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Principles of Management

Chapter 1

Understanding the Manager’s Job

principles of management 1

Learning Goals

• Define management, describe the kinds of managers found in organizations, and identify and briefly explain the four basic management functions

• Justify the importance of history and theory to • Justify the importance of history and theory to management and explain the evolution of management thought

• Discuss contemporary management issues and challenges


Management

• Management is a set of activities

directed at an organization’s

resources with the aim of achieving resources with the aim of achieving

organizational goals in an efficient

and effective manner


Management

• Activities include the four functions

of management

–Planning (and decision making)–Planning (and decision making)

–Organizing

–Leading

–Controlling


Management

• Resources include:

–Human

–Financial

–Physical

–Information


Management in Organizations

Inputs from the environment• Human resources• Financial resources

Planningand decision

makingOrganizing

Goals attained• Efficiently• Financial resources

• Physical resources• Information resources

LeadingControlling

• Efficiently• Effectively


Efficiency

versusversus

Effectiveness

Source: Van Fleet, David D., Contemporary Management, Second Edition. Copyright © 1991 by Houghton Mifflin Company. Used with permissions.


EFFICIENCYAllocatesAllocates

andandConservesConservesResourcesResourcesDoing thingsDoing things

Efficiency vs. Effectiveness

EFFECTIVENESSEFFECTIVENESS

Waste ofWaste ofResourcesResources

right (effort)right (effort)

DoingDoing the right things (accomplishment)principles of management 8

Kinds of Managers by Level and Area

Levels of Management

Top managers

Middle managers

Areas of Management

First-line managers


Important Definitions

• Top Managers

• Middle Managers

• First-line Managers

• Operative Employees


Managers In Different Areas of The

Organization

• Marketing Managers

• Financial Managers

• Operations Managers• Operations Managers

• Human Resource Managers

• Administrative Managers


The Management Process

OrganizingDetermining how

best to groupactivities and

resources

Planning andDecision Making

Setting the organiza-tion’s goals and

deciding how bestto achieve them

ControllingMonitoring

and correctingongoing activitiesto facilitate goal

attainment

LeadingMotivating membersof the organizationto work in the best

interests of theorganization

Figure 1.2principles of management 12

The Basic Functions of Management

A Circular Process

Planning and Decision Making

Organizing

Leading

Controlling


Skills and

the the

Manager


Fundamental Management Skills

• Management Skill Mixes at Different

Organizational Levels


Management: Science or Art?

• Science of Management – some aspects of management are objective and can be approached with rationality and logic

• Art of Management – some aspects of management are subjective and are based on intuition and experience


The Evolution of the Study of Management

The importance of history and theory

• Theory

• HistoryHistory


The Historical Context of Management

• Management Through the Ages

B Egyptians

C Babylonians

D Greeks

G Venetians

E Romans

3000 B.C. 2500 B.C.

A Sumerians F Chinese

2000 B.C. 1500 B.C. 1000 B.C. 500 B.C. A.D.1500A.D.500 A.D.1000

A Used written rules and regulations for governance

B Used management practices to construct pyramids

C Used extensive set of laws and policies for gover nance

D Used different governing systems for cities and s tate

E Used organized structure for communication and con trol

F Used extensive organization structure for governme ntagencies and the arts

G Used organization design and planning concepts tocontrol the seas


An Integrative Framework

of Management Perspectives

Systems Approach• Recognition of internal

interdependencies• Recognition of

environmental influences

Contingency Perspective• Recognition of the situational

nature of management• Response to particular

characteristics of situation

ClassicalManagementPerspectives

BehavioralManagementPerspectives

QuantitativeManagementPerspectivesPerspectives

Methods forenhancingefficiency andfacilitating planning,organizing, andcontrolling

PerspectivesInsights for moti-vating performanceand understandingindividual behavior,groups and teams,and leadership

PerspectivesTechniques forimproving decisionmaking, resourceallocation, andoperations

Effective and efficient management


Classical Management Perspective

• Scientific Management

– Frederick Taylor

– The Gilbreths– The Gilbreths

– Henry Gantt


Steps in Scientific Management

Develop a sciencefor each element ofthe job to replace oldrule-of-thumb methods

Scientifically selectemployees and thentrain them to do the jobas described in step 1

