Management , Fifth Edition

M anagement

5e

Management 5e Chuck Williams VP/Editorial Director: Jack W. Calhoun Editor-in-Chief: Melissa S. Acuña Executive Editor: Joe Sabatino Developmental Editor: Jamie Bryant, B-Books

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Brief Contents

INTRODUCTION TO MANAGEMENT 2

PLANNING 152

ORGANIZING 306

LEADING 468

CONTROLLING 590

1 2 3 4 5

1 2 3 4

Management 4 The History of Management 36 Organizational Environments and Cultures 76 Ethics and Social Responsibility 112

5 6 7 8

Planning and Decision Making 154 Organizational Strategy 192 Innovation and Change 230 Global Management 268

9 10 11 12

Designing Adaptive Organizations 308 Managing Teams 346 Managing Human Resource Systems 382 Managing Individuals and a Diverse Workforce 432

13 Motivation 470 14 Leadership 510 15 Managing Communication 550

16 Control 592 17 Managing Information 628 18 Managing Service and Manufacturing Operations 660

Endnotes 697 Glossary 745 Name Index 761 Subject Index 769

BRIEF CONTENTS

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Contents

Chapter 2: The History of Management 36

1

In the Beginning 38 The Origins of Management 39

INTRODUCTION TO MANAGEMENT 2

Chapter 1: Management 4 What Is Management? 6 Management Is . . . 6 Management Facts History of Management 8 Management Functions 8 What Really Works Meta-Analysis 10

What Do Managers Do? 12 Kinds of Managers 12 Doing the Right Thing Tell and Show People That Ethics Matter 14 Managerial Roles 17

THE END OF EACH C H A P T E R C O N TA I N S THE FOLLOWING M AT E R I A L : Key Terms Self Assessment Management Decision Management Team Decision Practice Being a Manager (an experiential exercise) Develop Your Career Potential Reel to Real

What Does It Take to Be a Manager? 21 What Companies Look for in Managers 22 Mistakes Managers Make 23 The Transition to Management: The First Year 25

Why Management Matters 27 Competitive Advantage through People 27 End-of-Chapter Assessments, Exercises, and Reel to Real 30

The Evolution of Management 42 Scientific Management 43 Bureaucratic and Administrative Management 50 Human Relations Management 55 Doing the Right Thing A Dangerous Mix: Power, Authority, and Autonomy 61 Operations, Information, Systems, and Contingency Management 63 Management Facts Fad Jumping 67 End-of-Chapter Assessments, Exercises, and Reel to Real 70

Chapter 3: Organizational Environments and Cultures 76 External Environments 78 Changing Environments 78 General Environment 83 Management Trends States, Employers, and Health Care 88 Specific Environment 88 Doing the Right Thing Dealing with Gifts and Suppliers 93 Making Sense of Changing Environments 94

Internal Environments 98 Organizational Cultures: Creation, Success, and Change 98 End-of-Chapter Assessments, Exercises, and Reel to Real 106

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Chapter 4: Ethics and Social Responsibility 112

Chapter 6: Organizational Strategy 192

What Is Ethical and Unethical Workplace Behavior? 114

Basics of Organizational Strategy 194

Ethics and the Nature of Management Jobs 115 Workplace Deviance 117 U.S. Sentencing Commission Guidelines for Organizations 119

How Do You Make Ethical Decisions? 123 Influences on Ethical Decision Making 123 Practical Steps to Ethical Decision Making 127 Doing the Right Thing If You Cheat in College, Will You Cheat in the Workplace? 128 What Really Works Integrity Tests 130

What Is Social Responsibility? 134 To Whom Are Organizations Socially Responsible? 135 For What Are Organizations Socially Responsible? 139 Responses to Demands for Social Responsibility 141 Social Responsibility and Economic Performance 143 End-of-Chapter Assessments, Exercises, and Reel to Real 146

Corporate-, Industry-, and Firm-Level Strategies 206 Corporate-Level Strategies 206 Management Facts BCG—A History 209 Industry-Level Strategies 213 Firm-Level Strategies 218 End-of-Chapter Assessments, Exercises, and Reel to Real 225

Chapter 7: Innovation and Change 230 Organizational Innovation 232 Why Innovation Matters 232 Managing Innovation 240 Doing the Right Thing Give Credit, Don’t Take It 242 Management Trends A 90,000-Member Idea Machine 244

2

Organizational Change 248

PLANNING 152

Chapter 5: Planning and Decision Making 154 Planning 156 Benefits and Pitfalls of Planning 157 How to Make a Plan That Works 159 Doing the Right Thing Stretch Goals: Avoid the “15 Percent Delusion” 160 Planning from Top to Bottom 164 What Really Works Management by Objectives 167

What Is Rational Decision Making? 169 Steps and Limits to Rational Decision Making 170 Doing the Right Thing PLUS—A Process for Ethical Decision Making 176 Using Groups to Improve Decision Making 176 What Really Works Devil’s Advocacy, Dialectical Inquiry, and Considering Negative Consequences 181 Management Facts Who First Thought of Brainstorming? 182 End-of-Chapter Assessments, Exercises, and Reel to Real 185

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Sustainable Competitive Advantage 195 Strategy-Making Process 197 Doing the Right Thing Is Ethics an Overlooked Source of Competitive Advantage? 199 What Really Works Strategy Making for Firms, Big and Small 200

CONTENTS

Organizational Decline: The Risk of Not Changing 248 Managing Change 250 What Really Works Change the Work Setting or Change the People? Do Both! 260 End-of-Chapter Assessments, Exercises, and Reel to Real 262

Chapter 8: Global Management 268 What Is Global Business? 270 Global Business, Trade Rules, and Trade Agreements 270

How to Go Global? 279 Consistency or Adaptation? 279 Forms for Global Business 280 Doing the Right Thing Fair and Safe Working Conditions in Foreign Factories 281

Where to Go Global? 286 Finding the Best Business Climate 286 Doing the Right Thing Foreign Corrupt Business Practices Act 291 Becoming Aware of Cultural Differences 292 Management Facts Bilingualism—A Growing Trend 294 Preparing for an International Assignment 294 What Really Works Cross-Cultural Training 297 End-of-Chapter Assessments, Exercises, and Reel to Real 299

