Access the web sites of Ron Jon Surf Shop (http://www.ronjonsurfshop.com/) and Hilo
Hattie (http://www.hilohattie.com/). Explain how the two companies are similar and how they
are different. Can you find elements of organizational planning, organizing, staffing, leading, and
control in their web content? Provide specific examples.
Your discussion post should be at least 250 words in length. Support your claims with examples
from required material(s) and/or other scholarly resources, and properly cite any references.
Introduction to Management:
Achieving Form through
After reading this chapter, you should be able to:
Describe an organization.
Define the concept of management and describe various management roles.
Explain the five management functions.
Recognize key historical figures and their contributions to management theory.
Many people think management is primarily concerned with supervising employees, or that
it constitutes an obscure set of practices invented by corporate experts in high-level positions
within an organization. Some might associate management with certain entrepreneurs, such as
Andrew Carnegie, founder of U.S. Steel; John D. Rockefeller, founder of Standard Oil; Ray Kroc,
the driving force behind McDonald’s; Sam Walton, who created the Walmart empire; or others
such as Meg Whitman, former CEO of eBay and current executives in other well-known corporate giants.
Instead, a more fundamental view suggests that the management discipline consists of a set of five
specific functions: planning, organizing, staffing, leading, and controlling. These five functions
are part of a body of practices and theories carried out by successful managers. You will learn
more about these five functions in this book. We want you to understand that although research
and theory form the basis of management, a more comprehensive view includes the other practices that managers use to implement these theories. Typically, managers direct their organizations while researchers evaluate how they operate and apply various theoretical perspectives.
The analysis of individual management practices and theories can be used to create innovative
new methods, theories, and approaches. As theorists try to bring some meaning to how management affects overall organizations, the purpose and practical applications for the various management theories are contained in the five functions. Understanding these five functions and the
underlying support theory behind them is the starting point for becoming a successful manager.
Chapter 1 introduces several important concepts of effective management and leadership. Each
concept serves as a building block to help you understand and apply the five functions of management. In this chapter, we define management and explain the nature of an organization. We
explore the nature of various types of organizations and examine historical figures along with
their contributions to management theory. The following “Management in Practice” box might
help you begin to understand the role of management in an organization’s success through the
application of the five functions.
MANAGEMENT IN PR AC TICE
Costco: Successful Management of the Five Functions
The world of retailing includes an endless number of small stores, chains of units offering specific
product lines, and “big box” outlets that dominate many markets. Within this mix, Costco has
located and maintained a unique niche over the past several decades. Even as the past decade presented several major challenges to the retail industry, Costco has grown and thrived. What is the
secret to this success? Part of the answer can be found in the application of the five functions of
In the planning process, a simple mission drives the entire company. Costco seeks to keep prices
low, sales volumes high, and ensure that employees are satisfied with their jobs and happy to be
part of the organization. Several key company policies serve to support this mission. For example,
the retailer, while large in scope, offers a more limited line of products on shelves when compared
to other big-box stores such as Walmart or Target. Each item can therefore be priced at only 14%
or less above its wholesale cost. This approach limits the amount of profit made on actual sales, but
the company offsets these discounts through its membership fee program, in which customers pay
an annual fee of $55 to shop in the store. Also, company managers constantly examine changing
conditions in the industry to make sure the organization is ready to respond.
The organizing function in Costco consists of a simple, straightforward approach. Individual jobs
are clearly defined for individual employees. Departmental activities are well spelled out and communicated, leading to no overlap in activities or functions. Clearly established lines of authority and
responsibility have existed for many years, giving every member of the company a sense of direction
with a solid understanding of his or her role in the company.
Costco takes a unique approach in the area of staffing. Rather than hiring business school graduates directly out of college, the organization’s human resources department selects and promotes
employees who have worked in stores and warehouses and sponsors them to take graduate-level
business courses. Also, the executive team recently acknowledged that managers in the top tier of
the Costco organization were all aging. In response, the organization has begun an active program
of “succession planning,” designed to ensure a smooth transition into the next generation of leaders (Stone, 2013).
As you will learn in the section of this book dedicated to leading, several key activities are involved.
Among them, motivational programs constitute a primary factor. Costco’s management team, led
by its cofounder Jim Sinegal, constantly emphasizes employee satisfaction. According to Brad Stone
from Bloomberg Business Week (2013), Costco pays its hourly workers an average of $20.89 per
hour, which does not include overtime. Remember, in the United States the minimum wage is $7.25
per hour. By comparison, Walmart reports its average wage for full-time employees in the United
States to be $12.67 per hour. Further, Costco offers an extensive health insurance program that covers nearly 90% of its employees and a 401(k) retirement plan. These benefit programs are superior
to those the competition offers.
