MGMT
Fall 2017
Case Assignment
Written Assignments
Students are required to apply textbook chapter and class concepts in a realistic manner by
preparing two written case analyses. The case studies are meant to provide students a means
by which course concepts can be applied and ideas can be discussed. Additional information is
provided below on the expectations and specific requirements for these assignments.
The written assignments should meet the following format requirements:
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edit carefully for spelling, grammar, and punctuation
type, double-space, and number all pages
set margins in which I can write feedback (1” all around is preferable)
use an easy-to-read type 12 font
keep in mind that business information is best conveyed in a crisp manner that only
contains important background, analysis, and conclusions; therefore, limit the
background discussion to one page and do not exceed six (6) pages excluding the
reference page.
• maintain a business style, but retain academic attributes that convey your knowledge
and its reputable sources (e.g., clear and specific application of course concepts, proper
citation of references, presence of peer-reviewed scholarly references).
Professional writing is the ability to express oneself both articulately and accurately using the
written word. Today’s business environments demand that reports and papers be accurate,
make a thoughtful and defendable point supported by evidence, and suggest a direction or an
actionable conclusion. Professional writing is a course expectation. Writing style, grammar,
and format will influence your grade as much as the content. Please consult CSULA Library and
Writing Center for assistance and ask others who write well to give you feedback.
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MGMT
Spring
Case Assignment
Case 2
Amazon – Amazon, based in Seattle, Washington and led by founder Jeff Bezos, is one of the
most highly valued companies in the world. Its business model has disrupted many other
traditional businesses. Amazon started in 1994 as an online bookstore and quickly diversified
into selling other products and services. Today it has vastly expanded into electronic devices
(Fire, Kindle, Echo), web services, groceries (Whole Foods), web services (AWS), as well as video
and music streaming. Amazon’s top leadership principle is “customer obsession”. Following is a
YouTube link to a “60 Minutes” story on Amazon and Jeff Bezos:
https://www.youtube.com/watch?v=zXzcHyYDLLE
In your paper (Instructions above) discuss how Amazon has grown successfully through utilizing
the principles and concepts discussed in the following textbook chapters:
Designing Adaptive Organizations (Chapter 9)
Managing Human Resources and Individuals and a Diverse Workforce (Chapters 12 and 13)
Motivation (Chapter 13)
Leadership (Chapter 14)
Clearly identify each issue you are analyzing by using bold type when you begin discussing an
issue. Keeping in mind the six-page limitation, focus your paper on the most important issues
listed above. Include a one or two paragraph conclusion as to why Amazon has succeeded.
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Timothy McCallion
Lecturer
MGMT 3070
Organizational Behavior
and Management
Management
• What is Management?
• A process of getting things done efficiently and effectively with and through others.
• Efficiency – Getting work done with a minimum of effort, expense, or waste (quickly,
input vs. output)
• Effectiveness – accomplishing tasks that help fulfill organizational objectives (goals)
• Steve Jobs on Management
Management
• Peter Drucker – was a well known writer, professor, and management
consultant.
• “Management is doing things right; leadership is doing the right things”
• Stephen Covey – was an educator, author, businessman.
• “Effective leadership is putting first thing first. Effective management is
discipline carrying it out”.
• Business Dictionary
• The organization and coordination of the activities of a business in order to
achieve defined objectives.
The Four Functions of Management
Management
• What do managers do?
• Planning – Determining organizational goals and a means for achieving them.
• Organizing – Deciding where decisions will be made, who will do what jobs
and tasks, and who will work for whom.
• Leading – Inspiring and motivating workers to work hard to achieve
organizational goals.
• Controlling – Monitoring progress toward goal achievement and taking
corrective action when needed.
Management
• Kinds of Managers
• Top Managers – Executives responsible for the overall direction of the organization.
“C” level, Chief Executive Officer; Chief Financial Office; Chief Legal Officer; Chief
Technology Officer; some Vice Presidents
• Middle Managers – Sets objectives consistent with top managements goals and for
planning and implementing subunit strategies for achieving these objectives. Plant
Manager; Division Manager; Region Manager; some Vice Presidents
• First Line Managers –Supervise non-managerial employees. Shift Supervisor; Office
Manager; Department Managers
• Team Leaders – Facilitates team activities
Management
• Managerial Roles
• Interpersonal Roles – Management jobs are people intensive.
• Figurehead
• Leader
• Liaison
Management
• Informational Roles
• Monitor role – scan their environment for information
• Disseminator role – share information with others in their departments or
companies.
• Spokesperson role – share information with people outside their departments
or companies.
Management
• Decisional role – Obtaining and sharing information isn’t enough
• Entrepreneur role – adapt themselves, their subordinates, and their units to
change.
• Disturbance handler – respond to severe pressures and problems that
demand immediate action.
• Resource allocator – decide who gets what resources and in what amounts.
• Negotiator role – negotiate schedules, projects, goals, outcomes, resources,
and employee raises
Management
• What companies look for in Managers
• Technical skills – specialized procedures, techniques, and knowledge required to get
the job done.
• Human skills – work well with others
• Conceptual skills – see the organization as a whole, understand how the different
parts affect each other, and recognize how the company fits into or is affected by its
environment.
• Motivation to manage – how enthusiastic employees are about managing the work
of others. (Many people are great specialists but not great managers).
Management
• Mistakes Managers make
• What have you observed?
• A top 10 list is shown on page 16 of the text
• Transition to Management – the toughest thing is to transition away from
the skill set that got you prompted (technical or professional) to another
skill (people development)
• Competitive Advantage Through People
• Top companies treat their people well
• Satisfied employees = Satisfied customers
• Millennials want meaningful work
The History of Management
• Ideas and practices through history – systematic changes in the
nature of work and organizations created the need for managers.
• Industrial Revolution – machines replaced individual work
• New ways of working – Ford’s assembly lines dramatically increased
productivity
• Scientific Management – thoroughly studying and testing different
work methods to identify the best, most efficient way to complete a
job.
• Father of Scientific Management – Fredrick Taylor (1856-1915)
• Soldering – when workers deliberately slow their pace or restrict their work output.
• Rate Buster – a group member whose work pace is significantly faster than the normal
pace in his or her group.
The History Of Management
• Taylor’s Four Principles of Scientific Management
• Develop a science for each element of a man’s (persons) work, which replaces
the old rule of thumb method.
• Scientifically select and then train, teach, and develop the workman, whereas
in the past, he chose his own work and trained himself as best he could.
• Heartily cooperate with the men (women) so as to insure all of the work being
done is in accordance with the principles of the science that has been
developed.
• There is an almost equal division of the work and the responsibility between
the management and the workmen (workwomen). The management take
over all of the work for which they are better fitted than the workmen, while
in the past, almost all of the work and the greater part of the responsibility
were thrown upon the men.
The History of Management
• Motion studies: Frank and Lillian Gilbreth
• Motion study – breaking each task or job into its separate motions and then
eliminating those that are unnecessary or repetitive.
• Time study – timing how long it takes good workers to complete each part of their
jobs.
• Gantt Chart – a graphical chart that shows which tasks must be completed
at which times in order to complete a project or task.
• Developed by Henry Gantt
• Used for many projects
• What are some examples of work that would be aided by Gantt charts?
The History of Management
• Bureaucracy – The exercise of control on the basis of knowledge,
expertise or experience.
• Elements of a bureaucratic organization – Max Webber (1864-1920)
1.
2.
3.
4.
5.
6.
7.
Qualification base hiring
Merit-based promotion
Chain of command
Division of labor
Impartial application of rules and procedures
Recorded in writing
Managers separate from owners
The History of Management
• Administrative Management – Henri Fayol (1841-1925)
• Fayol’s Fourteen Principles of Management (Exhibit 2.5)
1.
2.
3.
4.
5.
6.
7.
Division of Work
Authority and Responsibility
Discipline
Unity of command
Unity of direction
Subordination of individual interests to the general interest
Remuneration
The History of Management
• Fayol’s Fourteen Principles of Management (continued)
8) Centralization
9) Scalar chain
10) Order
11) Equity
12) Stability of tenure of personnel
13) Initiative
14) Esprit de Corps
The History of Management
• Human Relations Management – Organizational success depends on
treating people well.
• Constructive conflict: Mary Parker Follett (1868-1933)
• Domination – an approach dealing with conflict in which one party satisfies its
desires and objectives at the expense of the other party’s desires and
objectives.
• Compromise – an approach to dealing with conflict in which both parties give
up some of what they wanted in order to reach agreement on a plan to
reduce or settle the conflict.
• Integrative conflict resolution – an approach to dealing with conflict in which
both parties indicate their preferences and then work together to find an
alternative that meets the needs of both.
The History of Management
• Hawthorne Studies (1924-1932): Elton Mayo (1880-1948)
• Conducted over eight years at Western Electric plant in Chicago
• Studied the impact of the levels of lighting and incentives on employee
productivity in the Relay Test Assembly Room.
• Production levels increased when experimenters increased the levels of
lighting
• Production levels increased when the experimenters subsequently decreased
the level of lighting
• Production levels increased when various changes were made to
compensation based upon individual or group production
• Throughout the five year study production levels increased (2400 relays per
day to 3000 relays per day).
The History of Management
• Hawthorne Effect
• Incorrectly defined as increasing productivity by paying more attention to
workers.
• Workers feeling and attitudes affected their work.
• Mayo concluded based upon other Hawthorne tests (Bank Wiring Room) that
“ work was done in accord with the group’s conception of a day’s work; this
was exceeded by only one individual who was cordially disliked”.
• Hawthorne conclusion: Workers are not just extensions of machines, and
that financial incentives weren’t necessarily the most important motivator
for workers.