3

ORGANIZING 306

Chapter 9: Designing Adaptive Organizations 308 Designing Organizational Structures 312 Departmentalization 312 Organizational Authority 318 Job Design 322

Designing Organizational Processes 327 What Really Works The Job Characteristics Model: Making Jobs More Interesting and Motivating 328 Intraorganizational Processes 330 Doing the Right Thing Don’t Scavenge That Office if Somebody Is Still in It 336 Interorganizational Processes 337 Management Trends Crowdsourcing 338 End-of-Chapter Assessments, Exercises, and Reel to Real 340

Chapter 10: Managing Teams 346

What Really Works Using Selection Tests to Hire Good Workers 406

Developing Qualified Workers 408 Training 409 Performance Appraisal 413

Keeping Qualified Workers 417 Compensation 418 Employee Separations 422 End-of-Chapter Assessments, Exercises, and Reel to Real 426

Chapter 12: Managing Individuals and a Diverse Workforce 432 Diversity and Why It Matters 435 Diversity: Differences That Matter 435

Diversity and Individual Differences 440 Surface-Level Diversity 441 Management Facts Pepsi’s Diversity Culture 445 Deep-Level Diversity 448 What Really Works Conscientiousness: The Organized, Hardworking, Responsible Personality 451

How Can Diversity Be Managed? 455 Managing Diversity 455 Doing the Right Thing Don’t Break the Law in the Name of Diversity 459 End-of-Chapter Assessments, Exercises, and Reel to Real 463

Why Work Teams? 348 The Good and Bad of Using Teams 348 Doing the Right Thing Don’t Be a Team Slacker— Do Your Share 352 Kinds of Teams 356

Managing Work Teams 361 Work Team Characteristics 361 What Really Works Cohesion and Team Performance 363 Enhancing Work Team Effectiveness 368 Management Trends Two Sheets and a Blanket 370 End-of-Chapter Assessments, Exercises, and Reel to Real 376

Chapter 11: Managing Human Resource Systems 382 Determining Human Resource Needs 384 Human Resource Planning 385 Employment Legislation 388

Finding Qualified Workers 394 Recruiting 394 Selection 398 Doing the Right Thing Don’t Embellish Your Résumé 399 Doing the Right Thing Don’t Use Psychics, Lie Detectors, or Handwriting Analysis to Make HR Decisions 403

4

LEADING 468

Chapter 13: Motivation 470 What Is Motivation? 472 Basics of Motivation 473 Doing the Right Thing Faking It, Not Making It 475 Management Trends Motivating the Multigenerational Work Force 480

How Perceptions and Expectations Affect Motivation 481 Equity Theory 482 Expectancy Theory 488

How Rewards and Goals Affect Motivation 491 Reinforcement Theory 492 What Really Works Financial, Nonfinancial, and Social Rewards 498 Goal-Setting Theory 499

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Motivating with the Integrated Model 502 End-of-Chapter Assessments, Exercises, and Reel to Real 504

Chapter 14: Leadership 510 What Is Leadership? 512 Leadership 512 Doing the Right Thing The Three M’s: Mission, Mentor, and Mirror 514 Who Leaders Are and What Leaders Do 517 What Really Works Leadership Traits Do Make a Difference 519

Situational Approaches to Leadership 522 Putting Leaders in the Right Situation: Fiedler’s Contingency Theory 523 Adapting Leader Behavior: Path-Goal Theory 527 Management Facts Executive Turnover 531 Adapting Leader Behavior: Hersey and Blanchard’s Situational Leadership® Theory 531 Adapting Leader Behavior: Normative Decision Theory 533

Strategic Leadership 538 Visionary Leadership 539 End-of-Chapter Assessments, Exercises, and Reel to Real 544

Chapter 15: Managing Communication 550 What Is Communication? 552 Perception and Communication Problems 553 Kinds of Communication 558 Management Trends Hey Coach! 565 Doing the Right Thing Protect Personal, Confidential Information 567

How to Improve Communication 567 Managing One-on-One Communication 568 Managing Organization-Wide Communication 579 End-of-Chapter Assessments, Exercises, and Reel to Real 584

5

CONTROLLING 590

Chapter 16: Control 592 Basics of Control 594 The Control Process 594

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CONTENTS

How and What to Control 600 Control Methods 601 Doing the Right Thing Don’t Cheat on Travel Expense Reports 603 What to Control? 606 Management Trends An Old Standby Is a Hot Trend 615 End-of-Chapter Assessments, Exercises, and Reel to Real 621

Chapter 17: Managing Information 628 Why Information Matters 630 Strategic Importance of Information 631 Characteristics and Costs of Useful Information 633 Doing the Right Thing Recycling and Disposing of Computer Equipment 636

Getting and Sharing Information 638 Capturing, Processing, and Protecting Information 638 Doing the Right Thing Password Do’s and Don’ts 646 Accessing and Sharing Information and Knowledge 648 End-of-Chapter Assessments, Exercises, and Reel to Real 654

Chapter 18: Managing Service and Manufacturing Operations 660 Managing for Productivity and Quality 662 Productivity 663 Quality 666

Managing Operations 674 Service Operations 675 Doing the Right Thing Protect Your Frontline Staff : The Customer Isn’t Always Right 678 Manufacturing Operations 679 Inventory 683 End-of-Chapter Assessments, Exercises, and Reel to Real 690

Endnotes 697 Glossary 745 Name Index 761 Subject Index 769

What’s New in 5e?

