6 Chapter Management and Leadership in Today’s Organizations THE FUTURE OF BUSINESS: The Essentials Gitman & McDaniel

Chapter 6 The Role of Management 1 The process of guiding the development, maintenance, and allocation of resources to attain organizational goals. Management Today’s companies rely on managers to guide the daily process using human, technological, financial, and other resources to create competitive advantage. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

The Managerial Process Chapter 6 The Managerial Process 1 Managerial Process Cycle Anticipating Problems Coordinating Resources Guiding Personnel Reviewing/ Changing In a global marketplace where the rate of change is rapidly increasing, flexibility and adaptability are crucial to the managerial process. This process is based in four key functional areas of the organization: planning, organization, leadership, and control. From this perspective, the managerial process can be described as 1) anticipating problems and designing plans to deal with them, 2) coordinating and allocating the resources needed to implement plans, 3) guiding personnel through the implementation process, and 4) reviewing results and making any necessary changes. This last stage provides information to be used in ongoing planning efforts, and thus the cycle starts over again. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Managerial Work Activities Chapter 6 Managerial Work Activities 1 Organizing Planning Controlling Leading Managerial work can b divided into four activities: planning, organizing, leading, and controlling. The four functions are highly interdependent, and require sound decision making and communication skills. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Four Types of Planning 2 Strategic Tactical Operational Contingency Chapter 6 Four Types of Planning 2 Strategic Tactical Operational Planning begins by anticipating potential problems or opportunities the organization may encounter. Managers then design strategies to solve current problems, prevent future problems, or take advantages of opportunities. These strategies serve as the foundation for goals, objectives, policies, and procedures. There are four types of planning: strategic, tactical, operational, and contingency. Each is described on the following slides. Contingency Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

What Managers Do and Why Chapter 6 What Managers Do and Why 2 Planning Organizing Leading Controlling Organizational mission and objectives Organizational efficiency and effectiveness Planning begins by anticipating potential problems or opportunities the organization may encounter. Managers then design strategies to solve current problems, prevent future problems, or take advantages of opportunities. These strategies serve as the foundation for goals, objectives, policies, and procedures. There are four types of planning: strategic, tactical, operational, and contingency. Each is described on the following slides. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Strategic Planning Strategic 2 1-5 years Top management Chapter 6 Strategic Planning 2 Strategic 1-5 years Top management External environment and entire organization Establish mission and long-term goals Strategic planning involves creating long-range, broad goals for the organization and determining what resources will be needed to accomplish those goals. An evaluation of external environmental factors is critical to successful strategic planning. Broad and general content High degree of uncertainty Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 6 Mission Statement 2 A formal document that states an organization’s purpose and reason for existing and describes its basic philosophy. Mission Statement An organization’s mission is formalized in its mission statement, a document that states the purpose of the organization and its reason for existing. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Ben & Jerry’s Mission Statement Chapter 6 Ben & Jerry’s Mission Statement 2 Ben & Jerry’s mission statement addresses three fundamental issues and states the basic philosophy of the company. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Tactical Planning Tactical 2 Less than one year Middle management Chapter 6 Tactical Planning 2 Tactical Less than one year Middle management Strategic business units Establish mid-range goals for implementation More specific content Moderate degree of uncertainty Tactical planning begins the implementation of strategic plans. Tactical plans have a shorter time frame than strategic plans and more specific objectives designed to support the broader strategic goals. Tactical plans address issues of coordinating and allocating resources to different parts of the organization. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Operational Planning Operational 2 Current time frame Chapter 6 Operational Planning 2 Operational Current time frame Supervisory management Geographical and functional divisions Implement and activate specific objectives Specific and concrete content Reasonable degree of certainty Operational planning creates specific standards, methods, policies, and procedures that are used in specific functional areas of the organization. Operational objectives are current, narrow, and resource focused. They are designed to help guide and control the implementation of tactical plans. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Contingency Planning Contingency 2 Chapter 6 Contingency Planning 2 Contingency When an event occurs or situation demands Top and middle management External environment and entire organization Meet unforeseen challenges and opportunities Both broad and detailed content Reasonable degree of certainty Even the best prepared organization must sometimes cope with unforeseen circumstances such as a natural disaster, an act of terrorism, or a radical new technology. Many companies have developed contingency plans that identify alternative courses of action for unusual or crisis situations. The plan usually stipulate the chain of command, standard operating procedures, and communication channels the organization will use during an emergency. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

