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Prepare a 600-700 word paper in which you define the four functions of management (planning, organizing, leading, and controlling).

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Management: Leading and Collaborating in a Competitive World, 7e Managing ISBN: 9780072923308 Authors: Thomas S. Bateman, Scott A. Snell Copyright © The McGraw-Hill Companies, Inc. (2007) Managing Management means, in the last analysis, the substitution of thought for brawn and muscle, of knowledge for folklore and tradition, and of cooperation for force. —Peter Drucker CHAPTER OUTLINE Managing in the New Competitive Landscape • • • • Globalization Technological Change Knowledge Management Collaboration across “Boundaries” Managing for Competitive Advantage • • • • • Innovation Quality Speed Cost Competitiveness Delivering All Four The Functions of Management • • • • • Planning: Delivering Strategic Value Organizing: Building a Dynamic Organization Leading: Mobilizing People Controlling: Learning and Changing Performing All Four Management Functions Management Levels and Skills • • • • • Top-Level Managers Middle-Level Managers Frontline Managers Working Leaders with Broad Responsibilities Management Skills You and Your Career • • • • • Be Both a Specialist and a Generalist Be Self-Reliant Be Connected Actively Manage Your Relationship with Your Organization Survive and Thrive LEARNING OBJECTIVES After studying Chapter 1, you will know: 1. The major challenges of managing in the new competitive landscape. 2. The drivers of competitive advantage for your company. 3. The functions of management and how they are evolving in today's business environment. 4. The nature of management at different organizational levels. 5. The skills you need to be an effective manager. 6. What to strive for as you manage your career. Prologue ED CATMULL AND PIXAR Pixar came out of the gates hitting five-for-five: Every film Pixar created, from Toy Story to The Incredibles, was a blockbuster. Every one of its films was not just a commercial success; each was extraordinary in its innovation and quality. The founder and president of Pixar is Ed Catmull, Pixar's unsung hero. Steve Jobs is Pixar's rock-star-famous CEO. Jobs (who actually spends most of his time with Apple), stated, “I'd trust Ed with my life. He runs the company day to day, and he doesn't get enough credit.” Catmull started dreaming about making computer-animated films in his 20s. Since then, he has created a new technology, turned it into a new art form, demonstrated impressive entrepreneurialism, and built one of the world's most distinctive business enterprises. Fortune magazine describes Catmull as a “geek's geek” who is “so down-to-earth that you'd never know by talking to him that he belongs in the ranks of Silicon Valley's most creative company builders.” Pixar doesn't just create great movies; it invents its own technologies, continually develops new production methods and organizational innovations, and is much more disciplined in its execution than its rivals in the movie-making industry. John Lasseter, the pioneering animator who directed Pixar's first three films, describes Catmull as “Pixar's heart and soul.” Sources: B. Schlender, “Incredible: The Man Who Built Pixar's Innovation Machine,” Fortune, November 15, 2004, 206–12; P. Burrows, “Pixar's Unsung Hero,” BusinessWeek, June 30, 2003, p. 68. Pixar is a great success story as described in the Prologue. In contrast, consider the founder of the streaming media company Pseudo.com. During the height of the Internet gold rush, he brashly told 60 Minutes and CBS, “Our business is to take you out. I'm in a race to take CBS out of business … That's why we're going to make the big bucks.” 1 He said this before CBS was embarrassed by its failure to authenticate some documents about President Bush's years with the National Guard, and before Dan Rather's resignation. But CBS, of course, is still around, whereas Pseudo.com, like many other dot-com startups, is not. Companies, like individuals, succeed or fail for a variety of reasons. Some of these reasons are circumstantial. Most are personal and human and include the decisions managers make and the actions they take. In business, there is no replacement for effective management. Companies may fly high for a while, but they cannot do well for very long without good management. It's the same for individuals: BusinessWeek's Managers of the Year succeed by focusing on fundamentals, knowing what's important, and managing well. The aim of this book is to help you succeed in those pursuits. Managing in the New Competitive Landscape When this decade began, the economy was soaring. Business seemed easy. Turns out, it's not easy. Even though the high-tech “new economy” heated up for a while, profits proved hard to come by, and many high-flying companies came crashing down. Why did so many companies fall so far, so fast? In little more than one year, the business world changed dramatically. The dot-com bubble burst, a recession came, September 11, 2001, brought terrorist attacks, and economic uncertainties snowballed. But changing circumstances were only part of the story. During the good times, managers made a lot of bad decisions. Many grew arrogant, mistreated customers, didn't worry about costs, and gave away valuable services because profits didn't seem to matter. They misapplied management principles, in part because they lacked managerial experience and expertise. 2 According to BusinessWeek, “The Darwinian struggle of daily business will be won by the people—and the organizations—that adapt most successfully to the new world that is unfolding.” 3 What defines this “new world,” and the competitive landscape of business? You will be reading about many relevant issues in the coming chapters, but we begin here by highlighting four key elements that make the current business landscape different from the past: globalization, technological change, the importance of knowledge and ideas, and collaboration across organizational “boundaries.” Globalization Far more than in the past, enterprises are global, with offices and production facilities in countries all over the world. Corporations such as GE, Bertelsmann, ASEA Brown Boveri, and Nestlé are “stateless”: They operate worldwide, transcending national borders. 4 Founded in the United States, MTV has been extremely successful expanding overseas, reaching 400 million households in 164 countries in 18 languages. CEO Judy Mc-Grath recently announced MTV's 100th channel: TV Base in Africa. 5 The movie industry also is grateful for expanding overseas markets. 6 The 2004 films King Arthur, Troy, and The Terminal all did poorly in the United States but did three times or more business internationally. Troy made more than $21 million in South Korea, which had virtually no theaters a few years ago. Russian companies are investing aggressively in theater building, and the third Harry Potter film opened in Italy during the summer—timing that used to be unthinkable, until theaters recently added air conditioning. Brad Pitt movies do particularly well in Japan, where women are the most frequent moviegoers, often going with girlfriends to Wednesday openings and then with their boyfriends on Saturdays. Meg Whitman took a chance on eBay in Germany based on her hunch that the urge to trade is human nature. Top CEOs know that the change from a local to a global marketplace is gaining momentum and is irreversible. 7 But some U.S. managers retain a U.S.-centric view of the business world. Some people told CEO Meg Whitman that eBay was uniquely American—for it to succeed, they said, buyers and sellers need optimism and mutual trust. 8 But Whitman suspected that the urge to trade is human nature. She moved into Europe and Australia. The best eBay franchise worldwide, she says, is Germany. And she entered China when the country had virtually no ecommerce. China is now eBay's fastest growing market. Whitman is now placing a long-term bet on India, where only about 2 percent of the population uses the Net. Ideally, transnational companies have managers who specialize not only in particular businesses and functions but also in particular countries. 9 Managers throughout the company need to be enlightened to global realities. But the point isn't simply that globalization is at the heart of huge transnational companies. It affects small companies as well. Many small companies export their goods. Many domestic firms assemble their products in other countries. And companies are under pressure to improve their products in the face of intense competition from foreign manufacturers. For example, Transmatic Manufacturing of Holland, Michigan, lost its most profitable contract to a Chinese firm. 10 Firms today must ask themselves, “How can we be the best in the world?” For students, it's not too early to think about the personal ramifications. As CEO Jim Goodnight of SAS, the largest privately held software company in the world, put it, “The best thing business schools can do to prepare their students is to encourage them to look beyond their own backyards. Globalization has opened the world for many opportunities, and schools should encourage their students to take advantage of them” (p. 19). 11 In a recent three-year period, foreign companies opened about 60,000 new factories in China. Technological Change You know how important technology is in life. It is, of course, vitally important in the business world as well. Technology both complicates things and creates new opportunities. The challenges come from the rapid rate at which communication, transportation, information, and other technologies change. 12 For example, Robert Nardelli of Home Depot and Phil Knight of Nike were named two of BusinessWeek's Best Managers of the Year. 13 Both were named for a variety of reasons, including good business results. But key decisions involved technology change. Nardelli invested in new technologies including cordless scan guns and self-checkout lanes. Knight not only changed some unpopular labor practices but also spent more time developing excellent information systems, logistics, and supply chains. In early 2005, Nike was in its strongest financial shape ever. Later chapters will discuss technology further, but here we highlight the rise of the Internet and its effects. Why is the Internet so important to business? 14 It is a marketplace, a means for manufacturing goods and services, a distribution channel, an information service, and more. It drives down costs and speeds up globalization. It provides access to information, allows more informed decisions, and improves efficiency of decision making. It facilitates design of new products, from pharmaceuticals to financial services. Managers can watch and learn what other companies are doing, on the other side of the world. While these advantages create business opportunities, they also create threats as competitors sometimes capitalize more than you do. At the beginning of this decade, technology was dazzling people with returns that seemed limitless. E-business (business conducted electronically) was all the rage. But when the overheated market crashed, “profitable Internet company” became an oxy-moron. 15 The term ebusiness became discredited to the point where GM dropped it and started calling its e-business efforts “digitization.” But by mid-2002, 25 percent of the publicly held Internet companies had become profitable. 16 Etravel and e-finance (shining examples at the time: Expedia, Priceline, and Schwab) emerged as big winners. The health services company WebMD, once branded a loser, began making money. Even nonprofitable Net companies at least had potential as takeover targets for established companies, because they could provide the Internet services those companies needed. When the dot-com bubble burst, many Internet-only companies died, making it seem that mixing the Internet with physical stores was the only way to make money online. But by 2002, most profitable Web companies were selling information-based products that don't require shipping, and so they didn't need physical stores 17 (as the jargon had it, “bricks” to go with their “clicks”). At the same time, old economy types, written off for dead during the heyday of the dot-com boom, have survived and are now using the Internet as a tool to solidify their future. Barnes & Noble sells successfully via the Net, not solely but as a complement to its real stores—people still like to browse the aisles, thumb through books, and have a cup of coffee. 