Management and Leadership Chapter 8
Managers must practice getting things done through ORGANIZATIONAL RESOURCES.
RESOURCES is a general term that incorporates human resources (employees), natural resources (raw
materials) and financial resources (money). Resources include the factors of production.
Management is deciding how to effectively use these scarce resources. Knowledge acquisition
and innovation are required to survive in the rapidly changing environment.
Managers are educated to guide, train, support, motivate and coach employees rather than tell
them what to do.
Management is an assignment, coaching is a choice.
Most modern managers emphasize teamwork and cooperation rather than discipline and giving orders.
Managers must earn the trust of their employees which includes rewarding them and finding other
ways to encourage them to stay in the firm.
Transparency in how managers do their job (corporate governance) and how they address corporate social
responsibility will become increasingly important.
Function of Management
Managers must deal with conflict resolution and balance between work and family as well as create trust.
Management is the process used to accomplish organizational goals through planning, organizing, leading
and controlling people and other organizational resources.
Planning Anticipates trends and determines the best strategy to achieve organizational goals.
Planning teams help monitor the environment, find business oppurtunities and watch for challenges.
Planning is most important and is usually reflected on a budget.
Organizing > includes designing the structure of the organization and creating conditions and systems
in which everyone and everything work together to achieve the organizations goals and objectives. The
idea is to design the firm so everyone’s working at a profit to please the customer. flexible and
adaptable Leading > creating a vision for the organization and communicating, guiding, training, coaching and
motivating others to work effectively to achieve the organizations goals and objectives. The rend is to
empower employees, giving them as much freedom to become self directed and motivated. Leadership is
necessary to keep employees focused along with training, coaching and motivating
Controlling > Involves establishing clear standards to determine whether and organization is
progressing towards its goals and objectives, reporting results, rewarding people and taking action if work is
not proceeding according to the plan. Measuring whether what actually occurs meets organizational goals.
Vision > encompassing explanation of why the organization ecists and where it’s trying to head. A vision
gives a sense of purpose.
Values > A set of fundamental beliefs that guide a business in the decisions they make. Vision informs
Mission Statement > An outline of the organizations fundamental purposes. Mission statements are
usually developed by top management, with some input from employees, depending on the size of the
company. A meaningful mission statement should address:
The organizations self concept Company philosophy and goals
Long term survival
The nature of the company’s product or service
Goals > are the broad, long term accomplishments an organization wishes to attain. Goals need to be
mutually agreed on by workers and managements.
Objectives > specific, short term statements dealing how to achieve the organizations goals.
SWOT Analysis > Analysis of an organizations strengths, weaknesses, opportunities and threats.
Opportunities and threats in the market place are identified, while they cannot always be controlled or
anticipated, they most definitely affect the organization. Opportunities and threats include concepts referred
to as PESTLE. (Political, economic, social, technological, legal and environmental) Strategic Planning > Outlines how the company will meet its objectives and its goals. It provides the
foundation for the policies, procedures, and strategies for obtaining and using resources to achieve those
1. What is the situation now?
2. Where do we want to go?
3. How do we get there?
Strategic – LONG TERM planning – focus on firm’s goals
Tactical – SHORT TERM planning – lower levels of firm
Tactical Planning > The process of developing detailed, short term statements about what is to be
done, who is to do it and how it is to be done. Tactical planning is normally the responsibility of managers or
teams of managers at LOWER LEVELS of the organization, whereas strategic planning is the responsibility
of the top managers of the firm.
Operational Planning > The process of setting work standards and schedules necessary to
implement the company’s tactical objectives. Operational planning focuses on specific responsibilities and
can include operation budgets. Contingency Planning > Process of preparing alternative courses of action that may be used if
original plans do not achieve the objectives. Morneau Shepell believes that most companies view
contingency planning solely as a tool to prevent operational shutdowns.
Crisis Planning > reacting to sudden changes in the environment.
Decision Making: Finding the Best Alternative
Decision Making > Choosing among two or more alternatives. The rational decision making model is
a series of steps that managers follow to make logical, intelligent and well founded decisions.
The 7 D’s of decision making are:
1. Define the situation
2. Describe and collect needed information
3. Develop alternatives
4. Develop agreement among those involved
5. Decide which alternative
6. Do what is indicated (begin implementation)
7. Determine whether the decision was a good one and follow up.
Problem Solving > Process of solving everyday problems that occur. Problem solving techniques
include brainstorming and PMI, which is listing all the pluses and minuses and Interesting.
Organization Chart > a visual device that shows relationships among people and divides the work. Top Management >
CEO > is responsible for introducing change (Executive)
COO > Putting changes into action (operations)
CFO > Obtaining funds, planning budgets, collecting funds (financial)
CIO/CKO > Right information to other managers so they can make the right decisions (Information and
Middle Management > General managers, division managers and branch and plant managers
(deans). Responsible for tactical planning and controlling.
Supervisory Management > Includes those who are responsible for supervising workers and
evaluating their daily performance. Skills Needed at Various Levels of Management
1. Technical Skills
ability to perform tasks in a specific discipline (software, selling)
2. Human Relations Skills
communication and motivation, leadership and coaching.
3. Conceptual Skills
Ability to picture the organization as a while and the relationships among its various parts. Needed when
planning, controlling and organizing.
Create a vision and rally others about that vision (concerns)
Establish corporate values (environment)
Promote corporate ethics (honesty)
Embrace transformational change (effective and efficient)
Stress accountability and responsibility (held accountable for actions)
Transparency > presentation of a company’s facts and figures in way that is clear, accessible and
apparent to all stakeholders. Various Leadership Styles
Involves making managerial decisions without consulting others. Affective with new and unskilled workers
who need clear direction and guidance.
