Ch 7: business management
Today, however, most managers tend to be more progressive. For example, they emphasize
teams and team building; they create drop-in centers, team spaces, and open work areas. They
may change the definition of work from a task you do for a specified period in a specific place to
something you do anywhere, anytime. They tend to guide, train, support, motivate, and coach
employees rather than tell them what to do. 1 Thus most modern managers emphasize teamwork
and cooperation rather than discipline and order giving. 2They may also open their books to
employees to share the company’s financials.
The people entering management today are different from those who entered in the past.
Leaders of Fortune 100 companies tend to be younger, more of them are female, and fewer of
them were educated at elite universities. Managers in the future are more likely to be working
in teams and assuming completely new roles in the firm. For one thing, they’ll be doing more
expansion overseas. Further, they may be taking a leadership role in adapting to climate
The four functions of management
The following definition of management provides the outline of this chapter: Management is the
process used to accomplish organizational goals through planning, organizing, leading, and
controlling people and other organizational resources
Planning includes anticipating trends and determining the best strategies and tactics to achieve
organizational goals and objectives. One of the major objectives of organizations is to please
customers. The trend today is to have planning teams to help monitor the environment, find
business opportunities, and watch for challenges. Planning is a key management function
because accomplishing the other functions depends heavily on having a good plan.
Organizing includes designing the structure of the organization and creating conditions and
systems in which everyone and everything work together to achieve the organization’s goals and
Leading means creating a vision for the organization and communicating, guiding, training,
coaching, and motivating others to achieve goals and objectives in a timely manner. The trend is
to empower employees, giving them as much freedom as possible to become self-directed and
self-motivated. This function was once known as directing; that is, telling employees exactly what
to do. In many smaller firms, that is still the manager’s role. In most large firms, however,
managers no longer tell people exactly what to do because knowledge workers and others often
know how to do their jobs better than the manager does.
Controlling establishes clear standards to determine whether an organization is progressing
toward its goals and objectives, rewarding people for doing a good job, and taking corrective
action if they are not. Basically, it means measuring whether what actually occurs meets the
Planning and decision making
Planning, the first managerial function, is setting the organization’s vision, goals, and objectives.
Executives find planning to be their most valuable tool. Avision is more than a goal; it’s a broad explanation of why the organization exists and where it’s trying to go.14 It gives the organization
a sense of purpose and a set of values that unite workers in a common destiny
Top management usually sets the vision for the organization and then often works with
others in the firm to establish a mission statement. A mission statement outlines the
organization’s fundamental purposes. It should address:
• The organization’s self-concept.
• Its philosophy.
• Long-term survival needs.
• Customer needs.
• Social responsibility.
• Nature of the product or service.
The mission statement becomes the foundation for setting specific goals and
objectives. Goals are the broad, long-term accomplishments an organization wishes to
attain. Because workers and management need to agree on them, setting goals is often a team
process. Objectives are specific, short-term statements detailing how to achieve the organization’s
goals. One of your goals for reading this chapter, for example, may be to learn basic concepts of
management. An objective you could use to achieve this goal is to answer the chapter’s Test Prep
Planning is a continuous process. A plan that worked yesterday may not be successful in
today’s market. Most planning also follows a pattern. The procedure you’ll follow in
planning your life and career is basically the same as the one businesses use. It answers
several fundamental questions:
1. What is the situation now? What are the success factors affecting the industry participants
and how do we compare? What is the state of the economy and other environments? What
opportunities exist for meeting people’s needs? What products and customers are most
profitable? Who are our major competitors? What threats are there to our business? These
questions are part of SWOT analysis, which analyzes the organization’s strengths and
weaknesses, and the opportunities and threats it faces, usually in that
order.16 Opportunities and threats are often external to the firm and cannot always be
Weaknesses and strengths are more often internal and therefore more within
reach of being measured and fixed. Figure 7.2 lists some of the general issues
companies consider when conducting a SWOT analysis: What external success
factors affect the industry? How does our firm measure up to other firms? What
are our social objectives? What are our personal development objectives? What
can we do to survive and prosper during a recession? For more on SWOT analysis,
see the Taking It to the Net exercise at the end of this chapter.
Strategic planning is done by top management and determines the major goals of the
organization and the policies, procedures, strategies, and resources it will need to achieve
them. Policies are broad guidelines for action, and strategies determine the best way to use
resources. At the strategic planning stage, top managers of the company decide which customers
to serve, when to serve them, what products or services to sell, and the geographic areas in
which to compete. Tactical planning is the process of developing detailed, short-term statements about what is to
be done, who is to do it, and how. Managers or teams of managers at lower levels of the
organization normally make tactical plans. Such plans can include setting annual budgets and
deciding on other activities necessary to meet strategic objectives.
Operational planning is the process of setting work standards and schedules necessary to
implement the company’s tactical objectives. Whereas strategic planning looks at the
organization as a whole, operational planning focuses on specific supervisors, department
managers, and individual employees. The operational plan is the department manager’s tool for
daily and weekly operations.
Contingency planning is the process of preparing alternative courses of action the firm can use if
its primary plans don’t work out. The economic and competitive environments change so rapidly
that it’s wise to have alternative plans of action ready in anticipation of such changes. For
example, if an organization doesn’t meet its sales goals by a certain date, the contingency plan
may call for more advertising or a cut in prices at that time. Crisis planning is a part of
contingency planning that anticipates sudden changes in the environment. For example, many
cities and businesses have developed plans to respond to terrorist attacks. You can imagine how
important such plans would be to hospitals, airlines, the police, and public transportation
Decision making is choosing among two or more alternatives, which sounds easier than it is. In
fact, decision making is the heart of all the management functions.
The rational decision-making model is a series of steps managers often follow to make logical,
intelligent, and well-founded decisions. Think of the steps as the six Ds of decision making:
1. Define the situation.
2. Describe and collect needed information.
3. Develop alternatives.
4. Decide which alternative is best.
5. Do what is indicated (begin implementation).
6. Determine whether the decision was a good one, and follow up.
Managers don’t always go through this six-step process. Sometimes they have to make
decisions on the spot—with little information available. They still must make good decisions in
all such circumstances. Problem solving is less formal than decision making and usually calls
for quicker action to resolve everyday issues. Both decision making and problem solving call for
a lot of judgment.
Problem-solving teams are two or more workers assigned to solve a specific problem (e.g.,
Why aren’t customers buying our service contracts?). Problem-solving techniques
include brainstorming, that is, coming up with as many solutions as possible in a short period of
time with no censoring of ideas.Another technique is called PMI, or listing all the pluses for a
solution in one column, all the minuses in another, and the implications in a third. The idea is to
make sure the pluses exceed the minuses.
You can try using the PMI system on some of your personal decisions to get some
practice. For example, should you stay home and study tonight? List all the pluses in one
column: better grades, more self-esteem, more responsible behavior, and so on. In the
other column, put the minuses: boredom, less fun, and so on. We hope the pluses
outweigh the minuses most of the time and that you study often. But sometimes it’s best
to go out and have some fun, as long as doing so won’t hurt your grades or job prospects. Creating a unified system
Top management, the highest level, consists of the president and other key company executives
who develop strategic plans. Job titles and abbreviations you’re likely to see often are chief
executive officer (CEO), chief operating officer (COO), chief financial officer (CFO),