18 Some observers compare e-commerce to the automobile industry in the era of the Model T, Ford's original all-black model in the early 1900s. 19 The Net clearly is a powerful tool for doing and improving business. The industry may now be poised for a long, steady climb for decades. 20 The Internet revolution is definitely here, and the real wealth creation is yet to come. 21 Google search sites span the Internet in over 100 languages. Will Wright of Electronic Arts helped develop the first Sims game in 2000, and also Sims2. Knowledge Management Companies and managers face a growing need for good, new ideas. Because companies in advanced economies have become so efficient at producing physical goods, most workers have been freed up to provide services or “abstract goods” like software, entertainment, data, and advertising. Efficient factories with fewer workers produce the cereals and cell phones the market demands; meanwhile, more and more workers create software and invent new products and services. As top consultant Gary Hamel puts it, “We have moved from an economy of hands to an economy of heads.” 22 Electronic Arts (EA) is a leader in a fad-driven, fast-moving business, and it has to work hard to stay on top. The company can't do that without utilizing the knowledge of world-class developers. Good developers are scarce. They must be able to create interesting stories, have the artistic talent to draw characters, and understand complex calculations to use cutting-edge graphics. 23 Electronic Arts has 12 studios around the world, in large part to capitalize on the knowledge held all over the globe. Chief knowledge officer will be an important job in coming years. 24 Knowledge management is the set of practices aimed at discovering and harnessing an organization's intellectual resources— fully utilizing the intellects of the organization's people. Knowledge management is about finding, unlocking, sharing, and altogether capitalizing on the most precious resources of an organization: people's expertise, skills, wisdom, and relationships. Knowledge managers find these human assets, help people collaborate and learn, help people generate new ideas, and harness those ideas into successful innovations. knowledge management Practices aimed at discovering and harnessing an organization's intellectual resources. Production of tangible goods remains an essential part of the economy and of effective management, but companies like GE, Dell, Toyota, and ABB owe their success in large part to intellectual capital. Whereas “capital” used to be a purely financial concept, it now has an additional meaning. Intellectual capital is the collective knowledge and brainpower of the organization. 25 Today, managers must create a work environment that attracts good people, makes them want to stay, and inspires creative ideas from everyone. The goal is to turn the brainpower of their people into profitable products. Advantages of Collaboration In business, you compete. Now more than ever, you must also collaborate to succeed. You collaborate with others in your work unit, other units in your organization, customers, and other companies including competitors. Because of the importance of collaboration in today's business world, we will highlight examples in every chapter so you don't lose sight of how essential it is. Collaboration across “Boundaries” One of the most important processes of knowledge management is to ensure that people in different parts of the organization collaborate effectively with one another. This requires productive communications among different departments, divisions, or other subunits of the organization. For example, British Petroleum tries to create “T-shaped” managers who break out of the traditional corporate hierarchy to share knowledge freely across the organization (the horizontal part of the T) while remaining fiercely committed to the bottom-line performance of their individual business units (the vertical part). This emphasis on dual responsibilities for performance and knowledge sharing occurs at GlaxoSmithKline (the pharmaceutical giant), Siemens (the large German industrial company), and Ispat International (a London-based steelmaker). 26 For example, a huge recent success for Procter & Gamble has been Prilosec—which is someone else's product. 27 Priolosec is AstraZeneca's over-the-counter version of its prescription heartburn medicine, and P& G sells it. Think also about the cross-company collaboration required for Apple Computer to create the huge successes of the iPod portable music player and iTunes online music store. 28 To build the iPod, Apple worked with Toshiba to come up with a new hard disk, a little-known start-up to customize software, and contractors to assemble the product in Taiwan. Apple also persuaded all the major record labels—known for their rivalries and distrust—to make their music available for download. Apple's ability to line up partners was key to creating these runaway market leaders. Collaboration across former “boundaries” occurs even between competing firms. For example, competitors dovetail electronic systems to purchase jointly, ship on shared semis, and store goods in commonly rented warehouses. 29 Companies today also must motivate and capitalize on the ideas of people outside the traditional company boundaries. How can a company best use the services of its consultants, ad agencies, and suppliers? What kinds of partnerships can it create with other companies in the same industry? And how about customers? Companies today still need to focus on delivering a product and making the numbers, but above all they must realize that the need to serve the customer drives everything else. Best serving the customer can start with involving the customer more in company decisions. For example, companies like P& G are getting customers to think creatively and talk with one another online to come up with new product and service ideas. 30 Jim Goodnight of SAS requires that all customer suggestions for product improvements be recorded. 31 The suggestions are placed in an annual survey for customers to rank, and the 10 top suggestions usually are followed for the next product upgrade. This isn't about the occasional comment from a customer; it's about a strategic, systematic, active approach to achieve better customer service through managing relationships in such a way that customers contribute their best ideas. Globalization, technological change, the monumental importance of new ideas, collaboration across disappearing boundaries … what are the repercussions of this tidal wave of new forces? The magazine Fast Company asked 17 business leaders to consider this question. Table 1.1 offers some of their comments. TABLE 1.1 Comments on the Competitive Landscape of the 21st Century Tom Peters, author and consultant: “Somebody once asked me what I wanted my epitaph to say. I want it to say, ‘He was a player.’ It wouldn't mean that I got rich … It would mean that I participated fully in these fascinating times … whatever this ‘new economy’ thing is, it is reinventing the world of commerce.” Jonathan Hoenig, founder of capitalistpig asset management: “The most valuable commodity isn't soybeans but service … The human touch is what's going to propel our ‘commodified’ business models into the next century and beyond. I feel terribly privileged to be alive at such an exciting time in history.” Patricia Seybold, author of customers.com: “A lot of people think the new economy is all about the Internet … it's really about customers. Customers are transforming entire industries … the customer is at the core of the business.” Nathan Myhrvold, cofounder and copresident of Intellectual Ventures: “The new economy is about rethinking and reshaping what has already happened. It's about producing fertile ground for radically new ideas. Workers with good ideas, or the ability to generate ideas, can write their own ticket.” Krishna Subramanian, chairwoman and CEO, Kovair Inc.: “Companies used to be structured around individual contribution. Now teamwork—presenting a seamless interface to the customer, across all points of contact and all business functions—is becoming more important. Pehong Chen, chairman, president and CEO, Broadvision Inc.: “That's what is so awesome about the new economy. You have the ability to do something with your work and to know that you made a difference. You. Not your system. Not your company's policies. You.” Thomas Stewart, Fortune magazine: “We stand at the beginning of a new century, in the middle of a technological revolution, and at the end of a great stock market bubble—virgin territory, construction sites, and ruins, all at once. Let's go.” SOURCES: R. F. Maruca, “Voices,” Fast Company, September 2000, pp. 105–44; T. Stewart, “Intellectual Capital: Ten Years Later, How Far We've Come,” Fortune, May 28, 2001, pp. 192– 93. Connections: ED CATMULL AND PIXAR One difference between animated and live-action film is that live-action uses what Hollywood calls a “gypsy” model: groups of actors, producers, and technicians who come together for a project and then scatter to new and different projects with new people. Animated films require far more collaboration, and Pixar doesn't disintegrate after each project—the organization remains, and the people keep working together. Most live-action films list 100 to 200 names in the credits; animated films require so much collaboration that The Incredibles, for example, credits about 800 people. Pixar has world-class artists and world-class programmers. The organization has three groups: technology development (delivering computer-graphics tools); creative development (creating stories, characters, and animation), and production (coordinating the entire filmmaking process). It wouldn't work if they didn't collaborate well. Catmull insists that the three groups talk with one another, continually. Anyone can talk with anyone else, without having to go up and down a rigid hierarchy of bosses and subordinates. The U.S. Navy sent people to Pixar to learn how to improve its own organization and communication. Ed Catmull has many patents to his name, but he is most proud of establishing Pixar University. Pixar U. offers 111 different courses, and everyone takes about half a dozen per year. Every person in Pixar receives enough training in cinema and the fine arts to think like a complete filmmaker. Goals like Catmull's are worthy of every other kind of business organization: to inspire people at all levels and in different units to work collaboratively, and to develop the depth and breadth of knowledge to think not only as specialists, but also like complete businesspeople. Managing for Competitive Advantage The rise of the Internet turned careers (and lives) upside down. People dropped out of school to join Internet start-ups or start their own. Managers in big corporations quit their jobs to do the same. Investors salivated, and invested heavily. The risks were often ignored, or downplayed— sometimes tragically, as companies went under. Consider two earlier industries of similar transforming power: automobiles and aviation. There have been at least 2,000 car makers, but now there are only three car companies left in the United States—and even they have not been great investments. Similarly, hundreds of aircraft manufacturers have gone bankrupt, some very recently. In all of aviation history, up to the year 2000, the net amount of money made by all U.S. airline companies was zero. 32 That's right: all those companies in total had made no money whatsoever. And that was before American, United, Delta, and Northwest lost over $3.6 billion in 2003 alone. 33 In recent years, the largest airlines have laid off more than 10,000 pilots, some of whom made six-figure salaries and have had to start over with regional carriers for $20,000. 