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Chapter 1-3

MGM101: Chapter 1-3 Textbook Notes

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University of Toronto Mississauga
Dave Swanston

Sheline Roopchandani 1 MGM101 Chapter 1: Management  "Bonnie Brooks, president and CEO of The Bay, has her work cut out for her.
 The Bay's owner Richard Baker, president and CEO of New York based NRDC Equity Partners, hired Bonnie Brooks as the first woman president of The Bay. Management & The Environment - As Walmart's founder Sam Walton was fond of saying, managers can motivate "ordinary people to do extraordinary things."3 They can transform organizations; they can create new ways of producing and distributing goods and services; and they can change how the world works through their actions. - In the late 1970s Steve Jobs of Apple Computer gave the world the first mass-marketed, easy-to-use personal computers; today, under Jobs's management Apple is still driving innovation with its iPod music player and iPad tablet.
 First, however, we must bet- ter understand the basic functions of management, where you can find managers in an organization, how one becomes a manager, the nature of managerial work, the roles managers adopt to get things done through people, and the different competencies that are required to become a good manager." The Functions of Management - In the early twentieth century, a French industrialist named Henri Fayol stated that man- agement had five main functions: planning, organizing, commanding, coordinating, and controlling.4 A lot of water has passed under the bridge since Fayol wrote about management, and we have learned much about the theory and practice of management; but, in a testament to the robustness of Fayol's original formulation, a modified version of Fayol's list is still widely used.  Planning & Strategizing  Planning is a formal process whereby managers choose goals, identify actions to attain those goals, allocate responsibility for implementing actions to specific individuals or units, measure the success of actions by comparing actual results against the goals, and revise plans accordingly.  Planning is used by senior managers to develop overall strategies for an organization (a strategy is an action that managers take to attain the goals of an organization).
 However, planning is often about formalizing a strategy that has already been selected and documenting the steps that managers must follow within the organization to put that strategy into effect.
  Although planning is a useful process for generating strategies, strategizing involves more than planning.
 Whereas planning is a formal process for generating the strategies of an organization, strategies can also arise in the absence of planning.  For example, anyone who has walked into a Starbucks store may have noticed that in addition to various coffee beverages and food, the company also sells music CDs.
 Customers can sip their coffee while listening to music from Starbucks' 200 000-song online music library, listening to Starbucks' "Hear Music" channel on XM satellite radio, or downloading music through iTunes. Starbucks' strategy to enter the music retailing business emerged from the grass roots of the organization in the absence of planning.
 It was the result of strategizing by an individual store manager, and only after some time was the strategy adopted by senior managers.  Organizing  Organizing refers to the process of deciding who within an organization will perform what tasks, where decisions will be made, who reports to whom, and how different parts of the organization will coordinate their activities to pursue a common goal.  For example, to implement the decision to expand Starbucks' operations into online music, Howard Schultz set up a separate unit within Starbucks called Hear Music; placed an executive, Don MacKinnon, in charge of that unit; and gave him the task of rolling out Hear Music in Starbucks stores across the country.  Controlling  Controlling is the process of monitoring performance against goals, intervening when goals are not met, and taking corrective action.  Controlling requires managers to compare performance against the plans to monitor how successful an organization is at implementing a strategy.
  Thus, at Starbucks Don MacKinnon has been given goals related to the rollout and sales of Hear Music, and his success at implementing the strategy will be assessed by comparing actual performance against the goals.  Leading and Developing Employees  Leading is the process of motivating, influencing, and directing others in the organiza- tion to work productively in pursuit of organization goals.7 Leading also entails articu- lating a grand strategic vision for an organization and becoming a tireless advocate for that vision.  Academics talk about the value of the human capital of an enterprise, by which they mean the skills and motivations of its employees; they assert that human capital can be a source of competitive advantage.8 Bonnie Brooks recognized the importance of human capital when she took on the top management position at The Bay; one of her first actions was to recruit a top-notch team of managers and creative designers through which she could get things done.  Management expert Peter Drucker has emphasized that hiring and promoting the right people are among the most important management tasks be- cause they have lasting consequences for the organization and are difficult to reverse.  According to Drucker, about one in three selection and promotion decisions are only minimally effective. The legendary former CEO of General Electric, Jack Welch, seen by many as one of the best managers of the twentieth century, estimated that he spent 70 percent of his time as CEO developing and selecting other managers, mentoring them, and evaluating their performance.10 Sheline Roopchandani 3 MGM101 Leading and developing employees are in many ways the core connection among planning and strategizing, organizing, controlling, and creating incentives.  The organization may become bureaucratic; control may be lost; employees will lack incentives and motivation; and the organization may suffer insufficient human capital. The Types of Managers - There are three main types of managers: general managers, functional managers, and frontline managers. - Frontline managers manage employees who are themselves not managers.
