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Adapting Management
Competencies for a Changing
Environment
Management Competencies for Today's World
(Chapter 1)
Managers and Management
Managers get things done by coordinating and motivating other people. Management is often a different experience from what people expect. Management is defined as the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources.
Turbulent environmental forces have caused a significant shift in the competencies required for effective managers. Traditional management competencies could include a command-and-control leadership style, a focus on individual tasks, and a standardization of procedures to maintain stability. New management competencies include being an enabler rather than a controller, using an empowering leadership style, encouraging collaboration, leading teams, and mobilizing for change and innovation.
The Oregon Ducks football team illustrates some of the new management competencies.
The Basic Functions of Management
Managers perform a wide variety of activities that fall within four primary management functions:
Planning : The management function concerned with defining goals for future performance and how to attain them. Organizing : The deployment of organizational resources to achieve strategic goals; involves assigning tasks, grouping tasks into departments, and allocating resources. Leading : Using influence to motivate employees to achieve the organization's goals. Controlling : Is concerned with monitoring employees' activities, keeping the organization on track toward meeting its goals and making corrections, as necessary.
Organizational Performance
An organization is a social entity that is goal-directed and deliberately structured. Good management is important because organizations
contribute so much to society. Efficiency pertains to the amount of resources —raw materials, money, and people—used to produce a desired volume of output. Effectiveness refers to the degree to which the organization achieves a stated goal.
Some managers are using mobile apps to increase efficiency; one example is Square, which is used to process credit and debit card payments with a smartphone. Performance is defined as the organization's ability to attain its goals by using resources in an efficient and effective manner. Managers at General Mills are concerned both with keeping costs low (efficiency) and providing products that meet changing consumer tastes (effectiveness).
Management Skills
Managers have complex jobs that require a range of abilities and skills. Technical skills include the understanding of and proficiency in the performance of specific tasks. Human skills refer to a manager's ability to work with and through other people and to work effectively as part of a group. Conceptual skills are the cognitive abilities to see the organization as a whole and the relationship among its parts.
The two major reasons that managers fail are poor communication and poor interpersonal skills. A manager's weaknesses become more apparent during stressful times of uncertainty, change, or crisis.
Types of Managers
There are many types of managers, based on their purpose and location in an organization:
Vertical Differences
Top managers : Managers at the apex of the organizational hierarchy responsible for the entire organization. Middle managers : Managers who work at the middle level of the organization and are responsible for major divisions or departments. First-line managers : Managers who are at the first or second level of the hierarchy and are directly responsible for overseeing groups of production employees.
Horizontal Differences
Functional managers : Managers responsible for a department that performs a single functional task, such as finance or marketing. General managers : Managers responsible for several departments that perform different functions, such as the manager of a Macy's department store or a Ford automobile factory.
Single-Use and Standing Plans
Single-use plans are plans that are developed to achieve a set of goals that are unlikely to be repeated in the future. Standing plans are ongoing plans that are used to provide guidance for tasks that occur repeatedly in the organization.
Benefits and Limitations of Planning
Benefits of planning and goal setting include serving as a source of motivation, determining resource allocation, providing a guide to action, and setting a standard for performance measurement. Limitations of planning and goal setting include the potential to create too much pressure to achieve targets, create a false sense of certainty, create rigidity that hinders response to a turbulent environment, and get in the way of creativity and intuition.
Planning for a Turbulent Environment
Contingency Planning
Contingency planning identifies important factors in the environment and defines a range of alternative responses to be taken in the case of emergencies, setbacks, or unexpected conditions.
Scenario Building
Scenario building is an approach where managers look at trends and discontinuities and imagine possible alternative futures to build a framework within which unexpected future events can be managed. Scenarios are alternative vivid pictures of what the future might be like. Many companies increased their use of contingency and scenario planning because of the global financial crisis and volatile economic conditions.
Crisis Planning
Crisis planning involves two major stages: crisis prevention and crisis preparation. The crisis prevention stage involves activities that managers undertake to try to prevent crises and to detect warning signs of potential crises. The crisis preparation stage includes all the detailed planning to handle a crisis when it occurs, such as designating a crisis management team and spokesperson, creating a detailed crisis management plan, and setting up an effective communications system.
