Understanding

the Management Process

From Chapter 7 Business Ownership

Corporation A business that exists separately from its

owners and is permitted to sell stocks An artificial being, (a legal person), invisible,

intangible, and existing only in contemplation of the law.

An artificial person created by law with most of the legal rights of a real person, including the rights to start and operate a business, to buy or sell property, to borrow money, to sue or be sued, and to enter into binding contracts

Corporation Advantages DisadvantagesFormation Difficulty / complex /

high cost starting

Source of funding

Greater Financial Capital(stock & loans)

Liability Liability Limited to the amount paid for stocks

Tax implications

Double taxation

Management and control

Specialized Management

Internal Conflicts

Transferability Increased Liquidity Unlimited Life

Hostile takeover (tender offer)

Others Government regulations and paperwork

Corporate Governance Structure

Shareholders: owners Preferred stocks: first to be paid; not voting right Common stocks: last to be paid; with voting right

Board of Directors: Elected by shareholders Oversees corporate management: policies

Corporate Officers: CEO, President, VPs, (directors) Hired by the board Day-to-day operations

Corporate Governance Structure

Shareholders: Electing directors Voting on critical issues

Delegating votes: Proxy: temporarily transfer voting rights to

others Pooling agreements: a contract to vote for the

same thing Voting trust: turn shares to a trustee, with a

certificate, the trustee votes according to agreements

Corporate Governance Structure Board of directors:

strategic planning and policy making The top governing body of a corporation, the

members of which are elected by the stockholders Responsible for setting corporate goals,

developing strategic plans to meet those goals, and the firm’s overall operation

Outside directors: experienced managers or entrepreneurs from outside the corporation who have specific talents

Inside directors: top managers from within the corporation

Executive Committee: management (3 board members)

Audit Committee: watch dog (independent outside directors)

Corporate Governance Structure

Corporate Officerschairman of the boardpresident ； executive vice

presidentscorporate secretary, treasurer, other top executives

Implement the chosen strategy and direct the work of the corporation, periodically reporting results to the board and stockholders

Pay Difference

0

100

200

300

400

500

600

CEO PayTimes

WorkerPay

1980 1990 2000 2006Source: 2007 Trends in CEO Pay,

http://www.aflcio.org/corporatewatch/paywatch/pay/index.cfm, accessed 2/8/09.

What is Management?

The process of coordinating people and other resources to achieve the goals of an organization Human resources

The people who staff the organization and use the other resources to achieve the goals of the organization

Financial resources The funds the organization uses to meet its obligations to

investors and creditors Material resources

The tangible physical resources an organization uses Information resources

The information about internal and external business environmental conditions that the firm uses to its competitive advantage

the management process

Basic Management Functions

Planning Establishing organizational goals

and deciding how to accomplish them Organizational goal: Mission

A statement of the basic purpose that makes an organization different from others

Strategic planning The process of establishing an organization’s

major goals and objectives and allocating the resources to achieve them

Establishing goals and objectives

Goal An end result that the organization is expected to

achieve over a one- to ten-year period Objective

A specific statement detailing what the organization intends to accomplish over a shorter period of time

Proper goals are Set at every level in the organization Consistent (supportive) with each other Optimized (balanced) to reduce conflicts

between goals

Why do businesses set Why do businesses set goals?goals?

Set directions and guidance for managers

Allocate resources Define corporate culture Assess performance

Stated Goal: Mission Statement

Novartis:We want to discover, develop and

successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.

We also want to provide a shareholder return that reflects outstanding performance and to adequately reward those who invest ideas and work in our company.

Stated Goal: Mission Statement

立足浦东，为浦东开发开放服务，为上海建设成为国际经济、金融、贸易和航运中心培养合格人才

“ ”让人们更便捷地获取信息，找到所求 香港生物科技研究院 致力为本地开发生产科

技产品之企业，提供下游产品研究开发支持服务及辅助设施，并提供主要之基础设施，促使香港特区生物科技工业之成功发展。

T3 Mission Statement determine the mission statement

for your company 3-5 sentences upload to moodle by 10/31/2010

Strategic Planning objectives that a business hopes and

plans to achieve Performance targets used to measure

success and failureCost reduction, profitability, revenue growth, stock price, employee motivation, business expansion, ……

Formulate Strategy Strategy: how to meet goals and how to

respond to new challenges and needs SWOT analysis

Internal: Strength and Weakness External: Opportunity and Threat

Organization and environment match Working Plans: strategic, tactical,

operational(all levels of management)

Different types of plansAn outline of the actions by which the organization

intends to accomplish its goals and objectives Strategic plan

An organization’s broadest plan, a guide for major policy setting and decision making

Tactical plan A smaller-scale plan to implement a strategy

Operational plan A plan to implement a tactical plan

Contingency plan A plan of alternative courses of action if the

organization’s other plans are disrupted or become ineffective

Different types of plans

Organizing

The grouping of resources and activities to accomplish some end result in an efficient and effective manner

Defining the tasks and activities to be carried out by a number of people to achieve particular objectives