Supervise employeesto make sure theyfollow the prescribedmethods for performingtheir jobs

Continue to plan the work, but use workers to get the work done

21 43

Figure 1.3


The Classical Management Perspective

• Administrative Management – focuses on

managing the total organization

– Henry Fayol

– Lyndal Urwick

– Max Weber


Fayol’s Guidelines to Effective

Management Practices

• Division of labor

• Authority

• Discipline

• Unity of command

• Renumeration

• Centralization

• Scalar chain

• OrderUnity of command

• Unity of direction

• Subordination of individuals to the common good

Order

• Equity

• Stability

• Initiative

• Esprit de corps


Weber’s Theory of Bureaucracy

• Division of labor

• Reliance on rules and regulations

• Hierarchy of authority

• Employment based on expertise• Employment based on expertise

• Inflexible

• Rigid

• Impersonal


The Classical Management Perspective

• Contributions– Laid the foundation for management theory

– Identified key processes, functions, and skills of managers – still important today

– Made management a valid subject of scientific inquiry

• Limitations• Limitations– Best used in simple, stable organizations

– Provided universal procedures that are not appropriate in all settings

– Most viewed employees as tools rather than resources


The Behavioral Management

Perspective

• Placed much more emphasis on individual attitudes and behaviors and on group processes in organizations.

• Recognized the importance of behavioral • Recognized the importance of behavioral processes in organizations

– Hugo Munsterberg

– Mary Parker Follet

– Elton Mayo


Behavioral Management

Perspective

• Elton Mayo – Hawthorne Studies

– Illumination study

– Group study– Group study


Human Relations Movement

– Grew out of the Hawthorne studies.

– Proposed that workers respond primarily to the social context of work, including social conditioning, group norms, and interpersonal dynamics.and interpersonal dynamics.

– Assumed that the manager’s concern for workers would lead to increased worker satisfaction and improved worker performance.


Behavioral Management

Perspective

• Abraham Maslow

– Advanced a theory that employees are motivated

by a hierarchy of needs that they seek to satisfy.

• Douglas McGregor• Douglas McGregor

– Proposed Theory X and Theory Y concepts

of managerial beliefs about people

and work.


Maslow’s Hierarchy of Needs

• Five levels

– Physiological – hunger, thirst, shelter, sex

– Safety – security and protection– Safety – security and protection

– Social – affection, interpersonal relationships

– Esteem – self-respect, achievement status

– Self-actualization – achieving full potential

• Usually thought in the form of a pyramid


Maslow’s Hierarchy of Needs

SA

Esteem NeedsEsteem Needs

Social Needs

Security Needs

Physiological Needs


Theory X and Theory Y

• Theory X Assumptions

– People do not like work and try to avoid it.

– Managers have to control, direct, coerce, and threaten employees to get them to work threaten employees to get them to work toward organizational goals.

– People prefer to be directed, to avoid responsibility, and to want security; they have little ambition.

Source: Douglas McGregor, The Human Side of Enterprise, Copyright © 1960 by McGraw-Hill. Reprinted by permission of The McGraw-Hill Companies.



• Theory Y Assumptions

– People do not dislike work; work is a natural part

of their lives.

– People are internally motivated to reach – People are internally motivated to reach

objectives to which they are committed.

– People are committed to goals to the degree that

they receive rewards when they reach their

objectives.




• Theory Y Assumptions

– People seek both seek responsibility and accept

responsibility under favorable conditions.

– People can be innovative in solving problems.– People can be innovative in solving problems.

– People are bright, but under most organizational

conditions their potentials are underutilized.



Theory X – Theory Y

Think of these theories as a continuum

Theory X Theory Y

Employees fall somewhere in between the two ends



Perspective

• Contemporary behavioral science in

management – emerged because of the too

simplistic descriptions of work behavior by simplistic descriptions of work behavior by

the human relations theorists.