34 What is the lesson to be learned from all the failures in these important transformational industries? A key to understanding the success of a company—whether traditional, Internetbased, or a combination of both—is not how much the industry in which it operates will affect society or how much it will grow. The key is the competitive advantage held by a particular company and how sustainable or renewable that advantage is. 35 Good managers know that they are in a competitive struggle to survive and win. To survive and win, you have to gain advantage over your competitors and earn a profit. You gain competitive advantage by being better than your competitors at doing valuable things for your customers. But what does this mean, specifically? To succeed, what must managers deliver? The fundamental success drivers are innovation, quality, speed, and cost competitiveness. Because it's easy for managers to get so caught up in being busy, get distracted, and lose sight of what really drives performance, you will periodically see this icon as a reminder of the need for innovation, quality, speed, and cost competitiveness. Innovation Procter & Gamble under new CEO A. G. Lafley has become a hot growth company through innovation. According to Lafley, organic growth (from growing core businesses through innovation rather than buying new businesses) is “the most precious kind of growth … Organic growth exercises your innovation muscle. It is a muscle. If you use it, it gets stronger” (p. 168). 36 Innovation is the introduction of new goods and services. Your firm must adapt to changes in consumer demands and to new competitors. When the Net allowed merchants to bypass traditional distribution channels and reach buyers directly, traditional marketers had to learn how to innovate to remain competitive. 37 Plus, products don't sell forever; in fact, they don't sell for nearly as long as they used to, because so many competitors are introducing so many new products all the time. Your firm must innovate, or it will die. innovation The introduction of new goods and services. In contrast to Procter & Gamble, Kraft hasn't had a major new brand launch since DiGiorno pizza in 1995, and it recently had a string of quarterly profit declines. Historically, Kraft was an icon of business innovation— think Oreos and Mac & Cheese. Kraft brought the world Miracle Whip at the 1933 World's Fair, Minute Rice right after World War II, then Cheez Whiz, Shake ‘N Bake, and Lunchables. Why the recent decline? Successes and failures have multiple sources, but after Kraft lost two top executives who were champions of new product development the company stopped taking risks and simply tried to milk aging brands. 38 A top consultant, Gary Hamel, notes that the real competition has always been between newcomers and the old guard. 39 The perpetual battle is between unconventional thinking and unthinking ritual. In recent years, newcomers battered incumbents with unconventional new approaches to business. Only the incumbents that keep innovating, like Wal-Mart and IBM, have continued to increase their share of wealth. Not mincing words while speaking directly to successful executives, Hamel warns, “Odds are, over the next few years newcomers are going to capture most of the new wealth in your industry. Odds are, your company is going to get its ass kicked by a bunch of irreverent, tradition-defying rebels.” 40 Innovation is today's holy grail. 41 It is the most potent means of creating new wealth. 42 Like the other sources of competitive advantage, innovation comes from people; it must be a strategic goal; and it must be managed properly. You will learn how great companies innovate in later chapters. Your firm must innovate, or it will die. Tide took its well-established detergent into new directions including Tide for cold-water washing, and a scrub brush to get out stains—all branded with the Tide name. Quality A Los Angeles–based homebuilder, KB Home, had a bad reputation for quality a few years back. But chairman and CEO Bruce Karatz worked with the National Association of Home Builders to create training programs for builders and contractors aimed at improving quality. 43 He also created a “Say Yes” program to handle customer complaints faster. But until the Web site called kbhomesucks.com closes, KB Home will need to continue working to improve its quality reputation. 44 Quality is the excellence of your product. The importance of quality and standards for acceptable quality have increased dramatically in recent years. Customers now demand highquality goods and services, and often they will accept nothing less. Bruce McMillan of Electronic Arts states, “Ten years ago, you could get away with creating a mediocre game. Now, with competition, you don't have that luxury.” 45 quality The excellence of your product (goods or services). Historically, quality pertained primarily to the physical goods that customers bought, and it referred to attractiveness, lack of defects, reliability, and long-term dependability. The traditional approach to quality was to check work after it was completed and then eliminate defects, using inspection and statistical data to determine whether products were up to standards. But then W. Edwards Deming, J. M. Juran, and other quality gurus convinced managers to take a more complete approach to achieving total quality. This includes preventing defects before they occur, achieving zero defects in manufacturing, and designing products for quality. The goal is to solve and eradicate from the beginning all quality-related problems and to live a philosophy of continuous improvement in the way the company operates. Deming and his ideas were actually rebuffed by U.S. managers; only when he found an audience in Japan, and Japan started grabbing big chunks of market share from the United States in autos, computer chips, and TVs, did U.S. managers start living his quality philosophy. 46 Today, service quality is vital as well. For example, making things easy for customers is an important dimension of service quality; FedEx, Alamo, and Dell make it easy for customers to use their services. Compared to Wal-Mart, Target in some ways offers stronger quality not only in its products but also product selection (more products, unique products) and the shopping experience: aesthetics, less crowded aisles, video games not in locked cabinets, and no TVs or other products in the parking lots in tractor trailers (as Wal-Mart sometimes has to do). 47 Quality is further provided when companies customize goods and services to the wishes of the individual consumer. Lands' End allows customers to create a “personal model” for testing the fit and look of swimwear. Chipshot.com allows golfers to configure clubs to their preferred specifications. 48 Cannondale of Bethel, Connecticut, allows customers to create personalized bicycles on a Web site. 49 Each customer is linked to a local dealer to place the final order and receive the product. Providing world-class quality requires a thorough understanding of what quality really is. 50 Quality can be measured in terms of product performance, customer service, reliability (failure or breakdowns), conformance to standards, durability, and aesthetics. Only by moving beyond broad, generic concepts like “quality,” to identifying specific quality requirements, can you identify problems, target needs, set performance standards more precisely, and deliver worldclass value. Consumers are willing to spend more for Sony electronics because of Sony's consistent delivery of quality in its products. Speed Google constantly improves its search product at a rapid rate. 51 Applebee's new computerized ordering system helped 98 percent of food orders to reach the table in less than 16 minutes, reducing the average length of a visit to the restaurant by seven minutes. 52 Right after digital images from Paris, Milan, and New York runway shows hit the Internet, knockoff houses reinterpret styles for the mass market and get them into stores within weeks. 53 For its athletic brand C9, Target has cut its product development cycle from over a year to between 10 weeks and nine months, depending on how trendy the item is. 54 Raymundo Hache of Interamericana Products International of the Dominican Republic, which ships pants to the U.S. market for Liz Claiborne, Tommy Hilfiger, and others, states, “If we're not fast enough, China will trample us.” 55 Speed often separates the winners from the losers. How fast can you develop and get a new product to market? How quickly can you respond to customer requests? You are far better off if you are faster than the competition—and if you can respond quickly to your competitors' actions. speed Fast and timely execution, response, and delivery of results. Speed isn't everything—you can't get sloppy in your quest to be first. But other things being equal, faster companies are more likely to be the winners, slow ones the losers. Even preInternet, speed had become a vital requirement in the 1990s. Companies were getting products to market, and in the hands of customers, faster than ever. Now, the speed requirement has increased exponentially. Andy Grove, chairman of Intel Corporation, says the Internet is a tool, and the biggest impact of that tool is speed. 56 Everything, it seems, is on fast-forward. Speed is no longer just a goal of some companies; it is a strategic imperative. Regarding quick delivery, Bruce Birnback, president of Rowe Furniture, said in November 2004, “Today it's not critical, but 18 to 24 months from now, I believe it will be the difference between being in business and not.” 57 Cost Competitiveness Wal-Mart keeps driving hard to find new ways to cut billions of dollars from its already very low distribution costs. Mona Williams, VP of communications for Wal-Mart, states, “We are the low-price leader in retail and will not cede that ground to anyone.” 58 While fuel and labor costs are high in the airline industry, LCCs (low-cost carriers, such as AirTran, Southwest, and JetBlue) keep expenditures 30 to 40 percent lower than the legacies, allowing them to offer lower fares and making all the major airlines suffer. 59 JetBlue and Southwest hold down repair costs by flying only one kind of jet. JetBlue's per-passenger-mile cost is lowest in the industry, and its market value is bigger than some of the big players. 60 Cost competitiveness means that your costs are kept low enough so that you can realize profits and price your products (goods or services) at levels that are attractive to consumers. eBay set the standard for profitable Internet companies by having so few fixed costs—no inventory, sales force, or warehouses. 61 Marriott, hit hard by the drop in tourism and travel, cut costs every way it could and offered much lower room rates. 62 Needless to say, if you can offer a desirable product at a low price, it is more likely to sell. cost competitiveness Keeping costs low in order to achieve profits and be able to offer prices that are attractive to consumers. Small businesses usually attend closely to costs at first, but then their owners start paying attention to other things. 63 The frugality habit slips, spending goes up, and costs escalate. If something goes wrong (things happen, unexpectedly), the company is strapped for cash. When a cash crisis comes, it's too late, and the owners have to think about laying off employees. Money can be wasted in countless ways, and savings can come from the most unexpected places. You want everyone in the company looking for new ways to keep costs under control. Managing your costs and keeping them down requires being efficient: accomplishing your goals by using your resources wisely and minimizing waste. Little things can save big money, but cost cuts involve trade-offs. Lucent cut the number of lightbulbs per cubicle from four to one. 64 The BBC could save $400,000 per year by banning free biscuits from internal meetings. The Swedish navy, dealing with budget cuts, dropped round-the-clock operations in favor of Monday through Friday, 9 to 5. Raw materials, equipment, capital, manufacturing, marketing, delivery, and labor are just some of the costs that need to be managed carefully. One reason so many dotcoms failed was that their huge, up-front advertising costs usually didn't translate into big sales; their customer acquisition costs were as much as four times higher than those of offline competitors. 