 - Multi- divisional enterprises like GE have four main levels of management: the corporate level, the business level, functional managers, and frontline managers. - Functional managers are found within the divisions where they manage functions or subunits within those functions.  Corporate Level General Managers  In a multidivisional enterprise the CEO formulates strategies that span businesses deciding, for example, whether to enter new businesses through acquisitions or whether to exit a business area.
  The CEO decides how the enterprise should be organized into different divisions and signs off on major strategic initiatives proposed by the heads of divisions, 
 has articulated a grand vision that includes pushing GE into environmentally friendly technologies. Immelt is doing this because he thinks it makes good business sense.  
 Under Immelt GE is also exiting some businesses that do not fit his strategic vision, including GE's insurance business, which was sold to Swiss Reinsurance Co.
 The CEO of a corporation also manages relationships with the people who own the company its shareholders.  Business Level General Managers - GE has general managers running the power generation business, the medical equipment business, the lighting business, and so on. - 
 Business-level managers often have considerable latitude to develop and implement strategies that they believe will improve the performance of their divisions, so long as those strategies are consistent with the overall goals and vision for the entire corporation.
 - Business-level general managers organize operations within their division, deciding how best to divide tasks into functions and departments and how to coordinate those subunits so that strategy can be successfully implemented.  Functional Managers - Below general managers we find functional managers, who are responsible for specific business functions that constitute a company or one of its divisions.
 - Thus a functional manager's sphere of responsibility is generally confined to one organizational activity (purchasing, marketing, production, or the like), whereas general managers oversee the operation of the entire company or a self-contained division.
 - Although they are not responsible for the overall performance of the organization, functional managers nevertheless have a major strategic role: to develop functional strategies and draft plans in their areas that help fulfill the strategic objectives set by business and corporate-level general managers - Each department will have its "own managers, who report to their superiors, the functional heads; those managers will be responsible for leading their units, organizing and controlling them as necessary, strategizing for the tasks under their control, and developing employees within their units.  Frontline Managers - Farthest down the management hierarchy are frontline managers, who manage employees who are not managers, themselves - A frontline sales manager might manage ten salespeople; a frontline manager in manufacturing might manage a work group of employees who physically assemble a product; and a frontline engineering manager in a software company might manage a group of developers writing computer code. - Most successful managers begin their managerial careers as frontline managers. - As we saw in the case of Tim Jones at Starbucks, who was a frontline manager responsible for the performance of an individual store, frontline managers can have an impact significantly beyond their jobs. Becoming a Manager - Although their precise roles and responsibilities vary depending on their levels in the organization, all managers have to lead and develop other employees, plan and strategize for their units, organize their units, and apply controls and incentives.  From Specialist to Manager  Initially these people are recruited for their ability to write computer code; but if they succeed at this job, they may find themselves in charge of other software engineers, becoming development leads (a frontline position at Microsoft).
  More generally, the successful may find themselves promoted into managerial roles whatever their background and initial functional assignment.
  Accountants and finance professionals may manage other accountants and finance professionals; engineers working in production may manage other engineers; scientists in R&D may manage other scientists; and salespeople might find themselves managing part of the sales force.  In these new roles technical skills remain important, but now people also have to manage. Sheline Roopchandani 5 MGM101  If they succeed, like Gregg Saretsky, they too may find themselves promoted to general management positions, running entire divisions of an organization where their ability to lead, plan, develop strategy, organize, control, and motivate through incentives becomes of paramount importance.  Mastering the Job - Harvard Business School professor Linda Hill wanted to discover what work life was like for functional specialists who had been newly appointed to management positions, so she followed 19 newly appointed frontline managers in their first year as managers These managers had all been star performers as functional specialists, and their promotions to management positions were seen as rewards and an opportunity for career advancement.
 These observations echoed work by McGill University professor Henry Mintzberg, who followed managers around and found that on average they processed 36 pieces of mail each day, attended eight meetings, and took a tour through the building or plant.15 Recent work by Mintzberg confirms the impression that a day in the life of an average manager is fragmented, full of different tasks, and characterized by constant interruptions, and involves significant interpersonal networking.16 Moreover, they found out that to get things done, they had to work closely with peers and their bosses people over whom the new managers had no formal authority.