The History of Management
• Acceptance theory of authority (Chester Barnard)
• Organization – a system of consciously coordinated activities or forces
created by two or more people.
• Organizations occur whenever two or more people work together for some
purpose.
• Cooperation is not the normal state of affairs according to Barnard.
• People cooperate within an organization based upon how people perceive
authority and whether they are willing to accept it. Directives need to be:
(1) understood; (2) consistent with the purpose of the organization;
(3) compatible with peoples personal interests; (4) can actually be carried
out by those people.
• Ask people to do things contrary to the organization’s purpose or their own
benefit and they will put up a fight.
The History of Management
• Operations Management – A quantitative or mathematical approach
to find ways to increase productivity, improve quality, and manage or
reduce costly inventories. Early application (Eli Whitney) –
interchangeable parts for muskets for the early US Government. Now
used throughout manufacturing.
• Information Management – speed up the access to timely
information. First technologies to revolutionize business information
management were paper and the printing press. Later came:
telegraph, telephone, internet
The History of Management
• Systems Management – Looking for connections between different part of
the organization and its environment. This is necessary for managers in
today complex businesses.
• Systems – a set of interrelated elements or parts that function as a whole.
• Subsystems - smaller systems that operate within the context of a larger system.
• Synergy – when two or more subsystems working together can produce more than
they can working apart.
• Closed systems – Systems that can sustain themselves without interacting with their
environment.
• Open Systems – Systems that can sustain themselves only by interacting with their
environments, on which they depends for their survival.
The History of Management
• No management ideas or practices are universal.
• Contingency Management – The most effective management theory
or idea depends on the kinds of problems or situations that managers
are facing at a particular time and place.
• Managers need to look for key contingencies that differentiate todays
situations or problems from yesterday’s situations or problems.
• Managers need to analyze problems, situations, and employees before taking
action to fix them.
Organizational Environments and Cultures
• External environments – all events outside a company that have the
potential to influence or affect it.
• Environmental change – the rate at which a company’s general and specific
environments change.
• Stable environment – an environment in which the rate of change is slow.
• Dynamic environment – an environment in which the rate of change is fast.
• Punctuated equilibrium theory – the theory that companies go through
long periods of stability (equilibrium), followed by short periods of
dynamic, fundamental change (revolutionary periods), and then a new
equilibrium.
Organizational Environments and Cultures
• Environmental complexity – the number of and intensity of external
factors in the environment that affect organizations.
• Simple environment
• Complex environment
• Resource scarcity – the abundance or shortage of critical
organizational resources in the organization’s external environment.
(Resources are not readily available)
• Uncertainty – extent to which managers can understand or predict
which environment changes and trends will affect their businesses.
Organizational Environments and Cultures
• General environment – economic, technological, sociocultural,
political/ legal component .
• Specific environment – customer, competitors, suppliers, industry
regulations (page 55 has a list of regulatory agencies), advocacy
groups
• Customers – monitoring customers changing wants and needs is critical to
business success. Reactive (surveys, promoters, passives, detractors) or
Proactive (anticipate needs).
• Competitors
• Competitive analysis is a process for monitoring the competition, anticipating their
moves, and determining their strengths and weaknesses.
Organizational Environments and Cultures
• Specific environment (continued)
• Suppliers – companies that provide material, human, financial, and
informational resources to other companies.
• Supplier relationships: Supplier dependence; Buyer dependence;
Opportunistic behavior; Relationship behavior
• Industry regulations (see page 55 list of Federal Regulators) – regulations and
rules that govern the business practices and procedures of specific industries,
businesses and professions.
• Advocacy groups - concerned citizens who band together to try to influence
the business practices of specific industries, businesses, and professions.
Could use: product boycott, media advocacy, other tactics
Organizational Environments and Cultures
• Organizational cultures – values, beliefs, and attitudes shared by
organizations members.
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Organizational stories
Organizational heroes
Company Mission – a company’s purpose or reason for existing
Example - Apple
• Changing organizational culture (Very difficult to pull off, but often
necessary for survival)
• Behavioral addition – new symbolic behaviors
• Behavioral substitution – new behaviors to replace former behaviors
• Message – the accepted way of doing things has changed
Ethics and Social Responsibility
• Ethics – the set of moral principles or values that defines right and wrong
for a person or group.
• Ethical Behavior – Behavior that conforms to a society’s accepted principles
of right and wrong.
• Workplace Deviance – unethical behavior that violates organizational
norms about right and wrong.
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Production deviance
Property deviance
Employee shrinkage
Political deviance - Favoritism
Personal aggression
Well’s Fargo $185 million fine. Over 5,000 employees fired.
Ethics and Social Responsibility
• U.S. Sentencing Commission Guidelines for Organizations
• Nearly all businesses are covered by the Guidelines. Includes: non profits,
labor unions, unincorporated entities, pension funds, trusts, etc.
• The purpose of the guidelines includes encouraging organizations to take
proactive steps that will discourage or prevent white collar crime before it
occurs.
• Provides companies incentives to cooperate with federal authorities.
• Compliance steps: Establish; Assign; Delegate; Encourage; Train; Enforce;
Improve (See exhibit 4.3)
Ethics and Social Responsibility
• Influences on ethical decision making
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Ethical Intensity – the degree of concern people have about an ethical issue
Magnitude of consequences – the total harm or benefit
Social consensus – agreement on whether behavior is good or bad.
Probability of effect – the chance that something will happen that results in
harm to others.
• Temporal immediacy – the time between an act and the consequences that it
produces.
• Proximity of effect – the social, psychological, cultural, or physical distance
between a decision maker and those affected by his or her decision.
• Concentration of effect – the total harm or benefit that an act produces on
the average person.
Ethics and Social Responsibility
• Influences on ethical decision making (continued)
• Moral development (Kohlberg)
• Pre-conventional Level of Moral Development
• People decide based upon selfish reasons
• Conventional Level of Moral Development
• People make decisions that conform to societal expectations. This is the level of most
people in the workplace.
• Post- conventional Level of Moral Development
• People make decisions based upon internalized principles.
Ethics and Social Responsibility
• Principles of ethical decision making – Different scholars have come up
with a different number of principles but they are generally consistent.
• Principles of:
• Religious injunction – Convention that you should never take an action that is not
kind and does not build a sense of community
• Government requirements – Convention that you should never take an action that
violates the law, for the law represents the minimum moral standard
• Individual rights – never take any action that infringes on others agreed-upon rights.
• Personal virtue (headline test) – never do anything that is not honest, open, and
truthful and that you would not be glad to see reported upon in the media.
• Distributive justice – never take any action that harms the least fortunate
• Utilitarian benefits – never take any action that does not result in the greater good
Ethics and Social Responsibility
• Practical steps to Ethical Decision Making
• Selecting and hiring ethical employees – Overt integrity testing; Personalitybased testing
• Codes of ethics – communicated internally and externally, practical standards
• Ethics training – employee awareness; achieve credibility w/ employees
• Ethical climate
• Organizational culture is key to fostering ethical decision making
• Whistle blowing – reporting others ethics violations to management or legal authorities.
A 2014 U.S. Supreme Court ruling greatly expands protections for whistle blowers.
• Fairly and consistently punish employees for ethical violations.
• CNN quiz
Social Responsibility
• Social Responsibility – a businesses obligations to pursue policies,
make decisions, and take actions that benefit society.
• To whom are organizations socially responsible?
• Shareholder Model – a view of social responsibility that holds that an
organization’s overriding goal should be profit maximization for the benefit of
the shareholders.
• Stakeholder Model – a theory of corporate responsibility that holds that
managements most important responsibility, long term survival, is achieved
by satisfying the interests of multiple corporate stakeholders.
• Primary Stakeholders
• Secondary Stakeholders
Social Responsibility
• For what are organizations socially responsible?
• Economic responsibility - a company’s social responsibility to make a profit
by producing a valued product or service
• Legal responsibility – a company's responsibility to obey society’s laws and
regulations.
• Ethics responsibility – a company’s social responsibility to not violate
accepted principles of right and wrong when conducting business.
• Discretionary responsibility – the social roles that a company fulfills beyond
its economic, legal, and ethical responsibilities.
Social Responsibility
• Social responsiveness – a company’s strategy to respond to
stakeholders’ economic, legal, ethical, or discretionary expectations
concerning social responsibility. Amgen; Cisco
• Reactive strategy - company does less than expected
• Defensive strategy -company admits responsibility but does the least required
to meet societal expectations
• Examples?
• Accommodative strategy -company accepts responsibility and takes action
• Proactive strategy – company anticipates problems before they occur and
takes action to address it
• Do companies get an economic reward for CSR?
Planning and Decision Making
• Planning is choosing a goal and developing a strategy to achieve that
goal.
• Benefits of planning – intensified effort; persistence; direction; development
of task strategies
• Pitfalls of planning – impede change; false sense of certainty; detachment of
planners (Tesco example)
• Developing a plan that works –Setting Goals
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Specific
Measurable
Attainable / Actionable
Realistic / Relevant
Timely
Planning and Decision Making
• Developing a plan that works –Commitment to goals
• Goal commitment is the determination to achieve a goal.
• Participation in setting goals
• Make the goals public
• Obtain top management support
• Developing effective action plans – Tracking progress
• Action plan – lists the specific steps, people, resources, and time period
needed to attain a goal.
• Proximal goals – short term goals or sub goals.
• Distal goals – long-term or primary goals
• Track and provide performance feedback
Planning and Decision Making
• Making a plan that works – Maintaining Flexibility
• Option-based planning – maintaining planning flexibility by making small,
simultaneous investments in many alternative plans.
• Slack resources – a cushion of extra resources that can be used with optionbased planning to adapt to unanticipated changes, problems, or
opportunities.