Innovative Approaches to Planning
Decentralized Planning
In many companies today, planning is decentralized, where top executives or planning experts work with managers in major divisions or departments to develop their own goals and plans.
Stretch Goals
Stretch goals are reasonable yet highly ambitious and compelling goals that energize people and inspire excellence. For example, at Amazon, a stretch goal was to build the first Kindle e-reader with built-in cellular access, so people did not have to connect to a PC.
Flexible Goal Setting
The more effective companies in a fast-shifting environment are those in which managers take a flexible approach to planning and goal setting, using tools like business performance dashboards to oversee plans and measure progress toward goals.
Thinking Strategically
Strategic management refers to the set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment to achieve organizational goals. A strategy is the plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining goals.
Levels of Strategy
Corporate-level strategy pertains to the organization as a whole and the combination of business units and products that make it up. Business-level strategy pertains to each business unit or product line within the organization. Functional-level strategy pertains to the major functional departments within each business unit, such as manufacturing, marketing, and R&D.
SWOT Analysis
Managers often start with a SWOT analysis, an audit or careful examination of strengths, weaknesses, opportunities, and threats that affect organizational performance.
Cost leadership strategy: Managers aggressively seek efficient facilities, cut costs, and use tight cost controls to be more efficient than others in the industry. Focus strategy: Managers use either a differentiation or a cost leadership approach, but they concentrate on a specific regional market or buyer group.
Global Strategy
Multidomestic strategy: Competition in each country is handled independently, and product design and advertising are modified to suit the specific needs of individual countries. Glocalization strategy: Combines global coordination and standardization to attain efficiency with local flexibility to meet needs in different countries.
Strategy Execution
Even the most creative strategies have no value if they cannot be translated into action. Effective execution is the most important, but also the most difficult, part of strategy. Key elements include embeddedness (deep understanding and acceptance of organizational direction and purpose throughout the organization), visible leadership, clear roles and accountability, candid communication, and appropriate HR practices.
Organizational Structure and Decision-
Making
Southwest Airlines' International Expansion
Southwest Airlines is training thousands of flight attendants, pilots, reservations agents, and other employees in new procedures and skills to support a strategy of international expansion.
Decision-Making Styles
The directive style is used by people who prefer simple, clear-cut solutions to problems. Managers with an analytical style like to consider complex solutions based on as much data as they can gather. People who tend toward a conceptual style also like to consider a broad amount of information. The behavioral style is often adopted by managers having a deep concern for others as individuals.
Pitfalls in Decision-Making
Being influenced by initial impressions: The mind often gives disproportionate weight to the first information it receives.
Justifying past decisions: Managers may make choices that justify their past decisions, even if those decisions no longer seem valid. Confirmation bias: Managers may put too much value on evidence that is consistent with a favored belief or viewpoint and too little on evidence that contradicts their favored position. Anchoring bias: Managers allow initial impressions, statistics, or estimates to act as anchors to subsequent thoughts and decisions. Overestimating ability to predict uncertain outcomes: Most people overestimate their ability to predict uncertain outcomes.
Improving Decision-Making
Use hard evidence: Evidence-based decision making means a commitment to make more informed and intelligent decisions based on the best available facts and evidence. Engage in rigorous debate: Constructive conflict based on divergent points of view can bring a problem into focus, clarify people's ideas, stimulate creative thinking, limit the role of bias, create a broader understanding of issues and alternatives, and improve decision quality. Avoid groupthink: Groupthink refers to the tendency of people in groups to suppress contrary opinions. Know when to bail: Escalating commitment refers to continuing to invest time and money in a decision despite evidence that it is failing. Do a post-mortem: After-action review is a disciplined procedure whereby managers review the results of decisions to evaluate what worked, what did not, and how to do things better.