• Organizational behavior takes a holistic view

of behavior, including individual, group, and

organization processes


Organizational Behavior

• Important topics in organizational behavior

research:

– Job satisfaction and job stress

– Motivation and leadership– Motivation and leadership

– Group dynamics and organizational politics

– Interpersonal conflict

– The structure and design of organizations



Perspective

• Contributions

– Gave insights into interpersonal processes such as motivation and group dynamics in organizations

– Focused managerial attention on these processes

– Challenged the view of employees as tools and not resources– Challenged the view of employees as tools and not resources

• Limitations

– The complexity of human behavior makes prediction difficult

– Managers may be reluctant to adopt some of the behavioral concepts

– Contributions are often not communicated to the practicing managers in an understandable form


The Quantitative Management

Perspective

• Focuses on decision making, economic

effectiveness, mathematical models, and the

use of computers in organizations

– Management science

– Operations management


The Quantitative Management

Perspective

• Contributions

– Developed sophisticated quantitative techniques to assist decision making

– Models have increased our awareness of complex organizational processes and have aided in the planning and controlling processes

• Limitations

– Cannot fully explain or predict behavior

– Mathematical sophistication may come at the expense of other important skills

– Models may require unrealistic or unfounded assumptions


Contemporary Management Theory

• The Systems Perspective

– A system is an interrelated set of elements

functioning as a whole. An organization as a

system is composed of four elements:

• Inputs (material and/or human resources)

• Transformation processes (technical and managerial

processes)

• Outputs (products and services)

• Feedback (reactions from the environment)


The Integrated Systems Model

InputsInputsFrom theFrom theenvironment:environment:HumanHumanMaterialMaterial

ProcessingProcessingTransformationTransformationprocess:process:TechnologyTechnologyOperating systemsOperating systems

OutputsOutputsInto the Into the environmentenvironmentProductProductServicesServices

FeedbackFeedback

MaterialMaterialFinancialFinancialInformationInformation

Operating systemsOperating systemsAdministrative Administrative systemssystemsControl systemsControl systems

ServicesServicesProfit/lossProfit/lossEmployee behaviorEmployee behaviorInformationInformation


Systems Perspective

• Open systems interact with one another and

other environments

• Closed systems do not interact with their • Closed systems do not interact with their

environment

• Subsystems recognizes the importance of

subsystems because of their

interdependence


Systems Perspective

• Synergy

– Subsystems are more successful working

together than working alone. The whole,

working together, is greater than the sum of its

parts.parts.

• Entropy

– A natural process leading to system decline

which can be avoided through organizational

change and renewal.


The Universal Perspective vs The

Contingency Perspective

• The Universal Perspective tries to identify the one

best way to manage an organization, includes

classical, behavioral and quantitative approaches

The Contingency Perspective suggests that universal • The Contingency Perspective suggests that universal

theories cannot be applied to organizations because

each organization is unique – what works in one

situation may not work in another


Contemporary Management Issues &

Challenges

• Downsizing

• Diversity and the New Workforce

• Information Technology

• New Ways of Managing• New Ways of Managing

• Globalization

• Ethics and Social Responsibility

• Managing for Quality

• Service Economy


Principles of Management

Chapter 2

The Environment of Organizations

and Managers


Learning Goals

• Discuss the environment of organizations and identify the

components of the general, task, and internal environments

• Describe the ethical and social environment of management

• Describe the international environment of management

• Discuss the importance and determinants of an • Discuss the importance and determinants of an

organization’s culture


The Organization’s Environment

• External Environment

– General environment

– Task environment

• Internal Environment• Internal Environment

– Conditions and forces within an organization.


The Organization and Its Environments

Competitors

Internationaldimension

Technologicaldimension

OwnersEmployees

Physical environmentBoard of directors

CulturePolitical-

legaldimension

Socioculturaldimension

Economicdimension

Regulators Customers

Strategicpartners

Suppliers

Internal environment

Task environment ExternalenvironmentGeneral environment


Five Dimensions of the

General Environment

Five Dimensions of the

General Environment

• The economic dimension - the overall health and vitality of the economic system in which the organization operates

• The technological dimension - the methods available for converting resources into products or services resources into products or services

• The political-legal dimension - government regulation of business and the relationship between business and the government

• The socio-cultural dimension — the general societal/cultural norms that the organization functions under

• The international dimension — the extent to which an organization is involved in or affected by business in other countries.