65 And one reason every company must worry about cost is that consumers can now easily compare prices on the Net from thousands of competitors. If you can't cut costs and offer attractive prices, you can't compete. As with the many dimensions of quality, understanding all specific costs is important. A chart making the e-mail rounds indicates that the cost of the active ingredients used in some of the most popular drugs in the United States is often under $1 while the consumer price is hundreds of dollars, indicating huge and arguably unfair percentage markups. Supporters of the pharmaceutical companies note that prices are less a function of the cost of ingredients than of the cost of funding R& D and the prices charged by pharmacies. The good news for consumers is that some pharmacies compete on the basis of cost and price: Costco, Sam's Club, and other discount volume stores often charge little over their cost for generic drugs. Although these are “membership” stores, nonmembers can buy prescriptions there because prescriptions are federally regulated. Delivering All Four Don't assume that you can settle for delivering just one of the four competitive advantages: low cost alone, or quality alone, for example. The best managers and companies deliver them all. Rubbermaid used to be Fortune's most admired company in the early 1990s, in large part because it was such a great innovator. But when it refused to meet Wal-Mart's requests for faster delivery and lower prices, it fell off the map. 66 A strong emphasis on speed hurt quality at Nissan; CEO Carlos Ghosn had to work hard to reverse the quality problem. He succeeded, and the brand got hot once again. 67 For MTV, rival music video channels have sprung up on every continent, and it has to respond quickly. The company is innovating with video-on-demand services, more new channels, expansion in the Internet and mobile entertainment markets, and a music download service to compete with Napster and Apple's iTunes. These moves are costly, and quality must be high to make these moves competitive and worthwhile. 68 Trade-offs may occur among the four, but this doesn't need to be a zero-sum game where one has to suffer at the expense of another. Early on, Wal-Mart realized that constant innovation in inventory-control systems would get merchandise on and off the shelves faster. This added speed would result in lower prices. 69 Electronic Arts sets demanding deadlines for teams pursuing breakthrough innovation. 70 An important component is an intranet library through which developers share best practices and technologies. They work (much!) faster by working smarter. And low cost isn't the only thing at which Dell excels: Its quality ratings tend to be high, and it builds and ships PCs quickly after receiving an order (all of Dell's suppliers know they must deliver parts to Dell within one hour). 71 Many of BusinessWeek's worst managers were forced out due to ethics scandals. 72 You will read more about the importance of ethics in later chapters. But “best” and “worst” are also determined by results, as indicated by the following examples. Don't forget: Don't focus on one aspect of performance and neglect the others. You might be better at or more interested in one than the others, but you should strive for all four. Best and Worst FROM THE PAGES OF When BusinessWeek announced in 2005 its Best and Worst Managers of the Year, the profiles describe the managers' business results and their major decisions and actions. As you read these examples, consider their relevance to the things described so far in the chapter. Among the best managers: • • • • Jeff Immelt, for embracing technology, generating innovation, and strengthening GE's global culture. Steve Jobs of Apple and Linus Torvalds of Open Source Development Labs, for their innovative iPod and Linux devices and software. Steven Reinemund of Pepsico, which is adding 200 product variations each year. Pepsico under Reinemund also is strong at developing people, especially leadership talent in the local teams that are key to its strength in India and China. John Henry of the Boston Red Sox, for adding seats to the oldest stadium in baseball, selling out all games, and routinely winning regional prime-time TV ratings after deciding to broadcast home games in high definition. His systems for mining baseball statistics to find undervalued players and avoiding long-term contracts for older stars whose performance might be on the decline kept costs down while forging a quality team. After 86 years without a championship, the Red Sox won it all in 2004. BusinessWeek's “worst manager” picks for the year included: • • • Franklin Raines of Fannie Mae, who gave his CFO free rein and tolerated “weak or nonexistent” financial controls. He employed improper bookkeeping, misstated earnings, and was forced out. Gary Bettman, who led the National Hockey League through years of unsustainable salary growth, culminating in a strike and then cancellation of the 2004–2005 season. NHL finances were in shambles. Salaries were 75 percent of revenues in 2004 versus 41 percent in 1991. Howard Pien of Chiron, one of only two major flu vaccine providers. Chiron was not allowed to release doses produced in the Liverpool, England, plant due to contamination problems. Pien increased production speed dramatically: Chiron produced 50 percent more vaccines than in the previous year and planned another 37 percent increase in 2005.But quality dropped. Chiron and its investors took a huge financial hit, and most of the rest of us went without flu vaccines. SOURCE: Special Report, “The Best & Worst Managers of the Year,” BusinessWeek, January 10, 2005, pp. 55–86. The Functions of Management Management is the process of working with people and resources to accomplish organizational goals. Good managers do those things both effectively and efficiently. To be effective is to achieve organizational goals. To be efficient is to achieve goals with minimal waste of resources, that is, to make the best possible use of money, time, materials, and people. Some managers fail on both criteria, or focus on one at the expense of another. The best managers maintain a clear focus on both effectiveness and efficiency. management The process of working with people and resources to accomplish organizational goals. These definitions have been around for a long time. But as you know, business is changing radically. The real issue is what to do. 73 The context of business and the specifics of doing business are changing, 74 but there are still plenty of timeless principles that make great managers, and great companies, great. While fresh thinking and new approaches are required now more than ever, much of what has already been learned about successful management practices remains relevant, useful, and adaptable, with fresh thinking, to the 21st-century business environment. To use an analogy: Engineering practices evolve continually, but the laws of physics are relatively constant. 75 In the business world today, the great executives not only adapt to changing conditions but also apply—fanatically, rigorously, consistently, and with discipline—the fundamental management principles. These fundamentals include the four traditional functions of management: planning, organizing, leading, and controlling. They remain as relevant as ever, and they still provide the fundamentals that are needed in start-ups as much as in established corporations. But their form has evolved. Planning: Delivering Strategic Value Planning is specifying the goals to be achieved and deciding in advance the appropriate actions needed to achieve those goals. Planning activities include analyzing current situations, anticipating the future, determining objectives, deciding in what types of activities the company will engage, choosing corporate and business strategies, and determining the resources needed to achieve the organization's goals. Plans set the stage for action and for major achievements. planning The management function of systematically making decisions about the goals and activities that an individual, a group, a work unit, or the overall organization will pursue. The planning function for the new business environment, discussed in Part 2 of this book, is more dynamically described as delivering strategic value. Historically, planning described a topdown approach in which top executives establish business plans and tell others to implement them. Now and in the future, delivering strategic value is a continual process in which people throughout the organization use their brains and the brains of customers, suppliers, and other stakeholders to identify opportunities to create, seize, strengthen, and sustain competitive advantage. This dynamic process swirls around the objective of creating more and more value for the customer. Effectively creating value requires fully considering a new and changing set of stakeholders and issues, including the government, the natural environment, globalization, and the dynamic economy in which ideas are king and entrepreneurs are both formidable competitors and potential collaborators. You will learn about these and related topics in Chapter 4 (planning and strategic management), Chapter 5 (ethics and corporate social responsibility), Chapter 6 (international management), and Chapter 7 (entrepreneurship). organizing The management function of assembling and coordinating human, financial, physical, informational, and other resources needed to achieve goals. Organizing: Building a Dynamic Organization Organizing is assembling and coordinating the human, financial, physical, informational, and other resources needed to achieve goals. Organizing activities include attracting people to the organization, specifying job responsibilities, grouping jobs into work units, marshaling and allocating resources, and creating conditions so that people and things work together to achieve maximum success. leading The management function that involves the manager's efforts to stimulate high performance by employees. Part 3 of the book describes the organizing function as building a dynamic organization. Historically, organizing involved creating an organization chart by identifying business functions, establishing reporting relationships, and having a personnel department that administered plans, programs, and paperwork. Now and in the future, effective managers will be using new forms of organizing and viewing their people as perhaps their most valuable resources. They will build organizations that are flexible and adaptive, particularly in response to competitive threats and customer needs. Progressive human resource practices that attract and retain the very best of a highly diverse population will be essential aspects of the successful company. You will learn about these topics in Chapter 8 (organization structure), Chapter 9 (organizational agility), Chapter 10 (human resources management), and Chapter 11 (managing the diverse workforce). When Gert Boyle unexpectedly found herself at the helm of a debt-ridden company, she had no knowledge of how to run it. Change was needed. Thirty-two years later, she and her son Tim Boyle have turned Columbia Sportswear Company into a successful outerwear company. Her first decisions were difficult ones, including firing nearly all of her roughly 55 employees, but Gert and Tim focused on listening to customers and innovating. Since 1984, sales have grown from $3 million to nearly $1 billion. Change can sometimes lead to very good things. Leading: Mobilizing People Leading is stimulating people to be high performers. It includes motivating and communicating with employees, individually and in groups. Leading involves close day-to-day contact with people, helping to guide and inspire them toward achieving team and organizational goals. Leading takes place in teams, departments, and divisions, as well as at the tops of large organizations. In earlier textbooks, the leading function was about how managers motivate workers to come to work and execute top management's plans by doing their jobs. Today and in the future, managers must be good at mobilizing people to contribute their ideas, to use their brains in ways never needed or dreamed of in the past. As described in Part 4, they must rely on a very different kind of leadership (Chapter 12) that empowers and motivates people (Chapter 13). Far more than in the past, great work must be done via great teamwork (Chapter 14), both within work groups and across group boundaries. Ideally, underlying these processes will be effective interpersonal and organizational communication (Chapter 15). Controlling: Learning and Changing Planning, organizing, and leading do not guarantee success. The fourth function, controlling, monitors performance and implements necessary changes. controlling The management function of monitoring performance and making needed changes. Monitoring is an essential aspect of control. If you have any doubts that this function is important, consider that after the terror attacks of September 11, 2001, many Department of Agriculture laboratories could not account for dangerous biological agents supposedly in their stockpiles, including 3 billion doses of a dangerous virus. The Department of Energy could not account fully for radioactive fuel rods and other nuclear materials lent to other countries. 