Deciding what is to be done and who is to do it

The allocation of responsibilities: tasks, resources, structures

Organizational Structure Functional

Groups are established based on functions needed to be performed

Divisional Divides into semi-autonomous groups which

are similar to individual companies Project Organization/ Matrix Organization

Specific function carried out by cross section

Basic Organizational Structure

P a yro ll A cco u n ting

V .P . F ina n ce

D is tric t S a le s M a n a g er D is tric t S a le s M a n g er

N a tion a l S a les

V .P . S a les V .P . M a rke ting V .P . H .R . V .P . P rod uc tion

P re sid e n t

B o a rd o f D ire c to rs

Field Managers Financial managers

Responsible for the organization’s financial resources Operations managers

Manage the systems that convert resources into goods and services

Marketing managers Responsible for facilitating the exchange of products

between the organization and its customers or clients Human resources managers

Manage the organization’s human resources programs Administrative managers (general managers)

Not associated with any specific functional area; provide overall administrative guidance and leadership

Organizational Structure:

Vertical: more levels, narrower span of control

Flat: less levels, wider span of control

Leading and motivating Leading

Influencing people to work toward a common goal

Motivating Providing reasons for people to work in the best

interests of the organization Directing

The combined processes of leading and motivating

Controlling

Evaluating and regulating ongoing activities to ensure that goals are achieved

Management: levels, skills,

responsibilities

Board of directors / CEO /

President / GM

Functional / Divisional

Managers

Operational

Conceptual/ human

Conceptual/human /

tech

Tech / human

Goal

Setting

Strategy Formulation

Implementation

Operational

Management: levels, skills,

responsibilities Top management:

goal setting: vision, concept, abstract Downward communication: human skills

Middle management: strategy formulation: concept Implementation: technical Upward and downward communication: human

skills Operational (first line) management:

Operation: technical Upward communication: human skills

To be an effective manager Personal skills

Oral communication Written communication Computer skills Critical thinking

Education and experience A solid academic background Practical work experience

Management Skills Conceptual skills:

Ability to see beyond present (vision) Ability to diagnose and analyze different situations

(decision-making) Ability to think in abstract terms (idea-forming)

Human relation skills (interpersonal skills): Ability to understand and to get along well with others The ability to deal effectively with other people Communication skills

Technical skills: Ability to perform specialized tasks

Top Management: Position titles:

Presidents, Treasurer, CEO, CFO Responsibilities:

guides and controls the overall fortunes of the organization

Policies, strategies, significant decision Skills:

Conceptual skills (vision, decision, idea) Human skills (downward communication;

external)

Middle Management Position titles:

Plant manager, operations manager, division manager Responsibilities:

implements the strategy and major policies developed by top management

How to meet goals by Implementing strategies, policies, decisions

Skills: Conceptual (implementation plan) Technical (tasks, implementation) Human (upward and downward communication)

First-Line Management Position titles:

Supervisor, office manager, group leader Responsibilities:

coordinates and supervises the activities of operating employees

Carry out tasks Working with and supervising employees Interacting with suppliers and other stakeholders

Skills: Technical (task) Human (upward and downward communication;

external )

Manager vs. Leader Decisional roles

Involve various aspects of management decision making

Entrepreneur, disturbance handler, resource allocator, negotiator

Interpersonal roles The manager deals with

people Figurehead, liaison, leader

Informational roles A manager either

gathers or provides information

Monitor, disseminator, spokesperson

• Audit company cultures.• Stay informed—

informed people don’t fear change.

• Beware of “aspirational” accounting. (Enron)

• Empower your people—turn them loose.

• Prevent erosion of human assets.

• Be generous with what you know.

Leadership The ability to influence others

Formal leadership Legitimate power of position as the basis

for authority

Informal leadership Not recognized formally by the

organization authority, but have influences through other factors

Leadership Styles Authoritarian

Holds all authority and responsibility, with communication usually moving from top to bottom

Laissez-faire Gives authority to employees and allows subordinates to

work as they choose with a minimum of interference; communication flows horizontally among group members

Democratic Holds final responsibility but also delegates authority to

others, who help determine work assignments; communication is active upward and downward

Effective leadership Interaction among the employees Characteristics of the work

situation The manager’s personality

Should Managers Use the Authoritarian Leadership Style?

YES Some employees need the

close supervision that authoritarian leaders provide.

When authoritarian leadership is used, communication moves from top (supervisor) to bottom (employees).

An authoritarian leader assigns workers to specific tasks and expects precise results, so workers know exactly what is expected.

NO Workers resent the close

supervision that results from the authoritarian leadership style.

The democratic and laissez-faire leadership styles allow workers to communicate with the supervisor and other members of their group.

Authoritarian leaders stifle the workers’ creativity and their ability to solve problems.

Decision Making

The act of choosing one alternative from among a set of alternatives

Major steps in the managerial decision-making process

Identifying the problem or opportunity

Problem The discrepancy between an actual condition

and a desired condition Opportunity

A “positive” problem Problem-solving impediments

Preconceptions about the problem Focusing on unimportant matters while

overlooking significant issues Analyzing symptoms rather than causes Failing to look ahead

Generating alternatives

Brainstorming Encouraging participants to come up

with new ideas “Blast! then refine”

Reevaluating objectives, modifying them if necessary, and devising a new solution

Selecting an alternative

Satisficing Choosing an alternative that is not the best

possible solution, but one that adequately solves the problem

Implementing and evaluating the solution

Requires time, planning, preparation of personnel, and evaluation of the results

An effective decision removes the difference between the actual condition and the desired condition

If a problem still exists, managers may Decide to give the chosen alternative more

time Adopt a different alternative Start the process all over again