ABOUT THIS EDITION If you walk down the aisle of the business section in your local bookstore (or surf the “Business” page at Amazon.com), you’ll find hundreds of books that explain precisely what companies need to do to be successful. Unfortunately, these books tend to be faddish, changing every few years. Lately, the best-selling business books have emphasized technology, leadership, and dealing with change, whereas ten years ago the hot topics were reengineering, going global, mergers, and management buyouts. One thing that hasn’t changed, though, and never will, is the importance of good management. Management is getting work done through others. Organizations can’t succeed for long without it. Well-managed companies are competitive because their work forces are smarter, better trained, more motivated, and more committed. Furthermore, good management leads to satisfied employees who, in turn, provide better service to customers. Because employees tend to treat customers the same way that their managers treat them, good management can improve customer satisfaction. Finally, companies that practice good management consistently have greater revenues and profits than companies that don’t. My goal in writing the first edition of Management was to write a textbook that students would enjoy, that students would refer to for practical, theory-driven advice, and that encouraged students to put theory-driven knowledge into practice for themselves. For the fifth edition, my goal was to update the content to reflect the changing face of management and to keep the text relevant, fresh, and interesting for students. In short, the ideas and concepts you’ll learn about in this book can improve the performance of the organization and department where you work, help you solve job-related problems, and improve your own job performance, even if you’re not a manager. So welcome to Management, 5e! Please take a few minutes to read the preface and familiarize yourself with the approach (combining theory with specific stories and examples), features, pedagogy, and end-of-chapter assignments in Management. This is time well spent. After all, besides your instructor, this book will be your primary learning tool.

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Combining Theory with Specific, Up-to-Date Stories and Examples Say “theory” to college students and they assume that you’re talking about complex, arcane ideas and terms that have nothing to do with the “real world,” but which need to be memorized for a test and then forgotten (at least until the final exam). However, students needn’t be wary of theoretical ideas and concepts. Theories are simply good ideas. And good theories are simply good ideas that have been tested through rigorous scientific study and analysis. Where textbooks go wrong is that they stop at theory and read like dictionaries. Or, they focus on theoretical issues related to research rather than practice. However, good management theories (i.e., good ideas) needn’t be complex, difficult to understand, or irrelevant. In fact, the late Rensis Likert, of the University of Michigan, once said that there is nothing as practical as a good theory. So, to make sure that you’re exposed to good ideas (i.e., good theories), that you can refer to for practical, theory-driven advice, and which encourage you to put theory-driven knowledge into practice for yourselves, each chapter in this book contains 50 to 60 specific stories and examples that illustrate how managers are using management ideas in their organizations. Let’s use an example from Chapter 8 on Global Management to show you what I mean. One of the key issues in Global Management is successfully preparing employees for international assignments. In fact, the difficulty of adjusting to language, cultural, and social differences in another country is the primary reason that so many businesspersons fail in international assignments. Consequently, you’ll read this passage in Chapter 8. For example, although there have recently been disagreements among researchers about these numbers, it is probably safe to say that 5 to 20 percent of American expatriates sent abroad by their companies will return to the United States before they have successfully completed international assignments. Of those who do complete their international assignments, about one-third are judged by their companies to be no better than marginally effective. In other words, this is fairly standard, research-based information. You’ll find it in most textbooks. Is it important for students to know this information? You bet! Is it likely that students will find this and the thousands of other pieces of theory and research-based facts throughout the book particularly compelling or interesting (and thus easier to learn)? Ah, there’s the problem. However, what if we combined theory and research with specific, “real world” stories and examples that illustrated good or poor use of those theories? For instance, the passage shown below is also in Chapter 8, where it follows the research-based information about the difficulty of adjusting to foreign cultures. In his book Blunders in International Business, David Ricks tells the story of an American manager working in the South Pacific who, by hiring too many local workers from one native group, unknowingly upset the balance of power in the island’s traditional status system. The islanders met on their own and quickly worked out a solution to the problem. After concluding their meeting at 3 AM, they calmly went to his home to discuss their solution with him (time was not important in their culture). But since the American didn’t speak their language, and couldn’t understand why they would show

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up in mass outside his home at 3 AM, he called in the Marines, who were stationed nearby, to disburse what he thought was a riot. After reading this passage, students have a vivid understanding about what can go wrong if people don’t receive cultural and language training before traveling or moving to another country. Why does this help students learn? Because the first passage cites theory and research on the effectiveness of cross-cultural training and the second brings the theory and research alive by indicating what can go wrong if you don’t get that cross-cultural training. Moreover, the stories and examples you’ll read in each chapter are relevant and up-to-date. You’ll read how Wal-Mart has started using software to schedule shifts for its 1.3 million workers. What used to take a store manager an entire day now takes only an hour, freeing up Wal-Mart managers to, well, manage. You’ll learn how surgeons and nurses at the Veterans Health Administration are using safety pauses in the operating room to overcome organizational silence and reduce mistakes. The surgical team pauses for a moment, is asked if anyone has concerns or comments, and then addresses them if need be. You’ll also learn how companies incorporate flexibility into their planning process so they can react appropriately and quickly when disruptions occur. For example, Virgin Atlantic spent considerable time and effort developing a reclining seat for first-class passengers, but before the company was able to bring the new seat to market, British Airways unveiled its fully flat bed for business class. In an instant, Virgin Atlantic’s original plan was all but useless, but the VA team regrouped, was allocated additional resources, and developed a suite (not just a seat) that helped it increase its market share amoung transatlantic passengers.You’ll also read about how companies use outsourcing to increase productivity—even companies you might not associate with outsourcing, like McDonald’s. Some franchises have all but eliminated the 10-second idle time a drive-thru employee experiences between orders waiting for the first car to pull away and the next one to pull up to the speaker. How? By outsourcing the order taking function to remote call centers. A call center employee can take an order from a hungry patron at one location and immediately after take an order from another hungry patron at a completely different location, perhaps a completely different state. As these stories show, each chapter has been updated with dozens of new real world business examples, straight from the latest pages of BusinessWeek, Fortune, Forbes, Fast Company, and Inc., as well as the Wall Street Journal, the New York Times, and other leading newspapers, to help you understand how management concepts are being used. In short, research and theory and stories and examples are important for effective learning. Therefore, this book contains over a thousand specific examples and stories to make management theories and ideas more interesting. So, to get more out of this book, read and understand the theories and theoretical ideas. Then read the stories or examples to learn how those ideas should or should not be used in practice. You’ll find that both are current and up-to-date.

