Sheline Roopchandani 1
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
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
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 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 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
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
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
- 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.
- 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
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
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
- 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."
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.
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
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.
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
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.
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.
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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
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.
Management is a challenging and complex task, and performing it effectively requires a variety of
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
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."
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.
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.
values are values that society expects people to follow because they distinguish right from wrong in
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.
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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
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