McDonald’s General Environment

International Dimension• Restaurants in 115

countries• About two-thirds of

sales from outsidethe UnitedStates

TechnologicalDimension• Improved information

technology• More efficient

operating systems

McDonald’sPolitical-LegalDimension• Government

food standards• Local zoning

climate• General posture

toward businessregulation

Sociocultural Dimension• Demographic shifts in

number of single adultsand dual-income families

• Growing concerns abouthealth and nutrition

EconomicDimension• Strong economic

growth• Low unemploy-

ment• Low inflation


Task environmentExternal environment

General environment

principles of management52

Five Dimensions of the Task

Environment

• Specific groups affecting the organization• Competitors seeking the same resources as the organization.

• Customers who acquire an organization’s products or resources.

• Suppliers that provide resources for the organization.

• Regulators (agencies and interest groups) that control, legislate, or • Regulators (agencies and interest groups) that control, legislate, or

influence the organization’s policies and practices.

• Strategic partners (allies) who are in a joint venture or partnership

with the organization.


McDonald’s Task Environment

Competitors• Burger King• Wendy’s• Subway• Dairy Queen

Customers• Individual

consumers• Institutional

customers

Regulators• Food and Drug

Administration• Securities

andExchangeCommission

• Environmental McDonald’s customers

Suppliers• Coca-Cola• Wholesale food

processors• Packaging

manufacturers

Strategic Partners• Wal-Mart• Disney• Foreign partners

• EnvironmentalProtectionAgency


Task environment


How

Organizations Organizations

and

Environments

Interact


How Business and Government

Influence Each Other

TheGovernment

The government influences businessthrough direct and indirect regulation:

• Environmental protection legislation• Consumer protection legislation• Employee protection legislation• Securities legislation• The tax codes

Business

• The tax codes

Business influences the government through:

• Personal contacts and networks• Lobbying• Political action committees (PACs)• Favors and other influence tactics


The Internal Environment

• Conditions and stakeholder forces within an organization

– Owners– Owners

– Board of Directors

– Employees

– Physical Work Environment - the actual physical environment of the organization and the work that people do.


Individual Ethics

• Ethical Behavior

– An individual’s personal beliefs regarding what

is right and wrong or good and bad.is right and wrong or good and bad.


Determinants of Individual Ethics


Managerial Ethics

Are the standards of behavior that guide

individual managers in their work


Managerial

EthicsEmployees Organization

• Conflicts of interest• Secrecy and

confidentiality• Honesty

• Hiring and firing• Wages and working

conditions• Privacy and respect

Subject to ethical ambiguities• Advertising and promotions• Ordering and purchasing

Three areas of concern for managerial ethics

•The relationships of the firm to the employee. • Ordering and purchasing

• Bargaining and negotiation• Financial disclosure• Shipping and solicitation• Other business relationships

Economic Agents• Customers• Competitors• Stockholders• Suppliers• Dealers• Unions

employee.

•The employee to the firm.

•The firm to other economic agents.


Ethics in OrganizationsEthics in Organizations

Organizational Values+

Individual ValuesIndividual Values=

Managerial Values


Ethics in Organizations

• Managing Ethical Behavior

– Must begin with top management

– Training on how to handle different ethical dilemmas.dilemmas.

– Code of Ethics

• A formal, written statement of the values and ethical standards that guides a firm’s actions

– Individual behavior


Social Responsibility and Organizations

• Social Responsibility

– The set of obligations (to behave responsibly) that

an organization has to protect and enhance the

social context in which it functions.social context in which it functions.


Social Responsibility and Organizations

• Areas of Social Responsibility

– Stakeholders: customers, employees, and

investors.

– The natural environment: environmentally – The natural environment: environmentally

sensitive products, recycling, and public safety.

– The general social welfare: charitable

contributions, and support for social issues such

as child labor and human rights.


Social Responsibility

VoluntaryResponsibilities

being a “good corporate citizen”;

contributing to the

Ethical Responsibilitiesbeing ethical; doing what is right, just,

and fair; avoiding harm

community and quality of life

Source: Adapted from Archie B. Carroll, “The Pyramid of CorporateSocial Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.