So What ’s New? If you are already familiar with the previous editions’ approach of reinforcing research and theory with stories and examples you may be asking yourself, “So what’s new?” The answer is quite a bit.

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To keep pace with the evolution of management, the Fourth Edition underwent a rigorous review process that identified areas where I could strengthen and refine the text. Reviewers gave wonderful feedback about which boxed features were not being used in class, so I have streamlined each chapter to focus on the main content, retaining only the most popular boxes from the Fourth Edition, “What Really Works?” and “Doing the Right Thing.” To each chapter, I’ve also added a short box on current management issues or interesting management facts. Titled “Management Fact” and “Management Trend,” these boxes provide short examples and issues that get students thinking beyond the book. For this edition, all eighteen of the “What Would You Do?” chapter-opening cases are new, and feature companies like Sony, PETA, StubHub, Whirlpool, Walgreens, Louis Vuitton, Tommy Hilfiger, and Radio Shack, among others. What brand new things will you find in Management, 5e? To start, you’ll find:

Practice Being a Manager—Working

through management issues before you even get to the workplace can be a beneficial way to practice being a manager. A new experiential exercise at the end of each chapter gives students a context in which to explore management issues and problems with other students. The guided exercises are supported by detailed teaching notes and role-playing instructions in the Instructor Manual.

Self Assessments—The Fourth Edition contained a self-assessment appendix, but for this edition, I wanted to better integrate the assessments into the chapters themselves. The chapter-ending cases and assignments now begin with a related assessment questionnaire to help students consider how their own perspectives influence their management skills. Basic scoring information follows each questionnaire, and the Instructor Manual contains directions for using the assessment tools in class.

Reel to Real Videos—When we asked professors how they used video in the classroom, we discovered two distinct preferences. Some like to use short video examples to reinforce certain points in the chapter; others like longer video cases that looked at various companies in-depth. In response to this feedback, each chapter of Management, 5e contains two video options. The first is a film clip from a popular Hollywood movie that relates to the chapter content. For example, students will see a “Biz Flix” clip from In Good Company for Chapter 2 on History of Management, from The Bourne Identity for Chapter 5 on Planning, from October Sky for Chapter 7 on Innovation, and from Casino for Chapter 18 on Managing Service and Manufacturing Operations, to name a few. The second video option is comprised of longer segments, called “Management Workplace,” which are an average of 12 minutes and provide a deeper look at a single company, its operations, and how it addresses various management issues every day. In the Fifth Edition, we go inside Original Penguin (apparel), Lonely Planet (travel guides), Organic Valley (organic dairy products), Timbuk2 (backpacks and bags), PepsiCo, NEADS (training service animals), and Peapod (online grocer). Both the “Biz Flix” and the “Management Workplace” videos guide students on what to look for and think about as they watch the video. Detailed teaching notes for both videos are in each chapter of the Instructor Manual.

CengageNOW for Williams—Management,

5e has a dedicated CengageNOW study tool that tightly integrates the material in the text with a myriad of review opportunities. Students can test their understanding, concentrate their review on their weakest areas, and then verify their progress using the latest technology.

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So what is new in Management, 5e? Quite a bit.

Book Features A tremendous amount of time and thought went into planning this textbook. I reviewed over 25 top selling textbooks in Management, Marketing, Finance, Statistics, and Economics. I asked more than 200 students and dozens of professors what they specifically liked and disliked about their textbooks. And, I pulled some of my favorite books (many of which were not about business) from my bookshelf to figure out what made them great books. Only then did I create the plan and organization for Management. The Fifth Edition retains the popular features of previous editions and adds some new ones. So take a few minutes now to familiarize yourself with these features. Doing so will help you get more out of the book and your management class.

What Would You Do?—Each chapter opens with an engaging case outlining actual management problems facing a well-known company. After students read the case, they are presented several questions to help guide their thinking about the issues, and are ultimately asked “If you were the manager at this company, what would you do?” Putting students in the place of the manager personalizes the dilemma and forces students to solve common managerial problems. The solution to the case, or “What Really Happened?” is in the Instructor Manual. Allowing students to compare what they would have done to what the managers really did provides a great learning opportunity.

Doing the Right Thing—At the U.S. Military Academy, there is a strict code of conduct: “A cadet will not lie, cheat or steal, nor tolerate those who do.” The code is concise and unmistakable. Regrettably, there is no equivalent code for managers because there’s no doubt they need one. Numerous studies and well-known corporate scandals make clear the distressing state of managerial ethics in today’s business world. Lying to stockholders about profits, cheating to win business, and stealing from companies have become all too common. And, because managers set the standard for others in the workplace, unethical behavior and practices quickly spread when they don’t do the right thing. Therefore, in each chapter, you’ll find practical, useful advice to help you become a more ethical manager or businessperson by “Doing the Right Thing.” Topics include ethical competitive analysis, avoiding the slippery slope of cheating, dealing with gifts from suppliers, avoiding conflicts of interest, not cheating on travel expenses, enforcing fair and safe working conditions in foreign factories, giving credit rather than taking it, and many more.

What Really Works?—Some studies show that two drinks a day increases life expectancy by decreasing your chances of having a heart attack. Yet other studies show that two drinks a day will shorten your life expectancy. For years, we’ve “buttered” our morning toast with margarine instead of butter because it was supposed to be better for our health. However, new studies now show that the trans-fatty acids in margarine may be just as bad for our arteries as butter. Confusing scientific results like these frustrate ordinary people who want to “eat right” and “live right.” It also makes many people question just how useful most scientific research really is. Managers also have trouble figuring out what works, based on the scientific research published in journals like the Academy of Management Journal, the Academy