In turn, the management team at Costco expects that customer satisfaction will be a high priority.
The basic philosophy suggests that happy employees will treat customers well; in competitor stores,
less well-paid employees are more likely to be surly and disinterested. Newly designated CEO Craig
Jelinek, who assumed his position in 2012, has been observed to practice the same no-nonsense
approach to leadership. To the relief of employees at every level of the company, this includes a
strong level of empathy and concern for the rank and file that had been established by Jim Sinegal.
Costco continues to refine the company’s control system. Store managers continually monitor sales
of individual items, removing those that do not fly off the shelves. When an innovation fails, it is
removed. For example, an experiment with self-checkout lanes similar to those offered by other
retailers was deemed ineffective. As a result, the machines were taken out. Activities are assessed
at every level of the company and corrections are made as needed.
What does the future hold for Costco? The challenge of Internet shopping continues to grow,
because the coming generation of shoppers appears to be more comfortable with—and actually prefers the web to brick-and-mortar stores. In response, Costco has tried to improve its online
shopping system. Also, tense relationships with some manufacturers, including Apple, Sony, and
Panasonic, will require additional consideration. Future growth may be tied to international expansion. The company’s plans include building new stores in France, Spain, Japan, Taiwan, and South
Korea. At the least, you can expect Costco to continue applying its unique approach to the five
management functions in order to deal successfully with a fast-paced, demanding retail environment (Stone, 2013).
1. Have you ever shopped at Costco? How was the experience different from that at other big-box
2. Do you think other retail chains would be wise to offer higher wages to employees? Why or
3. Can you think of another company that manages its operations in the same way as Costco?
Every day, you encounter numerous organizations. Now you are taking a class from an educational organization; later you may visit a grocery store. Those who stop to pay parking tickets
encounter a local government organization. In a modern, postindustrial society, interactions with
organizations shape the nature of daily living, including maintaining your home, being part of
social and religious groups, and making a living.
An organization is a collection of people who work together and coordinate their actions to
achieve a wide variety of goals or desired future outcomes. The purpose of any organization is to
serve a social need. Organizations take the forms of profit-seeking (or business) organizations,
nonprofits, and government agencies. Organizations are driven by a mission to accomplish a set
of agreed-upon goals:
• an economic goal (a profit-seeking entity)
• a social good (nonprofit entity)
• the general public’s welfare (government entity)
Profit-seeking organizations (also known as for-profit or business organizations) deliver
goods and services that offer value to consumers in exchange for money, normally expressed as
sales and other revenues. Profit-seeking companies offer products and services to consumers,
other companies, and to governmental organizations.
Other organizations have different concepts regarding their purposes. Nonprofit organizations are created because there is an expressed social need. Typically, donations are solicited
to maintain nonprofit organizations. Sometimes society doesn’t need what an organization
produces, and the organization fails. Governmental organizations serve different purposes,
including maintaining order, providing universal services such as roads and fire protection,
and regulating commerce. Governmental organizations generate revenues through taxes
In this book we examine primarily business organizations, how they operate, why they were
established, and the reasons some fail while others thrive. The feature box “Organizational
Characteristics” discusses other characteristics of organizations.
Organizations display six distinct characteristics. Each of them must be found within a group of
people in order for that collective to be considered an organization. The elements found in organizations include the following:
• Membership consists of more than two people. One-person organizations do not exist.
• People in the organization routinely interact. In today’s society, interactions take place in a
variety of ways: face-to-face contact, in group and team meetings, and via the use of numerous technologies. These interactions can be as basic as written memos and notes but also can
include recent innovations such as the Internet, websites, email, social media posts, and others.
• Tasks are divided among members (division of labor). In the coming chapters, we will look at
the ways jobs are designed and how the tasks of individual members are coordinated to achieve
various goals. At the least, an organization includes dividing up jobs and then combining them
to accomplish specific outcomes.
• Someone is in charge (a hierarchy of authority). Even the most basic, rudimentary organization
has a leader. As organizations grow in size, the hierarchy of authority becomes more complex.
In the coming chapters, you will be exposed to the ways in which organizations are designed to
develop lines of authority and responsibility.
• Activities are coordinated among members. Through the use of devices such as planning programs, motivational systems, and the efforts of leaders, members are encouraged and taught to
work together to achieve larger objectives.
• Members share a common purpose or goal. Every type of organization has an overarching goal
that all members seek to achieve. This characteristic is seen in business or for-profit organizations, nonprofits, and governments.