76 On a different note, a man with a hatchet entered an Oklahoma City Wal-Mart. On his way in, the greeter not only failed to alert authorities but placed a sticker on the weapon so he would not be charged for it when he left. The man, who robbed the store, had claimed he was returning it. 77 Control failures can take many forms! When managers implement their plans, they often find that things are not working out as planned. The controlling function makes sure that goals are met. It asks and answers the question, “Are our actual outcomes consistent with our goals?” It makes adjustments as needed. Successful organizations, large and small, pay close attention to the controlling function. But Part 5 of the book makes it clear that today and for the future, the key managerial challenges are far more dynamic than in the past; they involve continually learning and changing. Controls must still be in place, as described in Chapter 16. But new technologies and other innovations (Chapter 17) make it possible to achieve controls in more effective ways, and to help all the people throughout the company, and across company boundaries (including customers and suppliers), to use their brains, learn, make a variety of new contributions, and help the organization change in ways that forge a successful future (Chapter 18). The four management functions apply to you personally, as well. You must find ways to create value, organize for your own personal effectiveness, mobilize your own talents and skills as well as those of others, monitor performance, and constantly learn, develop, and change for the future. As you proceed through this book and this course, we encourage you to not merely do your “textbook learning” of an impersonal course subject, but to think about these issues from a personal perspective as well, using the ideas for your own personal development. Performing All Four Management Functions As a manager, your typical day will not be neatly divided into the four functions. You will be doing many things more or less simultaneously. 78 Your days will be busy and fractionated, spent dealing with interruptions, meetings, and firefighting. There will be plenty to do that you wish you could be doing but can't seem to get to. These activities will include all four management functions. Some managers are particularly interested in, devoted to, or skilled in one or two of the four functions but not in the others. But you should devote adequate attention and resources to all four functions. You can be a skilled planner and controller, but if you organize your people improperly or fail to inspire them to perform at high levels, you will not be realizing your potential as a manager. Likewise, it does no good to be the kind of manager who loves to organize and lead, but who doesn't really understand where to go or how to determine whether you are on the right track. Good managers don't neglect any of the four management functions. Knowing what they are, you can periodically ask yourself if you are devoting adequate attention to all of them. Management Levels and Skills Organizations (particularly large organizations) have many levels. In this section, you will learn about the types of managers found at three different organizational levels: top-level, middle level, and frontline. Top-Level Managers Top-level managers are the senior executives of an organization and are responsible for its overall management. Top-level managers, often referred to as strategic managers, are supposed to focus on long-term issues and emphasize the survival, growth, and overall effectiveness of the organization. top-level managers Senior executives responsible for the overall management and effectiveness of the organization. Top managers are concerned not only with the organization as a whole but also with the interaction between the organization and its external environment. This interaction often requires managers to work extensively with outside individuals and organizations. The chief executive officer (CEO) is one type of top-level manager found in large corporations. This individual is the primary strategic manager of the firm and has authority over everyone else. Others include the chief operating officer (COO), company presidents, vice presidents, and members of the top management team. Traditionally, the role of top-level managers has been to set overall direction by formulating strategy and controlling resources. But now, top managers are more commonly called upon to be not only strategic architects but also true organizational leaders. As leaders they must create and articulate a broader corporate purpose with which people can identify, and one to which people will enthusiastically commit. Among 1,000 top executives in Fortune 100 companies, 48 percent went to public undergraduate schools, compared with only 32 percent two decades earlier. The number of top executives who went to Ivy League schools fell from 14 percent to 10 percent, and private non-Ivies from 54 percent to 42 percent. 79 Middle-Level Managers As the name implies, middle-level managers are located in the organization's hierarchy below top-level management and above the frontline managers. Sometimes called tactical managers, they are responsible for translating the general goals and plans developed by strategic managers into more specific objectives and activities. middle-level managers Managers located in the middle layers of the organizational hierarchy, reporting to top-level executives. Traditionally, the role of the middle manager is to be an administrative controller who bridges the gap between higher and lower levels. Middle-level managers take corporate objectives and break them down into business unit targets; put together separate business unit plans from the units below them for higher-level corporate review; and serve as linchpins of internal communication, interpreting and broadcasting top management's priorities downward and channeling and translating information from the front lines, upward. As a stereotype, the term middle manager connotes mediocrity: unimaginative people behaving like bureaucrats and defending the status quo. But middle managers are closer than top managers to day-to-day operations, customers, and frontline managers and employees—so they know the problems. They also have many creative ideas—often better than their bosses'. Good middle managers provide the operating skills and practical problem solving that keep the company working. 80 Frontline Managers Frontline managers, or operational managers, are lower-level managers who supervise the operations of the organization. These managers often have titles such as supervisor or sales manager. They are directly involved with nonmanagement employees, implementing the specific plans developed with middle managers. This role is critical in the organization, because operational managers are the link between management and nonmanagement personnel. Your first management position probably will fit into this category. frontline managers Lower-level managers who supervise the operational activities of the organization. Traditionally, frontline managers have been directed and controlled from above, to make sure that they successfully implement operations in support of company strategy. But in leading companies, the role has expanded. Whereas the operational execution aspect of the role remains vital, in leading companies frontline managers are increasingly called upon to be innovative and entrepreneurial, managing for growth and new business development. Managers on the front line—which usually means newer, younger managers—are crucial to creating and sustaining quality, innovation, and other drivers of financial performance. 81 In outstanding organizations, talented frontline managers are not only allowed to initiate new activities but are expected to by their top and middle-level managers. And they are given freedom, incentives, and support to find ways to do so. 82 Table 1.2 elaborates on the changing aspects of different management levels. You will learn about each of these aspects of management throughout this course. TABLE 1.2 Transformation of Management Roles and Activities Roles Frontline Managers Middle-Level Managers Top-Level Managers Changing • From operational • From administrative • From resource implementers to controllers to allocators to aggressive supportive coaches institutional leaders Key entrepreneurs • Developing • Establishing high Activities • Creating and individuals and performance pursuing new supporting their standards growth activities • Institutionalizing a set opportunities for • Linking dispersed of norms and values the business knowledge and to support cooperation • Attracting and skills across units and trust developing • Managing the • Creating an over resources tension between arching corporate • Managing short-term purpose and ambition continuous performance and performance long-term ambition improvement within the unit SOURCE: Adapted from C. Bartlett and S. Goshal, “The Myth of the Generic Manager: New Personal Competencies for New Management Roles,” California Management Review 40, no. 1, Fall 1997, pp. 92–116. Working Leaders with Broad Responsibilities The trend today is toward less hierarchy and more teamwork. In small firms—and in those large companies that have adapted to the times—managers have strategic, tactical, and operational responsibilities. They are complete businesspeople; they have knowledge of all business functions, are accountable for results, and focus on serving customers both inside and outside their firms. All of this requires the ability to think strategically, translate strategies into specific objectives, coordinate resources, and do real work with lower-level people. In short, today's best managers can do it all; they are “working leaders.” 83 They focus on relationships with other people and on achieving results. They don't just make decisions, give orders, wait for others to produce, and then evaluate results. They get dirty, do hard work themselves, solve problems, and produce value. What does all of this mean in practice? How do managers spend their time—what do they actually do? A classic study of top executives found that they spend their time engaging in 10 key activities or roles, falling into three categories: interpersonal, informational, and decisional. 