• Planning from top to bottom – Starting at the top
• Strategic plans – overall company plans that clarify how the company will
serve customers and position itself against competitors over the next two to
five years.
• Purpose statement – a statement of a company’s purpose or reason for
existing.
Planning and Decision Making
• Planning from top to bottom – Middle Management
• Tactical Plans – direct behavior and efforts over six month to two years
• Management by Objectives – four step process in which managers and
employees:
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1) discuss possible goals
2) collectively select goals (challenging, attainable, consistent w/ company goals)
3) develop tactical plans that lead to the accomplishment of goals and objectives
4) meet regularly to review progress towards the goals
• First Level Management
• Operational Plans – day to day plans, developed and implemented by lower level
managers, for producing or delivering the organizations products and services over a
thirty day to six month period; Standing plans; Single use plans
Rational Decision Making
• Decision making – the process of choosing a solution from available
alternatives.
• Rational decision making – a systematic process in which managers
define problems, evaluate alternatives, and choose optimal solutions
that provide maximum benefits to their organizations.
• I. Define the problem
• Problem – a gap between a desired state and an existing state.
• Problem identification isn’t enough.
• Managers must have the knowledge, skills, and resources to fix a problem.
Rational Decision Making
• II. Identify the criteria
• Decision criteria – the standards used to guide judgments and
decisions.
• III. Weigh the criteria
• Absolute comparisons – a process in which each decision criterion is
compared to a standard or ranked on its own merit.
• Relative comparison – a process in which each decision criterion is
compared directly with every other criterion.
Rational Decision Making
• IV. Generate Alternative Courses of Action
• Identify courses of action that could solve the problem
• V. Evaluate Alternative Courses of Action
• Evaluate each alternative and systematically assign it a weight
• VI. Compute the optimal decision by determining the optimal value
of each alternative.
• Limits to Rational Decision Making
• Maximize – choose the best alternative
• Satisficing – choosing a “good enough” alternative
Rational Decision Making
• Using Groups to make decisions
• Advantages of Groups
• Groups are good for defining problems and generating alternatives.
• Disadvantages of groups
• Groupthink –Occurs in highly cohesive groups. This is due to pressure within
groups for members to agree with each other.
• It takes a lot of time
• Strong personalities can dominate the group
• Equality bias whereby each person is treated equally competent
• Pitfalls of groups can be overcome and lead to better decisions
Rational Decision Making
• Group decision making - Structured conflict
• C-type conflict (cognitive conflict) – focusses on problem and issue related
differences.
• A-type conflict (affective conflict) – focusses on individuals or personal issues.
• Devil’s advocacy – an individual or sub group is assigned the role of critic.
When done properly it can lead to better decisions by introducing C-type
conflict into the decision making.
• Dialectical inquiry – decision makers state the assumptions of a proposed
solution (thesis) and generate a solution that is the opposite(antithesis) of
that solution. Produces C-type conflict.
Rational Decision Making
• Group decision making – Nominal group technique
• A decision making method that begins and ends by having group members
quietly write down and evaluate ideas to be shared with the group.
• Reduces A-type conflict but limits C-type conflict. Can produce good
decisions.
• Group decision making – Delphi Technique
• A decision-making method in which members of a panel of experts respond
to questions and to reach others until reaching agreement on an issue.
• Developed by Rand for the department of defense.
• Usually it is focused on trying to predict the future.
Rational Decision Making
• Group decision making – Electronic Brainstorming
• Group members use computers to build on each others ideas and generate as
many alternative solutions as possible. It overcomes the following:
• Production Blocking – a disadvantage of face to face brainstorming in which a
group member must wait to share as idea because another member is
presenting an idea.
• Evaluation Apprehension – fear of what others will think of your ideas.
• Disadvantages:
• Expenses of computers, software
• Anonymity of ideas may bother some leaders
• Some members may express themselves better orally rather than in writing
Organizational Strategy
• Sustainable Competitive Advantage
• Organizations can achieve a competitive advantage by using their
resources to provide greater value for customers than competitors
can.
• Resources are the assets, capabilities, processes, employee time, information,
and knowledge that an organization controls.
• Competitive advantage – providing greater value for customers than
competitors can.
• Sustainable competitive advantage – a competitive advantage that other
companies have tried unsuccessfully to duplicate and have, for the moment,
stopped trying to duplicate.
Organizational Strategy
• Achieving a sustainable competitive advantage
• Resources – the assets, capabilities, processes, employee time,
information, and knowledge that an organization uses to improve its
effectiveness and efficiency and create and sustain competitive
advantage.
• Valuable resources – allows companies to improve efficiency and effectiveness
• Rare resources – a resource that is not controlled or possessed by many competing
firms
• Imperfectly imitable resources – a resource that is impossible or costly or difficult
for other firms to duplicate
• Non-substitutable resources – a resource that produces value or competitive
advantage and has no equivalent substitutes or replacements
Organizational Strategy
• Strategy Making Process – to create a sustainable competitive
advantage a company must have a strategy.
• Plan vs. Strategy
• Step 1 – Assess need for strategic change
• Step 2 – Conduct situational analysis
• Step 3 – Choose strategic alternatives
Organizational Strategy
• I. Assess the need for strategic change (Determine whether a
company needs to change its strategy to obtain a competitive
advantage).
• Avoid competitive inertia – a reluctance to change strategies or competitive
practices that have been successful in the past.
• Look for sign of strategic dissonance – a discrepancy between a company’s
intended strategy and the strategic actions managers take when
implementing that strategy.
Organizational Strategy
• II. Conduct situational analysis (SWOT) – an assessment of the
strengths and weaknesses in an organization’s internal environment
and the opportunities and threats in its external environment.
• Distinctive competence – what a firm can make, do, or perform better
than its competitors.
• Core capabilities – the internal decision making routines, problem
solving processes, and organizational cultures that determine how
efficiently inputs can be turned into outputs.
Organizational Strategy
• Conduct situational analysis SWOT (continued)
• Shadow strategy task force – a committee within a company that analyzes the
company’s own weaknesses to determine how competitors could exploit
them for competitive advantage.
• Strategic group – a group of companies within an industry against which top
managers compare, evaluate, and benchmark strategic threats and
opportunities.
• Core firms – the central companies in a strategic group
• Secondary firms – the firms in a strategic group that follow strategies related to but
somewhat different from those of the core group.
Organizational Strategy
• III. Choose strategic alternatives
• Strategic reference points – the strategic targets that managers use to
measure whether a firm has developed the core competencies it needs to
achieve a sustainable competitive advantage.
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Risk-avoiding strategy
Risk-seeking strategy
Actively changing and adjusting the strategic reference point
Effective organizations will frequently revise their strategic reference points to better
focus managers on new challenges and opportunities that occur in ever changing
business environments.
Organizational Strategy
• Corporate- Level Strategy – the overall organizational strategy that addresses the
questions:
• What business or businesses are we in or should we be in?
• How should we compete in this industry?
• Who are our competitors, and how should we respond to them?
• Diversification – reduce risk by buying a variety of items (stocks or businesses) so that the
failure of one doesn’t doom the entire portfolio.
• Portfolio strategy – Risk minimization through business diversification. The more businesses
in which a company competes the smaller its overall chance of failing (Berkshire Hathaway,
AT&T). It could theoretically reduce risk even more with unrelated diversification by building
or acquiring new businesses.
• Acquisition – the purchase of a company by another company
Organizational Strategy
• Corporate-Level Strategy (continued)
• BCG Matrix – categorizes business by growth rate and relative market share
and helps managers decide how to invest funds
• Star – large share of a fast growing market
• Question Mark – small share of a fast growing market
• Cash Cow – large share of a slow growing market
• Dogs – small share of a slow-growing market
• Overreliance on BCG can lead to strategic errors such as not investing enough
in cash cows.
• Related diversification – creating or acquiring companies that share similar
products, manufacturing, marketing, technology, or cultures.
Organizational Strategy
• Grand strategy – a broad strategic plan used to help an organization
achieve its strategic goals.
• Types of grand strategy:
• Growth strategy – focuses on increasing profits, revenues, market share, or
the number of places in which a company does business
• Stability strategy – focuses on improving the way in which a company sells the
same products or services to the same customers.
• Retrenchment - focusses on turning around very poor performance by
shrinking the size or scope of the business.
• Recovery – strategic action taken after retrenchment to return to a growth
strategy.
Organizational Strategy
• Industry- Level Strategy – How should we compete in this industry?
• Porter’s Five Industry Forces
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•
•
•
•
Character of the rivalry
Threat of new entrants
Threat of substitute products or services
Bargaining power of suppliers
Bargaining power of buyers
Organizational Strategy
• Positioning strategies
• Cost leadership – producing a product or service of acceptable quality at
consistently lower production costs than competitors can, so that the firm can
offer the product or service at the lowest price in the industry.
• Differentiation – positioning strategy of providing a product or service that is
sufficiently different from competitors offerings that customers are willing to
pay a premium price for it.
• Focus strategy – positioning strategy of using cost leadership or
differentiation to produce a specialized product or service for a limited,
specially targeted group of customers in a particular geographic region or
market segment.
Organizational Strategy
• Adaptive Strategies – to chose a strategy best fitted to the
organizations external environment
• Defenders – moderate, steady growth through offering a limited range of high
quality products and services to a well defined set of customers
• Prospectors – fast growth by searching for new market opportunities,
encouraging risk taking, and being the first to bring innovative new products
to market
• Analyzers – Following or imitating the proven success of prospectors
• Reactors – Companies that react to changes in the external environment after
they occur. Usually leads to failure.