 - Over time the managers in Hill's study discovered that they had two sets of responsibilities: agenda setting for their teams and network building within the organization. - Managers must realize that to get things done and to help their own team succeed, they must work closely with a network of peers and superiors, persuading them to buy in to the agenda of the manager's team. Managerial Roles - One of the earliest and most enduring descriptions of managerial roles comes from Henry Mintzberg, who (as we have already noted) shadowed managers ob- serving what they did during the day. Mintzberg developed a list of roles that he grouped into three categories: interpersonal roles, informational roles, and decisional roles (see Figure 1.2). - Most researchers have found similar sets of roles (although there are some variations in labels and categories) The roles that Mintzberg identified flesh out the richness of managerial work and tell us how managers behave and what they do when trying to perform the main functions of management."  Interpersonal Roles  Management jobs are people-intensive: Research suggests that managers spend somewhere between 66 and 80 percent of their time in the company of others.19 Seldom do managers work alone for long periods without outside communication  Mintzberg identified three types of inter- personal roles: a figurehead role, a leader role, and a liaison role.  At lower levels in a company, functional and frontline managers perform a variety of figurehead roles.  Managers behave as leaders to influence, motivate, and direct others within organizations and to strategize, plan, organize, control, and develop.
  These may be the managers of other units within the organization or people outside the organization, such as suppliers, buyers, and strategic partners.  Informational Roles  Managers collect information from various sources both inside and outside the organization, process that information, and distribute it to others who need it.
  Managers rely on both formal and informal channels to collect the information required for effective monitoring.  
 By monitoring the external competitive and internal organizational environments for information, managers try to gain knowledge about how well the organization is performing and whether any changes in strategy or operational processes are required.  
 In addition, the information collected from monitoring can help managers think more clearly about the company's strategy.
  In their dissemination role managers regularly inform staff about the company's direction and sometimes about specific technical issues.  Decisional Roles  Management guru Peter Drucker once wrote that whatever managers do, they do through making decisions. The information collected through monitoring is directed toward discovering problems or opportunities, weighing options, making decisions, and ensuring that those decisions are put into action.  In their role as entrepreneurs, managers must make sure that their organizations innovate and change when necessary, developing or adopting new ideas and technologies and improving their own products and processes.
  A crucial decision responsibility of managers is to decide how best to allocate the scarce resources under their control between competing claims in order to meet the organization's goals.
  As a resource allocator, a manager in charge of product development, for example, may have to assign people, money, and equipment to three different product development teams.
  Managers who are successful when making negotiation decisions can lower input costs, strike better deals with customers, gain access to more high-quality re- sources within the organization, and better organize their own subordinates.  Some Qualifications  Mintzberg's work is useful for what it tells us about the nature of managerial work and the behaviours managers must adopt to execute successfully the functions of management.
 Sheline Roopchandani 7 MGM101  As a practical matter, all of the roles described in Mintzberg's model seem important, and most successful practicing managers probably engage in all of them at least occasionally.  
 For example, evidence shows that managers can improve strategic thinking and decisions within their organization by taking on the role of devil's advocate, questioning the logic underlying proposed decisions to expose flawed thinking. Similarly, many successful managers adopt a mentoring role with their subordinates.  As mentors, managers draw on their own experiences to offer important insights to their subordinates, coaching them on how to become better managers.  
 The managerial roles model tries to describe what all managers do in all situations. Management Competencies: Do you have what it takes? - They must possess several competencies skills, values, and motivational preferences that allow them to perform their jobs effectively and become proficient at planning and strategizing, organizing, controlling, developing, and leading. We might be gifted with some competencies at birth, but most are developed through upbringing, education, and experience. - No single set of competencies represents the perfect combination for successful management.  Managerial Skills  Management is a challenging and complex task, and performing it effectively requires a variety of skills  Conceptual Skills  ability to see the "big picture," to understand how the various parts of the organization affect each other, and to conceptualize how those parts can be organized to improve the performance of the overall organization.  In general, managers farther down in an organization, such as frontline managers, face narrowly focused tactical issues as opposed to bigger strategic issues, and the problems they confront tend to be routine rather than exceptional."  Technical Skills  The reasoning is that managers in the lower part of the hierarchy work directly with technical staff, whereas managers farther up the hierarchy work more with other managers.  In fact, higher-level managers usually require technical knowledge and skills across a broader spectrum of functional areas (marketing, production, accounting, and so on) than is necessary for lower-level managers operating within one functional area.  Human Skills  The human skills that managers need include the abilities to communicate, persuade, manage conflict, motivate, coach, negotiate, and lead.  
 They include the manager's self-awareness and self-management.32 Good managers know how to manage themselves, which lets them manage others more effectively.
  Human skills are important whether you are a night manager at a Mac's store, a development manager at Microsoft, or the chief executive officer at CIBC.
  A recent study of thousands of managers at IBM, Lucent, PepsiCo, British Airways, and hundreds of other diverse organizations revealed that human skills are more important than technical and conceptual skills for managers across a wide range of levels.33 The analysis showed that people get promoted into management, and promoted from lower to higher levels of management, by demonstrating acceptable levels of technical and cognitive skills.  Managerial Values  Another important characteristic of successful managers is the values they hold and the strength of those values. Values are stable, evaluative beliefs that guide our preferences for outcomes or courses of action in a variety of situations. They are perceptions about what is good or bad, right or wrong.