Organizing the Vertical Structure
Division of labor: The degree to which organizational tasks are subdivided into separate jobs, also called work specialization. Span of management: The number of employees reporting to a supervisor, sometimes called span of control. Centralization and decentralization: Centralization means that decision authority is located near top organization levels, while decentralization means that decision authority is pushed down to lower organization levels. Chain of command: An unbroken line of authority that links all individuals in the organization and specifies who reports to whom. Authority, responsibility, and accountability: Authority is the formal and legitimate right to make decisions, issue orders, and allocate resources. Responsibility is the duty to perform the task or activity that one has been assigned. Accountability means that people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command. Delegation: When managers transfer authority and responsibility to positions below them in the hierarchy. Line and staff authority: Line authority refers to the formal power to direct and control immediate subordinates, while staff authority refers to the right to advise, counsel, and recommend in the manager's area of expertise.
An organic, horizontal approach is needed for a differentiation strategy and when the organization needs flexibility to cope with an uncertain environment.
Structure Fits the Technology
Woodward's Manufacturing Technology
Small-batch production: Involves the production of goods in batches of one or a few products designed to customer specification. Mass production: Characterized by long production runs to manufacture a large volume of products with the same specifications. Continuous process production: Involves mechanization of the entire workflow and nonstop production, such as in chemical plants or petroleum refineries. Technical complexity: The degree to which complex machinery is involved in the production process to the exclusion of people.
Service Technology
Service technology is characterized by intangible outputs and direct contact between employees and customers. Intangible output: Services are perishable and cannot be stored in inventory. Direct contact with customers: Employees and customers interact directly to provide and purchase the service.
Remember This
Types of technologies include manufacturing and service. Small-batch and continuous process technologies are associated with a more flexible horizontal structure, whereas a tighter vertical structure is appropriate for mass production. Service technologies tend to have more flexible horizontal structures.
Chapter 15: Leadership
Remember this
The attitudes and behaviors of leaders shape the conditions that determine how well employees can do their jobs, thus playing a tremendous role in the organization's success. Leadership is the ability to influence people toward the attainment of organizational goals. Many different styles of leadership can be effective.
Contemporary Leadership
Corporate governance: The framework of systems, rules, and practices by which an organization ensures accountability, fairness, and transparency in its relationships with stakeholders. Authentic leadership: Leadership by individuals who know and understand themselves, who espouse and act consistent with higher- order ethical values, and who empower and inspire others with their openness and authenticity.
Authentic Leadership
Authentic leaders pursue their purpose with passion. Authentic leaders practice solid values and stay true to them even under pressure. Authentic leaders lead with their hearts as well as their heads, maintaining compassion and courage. Authentic leaders establish connected relationships, building positive and enduring relationships. Authentic leaders demonstrate self-discipline, maintaining a high degree of self-control and self-discipline.
Remember this
A significant influence on leadership styles in recent years is the turbulence and uncertainty of the environment. Level 5 leadership is characterized by an almost complete lack of ego (humility) and a fierce resolve to do what is best for the organization (will). A servant leader is a leader who serves others by working to fulfill followers' needs and goals, as well as to achieve the organization's larger mission. Authentic leadership refers to leadership by individuals who know and understand themselves, who espouse and act consistent with higher- order ethical values, and who empower and inspire others with their openness and authenticity. Women leaders typically score higher than men on abilities such as motivating others, building relationships, and developing others, which are particularly suited to today's organizations. Interactive leadership is a leadership style characterized by values such as inclusion, collaboration, relationship building, and caring.
From Management to Leadership
Leadership and management reflect different sets of qualities and skills that provide different benefits for the organization. Management promotes stability and efficient organizing to meet current commitments, whereas leadership often inspires engagement and organizational change to meet new conditions. Both leadership and management are important to organizations, and people can learn to be good leaders as well as good managers.
A transformational leader is distinguished by a special ability to bring about innovation and change by:
Creating an inspiring vision Shaping values Building relationships Providing meaning for followers
Transactional Leadership
A transactional leader, on the other hand, clarifies subordinates' roles and task requirements, initiates structure, provides rewards, and displays consideration for followers.
Followership Styles
Alienated Follower
A person who is an independent, critical thinker but is passive in the organization.