(departmentalization) Contract Manufacturing Chapter 6 Organizing 3 Licensing (departmentalization) Contract Manufacturing (delegation) Dividing up tasks (division of labor) A second key function of managers is organizing, which is the process of coordinating and allocating a firm’s resources in order to carry out its plans. Organizing includes developing a structure for the people, positions, departments, and activities within the firm. Managers can arrange the structural elements of the firm to maximize the flow of information and the efficiency of work processes. They accomplish this by: Dividing up tasks Grouping jobs and employees Assigning authority and responsibilities. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Levels of a Managerial Hierarchy Chapter 6 Levels of a Managerial Hierarchy 3 Middle Management Top Management Supervisory Management Strategic Plans Tactical Plans In the managerial hierarchy, the fewest managers are found at the highest level of the pyramid—top management. Examples are the CEO, president and vice president. Top-level managers develop strategic plans and address long-range issues. The second and third tiers of the hierarchy are called middle management and supervisory management. Middle managers, such as division heads, are responsible for beginning the implementation of strategic plans. They carry out tactical plans. Supervisors design and carry out operational plans for the ongoing daily activities of the firm. Operational Plans Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Levels of a Managerial Hierarchy 3 Top Management Middle Management Supervisory Management CEO President Governor General Director Regional Manager Division head Director Plant manager Sales manager Supervisor Team leader Foreman Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 6 Leadership 4 The process of guiding and motivating others toward the achievement of organizational goals. Leadership Leadership, the third key management function, is the process of guiding and motivating others toward the achievement of organizational goals. Managers are responsible for directing employees on a daily basis as the employees carry out the plans and work within the structure created by management. Organizations need strong effective leadership at all levels to meet goals and remain competitive. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Primary Sources of Power Chapter 6 Primary Sources of Power 4 Referent power Expert power Coercive power Reward power Legitimate power Derived from individual’s charisma and respect/admiration inspired Derived from individual’s extensive knowledge Derived from individual’s ability to threaten negative outcomes Derived from individual’s control over rewards Derived from individual’s position in an organization To be effective leaders, managers must be able to influence others’ behavior. This ability to influence others to behave in a particular way is called power. The five primary sources, or bases, of power are described here. Many leaders use a combination of all of these sources of power to influence individuals toward goal achievement. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Leadership Styles 4 Autocratic Style Participative Style Chapter 6 Leadership Styles 4 Autocratic Style Participative Style Free-Rein (Laissez-Faire) Style Amount of authority held by the leader Amount of authority held by group members Individuals in leadership positions tend to be relatively consistent in the way they attempt to influence the behavior of others. This pattern of behavior is referred to as leadership style. There are three distinct leadership styles. Autocratic leaders are directive leaders, allowing for very little input from subordinates. These leaders prefer to make decisions on their own. Information typically flows one way: from manager to subordinate. the military is generally autocratic. Participative leadership is a leadership style in which the leader shares decision making with group members and encourages discussion of issues and alternatives. The three types are described on the following slide. Free-rein or laissez faire leaders turn over all authority and control to subordinates. Employees are assigned a task and given free rein to figure out the best way to accomplish it. This approach is sometimes with highly trained professionals. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Participative Leadership Chapter 6 Participative Leadership 4 Consultative Consensual Democratic Participative Leadership Types Democratic leaders solicit input from all members of the group and then allow the group members to make the final decision through a voting process. Consensual leaders encourage discussion about issues and then require that all parties involved agree to the final decision. This is used by labor mediators. Consultative leaders confer with subordinates before making a decision, but retain the final decision-making authority. This technique has been used to increase the productivity of assembly-line workers. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 6 Empowerment 4 The process of giving employees increased autonomy and discretion to make decisions, as well as control over the resources needed to implement those decisions. Empowerment Participative and free-rein leaders use a technique called empowerment to share decision-making authority with subordinates. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 6 Corporate Culture 4 The set of attitudes, values, and standards that distinguishes one organization from another. Corporate Culture The leadership style of managers is usually indicative of the underlying philosophy, or values, of the organization. The set of attitudes, values, and standards of behavior that distinguishes one organization from another is called corporate culture. It evolves over time and is based on the accumulated history of the organization, including the vision of the founders. Although culture is intangible, it can have a strong impact on a company's success. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Chapter 6 The Control Process 5 1. Set performance standards and goals 2. Measure performance 3. Compare actual performance to established standards 4. Take corrective action 5. Use information to set up future performance standards Controlling is the process of assessing the organization's progress toward accomplishing its goals. It includes monitoring the implementation of a plan and correcting deviations of that plan. Controlling can be visualized as a cyclical process made up of five stages, as shown on this slide. Performance standards are the levels of performance the company wants to attain. These goals are based on its strategic, tactical, and operational plans. Effective performance standards state a measurable behavioral objective that can be achieved in a specified time period. Why is controlling such an important part of a manager’s job? It helps managers to determine the success of the functions of planning, organizing, and leading. Second, control systems direct employee behavior toward achieving organizational goals. Third, control systems provide a means of coordinating employee activities and integrating resources throughout the organization. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Managerial Roles 6 Informational Roles Monitor Chapter 6 Managerial Roles 6 Informational Roles Monitor Gathers information relevant to organization Disseminator Provides information where it is needed Spokesperson Transmits information to people outside the organization Interpersonal Roles Figurehead Represents the company in a symbolic way Leader Guides and motivates employees to achieve goals Liaison Acts as a go-between among individuals, inside and outside A role is a set of behavioral expectations, or a set of activities that a person is expected to perform. Managers’ roles fall into three basic categories: informational roles, interpersonal roles, and decisional roles. Decisional Roles Entrepreneur Searches out new opportunities and initiates change Disturbance Handler Handles unexpected events and crises Resource Allocator Designates use of organizational resources Negotiator Represents the company at negotiating processes Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