Organizational Strategy
• Firm- Level Strategies
• Direct competition
• Market Commonality – the degree to which two companies have overlapping products,
services, or customers in multiple markets (McDonald’s / Burger King)
• Resource Similarity – The extent to which a competitor has similar amounts and kinds of
resources.
• Strategic Moves of Direct Competition
• Attack – a competitive move designed to reduce a rival’s market share or profits
• Response – a competitive countermove, prompted by a rival’s attack, to defend or
improve a company’s market share or profit.
Innovation and Change
• Organizational innovation – the successful implementation of
creative ideas in organizations.
• A technology cycle begins with the birth of a new technology and
ends when the technology reaches its limits and dies as it is replaced
by a newer substantially better technology.
• S –curve pattern of innovation – a pattern of innovation
characterized by slow initial progress, then rapid progress, and then
slow progress again as a technology matures and reaches its limits.
S –curve pattern of innovation
S –curve pattern of innovation
Innovation and Change
• Technological innovation can enable a company to duplicate the
benefits obtained from another company’s distinctive advantage. It
can also turn another company’s competitive advantage into a
competitive disadvantage.
• Film camera (film dominated by Kodak) -- digital cameras (no film
necessary) -- increasingly sophisticated digital camera -- smartphone
camera (no extra cost to consumers, increasingly sophisticated
features)
Innovation and Change
• Technology cycles occur whenever there are major advances in the
knowledge, tools, and techniques of a field of discipline, whatever it may
be.
• Innovation Streams – patterns of innovation over time that can create
sustainable competitive advantage.
• The best way for a company to protect themselves from strategic threats of
innovation is to create a stream on innovative ideas and products year after
year.
• Technological discontinuity – the phase of a innovation stream in which
scientific advance or unique combination of existing technologies creates a
significant breakthrough in performance or function.
Innovation and Change
• Discontinuous change – the phase of a technology cycle characterized
by technological substitution and design competition.
• Technological substitution – the purchase of new technologies to
replace older ones (i.e., smart phones vs. basic mobile phones)
• Design competition – competition between old and new
technologies to establish a new technological standard or
dominant design.
• Dominant design – a new technological design or process that
becomes the accepted market standard.
Innovation and Change
• Technological lockout – the
inability of a company to
competitively sell its products
because it relies on old technology
or a non dominant design.
• Incremental change – the phase of
a technology cycle in which
companies innovate by lowering
costs and improving the
functioning and performance of
the dominant technological design.
Innovation and Change
• Managing Innovation
• Creative work environments – workplace cultures in which workers perceive
that new ideas are welcomed, valued, and enjoyed.
• Flow – a psychological state of effortlessness, in which you become
completely absorbed in what you are doing, and time seems to pass quickly.
• Requires removing distractions
• Achieving a balance between skills and task challenge
Innovation and Change
• Experiential approach to innovation - use hands on experience to reduce
uncertainty. Can achieve discontinuous change (technological substitution).
•
•
•
•
•
Design iteration
Product prototype – full scale working model
Testing – the systematic comparison of different product designs or design iterations.
Milestones – formal project review points used to assess progress and performance
Multifunctional teams – work teams composed of people from different
departments
• Powerful leaders accelerate innovation (provide vision, discipline, and
motivation)
Innovation and Change
• Compression approach – an approach to innovation that assumes
that incremental innovation can be planned using a series of steps
and that compressing those steps can speed innovation.
• Generational change - change based upon incremental
improvements to dominant designs.
• The risk of not changing / innovating
• Organizational decline – a large decrease in organizational performance that
occurs when companies don’t anticipate, recognize, neutralize, or adapt to
the internal or external pressures that threaten their survival.
• Businesses operate in a constantly changing environment
Innovation and Change
• Managing change
• Change forces – forces that produce differences in the form, quality, or condition of
an organization over time
• Resistance forces - support the existing conditions in organizations
• Resistance to change – opposition to change resulting from self-interest,
misunderstanding and distrust, and a general intolerance for change.
• Unfreezing – getting people affected by change to believe that change is needed.
• Change intervention – process used to get workers and managers to change their
behavior and work practices
• Refreezing – supporting and reinforcing new changes so that they stick
• Coercion (use of formal power) should only be used when a crisis exists or when all
other attempts have failed.
Innovation and Change
• Change requires:
•
•
•
•
•
•
A vision for change
Communications
Removing obstacles to change
Systematically planning for and creating short-term wins
Not declaring victory too soon
Anchoring change in the corporate culture
Innovation and Change
• Change tools and techniques
• Results driven change – identify the needed result
• Workout – generate and act on specific solutions to specific business
problems
• Organizational developments – planned change interventions designed to
improve an organizations long term health and performance.
• Change agent – someone formally in charge of the change effort
Global Management
• Global business is the buying and selling of goods and services by
people from different countries.
• Multinational corporations - a corporation that owns business in two
or more countries.
• LOGO’S
• Direct foreign investment occurs when a company builds a new
business or buys an existing business in a foreign country.
• Increasingly common way to do business
Global Management
• Trade barriers are Government imposed regulations that increase the
cost and restrict the number of imported goods.
• Protectionism – a government’s use of trade barriers to shield domestic
companies and their workers from foreign competition
• Tariffs – a direct tax on imported goods
• Nontariff barriers
•
•
•
•
•
Quotas
Voluntary export restraints
Government import standards
Subsidies
Customs classifications
Global Management
• Trade agreements
• General Agreement on Tariffs and Trade (GATT)
• World Trade Organization (WTO) – replaced GATT. Administers trade
agreements and facilitates trade negotiations.
• Regional trading zones
• Maastricht Treaty of Europe (1992) – created the European Union
• North American Free Trade Agreement (NAFTA) – United States, Canada,
Mexico. Eliminated most product tariffs between the three countries, and
prevents (most) future tariffs.
• Pending – Trans Pacific Partnership (TPP)
Global Management
• Why do consumers care about free trade?
• Why would a government impose trade restrictions?
• Why do labor unions generally oppose free trade?
Global Management
• Free trade intensifies competition and can’t therefore be ignored by
managers.
• After a company decides to go global it has to decide how to go
global. (rules, guidelines, policies, and processes)
• Global consistency
• Local adaption
Global Management
• Forms for global business
• Exporting
• Cooperative contracts
• Licensing – Disney Parks; Television shows
• Franchise – McDonald’s
• Strategic alliances
• Joint venture – a strategic alliance in which tow or more companies collaborate to form a
third, independent company (Verizon Wireless was formerly a joint venture of
Vodaphone and Verizon).
• Wholly owned affiliates
• Global new ventures – companies that are founded with an active global
strategy.
Global Management
• Other important considerations
•
•
•
•
•
Growing markets
Choosing a location
Minimizing political risk
Becoming aware of different cultures
Preparing for an international assignment
• Language and cross cultural training
• Spouse, family issues
• Conclusion – Global Management is complex and increasingly
important to most businesses.
Global Management
• Trade Barriers are government imposed regulations that increase the
cost and restrict the number of imported goods.
•
•
•
•
•
•
•
•
Protectionism
Tariff
Nontariff barrier
Quota – a limit on the number or volume of imported products
Voluntary export restraints
Government imposed standards
Subsidies
Customs classification
Global Management
• Trade Agreements
•
•
•
•
General Agreement on Trade and Tariffs (GATT)
World Trade Organization (WTO)
Regional trading zones
Maastricht Treaty of Europe is a 1992 regional trade agreement among European
countries which led to the European Union (EU)
• North American Free Trade Agreement (NAFTA) – a regional trade agreement among
the United States, Canada, and Mexico.
• Proponents of free trade agreements believe they benefit consumers by
increasing choice, competition, and purchasing power and thus decease
what people pay for food, clothing, necessities, and luxuries.
Global Management
• Once a company decides it will go global, it must to decide how it will
go global.
• Consistency vs. Adaptation
• Global consistency – when a multinational company has offices, manufacturing plants,
and distribution facilities in different countries and runs them all using the same rules,
guidelines, policies, and procedures.
• Local Adaption – modifying rules, guidelines, policies, and procedures to adapt to
differences in foreign customers, governments, and regulatory agencies.
• Benefits of Adaptation
• Benefits of Consistency
Global Management
• Once a company decides it will go global, it must to decide how it will
go global.
• Exporting – selling domestically produced products to customers in foreign
countries. Expands the market. However, the products may be subject to
trade barriers. Also, products will have transportation costs and exporters will
be reliant on foreign importers.
• Cooperative contract
• Licensing – Disney theme parks
• Franchise – McDonald’s
• Both have advantages and disadvantages
Global Management
• Once a company decides it will go global, it must to decide how it will
go global.
• Strategic Alliances – an agreement in which companies combine key
resources, costs, risks, technology, and people
• Joint ventures – a strategic alliance in which two existing companies
collaborate to form a third, independent company (Originally Verizon Wireless
was a joint venture between Vodafone and Verizon)
• Wholly Owned affiliates
• Global New Ventures – new companies that are founded with an active global
strategy and have sales, employees, and financing in different countries.
Global Management
• Business climate considerations
• Growing markets
• Purchasing power – the relative cost of a standard set of goods and services in different
countries
• Degree of global competition
• Choosing an office / manufacturing location
• Quantitative factors (taxes, exchange rates, labor costs, etc.)
• Qualitative factors (workforce quality, strategy)
• Minimizing political risk
• Political uncertainty – the risks from changes in political regimes that can result from
war, revolution, death of political leaders, social unrest, or other influential events
• Policy uncertainty – the risk associated with changes in laws and government policies
that directly affect the way foreign companies conduct business
Global Management
• Cultural Differences
• National culture – the set of shared values and beliefs that affect the
perception, decisions, and behavior of the people from a particular country.