84 Table 1.3 summarizes these roles. Even though the study was done decades ago, it remains highly relevant as a description of what executives do. And even though the study focused on top executives, managers at all levels engage in all these activities. As you study the table, you might ask yourself, Which of these activities do I enjoy most (and least)? Where do I excel (and not excel)? Which would I like to improve? Whatever your answers, you will be learning more about these activities throughout this course. TABLE 1.3 Managerial Roles: What Managers Do Interpersonal Roles Leader: Staffing, training, and motivating people Liaison: Maintaining a network of outside contacts who provide information and favors Informational Roles Figurehead: Performing symbolic duties (ceremonies and serving other social and legal demands) Monitor: Seeking and receiving information to develop a thorough understanding of the organization and its environment; serving as the “nerve center” of communication Disseminator: Transmitting information from source to source, sometimes interpreting and integrating diverse perspectives Spokesperson: Speaking on behalf of the organization about plans, policies, actions, and results Decisional Roles Entrepreneur: Searching for new business opportunities and initiating new projects to create change Disturbance handler: Taking corrective action during crises or other conflicts Resource allocator: Providing funding and other resources to units or people; includes making or approving significant organizational decisions Negotiator: Engaging in negotiations with parties outside the organization as well as inside (for example, resource exchanges) SOURCE: Adapted from H. Mintzberg, The Nature of Managerial Work (New York: Harper & Row, 1973), pp. 92–93. Management Skills Performing management functions and roles, and achieving competitive advantage, are the cornerstones of a manager's job. However, understanding this does not ensure success. Managers need a variety of skills to do these things well. Skills are specific abilities that result from knowledge, information, practice, and aptitude. Although managers need many individual skills, which you will learn about throughout the text, consider three general categories: technical skills, interpersonal and communication skills, and conceptual and decision skills. 85 First-timers greatly underestimate the challenges of the many technical, human, and conceptual competencies required. 86 But when the key management functions are performed by managers who have these critical management skills, the result is high performance. A technical skill is the ability to perform a specialized task that involves a certain method or process. Most people develop a set of technical skills to complete the activities that are part of their daily work lives. The technical skills you learn in school will provide you with the opportunity to get an entry-level position; they will also help you as a manager. For example, your accounting and finance courses will develop the technical skills you need to understand and manage the financial resources of an organization. technical skill The ability to perform a specialized task involving a particular method or process. Conceptual and decision skills involve the ability to identify and resolve problems for the benefit of the organization and everyone concerned. Managers use these skills when they consider the overall objectives and strategy of the firm, the interactions among different parts of the organization, and the role of the business in its external environment. As you acquire greater responsibility, you must exercise your conceptual and decision skills with increasing frequency. You will confront issues that involve all aspects of the organization and must consider a larger and more interrelated set of decision factors. Much of this text is devoted to enhancing your conceptual and decision skills, but remember that experience also plays an important part in their development. conceptual and decision skills Skills pertaining to the ability to identify and resolve problems for the benefit of the organization and its members. Interpersonal and communication skills influence the manager's ability to work well with people. These skills are often called people skills. Managers spend the great majority of their time interacting with people, 87 and they must develop their abilities to lead, motivate, and communicate effectively with those around them. Your people skills often make the difference in how high you go. 88 interpersonal and communication skills People skills; the ability to lead, motivate, and communicate effectively with others. A Fortune article decried the lack of communication and other “people” skills among recent MBAs launching their management careers. 89 It is vital to realize the importance of these skills in getting a job, keeping it, and performing well in it. As one expert commented, “In many, many companies, the reason a manager fails is not because he doesn't have the technical skills. It's because he doesn't have the people skills.” 90 Recruiters want good technical skills, of course, but the attribute they rank at the top of the list is communication and interpersonal skills. The importance of these skills varies by managerial level. Technical skills are most important early in your career. Conceptual and decision skills become more important than technical skills as you rise higher in the company. But interpersonal skills are important throughout your career, at every level of management. Many high-potential, “fast-track” managers have had their careers “derailed” because of problems in the interpersonal arena. 91 Hewlett-Packard CEO Carly Fiorina, a highly talented executive, was fired in early 2005. All three of these skills contributed in some way to her downfall. 92 She is courageous, decisive, and forceful, makes great presentations, and was widely admired outside the company. But she lacked a technical background and became interpersonally difficult when the Compaq merger which she conceived (and others doubted) didn't work well. She became more stubborn, handled confrontation poorly, and used a leadership style that most H-P employees didn't appreciate. A key task of her successor is to boost morale. When Hewlett-Packard hired Carly Fiorina, the beleagured computer company seemed to be on the upswing. But deteriorating leadership and interpersonal skills, not to mention a problematic Compaq merger, sealed her fate in early 2005. You and Your Career At the beginning of your career, your contribution to your employer depends on your own performance; that's all you're responsible for. But upon becoming a manager, you are responsible for a whole group. To use an orchestra analogy, instead of playing an instrument, you're a conductor, coordinating others' efforts. 93 The challenge is much greater than most first-time managers expect it to be. Throughout your career you'll need to lead teams effectively, as well as influence people over whom you have no authority; thus the human skills are especially important. These days, businesspeople talk about emotional intelligence, 94 or “EQ”—the skills of understanding yourself (including strengths and limitations), managing yourself (dealing with emotions, making good decisions, seeking and using feedback, exercising self-control), and dealing effectively with others (listening, showing empathy, motivating, leading, and so on). Andrea Jung, chair and CEO of Avon Products, says “Emotional intelligence is in our DNA here at Avon because relationships are critical at every stage of our business.” 95 emotional intelligence The skills of understanding yourself, managing yourself, and dealing effectively with others. A common complaint about leaders, especially newly promoted ones who had been outstanding individual performers, is that they lack what is perhaps the most fundamental of EQ skills: empathy. The issue is not lack of ability to change (you can), but the lack of motivation to change (you should decide to do so). 96 William George, former chair and CEO of Medtronic, says some people can go a long way in their careers based on sheer determination and aggressiveness, but personal development including EQ ultimately becomes essential. 97 What should you do to forge a successful, gratifying career? You are well advised to be both a specialist and a generalist, to be self-reliant and connected, to actively manage your relationship with your organization, and to be fully aware of what is required to not only survive, but also to thrive, in today's world. Be Both a Specialist and a Generalist If you think your career will be as a specialist, think again. Chances are, you will not want to stay forever in strictly technical jobs with no managerial responsibilities. Accountants are promoted to accounting department heads and team leaders, sales representatives become sales managers, writers become editors, and nurses become nursing directors. As your responsibilities increase, you must deal with more people, understand more about other aspects of the organization, and make bigger and more complex decisions. Beginning to learn now about these managerial challenges may yield benefits sooner than you think. So, it will help if you can become both a specialist and a generalist. 98 Seek to become a specialist: you should be an expert in something. This will give you specific skills that help you provide concrete, identifiable value to your firm and to customers. And over time, you should learn to be a generalist, knowing enough about a variety of business disciplines so that you can think strategically and work with different perspectives. Be Self-Reliant To be self-reliant means to take full responsibility for yourself, your actions, and your career. 99 You cannot count on your boss or your company to take care of you. A useful metaphor is to think of yourself as a business, with you as president and sole employee. Table 1.4 gives some specific advice about what this means in practice. TABLE 1.4 Keys to Career Management Vicky Farrow of Sun Microsystems gave the following advice to help people assume responsibility for their own careers: 1. 2. 3. 4. 5. 6. 7. 8. Think of yourself as a business. Define your product: What is your area of expertise? Know your target market: To whom are you going to sell this? Be clear on why your customer buys from you. What is your “value proposition”— what are you offering that causes him to use you? As in any business, strive for quality and customer satisfaction, even if your customer is just someone else in your organization—like your boss. Know your profession or field and what's going on there. Invest in your own growth and development, the way a company invests in research and development. What new products will you be able to provide? Be willing to consider changing your career. SOURCE: W. Kiechel III, “A Manager's Career in the New Economy,” Fortune, April 4, 1994, pp. 68–72. Copyright © 1994 Times, Inc. All rights reserved. Reprinted by permission. To make this point in another way: To add value, you must think and act like an entrepreneur. Find new ways to make your overall performance better. Take responsibility for change; be an innovator. 100 Don't just do your work and wait for orders; look for opportunities to contribute in new ways, to develop new products and processes, and to generate constructive change that strengthens the company and benefits customers and colleagues. Be Connected Being connected means having many good working relationships and interpersonal contacts and being a team player with strong interpersonal skills. 101 For example, those who want to become partners in professional service organizations like accounting, advertising, and consulting firms strive constantly to build a network of contacts. Their “connectedness” goal is to work not only with lots of clients but also with a half dozen or more senior partners, including several from outside their home offices and some from outside their country. A recent study of new auditors 102 showed that social relationships improved newcomers' knowledge of the organization and their jobs, their social integration into the firm, and their commitment to the organization. Social capital is the goodwill stemming from your social relationships, and can be mobilized on your behalf. It aids career success, compensation, employment, team effectiveness, successful entrepreneurship, and relationships with suppliers and other outsiders. 103 Just ask Jay Alix, a successful advisor to and acquirer of troubled companies. Believing that in his competitive business getting hired is not a function of competence alone, but also of whom you know, Mr. Alix prides himself on his networking prowess. He stays in constant touch with hundreds of people, and calls his network of contacts “the daisy chain.” 104 Look at this another way: All business is a function of human relationships. 