Participative (democratic) Leadership
Managers and employees working together to make decisions. Increases job satisfaction but not
Managers setting objectives and employees being relatively free to do whatever it takes to accomplish
those objectives. Most successful in which managers supervise doctors, engineers etc. traits include
warmth, friendliness and understanding.
Transformational leadership > Occurs when visionary leaders can influence others to follow them
in working to achieve a desired outcome or goal.
Transactional leadership > associated with employees who are motivated by a system of reward.
The leader is given power to assign tasks and their successful completion leads to rewards and
Empowering employees means giving them knowledge to do the best job they can. Knowledge Management > Finding the right information, keeping the information in a readily
accessible place and making the information known to everyone in a firm.
The Control Process (5 Steps)
1. Establishing clear performance standards. This ties the planning function
to the control function. Without clear standards, control is impossible.
2. Monitoring and recording actual performance (results)
3. Comparing results against plans and standards
4. Communicating results and deviations to the employees involved
5. Taking corrective action when needed and providing positive feedback for
work well done.
External Customers > Include dealers, who buy products to sell to other and ultimate customers
such as you and me, who buy products for their own personal use.
Internal Customers > Individuals and units within the firm that receive services from other
individuals or units. Describe the changes occurring today in the management function.
Many managers are changing their approach to corporate management.
What reasons can you give to account for these changes in management?
Business people are being challenged to be more ethical and to make their accounting practices more
visible to investors and the general public. Change is now happening faster than ever, and global
competition is just a click away. Managing change is an important element of success, particularly in
light of today's emphasis on speed in the global marketplace. National borders mean much less now
than ever before, and cooperation and integration among companies have greatly increased. Within
companies, knowledge workers are demanding managerial styles that allow for freedom, and the
workforce is becoming increasingly diverse, educated, and selfdirected.
How are managers' roles changing?
Managers are being educated to guide, train, support, and teach employees rather than tell them what
Describe the four functions of management.
Managers perform a variety of functions.
What are the four primary functions of management?
The four primary functions are (1) planning, (2) organizing, (3) leading, and (4) controlling.
Describe each of the four functions.
Planning includes anticipating trends and determining the best strategies and tactics to achieve
organizational goals and objectives. Organizing includes designing the structure of the organization and
creating conditions and systems in which everyone and everything works together to achieve the
organization's goals and objectives. Leading involves creating a vision for the organization and guiding,
training, coaching, and motivating others to work effectively to achieve the organization's goals and
objectives. Controlling involves establishing 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. Relate the planning process and decision making to the accomplishment of
The planning function involves the process of setting objectives to meet the organizational goals. Goals
are broad, longterm achievements that organizations aim to accomplish.
What are the four types of planning, and how are they related to the
organization's goals and objectives?
Strategic planning is broad, longrange planning that outlines the goals of the organization. Tactical
planning is specific, shortterm planning that lists organizational objectives. Operational planning is part
of tactical planning and involves setting specific timetables and standards. Contingency planning
involves developing an alternative set of plans in case the first set does not work out.
What are the steps involved in decision making?
Decision making is choosing among two or more alternatives and it is the heart of all management
functions. The seven Ds of decision making are (1) define the situation, (2) describe and collect needed
information, (3) develop alternatives, (4) develop agreement among those involved, (5) decide which
alternative is best, (6) do what is indicated (begin implementation), and (7) determine whether the
decision was a good one and follow up.
Describe the organizing function of management.
Organizing means allocating resources (such as funds for various departments), assigning tasks, and
establishing procedures for accomplishing the organizational objectives.
What are the three levels of management in the corporate hierarchy?
The three levels of management are (1) top management (highest level consisting of the president and
other key company executives who develop strategic plans); (2) middle management (general
managers, division managers, and plant managers who are responsible for tactical planning and
controlling); and (3) supervisory management (firstline managers/supervisors who evaluate workers'
What skills do managers need?
Managers must have three categories of skills: (1) technical skills (ability to perform specific tasks such
as selling products or developing software), (2) human relations skills (ability to communicate and
motivate), and (3) conceptual skills (ability to see organizations as a whole and how all the parts fit
together). Managers at different levels need different skills. Explain the differences between leaders and managers, and describe the
various leadership styles.
Executives today must be more than just managers; they must be leaders as well.
What's the difference between a manager and a leader?
A manager plans, organizes, and controls functions within an organization. A leader has vision and
inspires others to grasp that vision, establishes corporate values, emphasizes corporate ethics, and
does not fear change.
Which leadership style is most effective?
Figure 8.8 shows a continuum of leadership styles ranging from bosscentered to subordinatecentered
leadership. The most effective leadership style depends on the people being led and the situation.
Summarize the five steps of the control function of management.
The control function of management involves measuring employee performance against objectives and
standards, rewarding people for a job well done, and taking corrective action if necessary.
What are the five steps of the control function?
Controlling incorporates (1) setting clear standards, (2) monitoring and recording performance, (3)
comparing performance with plans and standards, (4) communicating results and deviations to
employees, and (5) providing positive feedback for a job well done and taking corrective action if
What qualities must standards possess to be used to measure performance
Standards must be specific, attainable, and measurable. Producing World Class Goods and Services CH.10
Canada is a large industrial country with many major industries. They are one of the largest
producers of forest products. Eight points that can improve Canada’s competitiveness are the
1. Lower taxes for businesses that invest in new products and technologies and
the skills of their employees.