•
•
•
•
•
•
Power distance
Individualism
Masculinity and femininity
Uncertainty avoidance
Short term / long term orientation
Indulgence
Global Management
• Employee considerations
• Expatriate – someone who lives and works outside his or her native country
• Language and cross cultural training
• Spouse, Family, dual career issues
• With Globalism the importance of understanding the related
management issues have take on a new importance for businesses of
all sizes.
Designing Adaptive Organizations
• Organizational structure – the vertical and horizontal configuration of
departments, authority, and jobs within a company.
• Who reports to whom?
• Who does what?
• Where does the work get done?
• Organizational process – the collection of activities that transforms
inputs into outputs that customers value.
• How do things get done?
• Departmentalization – subdividing work and workers into separate units
responsible for particular business functions or areas of expertise.
Designing Adaptive Organizations
Designing Adaptive Organizations
• Functional departmentalization – organizing work and workers into
separate units responsible for particular business functions or areas
of expertise.
• Example – production, accounting, sales, human resources, etc.
• Advantages
• Allows work to be done by highly qualified specialists
• Lowers cost by reducing duplication
• Less problematic for managers
• Disadvantages
• Cross-department coordination can be difficult (Marketing vs. Manufacturing)
• May lead to slower decision-making
• Managers and workers have narrower experience and expertise
Designing Adaptive Organizations
• Product departmentalization – organizing work and workers into
separate units responsible for producing particular products or
services.
• Advantages
• It allows managers to specialize in one area of expertise
• Makes it easier for top managers to assess performance
• Faster decision making because of fewer functional conflicts
• Disadvantages
• Duplication of functions (accounting, sales, HR, procurement etc.)
• Challenge of coordinating across product departments (could lead to non-standard
policies and procedures)
Designing Adaptive Organizations
• Customer departmentalization – organizing work and workers into
separate units responsible for particular kinds of customers
(consumer, enterprise).
• Advantages
• Focusses the organization on customer needs rather than on products or business
functions.
• Allows companies to specialize and adapt to customer needs.
• Disadvantages
• Leads to duplication of resources
• Difficult to achieve coordination across different customer departments
• Could lead to decisions that help customers but hurt the business
Designing Adaptive Organizations
• Geographic departmentalization – organizes work and workers into
separate units responsible for doing business in particular geographic
areas.
• Advantages
• Helps companies respond to demands of different markets
• Possible lowers cost by locating unique organizational resources closer to customers
(e.g.. Reduced shipping costs)
• Disadvantages
• Duplication of resources
• Difficult to coordinate departments with geographic separation and limited individual
personal contacts
Designing Adaptive Organizations
• Matrix departmentalization – a hybrid organizational structure in
which two or more forms of departmentalization, most often product
and functional, are used together.
• Features
• Employees report to two bosses
• Leads to more cross functional interaction
• Requires significant coordination between managers
• Advantage
• Allows efficient management of large complex tasks such as R&D through avoiding
duplication
• Disadvantage
• High level of coordination is required to manage to the complexity of the organization
and the task
Designing Adaptive Organizations
Designing Adaptive Organizations
• Matrix (continued)
• Simple matrix – a form of matrix management departmentalization in which
managers in different parts of the matrix negotiate conflicts and resources.
• Complex matrix – a form of matrix departmentalization in which managers in
different parts of the matrix report of matrix managers, who help them sort out
conflicts and problems.
• Conclusion – There is no ideal organization design and that is why
companies “reorganize”. In many cases it is important to adjust the
organization to gain efficiencies and to respond to externalities. Executive
spend a lot of time trying to get the right organizational structure.
Designing Adaptive Organizations
• Organizational authority
• Authority – the right to give commands, take action, and make decisions to
achieve organizational objectives.
• Chain of command – the vertical line of authority that clarifies who reports to
whom throughout the organization
• Unity of command – principle that workers should report to just one boss.
(differs from matrix organization)
Designing Adaptive Organizations
• Line vs. Staff authority
• Line authority – the right to command immediate subordinates in the chain
of command.
• Staff authority – the right to advise, but not command, others who are not
subordinates in the chain of command.
• Line function – an activity that contributes directly to creating or selling the
company’s products.
• Staff function – an activity that does not contribute directly to creating or
selling the company’s products but supports line activities (legal, HR,
accounting).
Designing Adaptive Organizations
• Delegation of authority – the assignment of direct authority and
responsibility to a subordinate to complete tasks for which the
manager is normally responsible.
• Advantages – Frees up the manager to do other important tasks. Provides
training.
• Disadvantages – Difficult for many managers to give up full authority, leading
to micromanagement. Delegated authority may not be commensurate with
the delegated responsibility.
Designing Adaptive Organizations
• Degree of Centralization - the location of authority in an organization.
• Centralization - most authority at the upper level of an organization
• Decentralization - significant amount of authority at lower levels
• Standardization – solving problems by consistently applying the same rules,
procedures, and processes. (Dell Customer support)
Designing Adaptive Organizations
BASIS FOR COMPARISON
CENTRALIZATION
DECENTRALIZATION
Definition
The retention of powers and authority
with respect to planning and decisions,
with the top management, is known as
Centralization.
The dissemination of authority,
responsibility and accountability to the
various management levels, is known as
Decentralization.
Communication Flow
Vertical
Open and Free
Decision Making
Slow
Comparatively faster
Advantage
Proper coordination and Leadership
Sharing of burden and responsibility
Power of decision making
Lies with the top management.
Multiple persons have the power of
decision making.
Reasons
Inadequate control over the organization Considerable control over the
organization
Best suited for
Small sized organization
Large sized organization
Designing Adaptive Organizations
• Job Redesign – modifying jobs to keep the benefits of specialized jobs while
reducing their costs and disadvantages.
• Job enlargement
• Job enrichment
• Job Design – the number, kind, and variety of tasks that individual workers
perform in doing their jobs.
• Job Specialization – a job composed of a small part of a larger task or process.
• Job Rotation – periodically moving workers from one specialized job to another
to give them more variety and the opportunity to use different skills.
Designing Adaptive Organizations
• Intra- Organizational Processes
• Reengineering – fundamental rethinking and radical redesign of business processes to
achieve dramatic improvements in critical measures of performance, such as cost,
quality, service, and speed.
• Task interdependence
• Pooled interdependence – each job or department independently contribute to the whole.
• Sequential interdependence – work completed in succession, with one group’s or job’s output becoming input
for the next group or job.
• Reciprocal interdependence –work completed by different jobs or groups working together in a back and forth
matter.
• Reengineering tries to reduce pooled and sequential interdependence while increasing
reciprocal interdependence. It promises big rewards but is often viewed as just another
cost cutting program that hurts morale and performance.
Designing Adaptive Organizations
• Intra-Organizational processes (continued)
• Empowerment – workers perceive their work to have impact and meaning and
perceive themselves to be competent and capable of self determination.
• Inter- organizational processes
• Modular Organizations – outsourcing non core activities
• Virtual Originations – companies sharing skills, costs, capabilities, etc., to collectively
solve customer issues.
• Conclusions – managers, especially top managers, expend a lot of
resources trying to insure that they have the best designed organization.
• Work teams – a small number of people with
complementary skills who hold themselves
accountable for pursuing a common purpose,
achieving performance goals, and improving
interdependent work processes.
Managing
Teams
• Advantages of teams: increase customer
satisfaction; improve product and service
quality; lead to increased job satisfaction
through cross training.
• Disadvantages of teams: initial high
turnover; social loafing (members not
pulling their weight); groupthink; minority
domination; reduced accountability
• Use teams when:
• There is a clear engaging reason or purpose
• The job can’t be done unless people work
together
• Rewards can be provided for teamwork and
team performance
• Ample resources are available
Managing
Teams
• Don’t use team when:
• There isn’t a clear engaging reason or purpose
• The job can be done by people working
independently
• Rewards are provided for individual effort and
performance
• The necessary resources are not available
Managing
Teams
• Traditional work group – a group composed of two
or more people who work together to achieve a
goal.
• Employee involvement teams – teams that provide
advice or make suggestions to management
concerning specific issues
• Semi-autonomous work groups – a group that has
the authority to make decisions and solve problems
related to the major task of producing a product or
service.
• Self-managing team – a team that manages and
controls all of the major tasks of producing a
product or service.
• Self designing teams – has the characteristics of
self-managed teams but also controls team design,
work tasks, and team membership.
Managing Teams
Managing
Teams
• Special kinds of teams
• Cross-functional team – team composed of
employees from different functional areas of the
organization. Often used with matrix and
product organizational structures.
• Virtual team – a team composed of
geographically and/ or organizationally
dispersed coworkers who use
telecommunications and information
technologies to accomplish an organizational
task. Are often temporary teams set up to
accomplish a single task.
• Project team – a team created to complete
specific, one time projects or tasks within a
limited time. Often used with matrix
organizations.
• Work Team Characteristics
• Team norms – informally agreed-on standards
that regulate team behavior.
Managing
Teams
• Team cohesiveness – the extent to which team
members are attracted to a team and motivated
to remain in it.
• Team size – very small or very large teams may
not perform as well as moderately sized teams.
• Team conflict – inevitable in most teams. Can be
productive if it is cognitive conflict.
Managing Teams – Stages of Development
Managing
Teams
• Enhancing Work Team Effectiveness
1. Teams must have a high degree of
autonomy.
2. Teams must be empowered with control
of resources.
3. Teams need structural accommodation.
4. Teams need bureaucratic immunity.
• Specific team goals - clarifies team priorities by
providing a clear focus and purpose.
• Challenging team goals – when faced with
difficult goals team members expect everyone
to contribute.