105 Building competitive advantage depends not only on you but on other people. Management is personal. Commercial dealings are personal. Purchase decisions, repurchase decisions, and contracts all hinge on relationships. Even the biggest business deals— takeovers—are intensely personal and emotional. Without good work relationships, you are an outsider, not a good manager and leader. Playing golf is an excellent way to make contacts and build a network. BusinessWeek produced this supplement noting, “Business golf is very much a part of the modern world. Whether you're opening doors or closing deals, whether you're entertaining clients or being entertained, golf probably plays an important role.” Actively Manage Your Relationship with Your Organization Many of the previous comments suggest the importance of taking responsibility for your own actions and your own career. Unless you are self-employed and your own boss, one way to do this is to think about the nature of the relationship between you and your employer. Figure 1.1 shows two possible relationships—and you have some control over which relationship you will be in. FIGURE 1.1 Two Relationships: Which Will You Choose? social capital Goodwill stemming from your social relationships. Relationship #1 is one in which you view yourself as an employee, and passively expect your employer to tell you what to do and give you pay and benefits. Your employer is in charge, and you are a passive recipient of its actions. Your contributions are likely to be adequate but minimal—you won't make the added contributions that strengthen your organization, and if all organizational members take this perspective, the organization is not likely to be strong for the long run. Personally, you may lose your job, or keep your job in a declining organization, or receive few positive benefits from working there and either quit or become cynical and unhappy in your work. In contrast, relationship #2 is a two-way relationship in which you and your organization both benefit from one another. The mindset is different: Instead of doing what you are told, you think about how you can contribute—and you act accordingly. To the extent that your organization values your contributions, you are likely to benefit in return by receiving full and fair rewards, support for further personal development, and a more gratifying work environment. If you think in broad terms about how you can help your company, and if others think like this as well, there is likely to be continuous improvement in the company's ability to innovate, cut costs, and deliver quality products quickly to an expanding customer base. As the company's bottom line strengthens, benefits accrue to shareholders as well as to you and other employees. What contributions can you make? You can do your basic work. But you can, and should, go further. You can also figure out new ways to add value—by thinking of and implementing new ideas that improve processes and results. You can do this by using your technical knowledge and skills, as in developing a better information system, accounting technique, or sales technique. You also can contribute with your conceptual and human skills and your managerial actions (see Figure 1.2). You can execute the essential management functions and deliver competitive advantage. You can deliver strategic value (Part 2 of this book). You can take actions that help build a more dynamic organization (Part 3). You can mobilize people to contribute to their fullest potential (Part 4). And you can learn and change—and help your colleagues and company learn and change—in order to adapt to changing realities and forge a successful future (Part 5). FIGURE 1.2 Managerial action is your opportunity to contribute Survive and Thrive Table 1.5 shows a résumé that might help a person to not just survive, but to thrive, in the 21st century. 106 Don't be discouraged if your résumé doesn't match this idealized résumé—it's tough to match, especially early in life! But do think about the messages. It indicates the kinds of skills that companies need now more than ever—and therefore the skills you should consider working to develop and the experiences you might want to accumulate. TABLE 1.5 A Résumé for the 21st Century Experience • • • • Multinational Corp—Worked with top-notch mentors in an established company with global operations. Managed a talented and fickle staff and helped tap new markets. Foreign Operation LLC—A stint at a subsidiary of a U.S. company, or at a foreign operation in a local market. Exposure to different cultures, conditions, and ways of doing business. Startup Inc.—Helped to build a business from the ground up, assisting with every-thing from product development to market research. Honed entrepreneurial skills. Major Competitor Ltd.—Scooped up by the competition and exposed to more than one corporate culture. Education • • Liberal Arts University—Majored in economics, but took courses in psychology (how to motivate customers and employees), foreign language (the world is a lot bigger than the 50 states), and philosophy (to seek vision and meaning in your work). Graduate Studies—The subject almost doesn't matter, so long as you developed your thinking and analytical skills. Extracurricular • • • • Debating (where you learned to market ideas and think on your feet). Sports (where you learned discipline and teamwork). Volunteer work (where you learned to step outside your own narrow world to help others). Travel (where you learned about different cultures). SOURCE: D. Brady “Wanted: Eclectic Visionary with a Sense of Humor,” BusinessWeek. August 28, 2000, p. 144. Now—far more than ever—you will be accountable for your actions and for results. 107 In the past, people at many companies could show up, do an OK job, get a decent evaluation, and get a raise equal to the cost of living and maybe higher. Today, managers must do more, better. Eminent management scholar Peter Drucker, in considering what makes managers effective, notes that some are charismatic while some are not, and some are visionary while others are more numbers-oriented. 108 But successful executives do share some common practices: • • • • They asked “What needs to be done?” rather than “What do I want to do?” They write an action plan. They don't just think, they do, based on a sound, ethical plan. They take responsibility for decisions. This requires checking up, revisiting, and changing if necessary. They focus on opportunities rather than problems. Problems have to be solved, and problem solving prevents more damage. But exploiting opportunities is what creates great results. A study of career success led one author to state, “In the current economic environment, people who fear competition, want security, and demand stability are often sinking like rocks in water.” 109 Success requires high standards, self-confidence in competitive situations, and a willingness to keep growing and learning new things. 110 You will need to learn how to think strategically, discern and convey your business vision, make decisions, and work in teams. You will need to deliver competitive advantage and thrive on change. These and other topics, essential to your successful career, provide the focus for the following chapters. EPILOGUE ED CATMULL AND PIXAR Because the last part of the chapter discussed careers, let's step back from the Pixar organization and describe its founder's career. When Ed Catmull was a kid, he drew crude animations and dreamed of working for Disney. He wasn't very good at art, but he was good at math, and he studied physics and computer science at the University of Utah. It so happened that the epicenter for the new discipline of computer graphics was Utah. After graduation, he worked for Boeing, returned to Utah for grad school, and met classmates including John Warnock (founder of Adobe Systems), Jim Clark (founder of Silicon Graphics and Netscape), and Alan Kay, who helped invent the graphical user interface. One of Catmull's animation projects was used by one movie as a special effect—but he was disappointed to never land another. He and his computer-graphics research group did make one of the first rock music videos. Then he went to work for Lucasfilm. George Lucas said that he hired Ed because his credentials were right, he was a nice guy, he loved movies, and he had an ambition: to make a computer-animated movie. Lucas later told Catmull he couldn't fund the group any longer and offered to let him keep the animation technology and go out on his own. Alan Kay, Catmull's friend from Utah, was now working at Apple, and he told Steve Jobs about Catmull. Jobs offered Catmull a position, but he was interested in using Catmull's technology only to build his computer company, not to make movies. The choice Catmull faced was to save his company (with Jobs's investment) or give up his dream (making computer-animated movies). Catmull said no thanks. Fortunately, within a year, Jobs changed his mind and agreed to support Catmull's filmmaking. Catmull joined Apple, where he used animation to produce commercials and learned about budgets, deadlines, and dealing with customers. Disney noticed Catmull's work and offered to fund a full-length feature film. That film, Toy Story, launched an incredible run. One analyst recently said about Pixar, “You show me another media company that generates 80% gross margins and 40% net margins. There aren't any.” A rave review, and it came even before The Incredibles and its successors. KEY TERMS • • • • • • • • • • • • • • • • • • Conceptual and decision skills Controlling Cost competitiveness Emotional intelligence Frontline managers Innovation Interpersonal and communication skills Knowledge management Leading Management Middle-level managers Organizing Planning Quality Social capital Speed Technical skill Top-level managers SUMMARY OF LEARNING OBJECTIVES Now that you have studied Chapter 1, you should know: The major challenges of managing in the new competitive landscape. Managers today must deal with dynamic forces that create greater and more constant change than ever before. Among many forces that are creating a need for managers to rethink their approaches, we highlighted four major waves of change: globalization, technological change including the Internet, knowledge management, and collaboration across organizational boundaries. The drivers of competitive advantage for your company. Because business is a competitive arena, you need to deliver value to customers in ways that are superior to your competitors. The four pillars of competitive advantage are innovation, quality, speed, and cost. The functions of management and how they are evolving in today's business environment. Despite massive change, management retains certain foundations that will not disappear. The primary functions of management are planning, organizing, leading, and controlling. Planning is analyzing a situation, determining the goals that will be pursued, and deciding in advance the actions needed to pursue these goals. Organizing is assembling the resources needed to complete the job and coordinating employees and tasks for maximum success. Leading is motivating people and stimulating high performance. Controlling is monitoring the progress of the organization or the work unit toward goals and then taking corrective action if necessary. In today's business environment, these functions more broadly require creating strategic value, building a dynamic organization, mobilizing people, and learning and changing. The nature of management at different organizational levels. Top-level, strategic managers are the senior executives and are responsible for the organization's overall management. Middle-level, tactical managers translate general goals and plans into more specific objectives and activities. Frontline, operational managers are lower-level managers who supervise operations. Today, managers at all levels must perform a variety of interpersonal, informational, and decisional roles. Even at the operational level, the best managers think strategically and operate like complete businesspeople. The skills you need to be an effective manager. To execute management functions successfully, managers need technical skills, conceptual and decision skills, and interpersonal and communication skills. A technical skill is the ability to perform a specialized task involving a certain method or process. Conceptual and decision skills help the manager recognize complex and dynamic issues, analyze the factors that influence those issues or problems, and make appropriate decisions. Interpersonal and communication skills enable the manager to interact and work well with people. As you rise to higher organizational levels, technical skills tend to become less important and conceptual skills become more important, while human skills remain extremely important at every level. What to strive for as you manage your career. To help you succeed in your career, keep in mind several goals: Be both a specialist and a generalist; be self-reliant but also connected; actively manage your relationship with your organization; and continuously improve your skills in order to perform in the ways demanded in the changing work environment. DISCUSSION QUESTIONS 1. Identify and describe a great manager. What makes him or her stand out from the crowd? 