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of Management Review, the Strategic Management Journal, the Journal of Applied Psychology, and Administrative Science Quarterly. It’s common for the Wall Street Journal to quote a management research article from one of these journals that says that total quality management is the best thing since sliced bread (without butter or margarine). Then, just six months later, the Wall Street Journal will quote a different article from the same journal that says that total quality management doesn’t work. If management professors and researchers have trouble deciding what works and what doesn’t, how can practicing managers know? Thankfully, a research tool called meta-analysis, which is a study of studies, is helping management scholars understand how well their research supports management theories. Fortunately, meta-analysis is also useful for practicing managers, because it shows what works and the conditions under which management techniques may work better or worse in the “real world.” Meta-analysis is based on the simple idea that if one study shows that a management technique doesn’t work and another study shows that it does, an average of those results is probably the best estimate of how well that management practice works (or doesn’t work). Fortunately, you don’t need a Ph.D. to understand the statistics reported in a meta-analysis. In fact, one primary advantage of meta-analysis over traditional significance tests is that you can convert meta-analysis statistics into intuitive numbers that anyone can easily understand. Indeed, each meta-analysis reported in the “What Really Works?” sections of this textbook is accompanied by an easy-to-understand statistic called the probability of success. As its name suggests, the probability of success uses a bar graph and a percentage (0 percent to 100 percent) to indicate the likelihood that a management technique will actually work. Of course, no idea or technique works every time and in every circumstance. However, in today’s competitive, fast-changing, global marketplace, few managers can afford to overlook proven management strategies like those discussed in the “What Really Works?” feature of this book.

Pedagogy Pedagogical features are meant to reinforce learning, but they don’t have to be boring. Accordingly, the teaching tools used in Management will help students learn and hold their interest, too.

Chapter Outline and Numbering System, Learning Objectives, and Section Reviews—Because of their busy schedules, very few students have the opportunity to read a chapter from beginning to end in one sitting. Typically, it takes students anywhere from two to five study sessions to completely read a chapter. Accordingly, at the beginning of each chapter, you’ll find a detailed chapter outline in which each major part in the chapter is broken out into numbered sections and subsections. For example, the outline for the first part of Chapter 4, on Ethics and Social Responsibility, looks like this: What Is Ethical and Unethical Workplace Behavior? 1. Ethics and the Nature of Management Jobs 2. Workplace Deviance 3. U.S. Sentencing Commission Guidelines 3.1 Who, What, and Why? 3.2 Determining the Punishment

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The numbered information contained in the chapter outline is then repeated in the chapter as learning objectives (at the beginning of major parts of the chapter) and as numbered headings and subheadings (throughout the chapter) to help students remember precisely where they are in terms of the chapter outline. Finally, instead of a big summary at the end of the chapter, students will find detailed reviews at the end of each section. Together, the chapter outline, numbering system, learning objectives, section headings (which mark the beginning of a section), and section reviews (which mark the end of a section) allow students to break the chapter into smaller, self-contained sections that can be read in their entirety over multiple study sessions. Furthermore, the numbered headings and outline should make it easier for instructors and students to know what is being assigned or discussed in class (“In section 3.1 of chapter 3…”).

Study Tip—Knowing how to study effectively is not an innate talent. So, to prepare students for studying the material, a detailed study tip appears in the chapter opener. Eighteen different tips give students many options for reviewing key concepts and mastering chapter content. Students are challenged to write their own tests and exchange them in a study group, explain the chapter concepts to a friend who is not in class, cut up the text glossary to make a quiz-bowl game, and much more.

Student Resources—The

Management package has many resources to help reinforce the concepts in each chapter. For that reason, the opening of each chapter includes a list of various study tools and where they can be found. Each list contains information about CengageNOW and the student website.

Key Terms—Key terms appear in boldface in the text, with definitions in the margins to make it easy for students to check their understanding. A complete alphabetical list of key terms appears at the end of each chapter as a study checklist, with page citations for easy reference.

End-of-Chapter Assignments In most textbooks, there are only two or three end-of-chapter assignments. By contrast, at the end of each chapter in Management, there are five assignments from which to choose. (But if you count the opening case, “What Would You Do?,” and its answer, “What Really Happened?,” it’s really six assignments.) This gives instructors more choice in selecting just the right assignment for their classes. It also gives students a greater variety of activities, making it less likely that they’ll repeat the same kind of assignment chapter after chapter.

Self Assessment—As

described above, each chapter has a “Self Assessment” questionnaire that helps students explore their own management perspectives.

Management Decision—“Management Decision” assignments are focused on a particular decision. Students must decide what to do in the given situation and then answer several questions to explain their choices. For example, students must decide whether to give a new employee a raise before company policy allows, if the company should permit camera phones in the office, whether to use personality tests as part of hiring and promotion decisions, if creating a workplace blog is worth the effort, whether to mine employees’ personal data to find out how to motivate them, and more. Some “Management Decision” features have optional extensions that turn the exercises into mini-projects. Information on how to do that is in the Instructor Manual.

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Management Team Decision—“Management Team Decision” assignments are similar to “Management Decision” assignments in that students face a problem, must decide what to do, and then answer several questions to explain their choices. The difference, however, is that “Management Team Decision” assignments are designed to be completed by student teams or groups. Teams have the opportunity to practice the group decision-making techniques outlined in Chapter 5 (Planning and Decision Making). Student management teams will decide whether to implement a shopper card program at a chain of independent supermarkets, consider the pros and cons of becoming a Wal-Mart supplier, build a balanced scorecard for H&R Block, map a strategy for Paramount Pictures, determine the role of innovation at ColgatePalmolive, and more.

Practice Being a Manager Experiential Exercises—The end of each chapter contains an experiential exercise to give students the opportunity to role play management scenarios, discuss management dilemmas, and resolve management problems. Some of the exercises have components that require individual, takehome preparation, but most are designed to be started and completed during the class session. Develop Your Career Potential—“Develop Your Career Potential” assignments have one purpose: to help students develop their present and future capabilities as managers. What students learn through these assignments is not traditional “book-learning” based on memorization and regurgitation, but practical knowledge and skills that help managers perform their jobs better. Assignments include interviewing managers, dealing with the press, conducting a personal SWOT analysis, learning from failure, developing leadership skills, 360-degree feedback, and more.