• Selecting people for teamwork
Managing
Teams
• Individualism vs. collectivism – the degree
to which a person believes that people
should be self-sufficient and that loyalty to
one’s self is more important than loyalty to
team or company. (Individualist vs.
Collectivist)
• Team level – the average level of ability,
experience, personality, or any other factor
on a team.
• Team diversity – the variances or differences
in ability, experience, personality, or any
other factor on a team.
Managing
Teams
• Team training – after selecting the right people
you need to train them. Organizations often
underestimate the amount of training.
• Interpersonal skills – skills, such as listening,
communicating, questioning, and providing
feedback, that enable people to have
effective working relationships with others.
• Decision making and problem solving
• Conflict resolution
• Technical training
• Team leader training
Managing
Teams
• Compensation and Recognition
• Compensating teams is very difficult.
Rewards must match the level of
performance.
• Skill based pay – pay’s employees for
learning additional skills or knowledge
• Gainsharing – companies share the financial
value of performance gains, such as
increased productivity, cost savings, or
quality, with their workers
• Non-financial rewards – vacations, plaques,
coffee mugs, certificates, praise. Employees
value hearing a sincere thank you.
Managing
Human
Resource
Systems
• Human Resource Management (HMR) – the process
of finding, developing, and keeping the right people
to form a qualified workforce.
• Federal Employment Laws
• Department of Labor (DOL)
• Equal Employment Opportunity Commission
(EEOC)
• Occupational Safety and Health Administration
(OSHA)
• Bona fide occupational qualification (BFOQ) – an
exception in employment law that permits sex,
age, religion, and the like to be used when
making employment decisions, but only if they
are “reasonably necessary to the normal
operation of that particular business”. BFOQ’s
are strictly monitored by the Equal employment
Opportunities Commission.
Managing
Human
Resource
Systems
• Adverse Impact and Employment Discrimination
• Disparate treatment – intentional discrimination
that occurs when people are purposely not given the
same hiring, promotion, or membership
opportunities because of their race, color, sex, age,
ethnic group, national origin, or religious beliefs.
• Adverse impact – unintentional discrimination that
occurs when members of a particular race, sex,
ethnic group are unintentionally harmed or
disadvantaged because they are hired, promoted, or
trained (or any other employment decision) at
substantially lower rates than others.
• Four-fifths rule – a rule of thumb used by the courts
and the EEOC to determine whether there is
evidence of an adverse impact; a violation of this
rule occurs when the impact ratio (calculated by
dividing the decision ratio for a protected class by
the decision ratio for a non protected group) is less
than 80%, or four fifths.
Managing
Human
Resource
Systems
• Sexual Harassment – a form of discrimination in
which unwelcome sexual advances, requests for
sexual favors, or other verbal or physical
conduct of a sexual nature occurs while
performing one’s job.
• Quid pro quo sexual harassment
• Hostile work environment
• California sexual harassment training
• Sexual harassment in the news
• Recruiting – the process of developing a pool of
qualified job applicants.
Managing
Human
Resource
Systems
• Job analysis – a purposeful, systematic process
for collecting information on the important work
related aspects of a job.
• Job description – a written description of the
basic tasks, duties, and responsibilities required
of an employee holding a particular job.
• Job specification – a written summary of the
qualifications needed to successfully perform a
particular job.
• The above items help companies meet the legal
requirement that their human resource
decisions be job related.
Managing
Human
Resource
Systems
• Types of recruiting
• Internal – developing a pool of qualified
candidates from people who already work in
the company.
• External – developing a pool of qualified
candidates from outside the company.
• Internet job sites including company
career portals
• Job fairs / virtual job fairs
• Advertisements
• Employees referrals
• Recruiting – passive candidates, active
candidates
Managing
Human
Resource
Systems
• Selection – the process of gathering information
about job applicants to decide who should be
offered a job.
• Validation – the process of determining how
well a selection test or procedure predicts
future job performance.
• Application forms and résumés– first device
used as part of the selection process.
Application forms are subject to employment
laws.
• Managers should verify information collects via
résumés and application forms.
• Employment references
• Background checks
• Selection tests – gives employers a chance to
know who will likely do well in a job and who
won’t. (Types of tests are covered in text section
11-3c)
Managing
Human
Resource
Systems
• Selection (continued)
• Interviews – a selection tool in which company
representatives ask job applicants job-related
questions to determine whether they are qualified
for the job.
• Unstructured interviews – interview in which
interviewers are free to ask the applicants
anything that they want (Not as accurate a
predictor as structured interviews).
• Structured interviews – interviews in which all
applicants are asked the same set of
standardized questions, usually including
situational, behavioral, background, and jobknowledge questions.
• Semi-structured interviews – Consists of mostly
structured questions, but some time is set aside
for unstructured interviewing. Allows
interviewers to probe answers to structured
questions.
• Training – provides meaningful benefits for most
companies if it is done well.
Managing
Human
Resource
Systems
• Needs assessment – the process of identifying and
prioritizing the learning needs of employees.
• Training methods – videos, lectures, planned
readings, coaching, mentoring, group discussions,
on the job training, computer based learning, etc.
• Evaluating training – reactions, learning, behavior,
results.
Managing
Human
Resource
Systems
• Performance appraisals – the process of assessing
how well employees are doing in their job.
• Objective performance measures – measures
that are easily and directly counted and
quantified (sales, units produced, billable hours,
etc..)
• Subjective performance measures – measures
that require someone to judge or assess a
workers performance
• Behavior Observation Scales (BOS) – rating
scales that indicate the frequency with which
workers perform specific behaviors that are
representative of the job dimensions critical to
successful job performance.
• Rater training
• Performance appraisal feedback
Managing
Human
Resource
Systems
• Compensation and Employee Separation
• Compensation – the financial and non
financial rewards that organizations give
employees in exchange for their work.
• Employee separation – the voluntary or
involuntary loss of an employee
• Job evaluation – a process that determines
the worth of each job in a company by
evaluating the market value of the
knowledge, skills, and requirements needed
to perform it.
Managing
Human
Resource
Systems
• Compensation Decisions
• Piecework
• Commission
• Profit sharing
• Employee stock ownership plan – awards
employees shares of company stock in
addition to their regular pay
• Stock option – gives employees the rights to
purchase shares of company stock at a set
price, even if the value of the stock
increases above that price. Stock options
have increasing been replaced by restricted
stock unit (RSU) grants or Performance
Stock Units (PSU).
Managing
Human
Resource
Systems
• Terminating employees
1. Should not be the first option
2. Should only be done for a good reason
• Wrongful discharge – according to Williams
employees win 68% of wrongful discharge
cases at an average award of over $500,000.
• Downsizing – the planned elimination of
jobs in a company.
• Retirement
• Employees turnover – loss of employees who
voluntarily choose the leave a company
• Functional turnover
• Dysfunctional turnover
Managing
Individuals
and a Diverse
Workforce
• Diversity – a variety of demographic, cultural,
and personal differences among an
organization's employees and customers.
• Diversity is not affirmative action – can lead
to cost savings, attracting and retaining
talent, and driving business growth.
• Affirmative action is purposeful steps taken
by an organization to create employment
opportunities for minorities and women.
•
•
•
•
Diversity makes good business sense
Surface level diversity
Deep level diversity
Social integration
• Surface level diversity – observable, easy to
measure
Managing
Individuals
and a Diverse
Workforce
• Age
• Sex
• Race/Ethnicity
• Mental of Physical Disability
Managing
Individuals
and a Diverse
Workforce
• Deep-Level Diversity – impressions based upon
behavior and psychological characteristics
• Disposition
• Personality
• Personality Dimensions
• Extraversion
• Emotional stability
• Agreeableness
• Conscientiousness
• Openness to experience
• Managing Diversity
• Diversity Paradigms
Managing
Individuals
and a Diverse
Workforce
• Diversity Principles – General approaches or
strategies for managing diversity.
• Treat group differences as important but
not special
• Find common ground
• Tailor opportunities to individuals not
groups.
• Solicit negative as well as positive
feedback
• Set high but realistic goals
Managing
Individuals and a
Diverse Workforce
• Diversity Training and
Practices
• Skills-based diversity
training
• Awareness training –
raise employees
awareness of diversity
issues and to challenge
the underlying
assumptions or
stereotypes they may
have about others.
• Diversity audits
• Diversity pairing
Motivation
• Motivation is the set of forces that
initiates, directs, and makes
people persist in their efforts to
accomplish a goal.
• Job performance=Motivation x
Ability x Situational Constraints
Motivation
Motivation
• Needs – the physical or
psychological requirements that
must be met to insure survival
and well being.
• People are motivated by
unmet needs
• Maslow’s hierarchy of
needs
• Rewards
• Extrinsic rewards – a reward that is
tangible, visible to others, and given to
employees contingent on the performance
of specific tasks or behaviors.
Motivation
• Intrinsic rewards – a natural reward
associated with performance of specific
tasks or behaviors. For example, a sense of
accomplishment or achievement.
• Both types of rewards are important to
workers.
Motivation
Motivation
• Motivating -- the basics
• Find out peoples needs
• Satisfy lower order needs first
• Expect peoples needs to change
• As lower orders needs are satisfied, create
opportunities for employees to satisfy
higher-order needs. This can be done by
creating opportunities for employees to
experience intrinsic rewards by providing
challenging work, encouraging employees to
take greater responsibility for their work,
and giving the employees freedom to purse
other task and projects that they find
interesting.
Motivation
• Equity Theory – people will be motivated when
they perceive they are being treated fairly.