2. Have you ever seen or worked for an ineffective manager? Describe the causes and the consequences of the ineffectiveness. 3. Describe in as much detail as possible how the Internet and globalization affect your daily life. 4. Identify some examples of how different organizations collaborate “across boundaries.” 5. Name a great organization. How do you think management contributes to making it great? 6. Name an ineffective organization. What can management do to improve it? 7. Give examples you have seen of firms that are outstanding and weak on each of the four pillars of competitive advantage. Why do you choose the firms you do? 8. Describe your use of the four management functions in the management of your daily life. 9. Discuss the importance of technical, conceptual, and interpersonal skills at school and in jobs you have held. 10. What are your strengths and weaknesses as you contemplate your career? How do they correlate with the skills and behaviors identified in the chapter? 11. Devise a plan for developing yourself and making yourself attractive to potential employers. How would you go about improving your managerial skills? 12. Consider the managers and companies discussed in the chapter. Have they been in the news lately, and what is the latest? If their image, performance, or fortunes have gone up or down, what has changed to affect how they have fared? 13. Who are BusinessWeek's most recent “best and worst managers,” and why were they selected? CONCLUDING CASE The New Recruit—You! The 21st century offers many challenges to every one of us. Just think about all that has happened and changed in your life already. The Internet, terrorism, major health issues, the development of third-world countries, hip-hop music, and even the Red Sox finally winning a World Series are all events of the recent past. Chapter 1 introduced you to many business-related aspects of the new competitive landscape. You just read about topics ranging from eBay and globalization to knowledge and innovation to quality, speed, and cost control. The basic functions and levels of management were discussed, along with personal management styles and strategies. Now enter you, the new recruit. How and where will you fit into all of this? Where will you live? What will you do? How will your business and personal careers evolve as the world continues to change at such a fast pace? We highly recommend that you consider and adopt the following perspective, strategy, and action plan. First and foremost, relax. Rarely, if ever, can or does a college student know exactly what lies ahead. The important thing is to just be doing something positive at all times. You are already doing that by attending college. Other positives include but are not limited to internships, parttime and summer jobs, travel, and community service. Try what you think you like. A steady diet of the above almost always leads to positive outcomes. And the nice thing is that you can change your mind and your course at almost any time. Nothing is carved in stone, especially early in your career. Positive, proactive, motivated people can easily change majors and jobs; plenty of people at school and work will offer referrals, recommendations, and guidance. Take a few minutes to review the chapter and its main topics one more time while thinking about yourself. Think about your personality, what you like and dislike, what you fear, and what you dream, and then address the following. QUESTIONS 1. Generate a list of products, services, industries, and cultures in which you are interested. Generate a second list of your favorite activities and interests. From those two lists, name and describe three or four specific jobs that match up nicely. 2. Draw a time-line across a page and highlight the next 1–3, 5–10, and 15–30 years. Move across that line and draft/jot down a series of internships, part-time jobs, and full-time jobs that you would like to have. Be sure to incorporate travel, community service, and anything else that you want to do with your life. Congratulations! You have just created a plan of action for yourself that ties in with the world of opportunities for a career in business management. Creating a plan is easy (talking the talk). Making it happen is possible, too, but you must take action (walking the walk). And don't forget, you can change your mind and your plan; just stay on that positive track. Good luck! EXPERIENTIAL EXERCISES 1.1 Personal Assessment of Management Skills (PAMS) To get an overall profile of your level of skill competence, respond to the following statements using the rating scale below. Please rate your behavior as it is, not as you would like it to be. If you have not engaged in a specific activity, answer according to how you think you would behave based on your experience in similar activities. Be realistic; this instrument is designed to help you tailor your learning to your specific needs. RATING SCALE 1. 2. 3. 4. 5. 6. Strongly disagree Disagree Slightly disagree Slightly agree Agree Strongly agree In regard to my level of self-knowledge: • • • • • ______ 1. I seek information about my strengths and weaknesses from others as a basis for self-improvement. ______ 2. In order to improve, I am willing to be self-disclosing to others (that is, to share my beliefs and feelings). ______ 3. I am aware of my preferred style in gathering information and making decisions. ______ 4. I understand how I cope with situations that are ambiguous and uncertain. ______ 5. I have a well-developed set of personal standards and principles that guide my behavior. When faced with stressful or time-pressured situations: • • • • • • ______ 6. I use effective time-management methods such as keeping track of my time, making to-do lists, and prioritizing tasks. ______ 7. I reaffirm my priorities so that less important things don't drive out more important things. ______ 8. I maintain a program of regular exercise for fitness. ______ 9. I maintain an open, trusting relationship with someone with whom I can share my frustrations. _____ 10. I know and practice several temporary relaxation techniques such as deep breathing and muscle relaxation. ______ 11. I maintain balance in my life by pursuing a variety of interests outside of work. When I approach a typical, routine problem: • • • ______ 12. I state clearly and explicitly what the problem is. I avoid trying to solve it until I have defined it. ______ 13. I generate more than one alternative solution to the problem, instead of identifying only one obvious solution. ______ 14. I keep steps in the problem-solving process distinct; that is, I define the problem before proposing alternative solutions, and I generate alternatives before selecting a single solution. When faced with a complex or difficult problem that does not have an easy solution: • • • • • ______ 15. I define a problem in multiple ways. I don't limit myself to just one problem definition. ______ 16. I unfreeze my thinking by asking lots of questions about the nature of the problem before considering ways to solve it. ______ 17. I think about the problem from both the left (logical) side of my brain and the right (intuitive) side of my brain. ______ 18. I avoid selecting a solution until I have developed many possible alternatives. ______ 19. I have specific techniques that I use to help develop creative and innovative solutions to problems. When trying to foster more creativity and innovation among those with whom I work: • • • • ______ 20. I make sure there are divergent points of view represented or expressed in every complex problem-solving situation. ______ 21. I try to acquire information from individuals outside the problem-solving group who will be affected by the decision, mainly to determine their preferences and expectations. _____ 22. I provide recognition not only for those who come up with creative ideas (the idea champions) but also for those who support others' ideas (supporters) and who provide resources to implement them (orchestrators). ______ 23. I encourage informed rule-breaking in pursuit of creative solutions. In situations where I have to provide negative feedback or offer corrective advice: • • • • • • • • • ______ 24. I help others recognize and define their own problems when I counsel them. ______ 25. I am clear about when I should coach someone and when I should provide counseling instead. ______ 26. When I give feedback to others, I avoid referring to personal characteristics and focus on problems or solutions instead. ______ 27. When I try to correct someone's behavior, our relationship is strengthened. ______ 28. I am descriptive in giving negative feedback to others. That is, I objectively describe events, their consequences, and my feelings about them. ______ 29. I take responsibility for my statements and point of view, for example, “I have decided” instead of “They have decided.” ______ 30. I identify some area of agreement in a discussion with someone who has a different point of view. ______ 31. I don't talk down to those who have less power or less information than I. _____ 32. When discussing someone's problem, I respond with a reply that indicates understanding rather than advice. In a situation where it is important to obtain more power: • • • • • • • • ______ 33. I put forth more effort and take more initiative than expected in my work. ______ 34. I am continually upgrading my skills and knowledge. ______ 35. I support organizational ceremonial events and activities. ______ 36. I form a broad network of relationships with people throughout the organization at all levels. ______ 37. In my work I strive to generate new ideas, initiate new activities, and minimize routine tasks. ______ 38. I send personal notes to others when they accomplish something significant or when I pass along important information to them. ______ 39. I refuse to bargain with individuals who use high-pressure negotiation tactics. ______ 40. I avoid using threats or demands to impose my will on others. When another person needs to be motivated: • • • • • • • • • ______ 41. I determine if the person has the necessary resources and support to succeed in a task. ______ 42. I use a variety of rewards to reinforce exceptional performances. ______ 43. I design task assignments to make them interesting and challenging. ______ 44. I make sure the person gets timely feedback from those affected by task performance. ______ 45. I help the person establish performance goals that are challenging, specific, and time bound. ______ 46. Only as a last resort do I attempt to reassign or release a poorly performing individual. ______ 47. I discipline when effort is below expectations and capabilities. ______ 48. I make sure that people feel fairly and equitably treated. ______ 49. I provide immediate compliments and other forms of recognition for meaningful accomplishments. When I see someone doing something that needs correcting: • • • ______ 50. I avoid making personal accusations and attributing self-serving motives to the other person. ______ 51. I encourage two-way interaction by inviting the respondent to express his or her perspective and to ask questions. ______ 52. I make a specific request, detailing a more acceptable option. When someone complains about something I've done: • • • ______ 53. I show genuine concern and interest, even when I disagree. ______ 54. I seek additional information by asking questions that provide specific and descriptive information. ______ 55. I ask the other person to suggest more acceptable behaviors. When two people are in conflict and I am the mediator: • • • ______ 56. I do not take sides but remain neutral. ______ 57. I help the parties g...
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