization with staff
departments, is the ______.

36. An organization structure in which authority and responsibility are jointly held by a group of
individuals is the ______.

37. In a ______, specialists from different functional areas of the organization are brought together
to work on specific projects.

38. The value system of an organization is called its ______.

Analysis of Learning Objectives

Learning Objective 7.1: Define management and the three types of skills necessary for
managerial success.

True or False

1.______ Management is defined as the process of achieving organizational objectives through

people and other resources.

2. ______ The highest level of management requires technical skills above any other.

3. ______ The lowest level of management is supervisory management, whose job it is to direct
the day-to-day operational activities of employees.

4. ______ Today, the essential role of a manager is simply being the boss.

Short Answer

5. List and define each of the three skills successful managers must have.
(1)

(2)

(3)

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 Management, Leadership, and the Internal Organization 7–8

Learning Objective 7.2: Explain the role of vision and ethical standards in business success.

True or False

1. ______ Vision is a clear perception of marketplace needs and the methods a company will use
to meet those needs.

2. ______ The firm’s mission statement rarely relies on the original vision for the firm.

3. ______ While new companies need to develop a vision, large, established companies do not.

4. ______ Vision must be focused and yet flexible enough to adapt to changes in the business
environment.

5. ______ Setting high ethical standards affects the welfare of all stakeholders: employees,
customers, investors, and society in general. However, it has little to do with building a
firm’s lasting success.

Learning Objective 7.3: Summarize the major benefits of planning, and distinguish among
strategic planning, tactical planning, and operational planning.

Multiple Choice

1. Through realistic assessments of current and future conditions, planning helps a company
a) turn vision into action.
b) take advantage of opportunities.
c) avoid costly mistakes.
d) All of the above.

2. The most far-reaching plans that determine the long-range focus and activities of the
organization are
a) strategic plans.
b) tactical plans.
c) operational plans.
d) contingency plans.

3. Plans that guide current and near-term activities, including implementing long-range plans, are
known as
a) strategic plans.
b) tactical plans.
c) operational plans.
d) contingency plans.

4. Detailed standards that guide implementation of plans and the selection of specific work targets
are articulated in

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 Management, Leadership, and the Internal Organization 7–9

a) strategic plans.
b) tactical plans.
c) operational plans.
d) contingency plans.

5. The type of plans that establish the primary objectives of an organization and allocate resources
accordingly are known as
a) strategic plans.
b) tactical plans.
c) operational plans.
d) contingency plans.

Learning Objective 7.4: Describe the strategic planning process.

Short Answer

1. Define and explain the six steps in the strategic planning process.
(1)

(2)

(3)

(4)

(5)

(6)

Learning Objective 7.5: Contrast the two major types of business decisions, and list the steps in

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 Management, Leadership, and the Internal Organization 7 – 10

the decision-making process.

Short Answer

1. Define and contrast programmed and nonprogrammed decisions.

2. What are the five steps in the decision-making process?

a)

b)

c)

d)

e)

Learning Objective 7.6: Define leadership and compare different leadership styles.

True or False

1. ______ Leadership can be defined as the ability to direct or inspire others to perform the
activities needed to reach an organization’s objectives.

2. ______ Experts agree that one leadership style works best regardless of the circumstances at
hand.

3. ______ Free-rein leadership means that managers have lost control of their subordinates and
operations will suffer.

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4. ______ When a manager actively involves subordinates in decision making, that manager is
utilizing the democratic leadership style.

5. ______ The current trend in management is toward more autocratic leadership styles.

Learning Objective 7.7: Discuss the meaning and importance of corporate culture.

True or False

1. ______ Corporate culture refers to the system of principles, beliefs, and values prevalent in an
organization.

2. ______ Cultures arise spontaneously, and leaders typically have very little influence on an
organization’s culture.

3. ______ The best leadership style to adopt depends in large measure on the culture of the
organization.

4. ______ One generation of employees passes on a corporate culture to newer employees, often
as part of the training process.

5. ______ An organization’s culture can really have very little impact on creating a competitive
differentiation for that firm.

Learning Objective 7.8: Identify the five major forms of departmentalization and the four main
types of organization structures.

Short Answer

1. What is the purpose of an organizational chart?

2. What is departmentalization?

3. Name and define the five major forms of departmentalization.

(1)

(2)

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 Management, Leadership, and the Internal Organization 7 – 12

(3)

(4)

(5)

4. Name and define the four main types of organization structures.

(1)

(2)

(3)

(4)

Self-Review

True or False

1. ______ Management principles apply to all organizations, whether they operate in the profit or
not-for-profit sector, and whether they are producers of products or services.

2. ______ Organizing is the management function of motivating and leading employees.

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3. ______ An organization’s planning process should reflect the competitive differentiation the
firm hopes to achieve.

4. ______ The interpersonal skills known as human skills have grown in importance with
increased diversity and globalization in the modern business environment.