Consider how a for-profit business organization might get started. A lone farmer purchases a plot
of land and is now ready to start planting on it, hoping to make a profit and providing healthy,
farm-fresh produce for the surrounding community. At this stage he has not yet established an
organization; he is just one man with a plot of land and some seeds. For his farm to become an
organization, he will need to decide how much produce he wants to sell and the nature of the
market—which consumers in the community will buy the produce. He also needs to know who
his competitors might be, because a farm down the road could be selling the identical assortment
of vegetables that he’s planning to market. The farmer will also need to assess how much capital,
or money, he has, and how much he will need to sustain the business. When thinking about the
financial cost, he must take into account how many resources he will need to operate the farm—
human resources and general resources such as tractors, planting materials, and water. After
hiring the needed human resources, including a manager to oversee the employees, the farmer’s
goal becomes to make a profit on the produce that he sells.
This is a simple example of a for-profit business organization in an early stage of development.
With the right management—and with good planning, organizing, staffing, leading, and controlling—it could become an even greater success than the farmer initially imagined. If that turns
out to be the case, he will need to focus on how to progress with the changes that occur as his
organization grows. You will learn more in this chapter and throughout this book about how to
keep an organization profitable and relevant. The following facts apply to organizations. Think
about them as you study the topics in this book.
• Most organizations are small, consisting of fewer than 200 members.
• Most organizations are short lived. Only 15% of business organizations survive more than
• Organizations go through life cycles: They are born, grow, mature, decline, and many
• Organizations are social systems. The people within them determine the eventual
1.2 Management Roles
Management theory is the study of the overall management process. The term management has
a variety of definitions. Our approach suggests that management consists of all the techniques
that are used to lead the human resources in an organization to become productive. To do so, an
organization’s manager must efficiently and effectively carry out the primary management functions. A manager is responsible for helping to achieve an organization’s goals and desired future
outcomes. Managers also supervise employees and seek to make the most of an organization’s
Management specialist Peter Drucker (1909–2005), one of the
most influential theorists on the subject of management and practice, wrote articles and books exploring how humans are organized across society with regard to business, government, and the
nonprofit sectors—the main sectors that organizations encompass. Drucker once said, “Management in turn, is the organ of
the institution. It has no function in itself, indeed, no existence
in itself” (Drucker, 1985). In essence, management cannot exist
without an organization.
One of Drucker’s most famous books, The Concept of the
Corporation (1946), analyzes General Motors as a large social
institution involved with business activities. He describes the
nature of management, how organizations select managers, how
managers act, and how an organization is structured into units of
management such as divisions or sections.
Drucker has also examined and explained the role and position
of large organizations in a modern society in his writings. Even
Claremont Graduate University/Associated Press
though these important and influential works were written over a
▲▲Management consultant Peter
half century ago, many of the management theories and methods
continue to be practiced today. His ideas greatly influenced the
business world, because at the time, management was not considered the most significant part of an organization. The theory during Drucker’s time was that the
president or the chief executive of an organization would give orders, and others would simply
Drucker shifted the focus of management to include the study of human interactions within an
organization, the flow of information, the decision-making process, and managerial autonomy,
because he believed these factors could greatly influence an organization’s success. In today’s
world of organizational practices, Drucker helped us understand the central importance of the
manager’s role; in essence, managers are absolutely crucial to the success of any organization.
Even though managers function in similar ways, each of them performs different tasks and operates on different levels within the organization. Organizations typically have three levels of management: front-line managers (supervisors), middle managers, and top managers (executives).
Let’s take a closer look at these three different types of managers.
Front-Line Managers or Supervisors
Front-line managers, or supervisors,
carry out and direct the daily activities of
the organization. Front-line managers work
in the various divisions, operating units, or
departments to assure the short-term goals
of the organization are achieved. Front-line
managers may have varying titles, including
• office manager
• department manager in a retail store
• production line leader or foreman in a
• head server in a restaurant
• director of accounts payable/
• crew chief on an airline flight
▲▲As a front-line manager a construction site foreman would
provide direction to on-site workers and be responsible for
implementing building plans.
These managers deal with short-term operating decisions and oversee the daily tasks of nonmanagerial employees.
An example of a front-line manager is the supervisor in an automotive parts company. Suppose
this supervisor is responsible for overseeing the employees who work within the distribution
division of the organization. She is responsible for making sure the parts are distributed to the
correct locations and to the customers who ordered them. More specifically, if a large shipment of
5,000 parts were to be sent to one of the organization’s best clients, the front-line manager would
be the person responsible for making sure the order was correctly filled.
Serving as a front-line manager often becomes the first step of a managerial career. If a supervisor does well and is successful, then he or she has demonstrated the potential to move to higher
ranks in the organization as a middle manager, and some day as an executive manager. Front-line
managers provide direction, technical support, and training of personnel. They are charged with
carrying out the plans developed by middle and executive manager ...
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