Instructor Supplements Comprehensive Instructor Manual—The instructor manual to accompany the Fifth Edition has been completely redone to help instructors in every type of class. In addition to the chapter outlines, additional activities, and solutions you expect, the new manual includes one pedagogy grid and three lesson plans per chapter. Each chapter of the instructor manual opens with a pedagogy grid that details all of the pedagogy in the chapter and the companies and teaching points presented. By giving you all the options you have in the chapter and the chapter content addressed by each option, you will be able to decide what you want to emphasize in class and the work you want to assign your students. Following the pedagogy grid is a series of three lesson plans: a lecture lesson plan, including lists of PowerPoint slides; a group-work lesson plan for professors who have smaller sections and/or more time during the semester; and a complete video lesson plan, including previewing, viewing, and post-viewing activities for both “BizFlix” and “Management Workplace.” The purpose of the video-only lesson plan is to illustrate how to teach using video without “losing time.” Each type of lesson plan includes pre-class preparation for the professor and for students, how to organize the content for the chapter during the class period, a list of possible assignments, and more. A detailed chapter outline (lecture notes) is still part of the instructor manual. The lecture notes include additional examples, teaching notes for key concepts and for feature boxes, prompts where relevant PowerPoint slides and transparencies cor-

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respond to chapter content, as well as prompts for where to show the video. Solutions for chapter features are included. In addition to all of these teaching tools, an appendix titled “Teaching Your First Management Course” can be found at the end of the instructor manual. This appendix is designed specifically to meet the needs and concerns of the first-time instructor.

Certified Test Bank—The Test Bank for the Fifth Edition of Management builds on the solid foundation of previous editions. A team of professors reviewed the entire test bank to verify the quality of each question. Then an editorial professional verified that the question concepts and wording matched the presentation in the text, as well as corrected grammatical and typographical errors and page references. Each test bank chapter contains at least 150 questions in a variety of types: truefalse, multiple-choice, short-answer, and critical-thinking questions, and a scenario section that asks students to answer questions based on detailed management situations, including on the chapter-opening “What Would You Do?” case. Thorough solutions are provided for each question, including difficulty ratings, AACSB tags, and page references where solutions appear in the text. A computerized version of the text bank is available on your Instructor Resource CD-ROM and by special request. ExamView allows to you create, edit, store, print, and otherwise customize your quizzes, tests, and exams. The system is menu-driven making it quick and easy to use. Course Pre- and Post-Assessments—To help you better determine your students’ baseline understanding of management principles, we have created an assessment test for your use at the beginning of the term. The 200-question pre-test covers the basic management concepts that students need to understand. As a conclusion to your course, you can administer the 200-question post-test. These tests are designed to help you track your students’ proficiency levels semester to semester. Pre- and post-assessments are also broken down by chapter, so if you prefer, you can administer throughout the semester for each chapter of the text. Assessment tests are available in both Word and ExamView formats.

ExamView—A computerized version of the Test Bank (called ExamView) is available on your Instructor Resource CD-ROM and by special request. ExamView allows you to add or edit questions, instructions, and answers. You can create, edit, store, print, and otherwise customize all your quizzes, tests, and exams. The system is menu-driven, making it quick and easy to use. Reel to Real Video—Nothing helps students master management concepts like seeing them put into practice in the real world. New “Management Workplace” videos give an extensive look into the workings of interesting and successful companies like Original Penguin, Lonely Planet, PepsiCo, Organic Valley, and Peapod. In addition to these longer segments, each chapter has a movie clip that ties into the management concepts presented in the chapter. Clips are short, so you can view and review them easily and quickly. Both the “Biz Flix” and “Management Workplace” videos are available on DVD. The Instructor Manual includes detailed teaching notes so that you can incorporate video into your class in a meaningful way.

PowerPoint® Slides—A rich set of PowerPoint slides, with teaching notes, will make class preparations easy and interesting. The approximately 30 to 50 slides per chapter cover all key concepts, terms, features, cases, and even some exhibits from

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the text. Animations and transitions add movement to many of the slides, allowing instructors to show one point at a time and adding a dynamic feel that will hold student interest throughout the presentation. Ample teaching notes offer additional insights and examples plus important points to cover in lectures. For instructors wishing to integrate various media, we have also created a set of video PowerPoint slides in which the “BizFlix” movie clips are embedded in appropriate slides. And to support the Self Assessment questionnaires, we have created a separate set of PowerPoint files that enable professors to use the assessment inventories in the classroom setting. In each Self Assessment PowerPoint chapter, individual assessment items are placed on separate slides. Excel spreadsheets embedded on each slide allow instructors to use the data from a simple show of hands to create distributions for each assessment item. Students can see where they fit in the distribution, making the assessment tool more interesting and relevant.

Who Wants to Be a Manager?—Games are an increasingly popular classroom review tool, so the Fifth Edition of Management includes a quiz game that uses JoinIn™ clicker technology. Each chapter has two rounds of 25 questions each, organized into 5 categories. Category names are fun, but the questions in each category are serious review of chapter concepts. A mixture of true-false and multiple choice questions keep students working through this enjoyable classroom review. Instructor Resource CD-ROM (IRCD)—For your convenience, the Instructor Manual, Test Bank, ExamView Software, PowerPoint presentations, and Who Wants to Be a Manager are available on a single CD-ROM, the IRCD.

The Business and Company Resource Center—Put a complete business library at your fingertips with the Business & Company Resource Center (BCRC). The BCRC is a premier online business research tool that allows you to seamlessly search thousands of periodicals, journals, references, financial information, industry reports, company histories, and much more. The BCRC is a powerful and time-saving research tool for students—whether they are completing a case analysis, preparing for a presentation, creating a business plan, or writing a reaction paper. Instructors can use the BCRC like an online coursepack, quickly and easily assigning readings and research projects without the inconvenience of library reserves, permissions, and printed materials. BCRC filters out the “junk” information students often find when searching the Internet, providing only the high quality, safe, and reliable news and information sources. Visit academic.cengage.com/bcrc to learn more about how this powerful electronic tool integrates a diverse collection of resources to reflect the natural research process and contact your local representative for pricing and optional bundling information for the Business & Company Resource Center with your text.