Legal Responsibilitiesobeying the law (society’s codification of rightand wrong); playing by the rules of the game

Economic Responsibilitiesbeing profitable


Arguments For and Against

Social Responsibility

1. Business creates problems andshould therefore help solve them.

2. Corporations are citizens in oursociety.

2. Involvement in social programsgives business too much power.

1. Business lacks the expertise tomanage social programs.

Arguments For Social Responsibility Arguments Against Social Responsibility

society.

3. Business often has the resourcesnecessary to solve problems.

4. Business is a partner in oursociety, along with the govern-ment and the general population.

SocialResponsibility

4. The purpose of business in U.S.society is to generate profitfor owners.

gives business too much power.

3. There is potential for conflictsof interest.


Managing Social ResponsibilityFormal Organizational Dimensions

• Legal Compliance

– Extent to which the organization conforms to local, state,

federal, and international laws

Ethical Compliance• Ethical Compliance

– Extent to which members of the organization follow

basic ethical/legal standards of behavior

• Philanthropic Giving

– Awarding of funds or gifts to charities and other social

programs


Trends in International Business

• Technological advances make this a very small

world

• Decreasing Isolation from Foreign Competition• Decreasing Isolation from Foreign Competition

– U.S. consumer goods markets are open to

overseas competitors.


Levels of International Business

Activity

• Exporting

• Importing

• Licensing

• Strategic Alliance and Joint Ventures• Strategic Alliance and Joint Ventures

• Direct Investment


Advantages and Disadvantages of Various

Approaches to Internationalization

Approaches to Internationalization Advantages Disadvantages

Importing or Exporting

1. Small cash outlay 2. Little risk 3. No adaptation necessary

1. Tariffs and taxes 2. High transportation costs 3. Government restrictions

Licensing 1. Increased profitability 2. Extended profitability

1. Inflexibility 2. Helps competitors

Strategic Alliance/ Joint Venture

1. Quick market entry 2. Access to materials and technology

1. Shared ownership (limits control and profits)

Direct Investment 1. Enhances control 2. Existing infrastructure

1. Complexity 2. Greater economic and political risk 3. Greater uncertainty


Environmental Challenges

of International Management


Controls on International Trade

• Key Concepts

– Tariffs are collected on goods shipped across national boundaries.

– Quotas are limits placed on the number or value of – Quotas are limits placed on the number or value of goods that can be traded as exports or imports.

– Export restraint agreementsare voluntary limits on the volume

or value of goods exported to,

or imported from, another country.


The Structure of the Global Economy

• Economic Communities

– Sets of countries that engage in high levels

of trade with each other through the elimination

of trade barriers such as quotas and tariffs.of trade barriers such as quotas and tariffs.

• European Union (EU)

• North American Free Trade Agreement (NAFTA)

• Latin American Integration Association

• Caribbean Common Market


European Union

(EU)

Member Nations

Source: Lucas, George H., Robert P. Bush, and Larry R. Gresham, Retailing. Copyright © 1994 by Houghton Mifflin Company. Used with permissions.

principles of management76

The Cultural Environment of International

Buisness

• Language

• The Meaning of Colors

• Nonverbal cues


The Organization’s Culture

• Organization Culture – collection of values, beliefs, behaviors, customs, and attitudes that characterize a community of people.

• Determinants of Organization Culture

Organization’s founder – Organization’s founder

– Articulate the culture through symbols, stories, heroes, slogans, and ceremonies that embody and personify the spirit of the organization.

– Corporate success strengthens the culture.


Organization Culture

• Managing Organization Culture

– Understand the current culture to understand whether to maintain or change it.

– Reward and promote people whose behaviors are whose behaviors are consistent with desired cultural values.

– Promote shared experiences that bond organizational memberstogether.


Organization Culture

• Changing Organization Culture

– Develop a clear idea of what kind of

culture you want to create.

– Bring in outsiders to important – Bring in outsiders to important

managerial positions.

– Adopt new slogans, stories,

ceremonies, and purposely

break with tradition.


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