  These shared values held by several people are important because they create a sense of collective purpose, which increases loyalty and satisfaction within the team and organization.  As Richard Branson of the Virgin Group has said, "A business has to be involving, it has to be fun and it has to exercise your creative instincts." Managers who act by their values are more likely to instill those values in others.
  Thus the personal values of middle and frontline managers need to echo and amplify the values that top management wants to spread throughout the organization.  The other reason why values represent an important characteristic of successful man- agers is that they stabilize and guide managers through ambiguous circumstances. Many forces, some of which are strong enough to steer them toward ineffective or unethical results, constantly buffet managers.  Managers don't just require strong values; they re- quire the right values.
 All managers in all situations must always engage in ethical behaviour, so they must embrace ethical values. 
 Ethical values are values that society expects people to follow because they distinguish right from wrong in that society.  Managerial Motivation  Along with the right combination of managerial skills and values, truly great managers also possess needs that motivate them to manage others effectively.
  Desire to Compete for Management Jobs Managers are more successful when they are motivated to compete for their jobs.
  Desire to Exercise Power Successful managers are motivated to seek power.
 Sheline Roopchandani 9 MGM101  To get things done in such a setting, Pfeffer argues that managers need to accumulate power and use that power in a constructive way. Power comes not just from formal authority: It also comes from personal traits, such as ability to influence others through communication; from a network of allies; and from control over crucial information or resources.
  This is consistent with studies reporting that effective managers have a moderately low need for affiliation they have less concern about being liked and are less sensitive to the pressure others impose to conform to their wishes. The other reason for the need to be different is that managers need to take centre stage to communicate and symbolize the organization's or work unit's future direction.
  Desire to Take Action One of the most important challenges for managers is to create momentum- motivating employees (as well as suppliers and other stakeholders) to achieve the organization's ambitions for the future. Stakeholders and Stakeholder Management - A stakeholder is an individual, institution, or community that has a stake in the operations of an organization and in how it does business. - Stakeholders include those who regularly transact directly with the organization, most notably employees, customers, sup- pliers, distributors, shareholders, and creditors  Stakeholders and the Organization  Each stakeholder group supplies the organization with important resources (or contributions), and in ex- change each expects its interests to be satisfied (by inducements). Employees provide labour and skills and expect commensurate income, job satisfaction, job security, and good working conditions.  Creditors such as bondholders provide the organization with capital in the form of debt, and they expect to be repaid on time with interest.
  The general public provides organizations with national infrastructure and seeks some assurance that the quality of life will be improved as a result of the organization's existence.  Taking Stakeholders into Account  In practice few organizations have the resources to simultaneously satisfy all stakeholder claims.48 For example, employee claims for higher wages can conflict with consumer demands for reasonable prices and shareholder demands for higher returns.
  Most businesses that have gone through this process quickly come to the conclusion that three stakeholder groups must be satisfied above all others if a firm is to survive and prosper: customers, employees, and shareholders. If customers defect, financial "performance will decline.  In general, if managers can satisfy the claims of the customers and employees of the firm, financial performance will be strong, the share price will rise, and this will satisfy the claims of shareholders.51 In other words, in the long run satisfying the claims of shareholders requires managers to first pay close attention to their customers and employees.
  Although it is important to focus on the claims of customers, employees, and share- holders, managers must be careful not to ignore the claims of other stakeholder groups.
  However, Monsanto failed to anticipate the adverse reaction from another important stakeholder group: the general public.
  The reality is that the scientific evidence is on Monsanto's side, but by ignoring public perceptions and failing to anticipate the hostile reaction from an important stakeholder group, Monsanto hurt rather than helped its case. It is true that a business corporation should try to maximize the return associated with holding its stock; but it is also true that if managers focus obsessively on that goal, they may take actions that not only run counter to the interests of other important stakeholder groups, but also are not in the best long-term interests of share- holders themselves.  
 Investors want to see the best ROI (return on investment) possible, and sometimes management will make decisions that support this goal without consideration for other stakeholders say, its lenders, employees, or customers.  
 Obviously, the shareholders have lost their investment, the lenders have lost the repayment of their loan, the employees have lost their jobs, and customers have lost access to a product.
  The lesson is that managers must pay attention to all stakeholder groups, balancing their claims and taking actions that are in the best long-term interests of key stakeholders lenders, employees, customers, and shareholders while being careful not to alienate other key stakeholders. Chapter 2: Evolution of Management Theory - Management science theory, developed during the Second World War, has become more important as researchers have developed rigorous analytical and quantitative techniques to help managers measure and control organizational performance. Scientific Management Theory: Managers
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