™

®

®

Web Tutor (for both WebCT , and Blackboard )—Online learning is growing at a rapid pace. Whether you are looking to offer courses at distance or to offer a Web-enhanced classroom, South-Western/Cengage Learning offers you a solution with WebTutor. WebTutor provides instructors with text-specific content that interacts with the two leading systems of higher education course management—WebCT and Blackboard. WebTutor is a turnkey solution for instructors who want to begin using technology like Blackboard or WebCT but who do not have Web-ready content available, or who do not want to be burdened with developing their own content. WebTutor uses the Internet to turn everyone in your class into a front-row student. WebTutor offers interactive study guide features such as quizzes, concept reviews, flashcards, discussion forums, additional video clips, and more. Instructor tools are also provided to facilitate communication between students and faculty.

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Williams Website (academic.cengage.com/management/williams)— The Williams website contains a wealth of resources for both instructors and students. Here is what’s available only for professors at the Instructor Resource page of the Williams website:

• • •

The full PowerPoint presentations with teaching notes. Files for the full Test Bank. Files for the full Instructor Manual are also available online. If you don’t have your materials on hand, you can download the chapters you need and customize them to suit your lesson plan.

Here is what’s available for students at the Williams website:

• • •

An abridged set of PowerPoint slides to help with review A quiz for each chapter Key terms with definitions

Student Supplements CengageNOW for Management, 5e—CengageNOW

for Management, 5e is an online assessment-driven and student-centered tutorial that provides students with a personalized learning plan. Based on a diagnostic Pre-Test, a customized learning path is generated for each student that targets their study needs and helps them to visualize, organize, practice, and master the material in the text. Media resources enhance problem-solving skills and improve conceptual understanding. An access code to CengageNOW for Williams can be bundled with new textbooks.

InfoTrac—Packaged free with every new copy of Management, 5e is a password for the InfoTrac database by Gale Research. InfoTrac enables students to connect with the real world of management through academic journals, business and popular magazines and newspapers, and a vast array of government publications. InfoTrac was used to create the end-of-chapter activities in each chapter; students can use InfoTrac for working through the “Management Decisions” at the end of each chapter.

Wall Street Journal Edition—This Wall Street Journal edition makes it easy to bring the real world into the classroom, providing numerous opportunities to relate economic concepts to daily news stories. New copies of Management, 5e can include an optional card entitling students to subscriptions to the Wall Street Journal and WSJ.com, giving students access to many articles used as examples in this textbook. Contact your local representative about pricing and optional bundling information.

Acknowledgments Let’s face it, writing a textbook is a long and lonely process. It’s surely the most difficult (and rewarding) project I’ve ever tackled. And, as I sat in front of my computer with a rough outline on the left side of my desk, a two-foot stack of journal articles on the floor, and a blank screen in front of me, it was easy at times to feel isolated. But, as I found out, a book like this doesn’t get done without the help of many other talented people.

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First, I’d like to thank the outstanding team of supplement authors: Thomas K. and Betty Pritchett (Kennesaw State University), for the outstanding test bank; Eric Brengle (B-books, Ltd.), for the superb PowerPoint slide designs; and Teri Irvin (Bbooks, Ltd.) for her detailed video lesson plans. I’d like to thank the world-class team at Cengage Learning for the outstanding support (and patience) they provided while I wrote this book; Joe Sabatino, who heads the Management group at Cengage Learning, was calm, collected, and continuously positive through the major ups and downs of this project; Clint Kernen, who was in charge of marketing the book, did an outstanding job of developing marketing themes and approaches; and Tamborah Moore, who managed the production process, was consistently upbeat and positive with me when I deserved otherwise. Authors are prone to complain about their publishers. But that hasn’t been my experience at all. Pure and simple, everyone at Cengage Learning has been great to work with throughout the entire project. However, special thanks on this team goes to Jamie Gleich Bryant, of B-books, Ltd., who was my developmental editor and with whom I had the most contact while writing the book. Jamie and her team worked with reviewers, edited the manuscript, managed the development of supplements, provided superb feedback and guidance at every stage of the book, and nudged and prodded me to write faster, make improvements, and maintain the high quality standards that were set when I began writing. Jamie’s enthusiasm, professionalism, commitment, and attention to detail made me a better writer, made this a better book, and made me appreciate my good fortune to work with such an outstanding talent. Thanks, Jamie, and here’s to many more editions. I’d like to thank an excellent set of reviewers whose diligent and thoughtful comments helped shape the earlier editions and whose rigorous feedback improved the Fifth Edition.

Ali Abu-Rahma United States International University

Michael Boyd Owensboro Community College

William Acar Kent State University

Jon L. Bryan Bridgewater State College

David C. Adams Manhattanville College

Wayne Buchanan Defiance College

Bruce R. Barringer University of Central Florida

Bruce Byars University of North Dakota, Grand Forks

Gayle Baugh University of West Florida James Bell University of Texas, Austin Greg Blundel Kent State University, Stark Katharine A. Bohley University of Indianapolis Santanu Borah University of North Alabama Angela Boston University of Texas, Arlington

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Diane P. Caggiano Fitchburg State College David Cassidy College of Eastern Utah Dan Cochran Mississippi State University C. Brad Cox Midlands Technical College Kathy Daruty Pierce College

Nicolette DeVille Christensen Guilford College

Ellen Ernst Kossek Michigan State University

Michael DiVecchio Central Pennsylvania College

Nancy E. Kucinski Hardin-Simmons University

Jennifer Dose University of Minnesota-Morris

Lowell H. Lamberton Central Oregon Community College Linfield College

Jason Duan Cameron University Joyce A. Ezrow Anne Arundel Community College Kimborough Ferrell Spring Hill College Charles R. Franz University of Missouri-Columbia Paul R. Gagnon Central Connecticut State University Franco Gandolfi Cedarville University Janice Gates Western Illinois University Anu A. Gokhale Illinois State University Barry Allen Gold Pace University Martin Grossman Bridgewater State College Susan C. Hanlon University of Akron Russell F. Hardy New Mexico State University David Hennessey Mount Mercy College Dorothy Hetmer-Hinds Trinity Valley Community College Roger W. Hutt Arizona State University at the Polytechnic Campus Joseph Izzo Alderson Broaddus College Jim Jawahar Illinois State University Kathleen Jones University of North Dakota Paul N. Keaton University of Wisconsin-La Crosse