The Decision Making Process Chapter 6 The Decision Making Process 6 3. Select one or more alternatives 1. Recognize or define the problem 2. Identify possible solutions 4. Put the plan into action 5. Follow up to see if problem is solved The events of September 11, 2001, shocked America. Addressing terrorism required a systematic approach to decision making. Managers typically follow five steps in the decision-making process. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Managerial Skills 7 Chapter 6 A skill is the ability to do something proficiently. Managerial skills fall into three basic categories: conceptual, human relations, and technical skills. The degree to which each type of skill is used depends upon the level of the manager’s position. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Human Relations Skills Managerial Skills 7 Conceptual Skills A manager’s ability to view the organization as a whole, understand the interdependencies, and its relation to external environment Human Relations Skills A manager’s interpersonal skills used to accomplish goals through the use of human resources Technical Skills A manager’s specialized areas of knowledge and expertise, and the ability to apply that knowledge Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved

Trends in Management and Leadership Chapter 6 Trends in Management and Leadership 8 Increasing employee empowerment Growing use of information technology Increasing need for global management skills Need to prepare for crises management Four important trends in management today are: Increasing employee empowerment. Firms are increasing the level of employee involvement in the decision making process, realizing that people at all levels in the organization possess unique knowledge, skills, and abilities. In order for empowerment to work, managers have to facilitate employee decision making by providing access to information, clear expectations for results, behavioral boundaries, and the resources employees need. The second trend is the proliferation of information technology. An example is PeopleSoft, a provider of automated human resource functions. As companies expand around the globe, managers will face the challenges of directing the behavior of employees around the world. They must recognize that cultural differences cause people to respond differently, and develop an individual-level program that is based on values and principles. Managers should apply example, involvement, and trust to this process. Managers should be prepared for crises. Managers should not become immobilized by the problem or ignore it. Managers should always tell the truth about the situation, and put the best people on the job to correct the problem. Finally, managers must learn from the experience. Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved