management 4 6 7 9 15 and 17

Abdul Rehman NAzeerAbdul Rehman NAzeer• Management Final ChaptersManagement Final Chapters

chapters :chapters :• 44• 66• 77• 99• 1515• 1717

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 4–1


Managing in a Managing in a Global Global EnvironmentEnvironment

ChapterChapter

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Management Stephen P. Robbins Mary Coulter

tenth edition


Learning OutcomesLearning OutcomesFollow this Learning Outline as you read and study Follow this Learning Outline as you read and study this chapter.this chapter.

4.1 What’s Your Global perspective?• Define parochialism.Define parochialism.

• Contrast ethnocentric, polycentric, and geocentric Contrast ethnocentric, polycentric, and geocentric attitudes towards global business.attitudes towards global business.

4.2 Understanding The global Environment• Describe the current status of the EU, NAFTA, Describe the current status of the EU, NAFTA,

ASEAN and other Regional Trade Allowances.ASEAN and other Regional Trade Allowances.

• Discuss the role of the WTO.Discuss the role of the WTO.


Learning OutcomesLearning Outcomes

4.3 Doing Business Globally• Contrast multinational, multidomestic, global, Contrast multinational, multidomestic, global,

transnational, and born global organizations.transnational, and born global organizations.• Describe the different ways organizations can go Describe the different ways organizations can go

international.international.

4.4 Managing In A Global Environment.• Explain how the global legal-political and economic Explain how the global legal-political and economic

environments affect managers.environments affect managers.• Discuss Hofstede’s five dimensions for assessing Discuss Hofstede’s five dimensions for assessing

cultures.cultures.• Describe the challenges of doing business globally in Describe the challenges of doing business globally in

today’s world.today’s world.



4.4 Managing In A Global Environment.• Explain how the global legal-political and economic Explain how the global legal-political and economic

environments affect managers.environments affect managers.

• Discuss Hofstede’s five dimensions for assessing Discuss Hofstede’s five dimensions for assessing cultures.cultures.

• Describe the challenges of doing business globally in Describe the challenges of doing business globally in today’s world.today’s world.


The Global MarketplaceThe Global Marketplace

• Opportunities and ChallengesOpportunities and Challenges Coping with the unexpected appearance of new Coping with the unexpected appearance of new

competitorscompetitors Acknowledging cultural, political, and economic Acknowledging cultural, political, and economic

differencesdifferences Dealing with increased uncertainty, fear, and worryDealing with increased uncertainty, fear, and worry Adapting to changes in the global environmentAdapting to changes in the global environment Avoiding parochialismAvoiding parochialism


What’s Your Global What’s Your Global Perspective?Perspective?

• ParochialismParochialism Is viewing the world exclusively through one’s own Is viewing the world exclusively through one’s own

eyes and perspectives.eyes and perspectives. Is not recognizing that others have different ways of Is not recognizing that others have different ways of

living and working.living and working. Is a significant problem for managers working in a Is a significant problem for managers working in a

global business world.global business world. Is falling into the trap of ignoring others’ values and Is falling into the trap of ignoring others’ values and

customs and strictly applying an attitude of “ours is customs and strictly applying an attitude of “ours is better than theirs” to foreign cultures.better than theirs” to foreign cultures.


Adopting a Global PerspectiveAdopting a Global Perspective• Ethnocentric AttitudeEthnocentric Attitude

The parochalistic belief that the best work approaches The parochalistic belief that the best work approaches and practices are those of the and practices are those of the homehome country. country.

• Polycentric AttitudePolycentric Attitude The view that the managers in the The view that the managers in the hosthost country know country know

the best work approaches and practices for running the best work approaches and practices for running their business.their business.

• Geocentric AttitudeGeocentric Attitude A A world-orientedworld-oriented view that focuses on using the best view that focuses on using the best

approaches and people from around the globe.approaches and people from around the globe.


Regional Trading AgreementsRegional Trading Agreements• The European Union (EU)The European Union (EU)

A unified economic and trade entity A unified economic and trade entity Belgium, Denmark, France, Greece, Ireland, Italy, Belgium, Denmark, France, Greece, Ireland, Italy,

Luxembourg, the Netherlands, Portugal, Spain, the United Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom, Germany, Austria, Finland, and SwedenKingdom, Germany, Austria, Finland, and Sweden

• North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA) Eliminated barriers to free trade (tariffs, import Eliminated barriers to free trade (tariffs, import

licensing requirements, and customs user fees)licensing requirements, and customs user fees) United States, Canada, and MexicoUnited States, Canada, and Mexico


Exhibit 4–1Exhibit 4–1 European Union European Union


Regional Trading AgreementsRegional Trading Agreements

• U.S.-Central America Free Trade Agreement (CAFTA)U.S.-Central America Free Trade Agreement (CAFTA)• Free Trade Area of the AmericasFree Trade Area of the Americas• Southern Cone Common Market (Mercosur)Southern Cone Common Market (Mercosur)• Association of Southeast Asian Nations (ASEAN)Association of Southeast Asian Nations (ASEAN)

Trading alliance of 10 Southeast Asian nationsTrading alliance of 10 Southeast Asian nations• African UnionAfrican Union• South Asian Association for Regional Cooperation South Asian Association for Regional Cooperation

(SARRC)(SARRC)


Exhibit 4–2Exhibit 4–2 ASEAN MembersASEAN Members

Source: Based on J. McClenahen and T. Clark, “ASEAN at Work,” IW. May 19, 1997, p. 42.


The World Trade Organization The World Trade Organization (WTO)(WTO)

• Evolved from the General Agreement on Tariffs Evolved from the General Agreement on Tariffs and Trade (GATT) in 1995.and Trade (GATT) in 1995.

• Functions as the only global organization Functions as the only global organization dealing with the rules of trade among nations.dealing with the rules of trade among nations.

• Has 149 member nations and 32 observer Has 149 member nations and 32 observer governments.governments.

• Monitors and promotes world trade.Monitors and promotes world trade.


Different Types of International Different Types of International OrganizationsOrganizations

• Multinational Corporation (MNC)Multinational Corporation (MNC) Maintains operations in multiple countries.Maintains operations in multiple countries.

• Multidomestic CorporationMultidomestic Corporation Is an MNC that decentralizes management and other Is an MNC that decentralizes management and other

decisions to the local country.decisions to the local country.

• Global CompanyGlobal Company Is an MNC that centralizes its management and other Is an MNC that centralizes its management and other

decisions in the home country.decisions in the home country.


Different Types of International Different Types of International Organizations (cont’d)Organizations (cont’d)

• Transnational Corporation (Borderless Transnational Corporation (Borderless Organization)Organization) Is an MNC that has eliminated structural divisions that Is an MNC that has eliminated structural divisions that

impose artificial geographic barriers and is organized impose artificial geographic barriers and is organized along business lines that reflect a geocentric attitude.along business lines that reflect a geocentric attitude.


Managing in A Global Managing in A Global EnvironmentEnvironment

• The Legal EnvironmentThe Legal Environment Stability or instability of legal and political systemsStability or instability of legal and political systems

Legal procedures are established and followedLegal procedures are established and followed

Fair and honest elections held on a regular basisFair and honest elections held on a regular basis

Differences in the laws of various nationsDifferences in the laws of various nations Effects on business activitiesEffects on business activities

Effects on delivery of products and servicesEffects on delivery of products and services


The Economic EnvironmentThe Economic Environment• Economic SystemsEconomic Systems

Free market economyFree market economy An economy in which resources are primarily owned and An economy in which resources are primarily owned and

controlled by the private sector.controlled by the private sector.

Planned economyPlanned economy An economy in which all economic decisions are planned by An economy in which all economic decisions are planned by

a central government.a central government.

• Monetary and Financial FactorsMonetary and Financial Factors Currency exchange ratesCurrency exchange rates Inflation ratesInflation rates Diverse tax policiesDiverse tax policies


The Cultural EnvironmentThe Cultural Environment• National CultureNational Culture

Is the values and attitudes shared by individuals from Is the values and attitudes shared by individuals from a specific country that shape their behavior and their a specific country that shape their behavior and their beliefs about what is important.beliefs about what is important.

May have more influence on an organization than the May have more influence on an organization than the organization culture.organization culture.


Exhibit 4–4Exhibit 4–4 What Are Americans Like What Are Americans Like

Americans are very informal.

Americans are direct.

Americans are competitive.

Americans are achievers.

Americans are independent and individualistic.

Americans are questioners.

Americans dislike silence.

Americans value punctuality.

Americans value cleanliness.Sources: Based on M. Ernest (ed.), Predeparture Orientation Handbook: For Foreign Students and Scholars Planning to Study in the United States (Washington, DC: U.S. Information Agency, Bureau of Cultural Affairs, 1984), pp. 103–05; A. Bennett, “American Culture Is Often a Puzzle for Foreign Managers in the U.S.,” Wall Street Journal, February 12, 1986, p. 29; “Don’t Think Our Way’s the Only Way,” The Pryor Report, February 1988, p. 9; and B.J. Wattenberg, “The Attitudes behind American Exceptionalism,” U.S. News & World Report, August 7, 1989, p. 25.


Global Management in Today’s Global Management in Today’s WorldWorld

• ChallengesChallenges Openness associated with globalizationOpenness associated with globalization Significant cultural differences (e.g., Americanization)Significant cultural differences (e.g., Americanization) Adjusting leadership styles and management Adjusting leadership styles and management

approachesapproaches

• RisksRisks Loss of investments in unstable countriesLoss of investments in unstable countries Increased terrorismIncreased terrorism Economic interdependence Economic interdependence


Terms to KnowTerms to Know• parochialismparochialism• ethnocentric attitudeethnocentric attitude• polycentric attitudepolycentric attitude• geocentric attitudegeocentric attitude• European Union (EU)European Union (EU)• EuroEuro• North American Free Trade North American Free Trade

Agreement (NAFTA)Agreement (NAFTA)• Association of Southeast Asian Association of Southeast Asian

Nations (ASEAN)Nations (ASEAN)• World Trade Organization World Trade Organization

(WTO)(WTO)• multinational corporations multinational corporations

(MNCs)(MNCs)• multidomestic corporationmultidomestic corporation• global companyglobal company• transnational or borderless transnational or borderless

organizationorganization

• born globals born globals • global sourcingglobal sourcing• exportingexporting• importingimporting• licensinglicensing• franchisingfranchising• strategic alliancesstrategic alliances• joint venturejoint venture• foreign subsidiaryforeign subsidiary• market economymarket economy• command economycommand economy• national culturenational culture• GLOBEGLOBE• wikiswikis• blogsblogs


Managers Managers as as Decision MakersDecision Makers

ChapterChapter

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tenth edition


Learning OutcomesLearning OutcomesFollow this Learning Outline as you read and Follow this Learning Outline as you read and study this chapter.study this chapter.

6.1 The Decision-Making Process.• Define decision.Define decision.

• Describe the eight steps in the decision-making process.Describe the eight steps in the decision-making process.

6.2 Managers Making Decisions.• Discuss the assumptions of rational decision making.Discuss the assumptions of rational decision making.

• Describe the concepts of bounded rationality, satisficing, and Describe the concepts of bounded rationality, satisficing, and escalation of commitment.escalation of commitment.

• Explain intuitive decision making.Explain intuitive decision making.



6.3 Types Of Decisions and Decision-Making Conditions.

• Explain the two types of problems and decisions.Explain the two types of problems and decisions.

• Contrast the three decision making conditions.Contrast the three decision making conditions.

• Explain maximax, maximin, and minimax decision choice Explain maximax, maximin, and minimax decision choice approaches.approaches.

6.4 Decision-Making Styles

• Describe two decision-making styles.Describe two decision-making styles.

• Discuss the twelve decision-making biases.Discuss the twelve decision-making biases.

• Explain the managerial decision-making model.Explain the managerial decision-making model.



6.5 Effective Decision Making In Today’s World.

• Explain how managers can make effective decisions Explain how managers can make effective decisions in today’s world.in today’s world.

• List the six characteristics of an effective decision List the six characteristics of an effective decision making process.making process.

• List the five habits of highly reliable organizations.List the five habits of highly reliable organizations.


Decision MakingDecision Making• DecisionDecision

Making a choice from two or more alternatives.Making a choice from two or more alternatives.

• The Decision-Making ProcessThe Decision-Making Process Identifying a problem and decision criteria and Identifying a problem and decision criteria and

allocating weights to the criteria.allocating weights to the criteria.

Developing, analyzing, and selecting an alternative Developing, analyzing, and selecting an alternative that can resolve the problem.that can resolve the problem.

Implementing the selected alternative.Implementing the selected alternative.

Evaluating the decision’s effectiveness.Evaluating the decision’s effectiveness.


Exhibit 6–1Exhibit 6–1The Decision-Making The Decision-Making ProcessProcess


Step 1: Identifying the ProblemStep 1: Identifying the Problem

• ProblemProblem

A discrepancy between an existing and desired state A discrepancy between an existing and desired state of affairs.of affairs.

• Characteristics of ProblemsCharacteristics of Problems

A problem becomes a problem when a manager A problem becomes a problem when a manager becomes aware of it.becomes aware of it.

There is pressure to solve the problem.There is pressure to solve the problem.

The manager must have the authority, information, or The manager must have the authority, information, or resources needed to solve the problem.resources needed to solve the problem.


Step 2: Identifying Decision CriteriaStep 2: Identifying Decision Criteria• Decision criteria are factors that are important Decision criteria are factors that are important

(relevant) to resolving the problem such as:(relevant) to resolving the problem such as: Costs that will be incurred (investments required)Costs that will be incurred (investments required)

Risks likely to be encountered (chance of failure)Risks likely to be encountered (chance of failure)

Outcomes that are desired (growth of the firm)Outcomes that are desired (growth of the firm)

Step 3: Allocating Weights to the CriteriaStep 3: Allocating Weights to the Criteria• Decision criteria are not of equal importance:Decision criteria are not of equal importance:

Assigning a weight to each item places the items in Assigning a weight to each item places the items in the correct priority order of their importance in the the correct priority order of their importance in the decision-making process.decision-making process.


Exhibit 6–2Exhibit 6–2 Criteria and Weights for Computer Replacement Criteria and Weights for Computer Replacement DecisionDecision

Criterion Weight

Memory and Storage 10

Battery life 8

Carrying Weight 6

Warranty 4

Display Quality 3


Step 4: Developing AlternativesStep 4: Developing Alternatives• Identifying viable alternativesIdentifying viable alternatives

Alternatives are listed (without evaluation) that can Alternatives are listed (without evaluation) that can resolve the problem.resolve the problem.

Step 5: Analyzing AlternativesStep 5: Analyzing Alternatives

• Appraising each alternative’s strengths and Appraising each alternative’s strengths and weaknessesweaknesses An alternative’s appraisal is based on its ability to An alternative’s appraisal is based on its ability to

resolve the issues identified in steps 2 and 3.resolve the issues identified in steps 2 and 3.


Exhibit 6–3 Assessed Values of Laptop Exhibit 6–3 Assessed Values of Laptop Computers Using Decision Criteria Computers Using Decision Criteria


Step 6: Selecting an AlternativeStep 6: Selecting an Alternative• Choosing the best alternativeChoosing the best alternative

The alternative with the highest total weight is The alternative with the highest total weight is chosen.chosen.

Step 7: Implementing the Step 7: Implementing the AlternativeAlternative• Putting the chosen alternative into action.Putting the chosen alternative into action.

Conveying the decision to and gaining commitment Conveying the decision to and gaining commitment from those who will carry out the decision.from those who will carry out the decision.


Exhibit 6–4Exhibit 6–4 Evaluation of Laptop Alternatives Evaluation of Laptop Alternatives Against Weighted Criteria Against Weighted Criteria


Step 8: Evaluating the Step 8: Evaluating the Decision’s EffectivenessDecision’s Effectiveness• The soundness of the decision is judged by its The soundness of the decision is judged by its

outcomes.outcomes.

How effectively was the problem resolved by How effectively was the problem resolved by outcomes resulting from the chosen alternatives?outcomes resulting from the chosen alternatives?

If the problem was not resolved, what went wrong?If the problem was not resolved, what went wrong?


Exhibit 6–5Exhibit 6–5 Decisions in the Management Decisions in the Management Functions Functions


Making DecisionsMaking Decisions• RationalityRationality

Managers make consistent, value-maximizing choices Managers make consistent, value-maximizing choices with specified constraints.with specified constraints.

Assumptions are that decision makers:Assumptions are that decision makers: Are perfectly rational, fully objective, and logical.Are perfectly rational, fully objective, and logical.

Have carefully defined the problem and identified all viable Have carefully defined the problem and identified all viable alternatives.alternatives.

Have a clear and specific goalHave a clear and specific goal

Will select the alternative that maximizes outcomes in the Will select the alternative that maximizes outcomes in the organization’s interests rather than in their personal interests.organization’s interests rather than in their personal interests.


Making Decisions (cont’d)Making Decisions (cont’d)• Bounded RationalityBounded Rationality

Managers make decisions rationally, but are limited Managers make decisions rationally, but are limited (bounded) by their ability to process information.(bounded) by their ability to process information.

Assumptions are that decision makers:Assumptions are that decision makers: Will not seek out or have knowledge of all alternativesWill not seek out or have knowledge of all alternatives

Will Will satisficesatisfice—choose the first alternative encountered that —choose the first alternative encountered that satisfactorily solves the problem—satisfactorily solves the problem—rather than maximize the rather than maximize the outcome of their decision by considering all alternatives and outcome of their decision by considering all alternatives and choosing the best.choosing the best.

Influence on decision makingInfluence on decision making Escalation of commitment: an increased commitment to a Escalation of commitment: an increased commitment to a

previous decision despite evidence that it may have been previous decision despite evidence that it may have been wrong. wrong.


Types of Problems and Types of Problems and DecisionsDecisions• Structured ProblemsStructured Problems

Involve goals that are clear.Involve goals that are clear.

Are familiar (have occurred before).Are familiar (have occurred before).

Are easily and completely definedAre easily and completely defined—infor—information about mation about the problem is available and complete.the problem is available and complete.

• Programmed DecisionProgrammed Decision

A repetitive decision that can be handled by a routine A repetitive decision that can be handled by a routine approach.approach.


Types of Programmed DecisionsTypes of Programmed Decisions• ProcedureProcedure

A series of interrelated steps that a manager can use A series of interrelated steps that a manager can use to respond (applying a policy) to a structured problem.to respond (applying a policy) to a structured problem.

• RuleRule An explicit statement that limits what a manager or An explicit statement that limits what a manager or

employee can or cannot do.employee can or cannot do.

• PolicyPolicy A general guideline for making a decision about a A general guideline for making a decision about a

structured problem.structured problem.


Policy, Procedure, and Rule Policy, Procedure, and Rule ExamplesExamples

• PolicyPolicy

Accept all customer-returned merchandise.Accept all customer-returned merchandise.

• ProcedureProcedure

Follow all steps for completing merchandise return Follow all steps for completing merchandise return documentation.documentation.

• RulesRules

Managers must approve all refunds over $50.00.Managers must approve all refunds over $50.00.

No credit purchases are refunded for cash.No credit purchases are refunded for cash.


Problems and Decisions (cont’d)Problems and Decisions (cont’d)• Unstructured ProblemsUnstructured Problems

Problems that are new or unusual and for which Problems that are new or unusual and for which information is ambiguous or incomplete.information is ambiguous or incomplete.

Problems that will require custom-made solutions.Problems that will require custom-made solutions.

• Nonprogrammed DecisionsNonprogrammed Decisions

Decisions that are unique and nonrecurring.Decisions that are unique and nonrecurring.

Decisions that generate unique responses.Decisions that generate unique responses.


Exhibit 6–7 Programmed Versus Nonprogrammed DecisionsExhibit 6–7 Programmed Versus Nonprogrammed Decisions


Decision-Making ConditionsDecision-Making Conditions• CertaintyCertainty

A situation in which a manager can make an accurate A situation in which a manager can make an accurate decision because the outcome of every alternative decision because the outcome of every alternative choice is known.choice is known.

• RiskRisk A situation in which the manager is able to estimate A situation in which the manager is able to estimate

the likelihood (probability) of outcomes that result the likelihood (probability) of outcomes that result from the choice of particular alternatives.from the choice of particular alternatives.


Terms to KnowTerms to Know• decisiondecision• Decision-making processDecision-making process• problemproblem• decision criteriadecision criteria• rational decision makingrational decision making• bounded rationalitybounded rationality• satisficingsatisficing• escalation of commitmentescalation of commitment• intuitive decision makingintuitive decision making• structured problemsstructured problems• programmed decisionprogrammed decision• procedureprocedure• rulerule

• policypolicy• unstructured problemsunstructured problems• nonprogrammed decisionsnonprogrammed decisions• certaintycertainty• riskrisk• uncertaintyuncertainty• directive styledirective style• analytic styleanalytic style• conceptual styleconceptual style• behavioral stylebehavioral style• heuristicsheuristics• business performance business performance

management (BPM) softwaremanagement (BPM) software


All rights reserved. No part of this publication may be reproduced, All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by stored in a retrieval system, or transmitted, in any form or by

any means, electronic, mechanical, photocopying, recording, or any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. otherwise, without the prior written permission of the publisher.

Printed in the United States of America.Printed in the United States of America.


Foundations of Foundations of PlanningPlanning

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tenth edition



7.1 The What And Why Of Planning• Define planning.Define planning.

• Describe the purposes of planning.Describe the purposes of planning.

• Explain what studies have shown about the relationship between Explain what studies have shown about the relationship between planning and performanceplanning and performance.

7.2 Goals And Plans7.2 Goals And Plans• Define goals and plans.Define goals and plans.

• Describe the types of goals organizations might have.Describe the types of goals organizations might have.

• Describe each of the different types of plans.Describe each of the different types of plans.



7.3 Setting Goals and Developing Plans7.3 Setting Goals and Developing Plans• Discuss how traditional goal setting and MBO work.Discuss how traditional goal setting and MBO work.

• Describe well written goals and explain hw to set them.Describe well written goals and explain hw to set them.

• Discuss the contingency factors that affect planning.Discuss the contingency factors that affect planning.

• Describe the approaches to planning.Describe the approaches to planning.

7.4 Contemporary Issues in Planning7.4 Contemporary Issues in Planning

• Explain the criticisms of planning.Explain the criticisms of planning.

• Describe how managers can effectively plan in today’s dynamic Describe how managers can effectively plan in today’s dynamic environment.environment.


What Is Planning?What Is Planning?

• PlanningPlanning A primary managerial activity that involves:A primary managerial activity that involves:

Defining the organization’s goalsDefining the organization’s goals Establishing an overall strategy for achieving those goalsEstablishing an overall strategy for achieving those goals Developing plans for organizational work activitiesDeveloping plans for organizational work activities

Formal planningFormal planning Specific goals covering a specific time periodSpecific goals covering a specific time period Written and shared with organizational membersWritten and shared with organizational members


Why Do Managers Plan?Why Do Managers Plan?• Purposes of PlanningPurposes of Planning

Provides directionProvides direction Reduces uncertaintyReduces uncertainty Minimizes waste and redundancyMinimizes waste and redundancy Sets the standards for controllingSets the standards for controlling


Planning and PerformancePlanning and Performance• The Relationship Between Planning and The Relationship Between Planning and

PerformancePerformance Formal planning is associated with:Formal planning is associated with:

Higher profits and returns on assets.Higher profits and returns on assets. Positive financial results.Positive financial results.

The quality of planning and implementation affects The quality of planning and implementation affects performance more than the extent of planning.performance more than the extent of planning.

The external environment can reduce the impact of The external environment can reduce the impact of planning on performance.planning on performance.

Formal planning must be used for several years Formal planning must be used for several years before planning begins to affect performance.before planning begins to affect performance.


How Do Managers Plan?How Do Managers Plan?• Elements of PlanningElements of Planning

Goals (also Objectives)Goals (also Objectives) Desired outcomes for individuals, groups, or entire Desired outcomes for individuals, groups, or entire

organizationsorganizations

Provide direction and evaluation performance criteriaProvide direction and evaluation performance criteria

PlansPlans Documents that outline how goals are to be accomplishedDocuments that outline how goals are to be accomplished

Describe how resources are to be allocated and establish Describe how resources are to be allocated and establish activity schedulesactivity schedules


Types of GoalsTypes of Goals• Financial GoalsFinancial Goals

Are related to the expected internal financial Are related to the expected internal financial performance of the organization.performance of the organization.

• Strategic GoalsStrategic Goals Are related to the performance of the firm relative to Are related to the performance of the firm relative to

factors in its external environment (e.g., competitors).factors in its external environment (e.g., competitors).

• Stated Goals versus Real GoalsStated Goals versus Real Goals Broadly-worded official statements of the organization Broadly-worded official statements of the organization

(intended for public consumption) that may be (intended for public consumption) that may be irrelevant to its real goals (what actually goes on in irrelevant to its real goals (what actually goes on in the organization).the organization).


Exhibit 7–1Exhibit 7–1 Types of PlansTypes of Plans


Types of PlansTypes of Plans• Strategic PlansStrategic Plans

Apply to the entire organization.Apply to the entire organization.

Establish the organization’s overall goals.Establish the organization’s overall goals.

Seek to position the organization in terms of its Seek to position the organization in terms of its environment.environment.

Cover extended periods of time.Cover extended periods of time.

• Operational PlansOperational Plans Specify the details of how the overall goals are to be Specify the details of how the overall goals are to be

achieved.achieved.

Cover a short time period.Cover a short time period.


Types of PlansTypes of Plans• Long-Term PlansLong-Term Plans

Plans with time frames extending beyond three yearsPlans with time frames extending beyond three years

• Short-Term PlansShort-Term Plans Plans with time frames of one year or lessPlans with time frames of one year or less

• Specific PlansSpecific Plans Plans that are clearly defined and leave no room for Plans that are clearly defined and leave no room for

interpretationinterpretation

• Directional PlansDirectional Plans Flexible plans that set out general guidelines and Flexible plans that set out general guidelines and

provide focus, yet allow discretion in implementationprovide focus, yet allow discretion in implementation


Types of PlansTypes of Plans• Single-Use PlanSingle-Use Plan

A one-time plan specifically designed to meet the A one-time plan specifically designed to meet the need of a unique situation.need of a unique situation.

• Standing PlansStanding Plans Ongoing plans that provide guidance for activities Ongoing plans that provide guidance for activities

performed repeatedly.performed repeatedly.


Setting Goals and Developing PlansSetting Goals and Developing Plans

• Traditional Goal SettingTraditional Goal Setting Broad goals are set at the top of the organization.Broad goals are set at the top of the organization. Goals are then broken into sub-goals for each Goals are then broken into sub-goals for each

organizational level.organizational level. Assumes that top management knows best because Assumes that top management knows best because

they can see the “big picture.”they can see the “big picture.” Goals are intended to direct, guide, and constrain Goals are intended to direct, guide, and constrain

from above.from above. Goals lose clarity and focus as lower-level managers Goals lose clarity and focus as lower-level managers

attempt to interpret and define the goals for their attempt to interpret and define the goals for their areas of responsibility.areas of responsibility.


Exhibit 7–2Exhibit 7–2 The Downside of Traditional The Downside of Traditional Goal SettingGoal Setting


• Maintaining the Hierarchy of GoalsMaintaining the Hierarchy of Goals Means–Ends ChainMeans–Ends Chain

The integrated network of goals that results from establishing The integrated network of goals that results from establishing a clearly-defined hierarchy of organizational goals.a clearly-defined hierarchy of organizational goals.

Achievement of lower-level goals is the means by which to Achievement of lower-level goals is the means by which to reach higher-level goals (ends).reach higher-level goals (ends).



• Management By Objectives (MBO)Management By Objectives (MBO) Specific performance goals are jointly determined by Specific performance goals are jointly determined by

employees and managers.employees and managers. Progress toward accomplishing goals is periodically Progress toward accomplishing goals is periodically

reviewed.reviewed. Rewards are allocated on the basis of progress Rewards are allocated on the basis of progress

towards the goals.towards the goals. Key elements of MBO:Key elements of MBO:

Goal specificity, participative decision making, an explicit Goal specificity, participative decision making, an explicit performance/evaluation period, feedbackperformance/evaluation period, feedback



Exhibit 7–3Exhibit 7–3 Steps in a Typical MBO Steps in a Typical MBO ProgramProgram

1. The organization’s overall objectives and strategies are formulated.

2. Major objectives are allocated among divisional and departmental units.

3. Unit managers collaboratively set specific objectives for their units with their managers.

4. Specific objectives are collaboratively set with all department members.

5. Action plans, defining how objectives are to be achieved, are specified and agreed upon by managers and employees.

6. The action plans are implemented.

7. Progress toward objectives is periodically reviewed, and feedback is provided.

8. Successful achievement of objectives is reinforced by performance-based rewards.


Does MBO Work?Does MBO Work?• Reason for MBO SuccessReason for MBO Success

Top management commitment and involvementTop management commitment and involvement

• Potential Problems with MBO ProgramsPotential Problems with MBO Programs Not as effective in dynamic environments that require Not as effective in dynamic environments that require

constant resetting of goals.constant resetting of goals.

Overemphasis on individual accomplishment may Overemphasis on individual accomplishment may create problems with teamwork.create problems with teamwork.

Allowing the MBO program to become an annual Allowing the MBO program to become an annual paperwork shuffle.paperwork shuffle.


Exhibit 7–4Exhibit 7–4 Well-Written Goals Well-Written Goals

• Written in terms of Written in terms of outcomes, not actionsoutcomes, not actions Focuses on the ends, not Focuses on the ends, not

the means.the means.

• Measurable and Measurable and quantifiablequantifiable Specifically defines how the Specifically defines how the

outcome is to be measured outcome is to be measured and how much is expected.and how much is expected.

• Clear as to time frameClear as to time frame How long before measuring How long before measuring

accomplishment.accomplishment.

• Challenging yet attainableChallenging yet attainable Low goals do not motivate.Low goals do not motivate. High goals motivate if they High goals motivate if they

can be achieved.can be achieved.

• Written downWritten down Focuses, defines, and Focuses, defines, and

makes goals visible.makes goals visible.

• Communicated to all Communicated to all necessary organizational necessary organizational membersmembers Puts everybody “on the Puts everybody “on the

same page.”same page.”


Steps in Goal SettingSteps in Goal Setting1.1. Review the organization’s mission statement.Review the organization’s mission statement.

Do goals reflect the mission?Do goals reflect the mission?

2.2. Evaluate available resources.Evaluate available resources.

Are resources sufficient to accomplish the mission?Are resources sufficient to accomplish the mission?

3.3. Determine goals individually or with others.Determine goals individually or with others.

Are goals specific, measurable, and timely?Are goals specific, measurable, and timely?

4.4. Write down the goals and communicate them.Write down the goals and communicate them.

Is everybody on the same page?Is everybody on the same page?

5.5. Review results and whether goals are being met.Review results and whether goals are being met.

What changes are needed in mission, resources, or goals?What changes are needed in mission, resources, or goals?


Developing PlansDeveloping Plans• Contingency Factors in a Manager’s PlanningContingency Factors in a Manager’s Planning

Manager’s level in the organizationManager’s level in the organization Strategic plans at higher levelsStrategic plans at higher levels

Operational plans at lower levelsOperational plans at lower levels

Degree of environmental uncertaintyDegree of environmental uncertainty Stable environment: specific plansStable environment: specific plans

Dynamic environment: specific but flexible plansDynamic environment: specific but flexible plans

Length of future commitmentsLength of future commitments Commitment Concept:Commitment Concept: current plans affecting future current plans affecting future

commitments must be sufficiently long-term to meet those commitments must be sufficiently long-term to meet those commitments.commitments.


Exhibit 7–5Exhibit 7–5 Planning in the Hierarchy of Planning in the Hierarchy of Organizations Organizations


Approaches to PlanningApproaches to Planning• Establishing a formal planning departmentEstablishing a formal planning department

A group of planning specialists who A group of planning specialists who helphelp managers managers write organizational plans.write organizational plans.

Planning is a function of management; it should never Planning is a function of management; it should never become the sole responsibility of planners.become the sole responsibility of planners.

• Involving organizational members in the processInvolving organizational members in the process

Plans are developed by members of organizational Plans are developed by members of organizational units at various levels and then coordinated with other units at various levels and then coordinated with other units across the organization.units across the organization.


Contemporary Issues in Contemporary Issues in PlanningPlanning• Criticisms of PlanningCriticisms of Planning

Planning may create rigidity.Planning may create rigidity.

Plans cannot be developed for dynamic Plans cannot be developed for dynamic environments.environments.

Formal plans cannot replace intuition and creativity.Formal plans cannot replace intuition and creativity.

Planning focuses managers’ attention on today’s Planning focuses managers’ attention on today’s competition not tomorrow’s survival.competition not tomorrow’s survival.

Formal planning reinforces today’s success, which Formal planning reinforces today’s success, which may lead to tomorrow’s failure.may lead to tomorrow’s failure.

Just planning isn’t enough.Just planning isn’t enough.


Contemporary Issues in Contemporary Issues in Planning (cont’d)Planning (cont’d)• Effective Planning in Dynamic EnvironmentsEffective Planning in Dynamic Environments

Develop plans that are specific but flexible.Develop plans that are specific but flexible.

Understand that planning is an ongoing process.Understand that planning is an ongoing process.

Change plans when conditions warrant.Change plans when conditions warrant.

Persistence in planning eventually pay off.Persistence in planning eventually pay off.

Flatten the organizational hierarchy to foster the Flatten the organizational hierarchy to foster the development of planning skills at all organizational development of planning skills at all organizational levels.levels.


Terms to KnowTerms to Know• planningplanning• goalsgoals• plansplans• stated goalsstated goals• real goalsreal goals• framingframing• strategic plansstrategic plans• operational plansoperational plans• long-term planslong-term plans• short-term plansshort-term plans• specific plansspecific plans

• directional plansdirectional plans• single-use plansingle-use plan• standing plansstanding plans• traditional goal settingtraditional goal setting• means-ends chainmeans-ends chain• management by management by

objectives (MBO)objectives (MBO)• missionmission• commitment conceptcommitment concept• formal planning formal planning

departmentdepartment


Organizational Organizational Structure and Structure and DesignDesign

ChapterChapter

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tenth edition


Designing Organizational StructureDesigning Organizational Structure• Organizational DesignOrganizational Design

A process involving decisions about six key elements:A process involving decisions about six key elements: Work specializationWork specialization DepartmentalizationDepartmentalization Chain of commandChain of command Span of controlSpan of control Centralization and decentralizationCentralization and decentralization FormalizationFormalization


Exhibit 9–1Exhibit 9–1 Purposes of OrganizingPurposes of Organizing

• Divides work to be done into specific jobs and departments.

• Assigns tasks and responsibilities associated with individual jobs.

• Coordinates diverse organizational tasks.

• Clusters jobs into units.

• Establishes relationships among individuals, groups, and departments.

• Establishes formal lines of authority.

• Allocates and deploys organizational resources.


Organizational StructureOrganizational Structure• Work SpecializationWork Specialization

The degree to which tasks in the organization are The degree to which tasks in the organization are divided into separate jobs with each step completed divided into separate jobs with each step completed by a different person.by a different person.

Overspecialization can result in human diseconomies Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.absenteeism, and higher turnover.


Departmentalization by TypeDepartmentalization by Type• Functional Functional

Grouping jobs by Grouping jobs by functions performedfunctions performed

• ProductProduct Grouping jobs by product Grouping jobs by product

lineline

• GeographicalGeographical Grouping jobs on the Grouping jobs on the

basis of territory or basis of territory or geographygeography

• Process Process Grouping jobs on the Grouping jobs on the

basis of product or basis of product or customer flowcustomer flow

• CustomerCustomer Grouping jobs by type of Grouping jobs by type of

customer and needscustomer and needs


Organizational Structure (cont’d)Organizational Structure (cont’d)• Chain of CommandChain of Command

The continuous line of authority that extends from The continuous line of authority that extends from upper levels of an organization to the lowest levels of upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom.the organization and clarifies who reports to whom.


Organizational Structure (cont’d)Organizational Structure (cont’d)• AuthorityAuthority

The rights inherent in a managerial position to tell The rights inherent in a managerial position to tell people what to do and to expect them to do it.people what to do and to expect them to do it.

• ResponsibilityResponsibility The obligation or expectation to perform.The obligation or expectation to perform.

• Unity of CommandUnity of Command The concept that a person should have one boss and The concept that a person should have one boss and

should report only to that person.should report only to that person.


Organizational Structure (cont’d)Organizational Structure (cont’d)• Span of ControlSpan of Control

The number of employees who can be effectively and efficiently The number of employees who can be effectively and efficiently supervised by a manager.supervised by a manager.


Exhibit 9–3Exhibit 9–3 Contrasting Spans of ControlContrasting Spans of Control


Organizational Structure (cont’d)Organizational Structure (cont’d)• CentralizationCentralization

The degree to which decision making is concentrated The degree to which decision making is concentrated at upper levels in the organization.at upper levels in the organization. Organizations in which top managers make all the decisions Organizations in which top managers make all the decisions

and lower-level employees simply carry out those orders.and lower-level employees simply carry out those orders.

• DecentralizationDecentralization Organizations in which decision making is pushed Organizations in which decision making is pushed

down to the managers who are closest to the action.down to the managers who are closest to the action.

• Employee EmpowermentEmployee Empowerment Increasing the decision-making authority (power) of Increasing the decision-making authority (power) of

employees.employees.


Exhibit 9–4Exhibit 9–4 Factors that Influence the Factors that Influence the Amount of Amount of Centralization and Decentralization Centralization and Decentralization

• More CentralizationMore Centralization Environment is stable.Environment is stable.

Lower-level managers are not as capable or experienced at Lower-level managers are not as capable or experienced at making decisions as upper-level managers.making decisions as upper-level managers.

Lower-level managers do not want to have a say in decisions.Lower-level managers do not want to have a say in decisions.

Decisions are relatively minor.Decisions are relatively minor.

Organization is facing a crisis or the risk of company failure.Organization is facing a crisis or the risk of company failure.

Company is large.Company is large.

Effective implementation of company strategies depends on Effective implementation of company strategies depends on managers retaining say over what happens.managers retaining say over what happens.


Exhibit 9–4 (cont’d) Factors that Influence the Amount Exhibit 9–4 (cont’d) Factors that Influence the Amount of Centralization and Decentralization of Centralization and Decentralization

• More DecentralizationMore Decentralization Environment is complex, uncertain.Environment is complex, uncertain.

Lower-level managers are capable and experienced at making Lower-level managers are capable and experienced at making decisions.decisions.

Lower-level managers want a voice in decisions.Lower-level managers want a voice in decisions.

Decisions are significant.Decisions are significant.

Corporate culture is open to allowing managers to have a say in Corporate culture is open to allowing managers to have a say in what happens.what happens.

Company is geographically dispersed.Company is geographically dispersed.

Effective implementation of company strategies depends on Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.managers having involvement and flexibility to make decisions.


Exhibit 9–5Exhibit 9–5 Mechanistic Versus Organic Mechanistic Versus Organic OrganizationOrganization

• High specialization

• Rigid departmentalization

• Clear chain of command

• Narrow spans of control

• Centralization

• High formalization

• Cross-functional teams

• Cross-hierarchical teams

• Free flow of information

• Wide spans of control

• Decentralization

• Low formalization


Common Organizational DesignsCommon Organizational Designs

• Traditional DesignsTraditional Designs Simple structureSimple structure

Low departmentalization, wide spans of control, centralized Low departmentalization, wide spans of control, centralized authority, little formalizationauthority, little formalization

Functional structureFunctional structure Departmentalization by functionDepartmentalization by function

– Operations, finance, marketing, human resources, and Operations, finance, marketing, human resources, and product research and developmentproduct research and development

Divisional structureDivisional structure Composed of separate business units or divisions with limited Composed of separate business units or divisions with limited

autonomy under the coordination and control the parent autonomy under the coordination and control the parent corporation.corporation.


Exhibit 9–7Exhibit 9–7 Strengths and Weaknesses of Strengths and Weaknesses of Traditional Traditional Organizational Designs Organizational Designs


Exhibit 9–8Exhibit 9–8 Contemporary Organizational Contemporary Organizational DesignsDesignsTeam StructureTeam Structure

• • What it is:What it is: A structure in which the entire organization is made up of A structure in which the entire organization is made up of work groups or teams.work groups or teams.

• • Advantages:Advantages: Employees are more involved and empowered. Reduced Employees are more involved and empowered. Reduced barriers among functional areas.barriers among functional areas.

• • Disadvantages:Disadvantages: No clear chain of command. Pressure on teams to perform.No clear chain of command. Pressure on teams to perform.

Matrix-Project StructureMatrix-Project Structure

What it is:What it is: A structure that assigns specialists from different functional A structure that assigns specialists from different functional areas to work on projects but who return to their areas when areas to work on projects but who return to their areas when the project is completed. Project is a structure in which the project is completed. Project is a structure in which employees continuously work on projects. As one project is employees continuously work on projects. As one project is completed, employees move on to the next project.completed, employees move on to the next project.

• • Advantages:Advantages: Fluid and flexible design that can respond to environmental Fluid and flexible design that can respond to environmental changes. Faster decision making.changes. Faster decision making.

• • Disadvantages:Disadvantages: Complexity of assigning people to projects. Task and Complexity of assigning people to projects. Task and personality conflicts.personality conflicts.


Exhibit 9–8 (cont’dExhibit 9–8 (cont’d ) Contemporary ) Contemporary Organizational Organizational Designs Designs

Boundaryless StructureBoundaryless Structure

What it is:What it is: A structure that is not defined by or limited to artificial A structure that is not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual horizontal, vertical, or external boundaries; includes virtual and network types of organizations.and network types of organizations.

• • Advantages:Advantages: Highly flexible and responsive. Draws on talent wherever it’s Highly flexible and responsive. Draws on talent wherever it’s found.found.

• • Disadvantages:Disadvantages: Lack of control. Communication difficulties.Lack of control. Communication difficulties.


Organizational Designs (cont’d)Organizational Designs (cont’d)• Contemporary Organizational DesignsContemporary Organizational Designs

Team structuresTeam structures The entire organization is made up of work groups or self-The entire organization is made up of work groups or self-

managed teams of empowered employees.managed teams of empowered employees.

Matrix and project structuresMatrix and project structures Specialists from different functional departments are Specialists from different functional departments are

assigned to work on projects led by project managers.assigned to work on projects led by project managers.

Matrix and project participants have two managers.Matrix and project participants have two managers.

In project structures, employees work continuously on In project structures, employees work continuously on projects; moving on to another project as each project is projects; moving on to another project as each project is completed.completed.


Organizational Designs (cont’d)Organizational Designs (cont’d)• Contemporary Organizational Designs (cont’d)Contemporary Organizational Designs (cont’d)

Boundaryless OrganizationBoundaryless Organization An flexible and unstructured organizational design that is An flexible and unstructured organizational design that is

intended to break down external barriers between the intended to break down external barriers between the organization and its customers and suppliers.organization and its customers and suppliers.

Removes internal (horizontal) boundaries:Removes internal (horizontal) boundaries:

– Eliminates the chain of commandEliminates the chain of command

– Has limitless spans of controlHas limitless spans of control

– Uses empowered teams rather than departmentsUses empowered teams rather than departments

Eliminates external boundaries:Eliminates external boundaries:

– Uses virtual, network, and modular organizational Uses virtual, network, and modular organizational structures to get closer to stakeholders.structures to get closer to stakeholders.


Removing External BoundariesRemoving External Boundaries• Virtual OrganizationVirtual Organization

An organization that consists of a small core of full-time An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on employees and that temporarily hires specialists to work on opportunities that arise.opportunities that arise.

• Network OrganizationNetwork Organization A small core organization that outsources its major A small core organization that outsources its major

business functions (e.g., manufacturing) in order to business functions (e.g., manufacturing) in order to concentrate on what it does best.concentrate on what it does best.

• Modular OrganizationModular Organization A manufacturing organization that uses outside suppliers to A manufacturing organization that uses outside suppliers to

provide product components for its final assembly provide product components for its final assembly operations.operations.


Today’s Organizational Design Today’s Organizational Design ChallengesChallenges• Keeping Employees ConnectedKeeping Employees Connected

Widely dispersed and mobile employeesWidely dispersed and mobile employees

• Building a Learning OrganizationBuilding a Learning Organization• Managing Global Structural IssuesManaging Global Structural Issues

Cultural implications of design elementsCultural implications of design elements


Organizational Designs (cont’d)Organizational Designs (cont’d)• The Learning OrganizationThe Learning Organization

An organization that has developed the capacity to An organization that has developed the capacity to continuously learn, adapt, and change through the continuously learn, adapt, and change through the practice of knowledge management by employees.practice of knowledge management by employees.

Characteristics of a learning organization:Characteristics of a learning organization: An open team-based organization design that empowers An open team-based organization design that empowers

employeesemployees Extensive and open information sharingExtensive and open information sharing Leadership that provides a shared vision of the organization’s Leadership that provides a shared vision of the organization’s

future.future. A strong culture of shared values, trust, openness, and a A strong culture of shared values, trust, openness, and a

sense of community.sense of community.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall15–96

Motivating Motivating EmployeesEmployees

ChapterChapter

1515


tenth edition


Learning OutcomesLearning OutcomesFollow this Learning Outline as you read and study Follow this Learning Outline as you read and study this chapter.this chapter.15.1 What Is Motivation?15.1 What Is Motivation?

• Define motivation.Define motivation.

• Explain Explain the three key elements of motivation.

15.2 Early Theories of Motivation15.2 Early Theories of Motivation• Describe Maslow’s hierarchy of needs and how it can be used to Describe Maslow’s hierarchy of needs and how it can be used to

motivate.motivate.

• Discuss how Theory X and Theory Y managers approach Discuss how Theory X and Theory Y managers approach motivation.motivation.

• Describe Herzberg’s motivation-hygiene theory.Describe Herzberg’s motivation-hygiene theory.

• Describe the three-needs theory.



15.3 15.3 Contemporary Theories of MotivationContemporary Theories of Motivation

• Explain how goal-setting and reinforcement theories Explain how goal-setting and reinforcement theories explain employee motivation.explain employee motivation.

• Describe job design approaches to motivation.

• Discuss the motivation implications of equity theory.Discuss the motivation implications of equity theory.

• Explain the three key linkages in expectancy theory Explain the three key linkages in expectancy theory and their role in motivation.and their role in motivation.


Learning OutcomesLearning Outcomes15.4 15.4 Current Issues in MotivationCurrent Issues in Motivation

• Describe the cross-cultural challenges of motivation.Describe the cross-cultural challenges of motivation.

• Discuss the challenges managers face in motivating Discuss the challenges managers face in motivating unique groups of workers.unique groups of workers.

• Describe open-book management, employee Describe open-book management, employee recognition, pay-for-performance, and stock option recognition, pay-for-performance, and stock option programs.programs.


What Is Motivation?What Is Motivation?• MotivationMotivation

Is the result of an interaction between the person and Is the result of an interaction between the person and a situation; it is not a personal trait.a situation; it is not a personal trait.

Is the process by which a person’s efforts are Is the process by which a person’s efforts are energized, directed, and sustained towards attaining energized, directed, and sustained towards attaining a goal.a goal. Energy:Energy: a measure of intensity or drive. a measure of intensity or drive.

Direction:Direction: toward organizational goals toward organizational goals

Persistence:Persistence: exerting effort to achieve goals. exerting effort to achieve goals.

Motivation works best when individual needs are Motivation works best when individual needs are compatible with organizational goals.compatible with organizational goals.


Early Theories of MotivationEarly Theories of Motivation

• Maslow’s Hierarchy of NeedsMaslow’s Hierarchy of Needs

• McGregor’s Theories X and YMcGregor’s Theories X and Y

• Herzberg’s Two-Factor TheoryHerzberg’s Two-Factor Theory

• McClelland’s Three Needs TheoryMcClelland’s Three Needs Theory


Early Theories of MotivationEarly Theories of Motivation• Maslow’s Hierarchy of Needs TheoryMaslow’s Hierarchy of Needs Theory

Needs were categorized as five levels of lower- to Needs were categorized as five levels of lower- to higher-order needs.higher-order needs. Individuals must satisfy lower-order needs before they can Individuals must satisfy lower-order needs before they can

satisfy higher order needs.satisfy higher order needs. Satisfied needs will no longer motivate.Satisfied needs will no longer motivate. Motivating a person depends on knowing at what level that Motivating a person depends on knowing at what level that

person is on the hierarchy.person is on the hierarchy.

Hierarchy of needsHierarchy of needs Lower-order (external): physiological, safetyLower-order (external): physiological, safety Higher-order (internal): social, esteem, self-actualizationHigher-order (internal): social, esteem, self-actualization


Exhibit 15–1Exhibit 15–1 Maslow’s Hierarchy of NeedsMaslow’s Hierarchy of Needs


Early Theories of Motivation Early Theories of Motivation (cont’d)(cont’d)

• McGregor’s Theory X and Theory YMcGregor’s Theory X and Theory Y Theory XTheory X

Assumes that workers have little ambition, dislike work, avoid Assumes that workers have little ambition, dislike work, avoid responsibility, and require close supervision.responsibility, and require close supervision.

Theory YTheory Y Assumes that workers can exercise self-direction, desire Assumes that workers can exercise self-direction, desire

responsibility, and like to work.responsibility, and like to work.

Assumption:Assumption: Motivation is maximized by participative decision making, Motivation is maximized by participative decision making,

interesting jobs, and good group relations.interesting jobs, and good group relations.


Early Theories of Motivation Early Theories of Motivation (cont’d)(cont’d)

• Herzberg’s Motivation-Hygiene TheoryHerzberg’s Motivation-Hygiene Theory Job satisfaction and job dissatisfaction are created by Job satisfaction and job dissatisfaction are created by

different factors.different factors. Hygiene factors:Hygiene factors: extrinsic (environmental) factors that extrinsic (environmental) factors that

create job dissatisfaction.create job dissatisfaction.

Motivators:Motivators: intrinsic (psychological) factors that create job intrinsic (psychological) factors that create job satisfaction.satisfaction.

Attempted to explain why job satisfaction does not Attempted to explain why job satisfaction does not result in increased performance.result in increased performance. The opposite of satisfaction is not dissatisfaction, but rather The opposite of satisfaction is not dissatisfaction, but rather

no satisfaction.no satisfaction.


Exhibit 15–2Exhibit 15–2 Herzberg’s Motivation-Herzberg’s Motivation-Hygiene TheoryHygiene Theory


Exhibit 15–3Exhibit 15–3 Contrasting Views of Contrasting Views of Satisfaction- Satisfaction- Dissatisfaction Dissatisfaction


Motivation and NeedsMotivation and Needs• Three-Needs Theory (McClelland)Three-Needs Theory (McClelland)

There are three major acquired needs that are major There are three major acquired needs that are major motives in work.motives in work. Need for achievement (nAch)Need for achievement (nAch)

– The drive to excel and succeedThe drive to excel and succeed

Need for power (nPow)Need for power (nPow)

– The need to influence the behavior of othersThe need to influence the behavior of others

Need of affiliation (nAff)Need of affiliation (nAff)

– The desire for interpersonal relationshipsThe desire for interpersonal relationships


Exhibit 15–4Exhibit 15–4 Examples of Pictures Used for Examples of Pictures Used for Assessing Assessing Levels of nAch, nAff, and nPow Levels of nAch, nAff, and nPow


Contemporary Theories of Contemporary Theories of MotivationMotivation

• Goal-Setting TheoryGoal-Setting Theory

• Reinforcement TheoryReinforcement Theory

• Designing Motivating JobsDesigning Motivating Jobs

• Equity TheoryEquity Theory

• Expectancy TheoryExpectancy Theory


Motivation and GoalsMotivation and Goals• Goal-Setting TheoryGoal-Setting Theory

Proposes that setting goals that are accepted, Proposes that setting goals that are accepted, specific, and challenging yet achievable will result in specific, and challenging yet achievable will result in higher performance than having no or easy goals.higher performance than having no or easy goals.

Is culture bound to the U.S. and Canada.Is culture bound to the U.S. and Canada.

• Benefits of Participation in Goal-SettingBenefits of Participation in Goal-Setting Increases the acceptance of goals.Increases the acceptance of goals.

Fosters commitment to difficult, public goals.Fosters commitment to difficult, public goals.

Provides for self-feedback (internal locus of control) Provides for self-feedback (internal locus of control) that guides behavior and motivates performance (self-that guides behavior and motivates performance (self-efficacy).efficacy).


Exhibit 15–5Exhibit 15–5 Goal-Setting TheoryGoal-Setting Theory


Motivation and BehaviorMotivation and Behavior• Reinforcement TheoryReinforcement Theory

Assumes that a desired behavior is a function of its Assumes that a desired behavior is a function of its consequences, is externally caused, and if reinforced, consequences, is externally caused, and if reinforced, is likely to be repeated.is likely to be repeated. Positive reinforcement is preferred for its long-term effects on Positive reinforcement is preferred for its long-term effects on

performance.performance.

Ignoring undesired behavior is better than punishment which Ignoring undesired behavior is better than punishment which may create additional dysfunctional behaviors.may create additional dysfunctional behaviors.


Designing Motivating JobsDesigning Motivating Jobs• Job DesignJob Design

The way into which tasks can be combined to form The way into which tasks can be combined to form complete jobs.complete jobs.

Factors influencing job design:Factors influencing job design: Changing organizational environment/structureChanging organizational environment/structure The organization’s technologyThe organization’s technology Employees’ skill, abilities, and preferencesEmployees’ skill, abilities, and preferences

Job enlargementJob enlargement Increasing the job’s scope (number and frequency of tasks)Increasing the job’s scope (number and frequency of tasks)

Job enrichmentJob enrichment Increasing responsibility and autonomy (depth) in a job.Increasing responsibility and autonomy (depth) in a job.


Designing Motivating Jobs Designing Motivating Jobs (cont’d)(cont’d)

• Job Characteristics Model (JCM)Job Characteristics Model (JCM) A conceptual framework for designing motivating jobs A conceptual framework for designing motivating jobs

that create meaningful work experiences that satisfy that create meaningful work experiences that satisfy employees’ growth needs.employees’ growth needs.

Five primary job characteristics:Five primary job characteristics: Skill variety:Skill variety: how many skills and talents are needed? how many skills and talents are needed?

Task identity:Task identity: does the job produce a complete work? does the job produce a complete work?

Task significance:Task significance: how important is the job? how important is the job?

Autonomy:Autonomy: how much independence does the jobholder how much independence does the jobholder have?have?

Feedback:Feedback: do workers know how well they are doing? do workers know how well they are doing?


Exhibit 15–6Exhibit 15–6 Job Characteristics ModelJob Characteristics Model

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work (Glenview, IL: Scott, Foresman, 1977). With permission of the authors.


Exhibit 15–7Exhibit 15–7 Guidelines for Job RedesignGuidelines for Job Redesign

Source: J.R. Hackman and J.L. Suttle (eds.). Improving Life at Work (Glenview, IL: Scott, Foresman, 1977). With permission of the authors.


Designing Motivating Jobs Designing Motivating Jobs (cont’d)(cont’d)

• Suggestions for Using the JCMSuggestions for Using the JCM Combine tasks (job enlargement) to create more Combine tasks (job enlargement) to create more

meaningful work.meaningful work.

Create natural work units to make employees’ work Create natural work units to make employees’ work important and whole.important and whole.

Establish external and internal client relationships to Establish external and internal client relationships to provide feedback.provide feedback.

Expand jobs vertically (job enrichment) by giving Expand jobs vertically (job enrichment) by giving employees more autonomy.employees more autonomy.

Open feedback channels to let employees know how Open feedback channels to let employees know how well they are doing.well they are doing.


Equity TheoryEquity Theory

Proposes that employees perceive what they get from Proposes that employees perceive what they get from a job situation (outcomes) in relation to what they put a job situation (outcomes) in relation to what they put in (inputs) and then compare their inputs-outcomes in (inputs) and then compare their inputs-outcomes ratio with the inputs-outcomes ratios of relevant ratio with the inputs-outcomes ratios of relevant others.others. If the ratios are perceived as equal then a state of equity If the ratios are perceived as equal then a state of equity

(fairness) exists.(fairness) exists.

If the ratios are perceived as unequal, inequity exists and the If the ratios are perceived as unequal, inequity exists and the person feels under- or over-rewarded.person feels under- or over-rewarded.

When inequities occur, employees will attempt to do When inequities occur, employees will attempt to do something to rebalance the ratios (seek justice).something to rebalance the ratios (seek justice).


Equity Theory (cont’d) Equity Theory (cont’d)

Employee responses to perceived inequities:Employee responses to perceived inequities: Distort own or others’ ratios.Distort own or others’ ratios.

Induce others to change their own inputs or outcomes.Induce others to change their own inputs or outcomes.

Change own inputs (increase or decrease efforts) or Change own inputs (increase or decrease efforts) or outcomes (seek greater rewards).outcomes (seek greater rewards).

Choose a different comparison (referent) other (person, Choose a different comparison (referent) other (person, systems, or self).systems, or self).

Quit their job.Quit their job.

Employees are concerned with both the absolute and Employees are concerned with both the absolute and relative nature of organizational rewards.relative nature of organizational rewards.


Exhibit 15–8Exhibit 15–8 Equity TheoryEquity Theory


Equity Theory (cont’d)Equity Theory (cont’d)

Distributive justiceDistributive justice The perceived fairness of the amount and allocation of The perceived fairness of the amount and allocation of

rewards among individuals (i.e., who received what).rewards among individuals (i.e., who received what).

– Influences an employee’s satisfaction.Influences an employee’s satisfaction.

Procedural justiceProcedural justice The perceived fairness of the process use to determine the The perceived fairness of the process use to determine the

distribution of rewards (i.e., how who received what).distribution of rewards (i.e., how who received what).

– Affects an employee’s organizational commitment.Affects an employee’s organizational commitment.


Expectancy TheoryExpectancy Theory States that an individual tends to act in a certain way States that an individual tends to act in a certain way

based on the expectation that the act will be followed based on the expectation that the act will be followed by a given outcome and on the attractiveness of that by a given outcome and on the attractiveness of that outcome to the individual.outcome to the individual.

Key to the theory is understanding and managing Key to the theory is understanding and managing employee goals and the linkages among and between employee goals and the linkages among and between effort, performance and rewards.effort, performance and rewards. Effort:Effort: employee abilities and training/development employee abilities and training/development

Performance:Performance: valid appraisal systems valid appraisal systems

Rewards (goals):Rewards (goals): understanding employee needs understanding employee needs


Exhibit 15–9Exhibit 15–9 Simplified Expectancy ModelSimplified Expectancy Model


Expectancy Theory Expectancy Theory

• Expectancy RelationshipsExpectancy Relationships Expectancy (effort-performance linkage)Expectancy (effort-performance linkage)

The perceived probability that an individual’s effort will result The perceived probability that an individual’s effort will result in a certain level of performance.in a certain level of performance.

InstrumentalityInstrumentality The perception that a particular level of performance will The perception that a particular level of performance will

result in the attaining a desired outcome (reward).result in the attaining a desired outcome (reward).

ValenceValence The attractiveness/importance of the performance reward The attractiveness/importance of the performance reward

(outcome) to the individual.(outcome) to the individual.


Exhibit 15–10 Integrating Contemporary Theories Exhibit 15–10 Integrating Contemporary Theories of Motivation of Motivation


Current Issues in MotivationCurrent Issues in Motivation• Cross-Cultural ChallengesCross-Cultural Challenges

Motivational programs are most applicable in cultures Motivational programs are most applicable in cultures where where individualismindividualism and achievement are cultural and achievement are cultural characteristicscharacteristics Uncertainty avoidance of some cultures inverts Maslow’s Uncertainty avoidance of some cultures inverts Maslow’s

needs hierarchy.needs hierarchy. The need for achievement (nAch) is lacking in other cultures.The need for achievement (nAch) is lacking in other cultures. Collectivist cultures view rewards as “entitlements” to be Collectivist cultures view rewards as “entitlements” to be

distributed based on individual needs, not individual distributed based on individual needs, not individual performance.performance.

Cross-Cultural ConsistenciesCross-Cultural Consistencies Interesting work is widely desired, as is growth, achievement, Interesting work is widely desired, as is growth, achievement,

and responsibility.and responsibility.


• Motivating Diverse Workforce Motivating Diverse Workforce Motivating a diverse workforce through flexibility:Motivating a diverse workforce through flexibility:

Men desire more autonomy than do women.Men desire more autonomy than do women.

Women desire learning opportunities, flexible work Women desire learning opportunities, flexible work schedules, and good interpersonal relations.schedules, and good interpersonal relations.

Motivating Unique Groups of WorkersMotivating Unique Groups of Workers



• Motivating Diverse WorkforceMotivating Diverse Workforce Compressed workweekCompressed workweek

Longer daily hours, but fewer daysLonger daily hours, but fewer days

Flexible work hours (flextime)Flexible work hours (flextime) Specific weekly hours with varying arrival, departure, lunch Specific weekly hours with varying arrival, departure, lunch

and break times around certain core hours during which all and break times around certain core hours during which all employees must be present.employees must be present.

Job SharingJob Sharing Two or more people split a full-time job.Two or more people split a full-time job.

TelecommutingTelecommuting Employees work from home using computer links.Employees work from home using computer links.


• Motivating ProfessionalsMotivating Professionals Characteristics of professionalsCharacteristics of professionals

Strong and long-term commitment to their field of expertise.Strong and long-term commitment to their field of expertise.

Loyalty is to their profession, not to the employer.Loyalty is to their profession, not to the employer.

Have the need to regularly update their knowledge.Have the need to regularly update their knowledge.

Don’t define their workweek as 8:00 am to 5:00 pm.Don’t define their workweek as 8:00 am to 5:00 pm.

Motivators for professionalsMotivators for professionals Job challengeJob challenge

Organizational support of their workOrganizational support of their work



• Motivating Contingent WorkersMotivating Contingent Workers Opportunity to become a permanent employeeOpportunity to become a permanent employee

Opportunity for trainingOpportunity for training

Equity in compensation and benefitsEquity in compensation and benefits

• Motivating Low-Skilled, Minimum-Wage Motivating Low-Skilled, Minimum-Wage EmployeesEmployees Employee recognition programsEmployee recognition programs

Provision of sincere praiseProvision of sincere praise



• Designing Appropriate Rewards ProgramsDesigning Appropriate Rewards Programs Open-book managementOpen-book management

Involving employees in workplace decision by opening up the Involving employees in workplace decision by opening up the financial statements of the employer.financial statements of the employer.

Employee recognition programsEmployee recognition programs Giving personal attention and expressing interest, approval, Giving personal attention and expressing interest, approval,

and appreciation for a job well done.and appreciation for a job well done.

Pay-for-performancePay-for-performance Variable compensation plans that reward employees on the Variable compensation plans that reward employees on the

basis of their performance:basis of their performance:

– Piece rates, wage incentives, profit-sharing, and lump-Piece rates, wage incentives, profit-sharing, and lump-sum bonusessum bonuses

Current Issues in MotivationCurrent Issues in Motivation


Designing Appropriate Rewards Designing Appropriate Rewards Programs (cont’d)Programs (cont’d)

Stock option programsStock option programs Using financial instruments (in lieu of monetary Using financial instruments (in lieu of monetary

compensation) that give employees the right to purchase compensation) that give employees the right to purchase shares of company stock at a set (option) price.shares of company stock at a set (option) price.

Options have value if the stock price rises above the option Options have value if the stock price rises above the option price; they become worthless if the stock price falls below the price; they become worthless if the stock price falls below the option price.option price.


From Theory to Practice: From Theory to Practice: Guidelines for Motivating Guidelines for Motivating EmployeesEmployees• Recognize individual Recognize individual

differencesdifferences

• Match people to jobsMatch people to jobs

• Use goalsUse goals

• Ensure that goals are Ensure that goals are perceived as attainableperceived as attainable

• Individualize rewardsIndividualize rewards

• Link rewards to Link rewards to performanceperformance

• Check the system for Check the system for equityequity

• Use recognitionUse recognition

• Show care and concern Show care and concern for employeesfor employees

• Don’t ignore moneyDon’t ignore money


Terms to KnowTerms to Know• motivationmotivation• hierarchy of needs theoryhierarchy of needs theory• physiological needsphysiological needs• safety needssafety needs• social needssocial needs• esteem needsesteem needs• self-actualization needsself-actualization needs• Theory XTheory X• Theory YTheory Y• Two Factor theoryTwo Factor theory• hygiene factorshygiene factors• motivatorsmotivators

• three-needs theorythree-needs theory• need for achievement need for achievement

(nAch)(nAch)• need for power (nPow)need for power (nPow)• need for affiliation (nAff)need for affiliation (nAff)• goal-setting theorygoal-setting theory• self-efficacyself-efficacy• reinforcement theoryreinforcement theory• reinforcersreinforcers• job designjob design• job scopejob scope• job enlargementjob enlargement


Terms to Know (cont’d)Terms to Know (cont’d)• job enrichmentjob enrichment• job depthjob depth• job characteristics job characteristics

model (JCM)model (JCM)• skill varietyskill variety• task identitytask identity• task significancetask significance• autonomyautonomy• feedbackfeedback• equity theoryequity theory• referentsreferents• distributive justicedistributive justice

• procedural justiceprocedural justice• expectancy theoryexpectancy theory• compressed workweekcompressed workweek• flexible work hours (flextime)flexible work hours (flextime)• job sharingjob sharing• telecommutingtelecommuting• open-book managementopen-book management• employee recognition employee recognition

programsprograms• pay-for-performance pay-for-performance

programsprograms• stock optionsstock options


Introduction Introduction totoControllingControlling

ChapterChapter

1717


tenth edition



17.1 17.1 What Is Control and Why Is It Important?What Is Control and Why Is It Important?• Define controlling.Define controlling.

• Discuss the reasons why control is important.Discuss the reasons why control is important.

• Explain the planning-controlling link.Explain the planning-controlling link.

17.2 The Control Process17.2 The Control Process• Describe the three steps in the control process.Describe the three steps in the control process.

• Explain why what is measured is more critical than how it’s Explain why what is measured is more critical than how it’s measured.measured.

• Explain the three courses of action managers can take in Explain the three courses of action managers can take in controlling.controlling.


Learning OutcomesLearning Outcomes17.3 17.3 Controlling Organizational PerformanceControlling Organizational Performance

• Define organizational performance.Define organizational performance.

• Describe three most frequently used measures of organizational Describe three most frequently used measures of organizational performance.performance.

17.4 Tools for Measuring Organizational Performance17.4 Tools for Measuring Organizational Performance

• Contrast feedforward, concurrent, and feedback controls.Contrast feedforward, concurrent, and feedback controls.

• Explain the types of financial and information controls managers Explain the types of financial and information controls managers can use.can use.

• Describe how balanced scorecards and benchmarking are used Describe how balanced scorecards and benchmarking are used in controlling.in controlling.


Learning OutcomesLearning Outcomes17.5 17.5 Contemporary Issues in ControlContemporary Issues in Control

• Describe how managers may have to adjust controls Describe how managers may have to adjust controls for cross-cultural differences.for cross-cultural differences.

• Discuss the types of workplace concerns managers Discuss the types of workplace concerns managers face and how they can address those concerns.face and how they can address those concerns.

• Explain why control is important to customer Explain why control is important to customer interactions.interactions.

• Define corporate governance.Define corporate governance.


What Is Control?What Is Control?• ControllingControlling

The process of monitoring activities to ensure that The process of monitoring activities to ensure that they are being accomplished as planned and of they are being accomplished as planned and of correcting any significant deviations.correcting any significant deviations.

• The Purpose of ControlThe Purpose of Control To ensure that activities are completed in ways that To ensure that activities are completed in ways that

lead to accomplishment of organizational goals.lead to accomplishment of organizational goals.


Why Is Control Important?Why Is Control Important?• As the final link in management functions:As the final link in management functions:

PlanningPlanning Controls let managers know whether their goals and plans Controls let managers know whether their goals and plans

are on target and what future actions to take.are on target and what future actions to take.

Empowering employeesEmpowering employees Control systems provide managers with information and Control systems provide managers with information and

feedback on employee performance.feedback on employee performance.

Protecting the workplaceProtecting the workplace Controls enhance physical security and help minimize Controls enhance physical security and help minimize

workplace disruptions.workplace disruptions.


Exhibit 17–1Exhibit 17–1 The Planning–Controlling LinkThe Planning–Controlling Link


The Control ProcessThe Control Process• The Process of ControlThe Process of Control

1.1. Measuring actual Measuring actual performance.performance.

2.2. Comparing actual Comparing actual performance against a performance against a standard.standard.

3.3. Taking action to correct Taking action to correct deviations or inadequate deviations or inadequate standards.standards.


Exhibit 17–2Exhibit 17–2 The Control Process The Control Process


1. Measuring: 1. Measuring: How & What How & What We MeasureWe Measure• Sources of Sources of

Information (How)Information (How) Personal observationPersonal observation

Statistical reportsStatistical reports

Oral reportsOral reports

Written reportsWritten reports

• Control Criteria Control Criteria (What)(What)

EmployeesEmployees SatisfactionSatisfaction

TurnoverTurnover

AbsenteeismAbsenteeism

BudgetsBudgets CostsCosts

OutputOutput

SalesSales


Exhibit 17–3Exhibit 17–3 Common Sources of Common Sources of Information for Information for Measuring Performance Measuring Performance


2. Comparing2. Comparing• Determining the degree of variation between Determining the degree of variation between

actual performance and the standard.actual performance and the standard.

Significance of variation is determined by:Significance of variation is determined by: The acceptable range of variation from the standard (forecast The acceptable range of variation from the standard (forecast

or budget).or budget).

The size (large or small) and direction (over or under) of the The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget).variation from the standard (forecast or budget).


Exhibit 17–4Exhibit 17–4 Defining the Acceptable Defining the Acceptable Range of Range of Variation Variation


Exhibit 17–5Exhibit 17–5 Example of Determining Example of Determining Significant Significant VariationVariation


3. Taking Managerial Action3. Taking Managerial Action• Courses of ActionCourses of Action

““Doing nothing”Doing nothing” Only if deviation is judged to be insignificant.Only if deviation is judged to be insignificant.

Correcting actual (current) performanceCorrecting actual (current) performance Immediate corrective action to correct the problem at once.Immediate corrective action to correct the problem at once. Basic corrective action to locate and to correct the source of Basic corrective action to locate and to correct the source of

the deviation.the deviation. Corrective ActionsCorrective Actions

– Change strategy, structure, compensation scheme, or Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employeestraining programs; redesign jobs; or fire employees


Taking Managerial ActionTaking Managerial Action

• Courses of Action (cont’d)Courses of Action (cont’d)

Revising the standardRevising the standard Examining the standard to ascertain whether or not the Examining the standard to ascertain whether or not the

standard is realistic, fair, and achievable.standard is realistic, fair, and achievable.

– Upholding the validity of the standard.Upholding the validity of the standard.

– Resetting goals that were initially set too low or too high.Resetting goals that were initially set too low or too high.


Exhibit 17–6Exhibit 17–6 Managerial Decisions in the Managerial Decisions in the Control Control Process Process


Controlling for Organizational Controlling for Organizational PerformancePerformance• What Is Performance?What Is Performance?

The end result of an activityThe end result of an activity

• What Is Organizational What Is Organizational Performance?Performance? The accumulated end results of all of the The accumulated end results of all of the

organization’s work processes and activitiesorganization’s work processes and activities Designing strategies, work processes, and work activities.Designing strategies, work processes, and work activities.

Coordinating the work of employees.Coordinating the work of employees.


Organizational Organizational Performance MeasuresPerformance Measures • Organizational Organizational ProductivityProductivity

Productivity:Productivity: the overall output of goods and/or the overall output of goods and/or services divided by the inputs needed to generate services divided by the inputs needed to generate that output.that output. Output: sales revenuesOutput: sales revenues

Inputs: costs of resources (materials, labor expense, and Inputs: costs of resources (materials, labor expense, and facilities)facilities)

Ultimately, productivity is a measure of how efficiently Ultimately, productivity is a measure of how efficiently employees do their work.employees do their work.


Organizational Organizational Performance Measures Performance Measures (cont’d)(cont’d)• Organizational Organizational EffectivenessEffectiveness

Measuring how appropriate organizational goals are Measuring how appropriate organizational goals are and how well the organization is achieving its goals.and how well the organization is achieving its goals. Systems resource modelSystems resource model

– The ability of the organization to exploit its environment in The ability of the organization to exploit its environment in acquiring scarce and valued resources.acquiring scarce and valued resources.

The process modelThe process model

– The efficiency of an organization’s transformation process The efficiency of an organization’s transformation process in converting inputs to outputs.in converting inputs to outputs.

The multiple constituencies modelThe multiple constituencies model

– The effectiveness of the organization in meeting each The effectiveness of the organization in meeting each constituencies’ needs.constituencies’ needs.


Industry and Company RankingsIndustry and Company Rankings

• Industry rankings on:Industry rankings on: ProfitsProfits

Return on revenueReturn on revenue

Return on shareholders’ Return on shareholders’ equityequity

Growth in profitsGrowth in profits

Revenues per employeeRevenues per employee

Revenues per dollar of Revenues per dollar of assetsassets

Revenues per dollar of Revenues per dollar of equityequity

• Corporate Culture Corporate Culture AuditsAudits

• Compensation and Compensation and benefits surveysbenefits surveys

• Customer satisfactionCustomer satisfactionsurveyssurveys


Tools for Measuring Tools for Measuring Organizational PerformanceOrganizational Performance• Feedforward ControlFeedforward Control

A control that prevents anticipated problems A control that prevents anticipated problems beforebefore actual occurrences of the problem.actual occurrences of the problem. Building in quality through design.Building in quality through design. Requiring suppliers conform to ISO 9002.Requiring suppliers conform to ISO 9002.

• Concurrent ControlConcurrent Control A control that takes place while the monitored activity A control that takes place while the monitored activity

is in progress.is in progress. Direct supervisionDirect supervision: management by walking around.: management by walking around.


Tools for Measuring Tools for Measuring Organizational Performance Organizational Performance (cont’d)(cont’d)• Feedback ControlFeedback Control

A control that takes place after an activity is done.A control that takes place after an activity is done. Corrective action is after-the-fact, when the problem has Corrective action is after-the-fact, when the problem has

already occurred.already occurred.

Advantages of feedback controls:Advantages of feedback controls: Provide managers with information on the effectiveness of Provide managers with information on the effectiveness of

their planning efforts.their planning efforts.

Enhance employee motivation by providing them with Enhance employee motivation by providing them with information on how well they are doing.information on how well they are doing.


Exhibit 17–8Exhibit 17–8 Types of Control Types of Control


Financial ControlsFinancial Controls

• Traditional ControlsTraditional Controls Ratio analysisRatio analysis

LiquidityLiquidity

LeverageLeverage

ActivityActivity

ProfitabilityProfitability

Budget AnalysisBudget Analysis Quantitative standardsQuantitative standards

DeviationsDeviations


Exhibit 17–9Exhibit 17–9 Popular Financial Ratios Popular Financial Ratios

ObjectiveObjective RatioRatio CalculationCalculation MeaningMeaning


Exhibit 17–9Exhibit 17–9 Popular Financial Ratios (cont’d) Popular Financial Ratios (cont’d)

ObjectiveObjective RatioRatio CalculationCalculation MeaningMeaning


Financial ControlsFinancial Controls

• Managing EarningsManaging Earnings

““Timing” income and expenses to enhance current Timing” income and expenses to enhance current financial results, which gives an unrealistic picture of financial results, which gives an unrealistic picture of the organization’s financial performance.the organization’s financial performance.

New laws and regulations require companies to clarify New laws and regulations require companies to clarify their financial information.their financial information.


Tools for Measuring Org’l Tools for Measuring Org’l Performance Performance (cont’d.)(cont’d.)• Balanced ScorecardBalanced Scorecard Is a measurement tool that uses goals set by Is a measurement tool that uses goals set by

managers in four areas to measure a company’s managers in four areas to measure a company’s performance:performance: FinancialFinancial CustomerCustomer Internal processesInternal processes People/innovation/growth assetsPeople/innovation/growth assets

Is intended to emphasize that all of these areas are Is intended to emphasize that all of these areas are important to an organization’s success and that there important to an organization’s success and that there should be a balance among them.should be a balance among them.


Information ControlsInformation Controls• Purposes of Information ControlsPurposes of Information Controls

As a tool to help managers control other As a tool to help managers control other organizational activities.organizational activities. Managers need the right information at the right time and in Managers need the right information at the right time and in

the right amount. the right amount.

As an organizational area that managers need to As an organizational area that managers need to control.control. Managers must have comprehensive and secure controls in Managers must have comprehensive and secure controls in

place to protect the organization’s important information.place to protect the organization’s important information.


Information Controls (cont’d)Information Controls (cont’d)• Management Information Systems (MIS)Management Information Systems (MIS)

A system used to provide management with needed A system used to provide management with needed information on a regular basis.information on a regular basis. Data:Data: an unorganized collection of raw, unanalyzed facts an unorganized collection of raw, unanalyzed facts

(e.g., unsorted list of customer names).(e.g., unsorted list of customer names).

Information:Information: data that has been analyzed and organized data that has been analyzed and organized such that it has value and relevance to managers.such that it has value and relevance to managers.


Benchmarking of Best PracticesBenchmarking of Best Practices• BenchmarkBenchmark

The standard of excellence against which to measure The standard of excellence against which to measure and compare.and compare.

• BenchmarkingBenchmarking Is the search for the best practices among Is the search for the best practices among

competitors or noncompetitors that lead to their competitors or noncompetitors that lead to their superior performance.superior performance.

Is a control tool for identifying and measuring specific Is a control tool for identifying and measuring specific performance gaps and areas for improvement.performance gaps and areas for improvement.


Contemporary Issues in ControlContemporary Issues in Control• Cross-Cultural IssuesCross-Cultural Issues

The use of technology to increase direct corporate The use of technology to increase direct corporate control of local operationscontrol of local operations

Legal constraints on corrective actions in foreign Legal constraints on corrective actions in foreign countriescountries

Difficulty with the comparability of data collected from Difficulty with the comparability of data collected from operations in different countriesoperations in different countries


Contemporary Issues in Control Contemporary Issues in Control (cont’d)(cont’d)

• Workplace ConcernsWorkplace Concerns Workplace privacy versus workplace monitoring:Workplace privacy versus workplace monitoring:

E-mail, telephone, computer, and Internet usageE-mail, telephone, computer, and Internet usage Productivity, harassment, security, confidentiality, intellectual Productivity, harassment, security, confidentiality, intellectual

property protectionproperty protection

Employee theftEmployee theft The unauthorized taking of company property by employees The unauthorized taking of company property by employees

for their personal use.for their personal use.

Workplace violenceWorkplace violence Anger, rage, and violence in the workplace is affecting Anger, rage, and violence in the workplace is affecting

employee productivity.employee productivity.


Exhibit 17–11 Top Internet Video Sites Viewed at WorkTop 10 Internet video brands viewed in the U.S. whileat work for January 2008, in millions of streams

Source: Bobby White, “The NewWorkplace Rules: No VideoWatching,” Wall Street Journal,March 4, 2008, p. B3.

YouTube 674.2

Yahoo 156.5

Fox Interactive Media 92.8

MSN/Windows Live 74.2

ESPN 68.3

CNN Digital 41.6

Turner Entertainment 41.4

NBC Universal 30.5

Disney Online 27.2

Nickelodeon 23.5


Exhibit 17–12 Controlling Employee TheftExhibit 17–12 Controlling Employee Theft

Sources: Based on A.H. Bell and D.M. Smith. “Protecting the Company Against Theft and Fraud,” Workforce Online (www.workforce.com) December 3, 2000; J.D. Hansen. “To Catch a Thief,” Journal of Accountancy, March 2000, pp. 43–46; and J. Greenberg, “The Cognitive Geometry of Employee Theft,” in Dysfunctional Behavior in Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach, A. O’Leary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 147–93.


Exhibit 17–13Exhibit 17–13 Workplace ViolenceWorkplace Violence

Witnessed yelling or other verbal abuse 42%

Yelled at co-workers themselves 29%

Cried over work-related issues 23%

Seen someone purposely damage machines or furniture 14%

Seen physical violence in the workplace 10%

Struck a co-worker 2%

Source: Integra Realty Resources, October-November Survey of Adults 18 and Over, in “Desk Rage.” BusinessWeek, November 20, 2000, p. 12.


Exhibit 17–14 Controlling Workplace ViolenceExhibit 17–14 Controlling Workplace Violence

Sources: Based on M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence,” Workforce Online (www.workforce.com). December 3, 2000; “Investigating Workplace Violence: Where Do You Start?” Workforce Online (www.forceforce.com), December 3, 2000; “Ten Tips on Recognizing and Minimizing Violence,” Workforce Online (www.workforce.com), December 3, 2000; and “Points to Cover in a Workplace Violence Policy,” Workforce Online (www.workforce.com), December 3, 2000.


Contemporary Issues in Control Contemporary Issues in Control (cont’d)(cont’d)

• Customer InteractionsCustomer Interactions Service profit chainService profit chain

Is the service sequence from employees to customers to Is the service sequence from employees to customers to profit. profit.

Service capability affects service value which impacts Service capability affects service value which impacts on customer satisfaction that, in turn, leads to on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business customer loyalty in the form of repeat business (profit).(profit).


Contemporary Issues in Control Contemporary Issues in Control (cont’d)(cont’d)• Corporate GovernanceCorporate Governance

The system used to govern a corporation so that the The system used to govern a corporation so that the interests of the corporate owners are protected.interests of the corporate owners are protected. Changes in the role of boards of directorsChanges in the role of boards of directors

Increased scrutiny of financial reporting (Sarbanes-Oxley Act Increased scrutiny of financial reporting (Sarbanes-Oxley Act of 2002)of 2002)

– More disclosure and transparency of corporate financial More disclosure and transparency of corporate financial informationinformation

– Certification of financial results by senior managementCertification of financial results by senior management


Terms to KnowTerms to Know• controllingcontrolling• market controlmarket control• bureaucratic controlbureaucratic control• clan controlclan control• control processcontrol process• range of variationrange of variation• immediate corrective immediate corrective

actionaction• basic corrective actionbasic corrective action• performanceperformance• organizational organizational

performanceperformance

• productivityproductivity• organizational organizational

effectivenesseffectiveness• feedforward controlfeedforward control• concurrent controlconcurrent control• management by walking management by walking

aroundaround• feedback controlfeedback control• economic value added economic value added

(EVA)(EVA)• market value added market value added

(MVA)(MVA)


Terms to Know (cont’d)Terms to Know (cont’d)• management information management information

system (MIS)system (MIS)• datadata• informationinformation• balanced scorecardbalanced scorecard• benchmarkingbenchmarking• employee theftemployee theft• service profit chainservice profit chain• corporate governancecorporate governance


Exhibit 17–7Exhibit 17–7 Popular Industry and Popular Industry and Company RankingsCompany Rankings

management 4 6 7 9 15 and 17

Education

pearson education

global organizations

global business world

global environmentcopyright

global company

prentice hall42

prentice hall43

prentice hall44