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University of Toronto St. George
Rotman Commerce
John Oesch

Chapter 6  All managers plan, organize, direct, and control day to day operations  Management: process of planning, organizing, leading, and controlling an enterprise’s financial, physical, human and information resources to achieve the organization’s goals of supplying various products and services o Planning, organizing, leading, and controlling are interrelated these activities generally follow one another in a sequence, but sometimes they are performed simultaneously o Management efficiency is different from management effectiveness  Efficiency: achieving the greatest level of output with a given amount of input (“doing things right”)  Effectiveness: achieving the organizational goals that have been set (“doing the right things”)  Planning: process of determining the firm’s goals and developing a strategy for achieving them (has 5 steps) o Step 1. Goals are established for the organization o Step 2. Managers identify whether a gap exists between the company’s desire and actual position o Step 3. Managers develop plans to achieve the desired goal o Step 4. Plans that have been decided upon are implemented o Step 5. Effectiveness of the plan is assessed  Goals indicate what results are desired, while plans indicate how these goals are to be achieved  Yahoo was created via this planning method  Prediction markets: creating a market where people can buy “shares” in various answers to important questions that need to be answered i.e. employees in a chip-design unit bought shares based on how many defects they though they would find (say 20 defects, then an employee buys 20 shares) and the person who predicted correctly is rewarded with a small prize  There are 3 levels of planning: o Strategic plans: set by top management, they reflect decisions about resource allocations, company priorities, and the steps needed to meet strategic goals (i.e. company’s plan to be number one in the market they are competing) o Tactical plans: shorter-range plans concerned with implementing specific aspects of the company’s strategic plans. They typically involve upper and middle management (i.e. company’s plan to increase sales in Europe by building facilities in Europe) o Operational plans: plans developed by middle and lower-level managers that set short- term targets for daily, weekly, or monthly performance (i.e. McDonald’s manager planning how Big Macs are to be cooked, warmed, and served)  Organizing: mobilizing the resources that are required to complete a particular task (i.e. HP had decentralized organization that had been successful in the past, but later became a problem so they reorganized their structure to regain their competitive edge)  Leading (directing): involves the interactions between managers and their subordinates as they both work to meet the firm’s objectives o Leadership is not merely giving orders; it’s about motivating and guiding employees  Controlling: process of monitoring a firm’s performance to make sure that it is meeting its goals (i.e. Air Canada monitoring baggage handling errors, and if it occurs frequently, they must act quickly to fix it) o Control can show where performance is better than expected and thus can serve as a basis for providing rewards or reducing costs  There are more lower level managers than middle, and there are more middle managers than top  Top managers: responsible for a firm’s overall performance and effectiveness and for developing long-range plans for the company. Titles include CEO (chief executive officer), CFO (chief financial officer), COO (chief operating officer) o Some top managers temporarily do the jobs of front-line workers in order to get insights into what employees are actually doing and to help them do their jobs better  Middle managers: responsible for implementing the decisions made by top managers. Titles include plant manager, operations manager, division manager, etc.  First-line managers: responsible for supervising the work of employees. Titles include supervisor, office manager, etc.  Human resource manager: provides assistance to other managers when they are hiring employees, training them, evaluating their performance, and determining their compensation level o In unionized companies, human resource managers are involved in negotiations with the union  Operations manager: responsible for the production systems that create goods and services, including production control, inventory control, and quality control o For larger firms, there may be operations managers at many levels (top, middle, first-line)  Information manager: responsible for designing and implementing systems that gather, process, and disseminate information. There can be many levels of information managers  Marketing manager: responsible for getting products and services to buyers. There can be many levels of marketing managers, but for firms that produce industrial products tend to put less emphasis on marketing and so they have fewer marketing managers  Financial managers: responsible for managing a firm’s finances, including investments and accounting functions. Nearly every company has financial managers and there can be many levels of them  Effective managers must have 5 key skills: o Technical skills: skills associated with performing specialized tasks within a company (i.e. accountants must be able to audit a company’s records, an animator must be able to draw cartoons, etc)  These skills are learned from education and/or experience  Technical skills are most important for first-line managers as they spend much time helping employees solve work-related problems and train them (technical skills are less and less important as you move up to middle and top manager) o Human relations skills: skills that enable managers to understand and get along with other people (a survey showed that 53% of newly promoted managers fail due to poor people skills)  Human relations skills are important at all levels, but they are most important for middle managers, who must act as bridges between top and first-line managers o Conceptual skills: a person’s ability to think in the abstract, to diagnose and analyze different situations, and to see beyond the present situation. They help managers recognize new market opportunities and threats  Top managers depend most on conceptual skills and first-line managers least, although some level of it is needed o Time management skills: the productive use that managers make of their time. To manage time effectively, managers must address 4 leading causes of wasted time:  Paperwork: some managers spend too much time on this  Telephone: managers are frequently interrupted by the telephone and so they should have an assistant screening calls  Meetings: meetings should have a specific agenda, and concise  Email: spend too much time o Decision making skills: skills in defining problems and selecting the best courses of action. Managers can improve their decision-making effectiveness by following a rational decision-making process:  Recognizing and defining decision situation: some stimulus indicates that a decision must be made. The stimulus can be a problem or an opportunity  Problem decision: a decision that is necessary when actually results do not meet the expectation (i.e. costs are higher than expected)  Opportunity decision: taking new initiatives or doing a current activity more effectively even if no problem exists (i.e. how to invest surplus funds)  Identifying alternatives: identify possible alternative courses of action the more important the decision, the more resources and time should be devoted  Evaluating alternatives  Selecting the best alternative: sometimes, there can be more than 1 alternative  Implementing the chosen alternative: one of the key things managers must deal with during implementation is employees’ resistance to change  Following up and evaluating the results: if an implemented alternative appears not to be working, managers can adopt an alternative that had previously been discarded, or start the whole decision-making process all over again  Many managers decide what they want to have happen and then conduct analyses to support their decision they are not always rational  Non-logical and emotional factors often influence managerial decision making and these fact
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