• Inputs
• Outputs
• Referents
• Outcome/ input ratio
• Under-rewarded
• Overrewarded
• Perceived Inequity
• Affects satisfaction
• Frustration, dissatisfaction, guilt
Motivation
• Equity Theory (continued)
• Motivating with equity theory
1. Correcting major inequities
2. Reduce employees inputs (ask employees
to do less)
3. Fair decision making processes
• Distributive justice – the perceived
degree to which rewards are fairly
distributed or allocated
• Procedural justice – the perceived
fairness of the process used to make a
reward allocation decision
• Expectancy Theory – people will be motivated to the
extent which they believe that their efforts will lead
to good performance, that good performance will
be rewarded, and that they will be offered attractive
rewards.
• Components of expectancy theory
• Motivation = Valence x Expectancy x
Instrumentality
Motivation
• Valence – the attractiveness or desirability
of a reward or outcome
• Expectancy – the perceived relationship
between efforts and performance
• Instrumentality - the perceived relationship
between performance and rewards
Motivation
• Reinforcement theory
• Reinforcement – the process of changing
behavior by changing the consequences that
follow behavior
• Positive – good behavior equals desirable
consequence
• Negative – withholding an unpleasant
consequence when a specific behavior is
performed
• Punishment – reinforcement that weakens
behavior by following behaviors with
undesirable consequences.
• Reinforcement schedules – Continuous,
Intermittent, Fixed interval, Fixed ratio, Variable
ratio
• Motivating with reinforcement theory – identify,
measure, analyze, intervene, evaluate
Motivation
• Goal-setting theory – people will be motivated
to the extent to which they accept specific,
challenging goals and receive feedback that
indicates their progress towards achievement.
• Goal – a target, objective, or result that
someone tries to accomplish.
• Goal specificity – the extent that goals are
detailed, exact, and unambiguous
• Goal difficulty
• Goal acceptance
• Performance feedback – information about
the quality or quantity of past performance
that indicates whether progress is being
made towards accomplishment of a goal
• Leadership – the process of influencing other to
achieve group or organizational goals.
Leadership
• Leadership traits (7 qualities)
• Traits – relatively stable characteristics, such
as abilities, phycological motives, or
consistent patterns of behavior.
• Trait Theory – a leadership theory that holds
that effective leaders possess a similar set of
traits or characteristics. The idea that
successful people are not like other people.
• Traits include - drive, desire to lead, selfconfidence, emotional stability, cognitive
ability, knowledge if the business
• Leadership Behaviors
• Initiating structure – the degree to which
leaders structure the roles of followers by
setting goals, giving direction, setting deadlines,
and assigning tasks.
Leadership
• Consideration – the extent to which a leader is
friendly, approachable, and supportive and
shows concern for employees.
• Some researchers have found that the most
effective leaders were strong on both initiating
structure and considerate leader behavior.
However, there does not appear to be a “best
leadership style”.
Leadership
• Team Management is viewed as
the ideal
• Putting leaders in the right situation
• Leadership style – the way a leader behaves towards
followers.
Leadership
• Contingency theory (Fiedler) – a leadership theory
states that to maximize work group performance,
leaders must be matched to the situation that best
fits their leadership style.
• Leaders are effective when the work groups
they lead perform well
• Leaders are more effective when their
leadership style matches the situation
• Favorableness depends upon the degree to
which the situation permits the leader to
influence the behavior of group members.
• Situational Favorableness – the degree to which
a situation either permits or denies a leader the
chance to influence the behavior of group
members.
Leadership
• Leaders member relations – the degree to
which followers respect, trust, and like their
leader.
• Task structure – the degree to which the
requirements of a subordinate’s tasks are
clearly specified.
• Position power – the degree to which the
leaders are able to hire, fire, reward, and
punish workers.
Leadership
• Adapting leader behavior
• Path-goal theory – a leadership theory that
leaders can increase subordinate satisfaction
and performance by clarifying and clearing the
paths to goals and by increasing the number and
kinds of rewards available for goal attainment.
• Leadership styles
• Directive leadership – a leadership style in
which the leader lets employees know precisely
what is expected of them, gives them specific
guidelines for performing tasks, schedules work,
sets standards of performance, and makes sure
that people follow standard rules and
regulations.
• Supportive leadership – style in which the
leader is friendly and approachable to
employees, shows concern for employees and
their welfare, treats them as equals, and creates
a friendly climate.
Leadership
• Leadership styles (continued)
• Participative leadership – a leadership style
in which the leader consults employees for
their suggestions and input before making
decisions.
• Achievement oriented leadership – a
leadership style in which the leader sets
challenging goals, has high expectations of
employees, and displays confidence that
employees will assume responsibility and
put forth extraordinary effort.
Leadership
• Visionary leadership
• Strategic leadership – the ability to
anticipate, envision, maintain flexibility,
think strategically, and work with others to
initiate changes that will create a positive
future for an organization.
• Visionary leadership – leaders that create a
positive image of the future that motivates
organizational members and provides
direction for future planning and goal
setting.
• Charismatic leadership – the behavioral
tendencies and personal characteristics of
leaders that create an exceptionally strong
relationship between them and their followers.
Leadership
• Articulate a clear vision for the future that is based
on strongly held values and morals
• Model those values by acting in a way consistent
with the vision
• Communicate high performance expectations to
followers
• Display confidence in followers’ abilities to achieve
the vision
• Ethical charismatics – charismatic leaders who
provide developmental opportunities for followers,
are open to positive and negative feedback,
recognize other’s contributions, share information,
and have moral standards that emphasize the larger
interests of the group, organization, or society.
Leadership
• Unethical charismatics – charismatic leaders who
control and manipulate followers, do what is best
for themselves instead of their organizations, want
to hear only positive feedback, share only
information that is beneficial to themselves, and
have moral standards that put their interests before
everyone else’s.
Leadership
• Transformational leadership – leadership that
generates awareness and acceptance of a
group’s purpose and mission and gets
employees to see beyond their own needs and
self-interests for the good of the group.
• They transform organizations by getting
their followers to accomplish more than
they intended and even more that they
thought possible.
• Idealized influence
• Inspirational motivation
• Intellectual stimulation
• Individualized consideration
• Transactional leadership – leadership based
upon an exchange process in which followers
are rewarded for good performance and
punished for poor performance.
Leadership
• Transformational leaders achieve better overall
financial results than transactional leaders.
• Successful leadership
Managing Communication
• Communication – the process of transmitting information from one person to
another.
• A very significant part of effective communication is perception.
• Perception – the process by which individuals attend to, organize, interpret, and
retain information from their environment.
• Perceptual filters – the personality, psychology, or experience based differences
that influence people to ignore or pay attention to particular stimuli.
Managing Communication
• Perceptual filters:
• Attention – the process of noting or becoming aware of particular stimuli.
• Organization – the process of incorporating new information onto your existing
knowledge.
• Interpretation – the process of attaching meaning to new knowledge.
• Retention – the process of remembering interpreted information. Retention affects
what we recall and commit to memory.
Managing Communication
• Perception problems
• Selective perception – the tendency to notice and accept objects and
information consistent with our values, beliefs, and expectations, while ignoring
or screening inconsistent information.
• Closure – the tendency to fill in gaps of missing information by assuming that
what we don’t know is consistent with what we already know.
Managing Communication
• Perceptions of Others
• Attribution theory – the theory that we all have a basic need to understand
and explain the causes of other peoples behavior.
• Defensive bias – the tendency for people to perceive themselves as
personally and situationally similar to someone who is having difficulty or
trouble.
• Fundamental attribution error – the tendency to ignore external causes of
behavior and to attribute other people’s actions to internal causes.
Managing Communication
• Self serving bias – the tendency to overestimate our value by attributing success
to ourselves (internal causes) and attributing failures to other causes or the
environment (external causes).
• People have a need to maintain a positive self-image.
• People can become defensive when managerial communication threatens
their positive self-image.
Managing Communication
• Kinds of Communication
• The Communications process
• Formal Communications channels
• Coaching and Counseling (one-on-one communication)
• Non-verbal communication
Managing Communication
• The Communications Process
• Encoding – putting a message into a written, verbal, or symbolic form that can
be recognized and understood by the receiver.
• Decoding – the process by the receiver translates the written, verbal, or
symbolic form of a message into an understood message.
• Feedback to sender – a return message to the sender that indicates the
receiver’s understanding of the message
• Noise- anything that interferes with the transmission of the intended
message.
• Jargon – vocabulary particular to a profession or group that interferes with
communication in the workplace. (downsizing, drilling down, restructuring)
Managing Communication
• Formal Communications Channel – the system of official channels that carry
organizationally approved messages and information.
• Downward communications – flows from higher to lower levels in an
organization
• Upward communications – flows from lower to higher levels in an
organization
• Horizontal communications – flows among managers and workers who are
the same level in an organization
Managing Communication
• Informal Communication Channels (grapevine)
• The transmission of messages from employee to employee outside of formal
communications channels
• Studies show that grapevines are highly accurate sources of information
• Because the information is “juicy” and timely and interesting it spreads rapidly
• Typically spread by face to face conversations which can reduce
misunderstandings and increase accuracy
• Most information in a company moves through the grapevine rather than
through formal communications channels, therefore people can “check it out”
with others.
• Managers should embrace the grapevine and keep employees informed. Also, it can
be a valuable source of information to managers.