Conformist
A follower who participates actively in the organization but does not use critical thinking skills.
Pragmatic Survivor
A follower who has qualities of all four follower styles, depending on which fits the prevalent situation.
Passive Follower
A person who exhibits neither critical independent thinking nor active participation.
Effective Follower
A critical, independent thinker who actively participates in the organization.
Power and Influence
Power
The potential ability to influence the behavior of others.
Influence
The effect a person's actions have on the attitudes, values, beliefs, or behavior of others.
Hard Position Power
Legitimate power: Power that stems from a manager's formal position in an organization and the authority granted by that position. Reward power: Power that results from the authority to bestow rewards. Coercive power: Power that stems from the authority to punish or recommend punishment.
Personal Soft Power
Expert power: Power that results from a leader's special knowledge or skill in the tasks performed by subordinates. Referent power: Identification with, respect and admiration for, and desire to emulate the leader.
Other Sources of Power
Personal Effort: People who show initiative, work beyond what is expected, take on undesirable but important projects, and show interest in learning about the organization and industry often gain power. Network of Relationships: People who are enmeshed in a network of relationships have greater power, as they know what's going on in the organization and industry. Information: People who have access to information and control over how and to whom it is distributed are typically powerful.
Interpersonal Influence Tactics
Rational Persuasion
The most frequently used influence strategy is to apply facts, data, and logical argument to persuade others that a proposed idea, request, or decision is appropriate.
Help People to Like You
People would rather say yes to someone they like than to someone they do not. Effective leaders strive to create goodwill and favorable impressions.
Exchange of Benefits and Favors
Leaders share what they have—whether it is time, resources, services, or emotional support.
Make corrections as necessary
Balanced Scorecard
A balanced scorecard is a comprehensive management control system that balances traditional financial measures with measures of:
Customer service Internal business processes The organization's capacity for learning and growth
Hierarchical vs. Decentralized Approaches to
Control
Hierarchical Control
Involves monitoring and influencing employee behavior through the use of: Rules Policies Hierarchy of authority Written documentation Reward systems Other formal mechanisms
Decentralized Control
The organization fosters compliance with organizational goals using: Organizational culture Group norms Focus on goals rather than rules and procedures
Comparison of Hierarchical and Decentralized Control
Hierarchical Control | Decentralized Control --- | --- Basic Assumptions: People are incapable of self-discipline and cannot be trusted | People work best when they are fully committed to the organization Actions: Uses detailed rules and procedures; formal control systems | Features limited use of rules; relies on values, group and self-control, selection, and socialization Consequences: Employees follow instructions and do just what they are told; employees feel a sense of indifference toward work; employee absenteeism and turnover is high | Employees take initiative and seek responsibility; employees are actively engaged and committed to their work; employee turnover is low
Open-Book Management
Open-book management allows employees to see for themselves the financial condition of the organization and encourages them to think and act like business owners.
Total Quality Management (TQM)
TQM is an organization-wide effort to infuse quality into every activity in a company through continuous improvement. It focuses on:
Teamwork Increasing customer satisfaction Lowering costs
TQM Techniques
Quality circles: Groups of 6-12 volunteer employees who meet regularly to discuss and solve problems affecting the quality of their work Benchmarking: The continuous process of measuring products, services, and practices against major competitors or industry leaders Six Sigma: A quality control approach that emphasizes a relentless pursuit of higher quality and lower costs Quality partnering: Assigning dedicated personnel within a particular functional area of the business to identify opportunities for improvement throughout the work process
Financial Statements and Analysis
Financial Statements
Balance sheet: Shows the firm's financial position with respect to assets and liabilities at a specific point in time Income statement: Summarizes the firm's financial performance for a given time interval
Financial Analysis
Ratio analysis: Statistics that express the relationships between performance indicators such as profits and assets, sales, and inventory Activity ratios: Measure the organization's internal performance with respect to key activities defined by management
Electronic Monitoring
Telematics
Technologies that wirelessly transmit data from remote sensors and GPS devices to computers for analysis.
