Paper on amazon covering specifics in how they manage the company

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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: • • • • • 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. 2 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. 3 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. • • • • 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. • • • • • • 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 • • • • 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 • • • • • 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: • • • • 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. • • • • 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 • • • • • 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 • Thank you
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Running Head: HOW AMAZON HAS GROWN SUCCESSFULLY

How Amazon has Grown Successfully
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HOW AMAZON HAS GROWN SUCCESSFULLY
How Amazon has Grown Successfully
Introduction
Amazon Inc was founded in 1995 by Jeff Bezos, an innovative entrepreneur. Jeff
Bezos sought to be at the frontier in terms of delivery. He has revolutionized the conventional
method of business by creating an online delivery platform that has a universal market
presence. Through the hard work under the management of Bezos, the company has
continued to scale greater heights. The company was initially famed for its delivery of books
but it has used its available resources to diversify its portfolio. This paper will critically
examine the methods as to which Amazon has managed to gain competitive advantage. It will
examine the leadership style adopted by the company, how it motivates its employees and
how it has successfully designed an adaptive organization.
Designing Adaptive Organizations
In order for a company to realize success, it should use its organizational resources to
develop efficient strategies. Amazon is an excellent example of an organization that is
constantly seeking strategies to improve the current business practices while at the same time
creating an organizational space to introduce new ideas for the future business. In an
interview, Jeff Bezos is quoted outlining plans that will ensure that the company creates
space for invention while carrying out its existing business. He introduces the concept of
ambidextrous organizations whereby the business can benefit by deploying diverse tactics
using the same resources to realize success.
Amazon is a company famed for online sale and delivery of books. Its latest attempt
was to ensure that the company reinvents itself by adding grocery and other commodities to
its portfolio. Jeff Bezos states that the business might become monotonous if it continues

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HOW AMAZON HAS GROWN SUCCESSFULLY
specializing on one thing meaning that the company risks failure to reinvent itself. Jeff Bezos
seeks to combine the positive attributes of the business to create a same size for all culture.
Amazon seeks to create a business strategy whereby it customers receive goods from under
one roof rather than focus on what competi...


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