Managing Communication
• Choosing the Right Communication Medium
• Oral communication – includes face to face interactions, group meetings,
phone calls
• Written communication - includes letters, emails, memos
• Listening
• Hearing
• Listening
• Active listening
• Empathetic listening
Managing Communication
• Giving feedback
• Destructive feedback – feedback that disapproves without any intention of
being helpful and almost always causes a negative or defensive reaction in the
recipient
• Constructive feedback – feedback intended to be helpful, corrective, and/or
encouraging
• Should be immediate and focused on specific behaviors
• Specific feedback focuses on particular acts or incidents
• Problem oriented feedback focuses on the problem or incident
associated with poor performance
Managing Communication
• One-on-one Communication
• Coaching – communication with someone for the direct purpose of improving the person’s
on the job performance or behavior
• Counseling - communication with someone about non job related issues that may be
affecting or interfering with the person’s performance (refer personal issues to Employee
Assistance Programs)
• Nonverbal Communication – any communication that does not involve words.
• 93% of information is transmitted nonverbally.
• 55% comes from body language
• 38% comes from the tone and pitch of the voice
• Kinesics – movements of the body and face
• Paralanguage – the pitch, rate, tone, volume, and speaking pattern (that is, use of silences,
pauses, or hesitations) of ones voice.
Managing Communication
• Organization Wide Communication
• Online discussion forums
• Televised / webcast speeches and meetings
• Broadcast voice mail
• Improving reception
• Organizational silence – when employees withhold information about organizational
problems or issues
• Company hotlines
• Survey feedback
• Blog
• Town hall meetings
• Control - a regulatory process of establishing
standards to achieve organizational goals,
comparing actual performance against the
standards, and taking corrective action when
necessary.
• Control Overview
Control
• Standards – a basis of comparison for
measuring the extent to which various kinds of
organizational performance are satisfactory or
unsatisfactory.
• Benchmarking – the process of identifying
outstanding practices, processes, and standards
in other companies and adapting them to your
company.
• Cycle time
• Price
• Quality
• What companies should be the benchmark
Control
• Control Methods
• Feedback control – gathering information about
performance after deficiencies occur
Control
• Concurrent control – gathering information
about performance deficiencies as they occur
• Feedforward control – monitoring performance
inputs rather than outputs to prevent or
minimize performance deficiencies before they
occur
• Control loss – the situation in which behavior
and work procedures do not conform to
standards.
Control
• Regulation costs – the costs associated with
implementing or maintaining control.
• Cybernetic feasibility – the extent to which it is
possible to implement each step in the control
process. (If one or more steps cannot be
implemented then maintain effective control
may be difficult or impossible).
• Control Methods
• Bureaucratic control – top down control, in
which managers try to influence behavior by
rewarding or punishing employees for
compliance or non-compliance with rules,
policies, and procedures
Control
• Objective control – the use of observable
measures or workers behaviors or outputs
to assess performance and influence
behavior
• Behavior control –regulation of behavior
and actions that workers perform
• Output control – regulation of results
• Normative control – the regulation of
workers’ behaviors and actions through
widely shared organizational values and
beliefs.
Control
• Concertive Control – the regulation of
worker’s behavior and decisions through
work group values and beliefs.
• Self-control (self-management) – managers
and workers control their own behavior by
setting their own goals, monitoring their
own progress, and rewarding themselves for
goal achievement.
Control
• What to Control?
• Balanced Scorecard – Measurement of
organizational performance in four equally
important areas:
• Finances
• Customers
• Internal operations
• Innovation and learning
• Sub optimization – Performance improvement
in one part of an organization but only at the
expense of decreased performance in another
part.
• Finance Control
Control
•
•
•
•
•
•
Cash flow analysis
Balance sheet
Income statements
Financial ratios
Budgets
Economic value added (EVA) – the amount
by which company profits (revenues minus
expenses minus taxes) exceed the cost of
capital in a given year.
Control
• Customers
• Customer defections – a performance
assessment in which companies identify
which customers are leaving and measure
the rate at which they are leaving.
• Customer survey – Good but may be
misleading by themselves.
• Net Promoter score (NPS)
Control
• Net Promoter Score Definition
• The Net Promoter Score is an index ranging from -100 to
100 that measures the willingness of customers to
recommend a company’s products or services to others.
It is used as a proxy for gauging the customer’s overall
satisfaction with a company’s product or service and the
customer’s loyalty to the brand.
• Net Promoter Score Calculation
• Customers are surveyed on one single question. They are
asked to rate on an 11-point scale the likelihood of
recommending the company or brand to a friend or
colleague.
• “On a scale of 0 to 10, how likely are you to recommend
this company’s product or service to a friend or a
colleague?”
• Based on their rating, customers are then classified in 3
categories: detractors, passives and promoters.
• Internal Perspective – the processes, decisions,
and actions that managers and workers make
within the organization.
• Quality – excellence, value and conformance
to expectations.
Control
• Value – customer perception that the
product quality is excellent for the price
offered.
• The way that a company defines quality
affects the methods and measures that
employees use to control quality.
• Innovation and Learning Perspective – can an
organization continue to improve and create
value?
• Continuous improvement (innovation and change).
Covered in Chapter 7 and 18.
Control
• Sustainability is an example of an area in
which many companies are striving for
continuous improvement.
1. Waste prevention & reduction –
prevent waste and pollution before they
occur
2. Recycle & reuse
3. Waste treatment
4. Waste disposal
Managing
Information
• Information has strategic importance
• Information – useful data that can influence
people’s choices and behaviors.
• Raw Data – facts and figures
• First-mover advantage
• Sustaining competitive advantage through
information technology
• Does it lower cost or create a better product?
• Is it different than competing firms?
• Is it difficult for competitors to obtain (create or
buy)?
• The key to sustaining a competitive advantage is
using information technology to continuously
improve and support the core functions of a
business.
Managing
Information
• Useful information
• Accurate
• Complete
• Relevant
• Timely
• Acquisition cost
• Processing cost
• Storage cost
• Retrieval cost
• Communication costs
Managing
Information
• Capturing information
• Bar codes
• Radio frequency identification (RFID)
• Electronic scanners
• Optical character recognition
Managing
Information
• Processing information – transforming raw data
into meaningful information.
• Data mining
• Data warehouse
• Supervised data mining
• Unsupervised data mining
• Association or affinity pattern
• Sequence patterns
• Predictive patterns
• Data clusters
Managing
Information
• Protecting information
• Authentication
• Authorization
• Two-factor authentication
• Firewall
• Virus
• Data encryption
• Virtual private network (VPN)
• Secure sockets layer encryption
• Access and sharing information
• Executive information system (EIS)
• Intranets
• Corporate portal
Managing
Information
• External access and sharing
• Electronic data exchange (EDI)
• Web services
• Extranets
• Sharing Knowledge and Expertise
• Knowledge – the understanding that one
gains from information.
Managing
Information
• Decision support system – an information
system that helps managers understand
specific kinds of problems and potential
solutions.
• Expert system – an information system that
contains specialized knowledge and decision
rules so that nonexperts can draw on this
knowledge base to make decisions.
• Operations Management – managing the
daily production of goods and services.
Managing Service
and Manufacturing
Operations
• Productivity – a measure of performance
that indicates how many inputs it takes to
produce or create an output.
• Why does productivity matter?
• Partial productivity – a measure of
performance that indicates how much
of a particular kind of input it takes to
produce an output.
• Multifactor productivity – an overall
measure of performance that indicates
how much labor, capital, materials, and
energy it takes to produce an output.
Managing Service
and Manufacturing
Operations
• Quality – a product or service free of
deficiencies, or the characteristics of a
product or service that satisfy customer
needs.
• Reliability – time between breakdowns
• Serviceability – ease of repair
• Durability – the mean time of failure
• ISO 9000 – a series of five international
standards (ISO 9000 – ISO 9004) for
achieving consistency in quality
management and quality assurance in
companies throughout the world.
• ISO 14000 – a series of international
standards for managing, monitoring,
and minimizing an organization’s
harmful effects on the environment.
Managing Service
and Manufacturing
Operations
• Total Quality Management (TQM) – an
integrated, principle based,
organization-wide strategy for
improving product and service quality.
1) Customer focus and satisfaction
2) Continuous improvement
3) Teamwork
Managing Service and Manufacturing Operations
• Service Operations
Managing Service and
Manufacturing
Operations
• Manufacturing Operations
• Processing
• Made-to-order operations
• Assemble-to-order operations
• Make-to-stock operations
• Flexibility
• Continuous-flow production
• Line-flow production
• Batch production
• Job shops – manufacturing
operations that handle custom
orders or small batch jobs.
Managing Service and
Manufacturing
Operations
• Manufacturing Operations
• Processing
• Made-to-order operations
• Assemble-to-order operations
• Make-to-stock operations
• Flexibility
• Continuous-flow production
• Line-flow production
• Batch production
• Job shops – manufacturing
operations that handle custom
orders or small batch jobs.
Managing Service
and Manufacturing
Operations
• Inventory – the amount and number of raw
materials, parts, and finished products that
a company has in its possession.
• Raw material
• Component parts
• Work-in-process
• Finished goods inventory
• Measuring inventory
• Average aggregate inventory
• Stock out
• Inventory turnover – the number of
times per year that a company sells, or
“turns over” its average inventory.
(generally the higher the number the
better).
• Inventory Cost
• Ordering cost
Managing Service
and Manufacturing
Operations
• Setup cost
• Holding cost
• Stock out cost
Managing Service
and Manufacturing
Operations
• Managing Inventory
1) Economic Order Quantity (EOQ)
2) Just-in-Time (JIT) – an inventory system in
which component parts arrive
from
suppliers just as they are needed at each
stage of production.
• Kanban – a ticket based JIT system that
indicates when to reorder inventory.
3) Materials requirement planning (MRP) –
system that determines the production
schedule, production batch sizes, and
inventory needed to complete final
products.
• Independent demand system- the level of
one kind of inventory does not depend on
anther (use EOQ)
• Dependent demand system –the level of
inventory depends on the number of
finished units to be produced (use JIT and
MRP)
Management 3080
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