2. Extend the Accelerated Capital Cost Allowance program for those companies
that invest in manufacturing and processing machinery and equipment
3. Encourage innovation and the commercialization of new products and
4. Help businesses develop and take advantage of international opportunities
5. Enhance the competitiveness of North America’s integrated supply chains
6. Improve the quality and availability of skilled workers
7. Strengthen Canada’s energy and logistics infrastructure
8. Improve regulatory efficiency
Research and Development
> Work dictated toward the innovation, introduction, and improvement of products and processes.
Technology and Innovation
Technology is knowing how to use and make tools for the jobs. It creates innovation and gives a
An innovation is a new product or process that can be purchased. An idea may lead to an invention but
cannot be called an innovation until it is commercialized.
When technological know how is developed, sold, distributed and used, it then becomes an innovation.
The three most important objectives of innovation are to
> improve product quality
> increase production capacity Producing World Class Goods and Services CH.10
> extend product range
SIED (Science innovation and electronic information division) believes that innovation and the adoption and
dissemination of innovative technologies and processes are vital to economic growth and development.
Through innovation, new products are introduced, new production processes are developed and introduced,
organizational changes are made. Through the adoption of newer, more advanced technologies and
practices, industries can increase their production capabilities, improve productivity and expand their lines
of new goods and services.
Top corporate R&D spenders
Canada’s Evolving Manufacturing and Services Base Producing World Class Goods and Services CH.10
Foreign manufacturers captured huge chunks of the North American Market so Canada had to become
more competitive by doing the following
> Focusing on customers
> Maintaining close relationships with suppliers and other companies to satisfy customer needs
> Practicing continuous improvement
> Focusing on quality
> Saving on costs through site selection
> Relying on Internet to unite companies
> Adopting production techniques such as enterprise resource, planning, computerintegrated
manufacturing, flexible manufacturing and lean manufacturing
The manufacturing and service sector employs over 87% of Canada’s working population. R&D spending
by businesses make up 52 percent of total R&D expenditures.
From Production to Operations Management
> creation of goods and services using the factors of production (land, labor, capital, entrepreneurship,
> The management activities that have helped firms create goods.
> Specialized area in management that converts or transforms resources into goods and services. It
includes inventory management, quality control, production scheduling, follow up services and more.
Transforms resources (including human) into automobiles for example. This is done through a process of
fabrication and assembly.
Manufacturing Turn to a Customer Orientation and Services for Profit
Manufacturers have expanded operations management out of the factory and moved it closer to the
customer, providing services such as custom manufacturing, fast delivery, credit, installation and repair. Producing World Class Goods and Services CH.10
In the area of corporate computing, the average company spends only one fifth of it’s annual personal
computer budget on purchasing hardware. The rest goes to technical support, administration and other
Many companies are trying to be more focused on services because they retain
more customers by building relationships.
Operations Management in the Service Sector
Operations management in the service industry is all about creating a good experience for those who use
Operations management is responsible for locating and providing services that will make a customer happy.
This has become the quality standard for hotels for example. It is the implementation phase of
When new information systems are developed to measure the quality of improvement of goods and
services including the speed of their delivery and customer satisfaction, productivity in the service sector
will go up dramatically.
Operations management has led to tremendous productivity increases in the service sector. The secret to
obtaining and holding a good job is to acquire appropriate education and training.
Operations Management Planning
Operations management planning helps solve many of the problems in service and manufacturing sectors.
These include facility location, facility layout, and quality control. The resources used may be different but
the management issues are similar.
The process of selecting a geographic locations for a company’s operations.
The convenience is not having to leave home for services. This is why there is a lot of interest in Internet
banking, Internet shopping, online education and other services. Producing World Class Goods and Services CH.10
Facility Location For Manufacturers
A major issue of the recent past has been the shift of manufacturing organizations from one city or province
to another in Canada or a foreign site.
Why would companies spend millions to move?
> Labour costs,
> availability of resources, including Labour
> access to transportation that can reduce time to market
> proximity to suppliers, proximity to customers
> crime rates
>quality of life for employees
>cost of living and the need to train or re train the local work force.
Availability of low cost labor or the right kind of skilled labor remains a key reason many producers move
their plant to Malaysia, China, India, Mexico and other countries.
By moving to areas where natural resources are inexpensive and plentiful, firms can significantly
lower the cost of buying resources but also the cost of shipping finished products.
Companies tend to cluster where smart and talented people are.
Time to market
They need sites that allow products to move quickly so that they can be delivered to customers
quicken response time, so many firms are seeking countries with the most advanced information
Another way to work closely with suppliers to satisfy your customers needs is to locate your production
facilities near supplier facilities. That cuts the cost of distribution and makes communication easier.
Many businesses are building factories in foreign countries to get closer to their international customers. Producing World Class Goods and Services CH.10
Location has become a critical issue in operations management.
A lot of outsourcing happens in the industry of software R&D. For companies needing software, hourly rates
outside of Canada are much lower. Outsourcing can become a problem due to language and cultural
differences, differences in expectations etc. Outsourcing is being used as a strategic tool for focusing
scarce human capital on core business activities. Canadians companies are also benefitting from other
Canada is one of the top IT outsourcing destinations in the world, especially for the United States.
US companies will outsource to Canada because of the
highly skilled IT professionals
stable workforce without high attrition rates
similar culture and language
familiarity with American business processes
same time zones allowing for real time communication
excellent communication system between the two countries
Canada’s Auto Industry
The auto industry is critical to Canada’s manufacturing economy. The auto sector is Canada’s biggest
contributor to manufacturing GDP and its largest manufacturing employer, employing one out of every
seven Canadians. The industry supports jobs across Canada in 13 assembly plants, more than 540 parts
manufacturers, 3900 dealerships and many other related industries.