5. ______ An organization chart is a picture that shows the organization’s structure and clarifies
what is expected of the employees.

6. ______ Empowering employees is common with autocratic leaders.

7. ______ Middle managers generally focus on long-term planning.

8. ______ Ethical standards and the vision of the top management have no bearing on one
another.

9. ______ An organization will structure groups of people and activities to permit greater and
more efficient attainment of organizational objectives.

10. ______ The line-and-staff organization is the oldest and simplest organization structure.

11. ______ As organizations grow larger, the need for organization structure diminishes.

12. ______ A line organization provides a clear chain of command.

13. ______ The committee organization often places authority and responsibility in the hands of a
single manager.

14. ______ In a matrix organization, each employee reports to two managers: one is a line manager
and the other is a project manager.

15. ______ The line organization is based on authority being passed down the chain of command.

16. ______ Committees tend to act very quickly in the decision-making process.

17. ______ Empowerment will thrive in a firm where autocratic leadership styles are common.

18. ______ Both the decision-making process and the organizing process require a follow up to be
sure the process has produced effective results.

19. ______ A mission statement makes explicit a firm’s purpose and aims.

20. ______ Objectives provide guideposts by which managers define the organization’s desired
performance in such areas as new product development or sales.

21. ______ A SWOT analysis helps a firm develop plans in case of a crisis, such as a security
breach.

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Multiple Choice

22. The process of anticipating future events and conditions and determining the courses of action
for achieving organizational objectives is
a) technical skills.
b) human skills.
c) conceptual skills.
d) configuration skills.

23. Knowing a computer program or how to maintain a machine are examples of

a) technical skills.
b) human skills.
c) conceptual skills.
d) configuration skills.

24. Inspiring trust, being a good communicator, and having empathy for others are examples of
a) technical skills.
b) human skills.
c) conceptual skills.
d) configuration skills.

25. In order to do the long-range planning that involves the entire organization, top managers need
to have developed
a) technical skills.
b) human skills.
c) conceptual skills.
d) configuration skills.

26. Which of the following is a major advantage of a line organization?

a) The managers become knowledgeable in several areas.
b) The chain of command is clear.
c) The paperwork required of top executives is simple.
d) Morale is improved through participative decision making.

27. Which of the following is an advantage of a committee organization?

a) It provides for quick decision making.
b) It makes decisions by compromising conflicting interests.
c) Workers have more than one supervisor.
d) Willingness to carry through with committee decisions is improved.

28. Which of the following is an advantage of a matrix organization?

a) Provides flexibility and quick adaptability.
b) Employees may have to answer to more than one supervisor.
c) Potential conflicts are minimized.
d) It is simple to understand.

29. In a large firm, a major drawback of the line organization is

a) the very slow process of decision making.

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 Management, Leadership, and the Internal Organization 7 – 15

b) overall, managers have few responsibilities.

c) the unclear and vague chain of command.
d) each manager has responsibility in areas in which they may not be experts.

30. Staff managers

a) have authority to give orders to line managers.
b) advise line managers.
c) are empowered to make decisions about line department operations.
d) all of the above

31. The obligation to perform an assigned task is known as

a) responsibility.
b) authority.
c) accountability.
d) power.

32. When employees take on a new responsibility

a) they agree to be obligated to complete the task.
b) they need adequate authority to complete the task.
c) they are held accountable for the results, as are their supervisors.
d) all of the above

33. A manager’s span of control is also known as

a) span of management.
b) chain of command.
c) glass ceiling.
d) corporate culture.

34. SWOT analysis requires management to consider

a) strengths and weaknesses, opportunities and threats.
b) suppliers, workers, other competitors, and time.
c) strategic planning, working plans, operational plans, and time frames.
d) sales, workforce, organization structure, and technologies.

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Application Exercises

1. As a new manager at a technology firm, you have been asked to provide a fresh viewpoint of the
organization and assess its competitive position. As you observe and research the firm, you
discover that the firm has a solid base of technical experts who design and produce cutting-edge
electronic components for the Canadian market while having no marketing or distribution in other
countries. You also note that the firm faces stiff competition from a new firm in the industry that is
also producing cutting-edge products. You later learn that the firm is in dispute with many of its
employees regarding compensation and benefits.
a) Describe the tool you will use to analyze the firm and its separate parts.

b) Discuss the results of your evaluation.

2. Paul McKinley has just returned from a management trainee job interview. He explains that he
thought he answered most of the questions well, except the one about his personal leadership style.
Paul said that the interviewer asked him to analyze what type of leader he sees himself as. Paul
explained that although he has given a great deal of thought to the type of leader he would prefer to
work with, he has given little thought to his own leadership style.
a) What suggestions would you give Paul to help him determine his leadership style?

b) In the event that Paul has another interview, what answer should he give if asked this question
again?

Short Essay Questions

3. What is planning? Name and define the four types of plans.

4. What is delegation? What are the implications of greater authority for employees?

5. What is corporate culture? What is leadership? How are they related?

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