To potential investors, Canada offers cost advantages due to our public Medicare program and until a few
years ago, a low currency.
To respond to the decreasing trend in new auto investments, a joint industrygovernment council was
established. A major goal of the Canadian Automotive Partnership Council is to improve the future of the
Taking Operations Management to the Internet Producing World Class Goods and Services CH.10
Many rapidly growing companies outsource engineering, design, manufacturing, and other tasks to other
companies that specialize in those functions. They create new relationships with suppliers over the Internet
making operations management an inter firm process in which companies work closely together to design,
produce and ship products to customers.
Many manufacturing companies are developing Internet focused strategies that will enable them and others
to compete more effectively in the future. These changes are having a dramatic effect on operation
managers as they adjust from a one firm system to an inter firm environment; this linking of firms is called
supply chain management.
Facility Location In The Future
Information technology IT, that is, computers, modems, email, voice mail, text messaging, and
teleconferencing, is giving firms and employees increased flexibility to choose locations while staying in the
Companies that no longer need to locate near sources of labor will be able to move to areas where land is
less expensive and the quality of life may be nicer.
Another large incentive to relocate or move is the tax situation and degree of government support.
Facility layout is the physical arrangement of resources, including people, to most efficiently
produce goods and provide services to customers.
Many companies are moving from an assemblyline layout in which workers do only a few tasks at a time,
to a modular layout, in which teams of workers combine to produce more complex units of the final product.
When working on a major product such as a bridge or airplane, companies use a fixedposition layout that
allows workers to congregate around the product to be completed.
A process layout is one in which similar equipment and functions are grouped together. The order in which
the product visits a function depends on the design of the item. This allows for flexibility. Producing World Class Goods and Services CH.10
Typical Layout Designs
Statistical Quality Control (SQC)
> The process that some managers use to continually monitor all phases of the production process and
assure quality is being built into the product from the beginning.
Statistical Process Control (SPC) Producing World Class Goods and Services CH.10
> The process of testing statistical samples of product components at each stage of the production and
plotting the test results on a graph.
> The steps for this are PLAN, DO, CHECK, ACT. The idea is to find errors before they happen. It was
used before the International Organization for Standardization (ISO)
Materials Requirement Planning (MRP)
Materials Requirement Planning (MRP)
> A computer based operations management system that uses sales forecasts to ensure that needed
parts and materials are available at the right time and place.
Enterprise Resource Planning (ERP)
> A newer version of MRP, combines the computerized functions of all the divisions and subsidiaries of the
firm such as finance, human resources and order fulfillment into a single integrated software program that
uses a single database.
The result is shorter time between orders and payment, less staff to do ordering and order processing,
reduced inventories and better customer services.
Enterprise Resource Planning
By entering customer sales information in an ERP system, a manufacturer can generate the next period’s
demand forecast, which in turn generates orders for raw materials, production scheduling and financial
ERP software enables the firm to monitor quality and customer satisfaction as it is happening. Producing World Class Goods and Services CH.10
Some firms are providing a service called sequential delivery. These firms are suppliers that provide
components in an order sequenced to their customers production process.
ERP can have problems such as reporting.
IT has had a major influence on the entire production process, from purchasing to final delivery. Many IT
advances have been addons to ERP.
> The function that searches for high quality material resources, finds the best suppliers, and negotiates
the best price for quality goods and services.
Instead of multiple suppliers, manufacturers rely more heavily on just one or two suppliers because the
relationship between them is close.
Now a business looking for supplies can contact an Internet based purchasing service and find the best
items and price. Also a company that’s selling can also look for sellers on the internet The time and dollar
cost of purchasing items has reduced tremendously.
Just In Time Inventory Control
One major cost of production is holding parts, motors and other items storage for later use. This can cause
damage to the items. To cut costs, many companies implemented the JIT (Just In Time) inventory control.
JIT systems keep a minimum of inventory on the premises and delivers parts, supplies and other needs just
in time to go on the assembly line. To work effectively, however, the process requires an accurate
production schedule using ERP and coordination with carefully elected suppliers who are usually connected
electronically so they know what is needed and when.
Other limitations are that JIT works best with standard products, demand needs to be high and stable to
justify the cost and saving and suppliers need to be very reliable.
JIT systems ensure that the right materials are at the right place at the right time at the cheapest cost to
meet both customer and production needs. That is a key step in modern product innovation. Producing World Class Goods and Services CH.10
Maintaining quality means consistently producing what the customer wants while reducing errors before
and after delivery to the customer.
In the past, products were completed and then tested for quality which resulted in these problems.
1. The need to inspect work required extra people and resources
2. If an error was found, someone had to correct the mistake or scrap the product. This was costly
3. If the customer found the mistake, they might be not satisfied and not buy from another firm thereafter.
Companies have turned to the use of modern quality control standards such as the Six Sigma.
Six Sigma Quality,
> sets a benchmark of 3.4 defects per million opportunities, detects potential problems to prevent this
The Canada Awards for Excellence
Excellence Canada is the leading authority in Canada on workplace excellence based on quality systems
and healthy workplace criteria.
ISO 9000 and ISO 14000 Standards
The international Organization for Standardization (ISO) is a worldwide federation of national standards
bodies from more than 140 countries that set the global measures for the quality of individual products. It’s
a non governmental organization that promotes the development of world standards to facilitate the
international exchange of goods and services.
ISO 9000 is a common name given to quality management and assurance
standards. Some of the latest standards include ISO 9004:2008.
The standards require that a company must determine what customer needs are, including regulatory and
legal requirements, and make communication arrangements to handle issues such as complaints.
It looked to se that companies were consistently producing the same products each time.
The EU demands that companies that want to do business with the EU be certified by ISO standards. Producing World Class Goods and Services CH.10
ISO 14000 is a collection of the best practices for managing an
organizations impact on the environment.
Certification in both ISO 9000 and ISO 14000 would show that a firm has a world class management
system in both quality and environmental standards.
Supply Chain Management
Logistics > involves those activities that focus on getting the right amount of the right products or
services to the right place at the right time at the lowest possible cost.
Supply Chain > a sequence of firms that perform activities required to create and deliver a good or
service to consumers or industrial users.
Supply Chain Management > the integration and organization of information and logistics activities
across firms in a supply chain for the purpose of creating and delivering goods and services that provide
value to customers.
The major factors contributing to the importance of supply chain management include the need for
improvement to remain competitive, the increase in outsourcing, shorter product life cycles and increased
customization, increase in globalization, the growth of tech and e commerce, increase in complexity through
JIT inventory and the need for better managements of inventories. Producing World Class Goods and Services CH.10
The production Process
The production process consists of taking the factors or production and using the inputs to produce goods,
services and ideas. Producing World Class Goods and Services CH.10
Form utility > The value producers add to materials in the creation of finished goods and services.
Andrew Groove used the example about eggs, toast and coffee. There are three basic requirements of
1. Build and deliver products in response to the demands of the customer at a scheduled delivery time
2. Provide an acceptable quality level
3. Provide everything at the lowest possible cost.
Process Manufacturing > Physically or chemically changes materials. (boiling egg)
Assembly Process > Puts together components to make a product (breakfast all three)
Continuous Process >One in which long production runs turn out finished goods over time
Intermittent Process > Production run is short and the producer adjusts the machines to make
different products (most common)
Improving Production Techniques and Cutting Costs
The ultimate goal of operations management is to provide high quality goods and services in response to
customer demand. The idea behind mass production was to make a large number of a limited variety of
products at a low cost.
Several major developments have made companies more competitive:
1. Flexible manufacturing
> designing machines to do multiple tasks so they can produce a variety of products. This increases
productivity and decreases costs.
2. Lean manufacturing
> the production of goods using less of everything compared to mass production. A company becomes
lean by continuously increasing its capacity to produce high quality goods while decreasing its need for
resources. Some characteristics are:
Half the human effort
Half the defects of finished products
One third of engineering effort
Half the floor space for same output
90 percent less inventory Producing World Class Goods and Services CH.10
3. Mass customization
To customize means to make a unique good or provide a specific service to an individual. Mass
customization means tailoring products to meet the needs of a large number of individual customers and is
now practiced widely. Is can be used in the service sector as well.
4. Computer aided design and manufacturing
> Computer aided design (CAD) is the use of computers in the design of products, for example 3D.
> Computer aided manufacturing (CAM) is the use of computers in manufacturing products. An example is
the clothing industry.
CAD has doubled productivity and now software programs unite CAD and CAM. The result is CIM
(Computer Integrated manufacturing)
Control Procedures: Pert and Gantt Charts
Operations managers must ensure products are manufactured and delivered on time, budget and to
The program evaluation and review technique (PERT) > a method for analyzing the tasks
involved in completing a given project, estimating the time needed to complete each task, and identifying
the minimum time needed to complete the total project. The steps for this are:
1. Analyzing and sequencing tasks that need to be done
2. Estimating the time needed to complete each task
3. Drawing a PERT network illustrating the information from step ½
4. Identifying the critical path
Critical Path > the sequence of tasks that takes the longest time to complete. We use the word critical
because a delay anywhere along this path will cause the project or production to be late. Producing World Class Goods and Services CH.10
Gantt Chart > A bar graph, now also prepared by computer, that shows what projects are being worked on
and how much has been completed at a given time.
Whereas PERT is a tool used for planning, a Gantt chart is a tool used to measure progress. Producing World Class Goods and Services CH.10
Describe the current state of Canadian manufacturing and how companies are
becoming more competitive.
Canada's industrial profile results in significant swings in activity and a number of challenges are faced in
an increasingly competitive global environment.
Where is most of Canada's industry focused?
Most of our industry is focused on natural resources, which results in significant growth when world
economies are growing, offset by significant retraction when the world economies are stagnant.
What have Canadian manufacturers done to achieve increased output?
Canadian manufacturers have increased output by emphasizing close relationships with suppliers and other
companies to satisfy customer needs; continuous improvement; quality; site selection; and production
techniques such as enterprise resource planning, computerintegrated manufacturing, flexible
manufacturing, and lean manufacturing.
Describe the evolution from production to operations management.
Operations management is a specialized area in management that converts or transforms resources
(including human resources) into goods and services.
What kinds of firms use operations managers?
Firms in both the manufacturing and the service sectors use operations managers.
Why is productivity so hard to measure?
The traditional way to measure productivity involves tracking inputs (worker hours) compared to outputs
(dollars). Quality improvements are not weighed. New information systems must be developed to measure
the quality of goods and services, the speed of their delivery, and customer satisfaction.
Describe operations management planning issues including facility location,
facility layout, materials requirement planning, purchasing, justintime inventory
control, quality control, and supply chain management.
Issues involved in both the manufacturing and the service sectors include facility location, facility layout,
materials requirement planning, purchasing, justintime inventory control, quality control, and supply chain
What is facility location and how does it differ from facility layout?
Facility location is the process of selecting a geographic location for a company's operations. Facility layout
is the physical arrangement of resources (including people) to produce goods and services effectively and
Why is facility location so important, and what criteria are used to evaluate
different sites? Producing World Class Goods and Services CH.10
The very survival of manufacturing depends on its ability to remain competitive, and that means either
making inputs less costly (reducing costs of labour and land) or increasing outputs from present inputs
(increasing productivity). Labour costs and land costs are two major criteria for selecting the right sites.
Other criteria include whether (1) resources are plentiful and inexpensive, (2) skilled workers are available
or are trainable, (3) taxes are low and the local government offers support, (4) energy and water are
available, (5) transportation costs are low, and (6) the quality of life and quality of education are high.
What relationship does enterprise resource planning (ERP) have with the
ERP is a computer application that enables multiple firms to manage all of their operations (finance,
requirements planning, human resources, and order fulfillment) on the basis of a single, integrated set of
corporate data. The result is shorter time between orders and payment, fewer staff to do ordering and order
processing, reduced inventories, and better customer service for all firms involved. It is an advanced form of
materials requirement planning.
What is justintime (JIT) inventory control?
JIT involves having suppliers deliver parts and materials just in time to go on the assembly line so they do
not have to be stored in warehouses.
What are the latest quality control concepts?
Six Sigma quality (just 3.4 defects per million products) detects potential problems before they occur.
Statistical quality control (SQC) is the process that some managers use to continually monitor all processes
in production to ensure that quality is being built into the product from the beginning. Statistical process
control (SPC) is the process of taking statistical samples of product components at each stage of the
production process and plotting those results on a graph. Any variances from quality standards are
recognized and can be corrected.
What quality standards do firms use in Canada?
International standards that Canadian firms strive to meet include ISO 9004:2000 (ISO 9000) and ISO
14000. The first is a European standard for quality and the second is a collection of the best practices for
managing an organization's impact on the environment.
Identify various production processes and describe techniques to improve
productivity including flexible manufacturing, lean manufacturing, mass
customization, and computeraided design manufacturing.
There are several different processes that manufacturers use to produce goods along with varying
techniques to improve productivity.
What is process manufacturing, and how does it differ from assembly processes? Producing World Class Goods and Services CH.10
Process manufacturing physically or chemically changes materials. Assembly processes put together
Are there other production processes?
Production processes are either continuous or intermittent. A continuous process is one in which long
production runs turn out finished goods over time. An intermittent process is an operation where the
production run is short and the machines are changed frequently to produce different products.
What is flexible manufacturing?
Flexible manufacturing involves designing machines to produce a variety of products.
What is lean manufacturing?
Lean manufacturing is the production of goods using less of everything compared to mass production: less
human effort, less manufacturing space, less investment in tools, and less engineering time to develop a
What is mass customization?
Mass customization means making customdesigned goods and services for a large number of individual
customers. Flexible manufacturing makes mass customization possible. Given the exact needs of a
customer, flexible machines can produce a customized good as fast as massproduced goods were once
How do CAD/CAM systems work?
Design changes made in computeraided design (CAD) are instantly incorporated into the computeraided
manufacturing (CAM) process. The linking of the two systems—CAD and CAM—is called computer
integrated manufacturing (CIM).
Explain the use of PERT and Gantt charts to control manufacturing processes
Operations managers must ensure their products or services are provided on time and on budget.
Is there any relationship between a PERT chart and a Gantt chart?
Figure 10.7 shows a PERT chart. Figure 10.8 shows a Gantt chart. Whereas PERT is a tool used for
planning, a Gantt chart is a tool used to measure progress. Motivating Employees Chapter 11
The Value of Motivation
Motivation > a person’s internal drive to act.
Unhappy workers will leave the company, and the cost associated with losing an employee fluctuates widely
depending on who you ask. Turnover costs include many variables.
Direct costs include the time and cost to hire the replacement such as paperwork, interviews and
moving expenses, and costs related to onboarding (orientation, training, and learning new material and
Indirect costs are harder to quantify but they can be large as these include loss of productivity. Besides
productivity, some organizations will think about what they have invested in the person in terms of training,
knowledge, and skills development that the person is now going to walk out the door with.
The soft costs are even greater: loss of intellectual capital, decreased morale, increased employee stress
and a negative reputation. Motivating the right people to join the organization and stay with it is the key
function of managers.
People are motivated by a variety of things, such as recognition accomplishment and status.
Intrinsic Reward > The personal satisfaction you feel when you perform well and achieve goals.
Extrinsic Reward > Something given to you by someone else in recognition for good work. (Pay
increase, praise, promotions)
Ultimately, motivations comes from within and individual and there are ways to stimulate people that bring
out their natural drive to do a good job.
Fredrick Taylor wrote the Principles of Scientific Management. He was the father of scientific management
because of this.
His goal was to increase worker productivity to benefit the firm and the worker.
Scientific Management > Studying workers to find the most efficient ways of doing things and
teaching people those techniques. Motivating Employees Chapter 11
3. Rules of work
• His most important tools were observation and the stopwatch.
• People were like large machines that need to be programmed
• Believed that the resulting improved productivity should benefit both the workers and company.
Time Motion Studies > Studies of the tasks performed to complete a job and the time needed to do
Principle of Motion Economy > Showed every job could be broken down into a series of
elementary motions. They then analyzed each motion to make it more effective. (Engineers Frank and
Lillian developed this)
Elton Mayo and the Hawthorne Studies
Elton Mayos study was to keep records of the workers productivity under different levels of illumination. The
result was: the productivity of the experimental group compared to that of other workers doing the same job
went up regardless of whether the lighting was bright or dim.
A second series of experiments were conducted and the room could be manipulated by temperature,
humidity, and other environmental factors. In the series of 13 experimental periods, productivity went up
each time, it increased 50 percent overall.
No matter what the experimenters did, productivity went up.
The workers thought of themselves as a social group. Talk freely, a lot of interaction, felt special and
worked hard to stay in the group
The workers were involved in the planning of the experiments. They believed their ideas were respected
and they felt engaged in managerial decision making.
No matter the physical conditions, the workers enjoyed the atmosphere of the special room and the
additional pay. Job satisfaction increased dramatically. Motivating Employees Chapter 11
Hawthorn Effect > The tendency for people to behave differently when they know that they are being
studied. Encouraged many to study human motivation and managerial studies that lead to greater
Motivation and Maslow’s Hierarchy of Needs
Abraham Maslow believed that to understand motivation at work, one must understand human motivation
Maslow’s Hierarchy Of Needs
This is based on the idea that motivation comes from need. If a need it met, it is no longer a motivator so a
higher level need becomes the motivator. Higher level needs demand the support of lower level needs. This
chart shows the various levels of need.
Physiological Needs – Basic survival needs, such as the need for food, water and shelter.
Safety Needs – The need to feel secure at work and home
Social Needs – The need to feel loved, accepted and part of the group Motivating Employees Chapter 11
Esteem Needs – The need for recognition and acknowledgment from others as well as self respect and
a sense of status or importance.
SelfActualization Needs – The need to develop to one’s fullest potential
Applying Maslow’s Theory
Firms must create a work environment that includes goals such as social contribution, honesty, reliability,
service, quality, dependability and unity – for all levels of employees.
Herzberg’s Motivation Factors
Another direction in managerial theory is to explore what managers do with the job itself to motivate
Psychologist Fredrick Herzberg asked workers to rank various job related factors in order of importance
relative to motivation. The question was: What creates enthusiasm for workers and makes them work to full
potential? The results showed that the most important motivating factors were the following:
1.Sense of achievement
3.Interest in the work itself
4.Opportunity for growth
5.Importance of responsibility
6.Importance of responsibility
7.Peer and group relationships
9. Supervisor’s fairness
10. Company’s policy and rules
12. Job security
13. Supervisor’s friendliness
14. Working conditions
Workers felt that the absence of good pay, job security and friendly supervisors could cause dissatisfaction
but their presence did not motivate employees to work harder, it just provided satisfaction and contentment.
Motivators made employees productive and gave them satisfaction. These factors, as you have seen,
mostly related to job content. Herzberg called other elements of the job: Motivating Employees Chapter 11
Hygiene Factors (Or Maintenance)
Could cause dissatisfaction if mission but would not necessarily motivate employees if improved.
Herzberg’s motivation factors led to this conclusion:
The best ways to motivate employees is to make their jobs interesting, help them achieve their
objectives and recognize their achievement through advancement and added responsibility. Motivating Employees Chapter 11
Applying Herzberg’s Theories
Improved working conditions (such as better wages or increased security) are taken for granted after
workers get used to them. This is what Herzberg meant by hygiene (maintenance) factors: their absence
causes dissatisfaction, but their presence (maintenance) does not motivate. The best motivator for some
employees is a simple and sincere “Thanks, I appreciate what you’re doing”.
Companies are ranked based on eight key criteria: community involvement, work atmosphere and social
culture; vacation and time off; performance management; health, financial and family benefits; training and
skills development; employee communications and physical workspace.
Maslow and Herzberg’s theories have been extended by job enrichment theory. Motivating Employees Chapter 11
Job Enrichment is a motivational strategy that emphasizes motivating the worker
through the job itself.
Work is assigned to individuals so that they have the opportunity to complete a recognizable task from start
to finish. They are also held responsible for completion.
J Richard Hackman and Greg R Oldman proposed the Job Characteristics Model which is used as a
framework to study how particular job characteristic
The five characteristics of work that are important in affecting individual motivation and performance are as
1. Skills Variety (The extent to which a job demands different skills)
2. Task Identity (The degree to which the job requires doing a task with a visible outcome from
beginning to end)
3. Task Significance (The degree to which the job has a substantial impact on the loves or work
of others in the company)
4. Autonomy (The degree of freedom, independence and discretion in scheduling work and
5. Feedback (The amount of direct and clear information that is received about job performance.
Variety, identity and significance contribute to the meaningfulness of the job. Autonomy gives people a
feeling of responsibility, and feedback contributes to a feeling of achievement and recognition.
Job enrichment is based on Herzberg’s motivators such as responsibility, achievement, and recognition. It
stands in contrast to job simplification, which produces task efficiency by breaking down a job into simply
steps and assigning people to each of those steps.
Job Engagement extends the work cycle by adding related tasks to the job description. (Ex. Cleaning,
Job Rotation makes work more interesting by motivating employees from one job to another. The
training is a cost involved but they will be more flexible.
McGregor’s Theory X and Theory Y
Douglas McGregor observed that managers attitudes generally fall into one of two sets of managerial
assumption, which he called Theory X and Y. Motivating Employees Chapter 11
The average person dislikes work and will avoid it if possible
Because of this dislike, workers must be forced, controlled, directed, or threatened with punishment to
make them put forth the efforts to achieve the organization’s goals.
The average worker prefers to be directed, wishes to avoid responsibility, has relatively little ambition and
Primary motivators are fear and money
The consequence of these attitudes and beliefs are managers who are very busy and who watches people
closely telling them what to do and how to do it. Motivation is more likely to take the form of punishment for
bad work rather then reward for good work.
Theory X managers give workers little responsibility, authority, or flexibility. Taylor and other theorists who
preceded him would have agreed with Theory X.
Most people like work, it is as natural as play or rest.
Most people naturally work toward goals to which they are committed.
The depth of a person’s commitment to goals depends on the perceived rewards for achieving them.
Under certain conditions, most people not only accept, but seek responsibility.
People are capable of using a relatively high degree of imagination, creativity, and cleverness to solve
People are motivated by a variety of rewards. Each worker is simulated by a reward unique to that worker
(time off, money, recognition)
Theory Y managers emphasize a relaxed managerial atmosphere in which workers are free to set
objectives, be creative, flexible and go beyond the goals set by management. Motivating Employees Chapter 11
For empowerment to be a real motivator, management should follow these three steps:
1. Find out what people think the problems in the organization are
2. Let them design the solutions
3. Get out of the way and let them put those solutions into action.
Many businesses go towards the theory Y management because many industries are finding it helpful
with dealing with on the spot problems.
Goal Setting Theory and Management by Objectives
Goal setting theory says setting ambitious but attainable goals can motivate workers and improve
performance if the goals are accepted, accepted, accompanied by feedback and if its conditions make
Goal setting improves employee performance in two ways:
1. Stretching the intensity and persistence of effort
2. Giving employees clearer role perceptions so that their efforts are channeled toward behaviors that
will improve work performance.
Peter Drucker developed a system of goal setting and implementation which
involves a cycle of discussion, review, and evaluation of objectives among top
and middle level managers, supervisors, and employees. Motivating Employees Chapter 11
MBO is most effective in relatively stable situations when managers can make long range goals and
implement them with few changes. Managers must also understand the difference between helping and
coaching subordinates.Helping means working with the subordinate and doing part of the work if
necessary. Coaching means acting as a resource, teaching, guiding and recommending but not
participating actively or doing the task.
Employee input and expectations are important. Problems can arise when management uses MBO as
a strategy for forcing managers and workers to commit t goals that are not really agreed on together but
are instrad set
Victor Vroom developed the expectancy theory, employee expectations can affect an individual’s
motivation. He asks three questions
1. Can I accomplish the task?
2. If I accomplish it, what’s my reward?
3. Is the reward worth the effort?
The amount of effort employees exert on a task depends on their expectations of the outcome.
Expectancy theory does note that expectation varies from individual to individual. Employees therefore
establish their own views in terms of task difficulty and the value of the reward. David Nadler and
Edward Lawler modified Vroom’s theory and suggested that managers follow five steps to improve
1. Determine what rewards employees value
2. Determine each employees desired performance standard
3. Ensure that performance standards are attainable
4. Guarantee rewards tied to performance
5. Be certain that employees consider the rewards adequate.
Reinforcing Employee Performance: Reinforcement Theory
Reinforcement theory is based on the idea the idea that positive and negative reinforcer motivate a
person to behave in certain ways. Motivating Employees Chapter 11
B.F Skinner asserted that positive reinforcement is more effective at changing and establishing
behavior than punishment and that the main thing people learn from being punished is how to avoid
Positive reinforcements are praise, recognition, or a pay raise. Negative reinforcement includes
reprimands, reduced pay, laying off or firing.
A manager may also try and stop undesirable behavior by not responding to it. This is called
extinction because the hope is that the unwanted behavior
Treating Employees Fairly: Equity Theory
Equity Theory has to do with perceptions of fairness and how those perceptions affect employees’
willingness to perform. The basic principle is that employees try and maintain equity between inputs
and outputs compared to others in similar positions. Equity comparisons are made from the information
that is available through personal relationships, professional organizations and so on.
Inequity may lead to lower productivity, reduced quality, increased absenteeism and voluntary
resignation. Motivating Employees Chapter 11
Equity judgments are based on perceptions and are therefore subject to error. When workers
overestimate their own contributionsas happens often they are going to feel that any rewards are
given out for performance are inequitable.
The best remedy is clear and frequent communication. Mangers must communicate as clearly as
possible both the results they expect and the outcomes that will occur when those results are achieved
or when they are not.
Putting Theory Into Action
Companies with motivated workforces usually have several things in common. The most important
factors are open communication systems and self managed teas. Open communication helps both
managers and team members understand the objectives and work together to achieve them. It is
crucial for people to be able to access the knowledge need when they need it.
Procedures for encouraging open communication include the following:
1. Create an organizational culture that rewards listening.
2. Train supervisors and managers to listen
3. Use effective questioning techniques
4. Remove barriers to open communication
5. Avoid vague and ambiguous communication
6. Make it easy to communicate
7. Ask employees what is important to them.
To implement such teams, managers at most companies must reinvent work. This means respecting
workers, providing interesting work, developing workers skills, allowing autonomy, decentralizing
authority, and rewarding good work, it is essential that managers behave ethically toward all
Letting people know you appreciate their work is usually more powerful than giving a raise or bonus
alone. Most people wanted a senior role and others wanted more benefits.
Companies that offer a small equity stake or stock options often have a good change for developing
loyal employees. Motivating Employees Chapter 11
Getting to know each worker personally and tailor the motivational effort to the individual. Cultural
differences also exist between generational cohorts raised in the same country.
Different cultures experience motivational approaches differently; therefore, managers study and
understand these cultural factors I designing a reward system. In a high context culture, workers build
personal relationships and develop long group trust before focusing on tasks. In a low context culture,
workers often view relationship building as a waste of time that diverts attention from the task.
Developing group leaders who are culturally astute, flexible and able to deal with ambiguity is a
challenge businesses face in the twenty first century.
David foot has studied the importance of demographic groups on business. He has categorized groups