Donald R. Leavitt Western Baptist College Lee W. Lee Central Connecticut State University Jerrold Leong Oklahoma State University Randy Lewis Texas Christian University Bob Livingston Cerritos College Linda Livingstone Baylor University Thomas P. Loughman Columbus State University Larry Maes Davenport University George Marron Arizona State University Lynda Martin Oklahoma State University David McCalman University of Central Arkansas Robert McGowan University of Denver Don Mosley University of South Alabama Sherry Moss Florida International University Jaideep Motwani Grand Valley State University Victoria T. Mullennex Davis & Elkins College John J. Nader Grand Valley State University Charlie Nagelschmidt Champlain College

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Patrick J. Nedry Monroe County Community College

Amit Shah Frostburg State University

Stephanie Newport Austin Peay State University

Thomas Shaughnessy Illinois Central College

Don A. Okhomina Fayetteville State University

Michelle Slagle University of South Alabama

James S. O’Rourke, IV University of Notre Dame

James Smas Kent State University

Rhonda S. Palladi Georgia State University

James O. Smith East Carolina University

Lynne Patten Clark Atlanta University

Charlotte Nix Speegle Cisco Junior College

Jane Pettinger Minnesota State University, Moorhead

Gregory K. Stephens Texas Christian University

Clifton D. Petty Drury University

John Striebich Monroe Community College

John Poirier Bryant University

Joseph Tagliaferre Pennsylvania State University

David M. Porter, Jr. UCLA

Jennie Carter Thomas Belmont University

Michael Provitera Barry University

Neal F. Thomson Columbus State University

Abe Qastin Lakeland College

James Thornton Champlain College

Robert Raspberry Southern Methodist University

Mary Jo Vaughan Mercer University

Levi Richard Citrus Community College

Michael Wakefield Colorado State University, Pueblo

Kim Rocha Barton College

James Whelan Manhattan College

Linda Ross Cleveland Community College

Joann White Jackson State University

Penni F. Sikkila Baker College

Xiang Yi Western Illinois University

Finally, my family deserves the greatest thanks of all for their love, patience, and support. Writing a textbook is an enormous project with incredible stresses and pressures on authors as well as their loved ones. However, throughout this project, my wife, Jenny, was unwavering in her support of my writing. She listened patiently, encouraged me when I was discouraged, read and commented on most of what I wrote, gave me the time to write, and took wonderful care of me and our family during this long process. My children, two in college and one in a business career, also deserve special thanks for their patience and for understanding why Dad was locked away at the computer for all of this time.

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Meet the Author: Chuck Williams University of the Pacific Chuck Williams is Dean of the Eberhard School of Business at the University of the Pacific. Previously, Chuck was associate professor of Management at the M.J. Neeley School of Business at Texas Christian University, where he has also served as an associate dean and the chair of the Management Department. He received his B.A. in Psychology from Valparaiso University, and specialized in the areas of Organizational Behavior, Human Resources, and Strategic Management while earning his M.B.A and Ph.D. in Business Administration from Michigan State University. Previously, he taught at Michigan State University and was on the faculty of Oklahoma State University. His research interests include employee recruitment and turnover, performance appraisal, and employee training and goal-setting. Chuck has published research in the Journal of Applied Psychology, the Academy of Management Journal, Human Resource Management Review, Personnel Psychology, and the Organizational Research Methods Journal. He was a member of the Journal of Management’s Editorial Board, and serves as a reviewer for numerous other academic journals. He was also the webmaster for the Research Methods Division of the Academy of Management (http://www.aom.pace.edu/rmd). Chuck is a co-recipient of the Society for Human Resource Management’s Yoder-Heneman Research Award. Chuck has consulted for a number of organizations, General Motors, IBM, JCPenney, Tandy Corporation, Trism Trucking, Central Bank and Trust, StuartBacon, the City of Fort Worth, the American Cancer Society, and others. He has taught in executive development programs at Oklahoma State University, the University of Oklahoma, and Texas Christian University. Chuck teaches a number of different courses, but has been privileged to teach his favorite course, Introduction to Management, for nearly 20 years. His teaching philosophy is based on four principles: (1) courses should be engaging and interesting; (2) there’s nothing as practical as a good theory; (3) students learn by doing; and (4) students learn when they are challenged. The undergraduate students at TCU’s Neeley School of Business named him instructor of the year. He was also a recipient of TCU’s Dean’s Teaching Award.

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one © ALAMY IMAGE

PART 1

Introduction to Management

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Management

The History of Management

Organizational Environments and Cultures

Ethics and Social Responsibility

T

his chapter begins by defining management and discussing the functions of management. We look at what managers do, what it takes to be a manager, what companies look for in their managers, the most serious mistakes managers make, and what it is like to make the tough transition from being a worker to being a manager.

T

his chapter reviews the historical origins of management ideas and practice and the historical changes that produced the need for managers. You’ll learn about various schools of management thought and the key contributions made by important management theorists.

C

hapter 3 examines the internal and external forces that affect business, including how those forces affect the decisions and performance of a company. We cover the general environment that affects all organizations and the specific environment unique to each company.

T

his chapter examines ethical behavior in the workplace and explains how unethical behavior can expose a business to legal penalties. You’ll read about the influences on ethical decision making and learn the practical steps that managers can take to improve ethical decision making.

Management Learning Outcomes:

In This Chapter:

1 Describe what management is. 2 Explain the four functions of

What Is Management? 1. Management Is … 2. Management Functions 2.1 Planning 2.2 Organizing 2.3 Leading 2.4 Controlling

management. 3 Describe different kinds of managers. 4 Explain the major roles and subroles that managers perform in their jobs. 5 Explain what companies look for in managers. 6 Discuss the top mistakes that managers make in their jobs. 7 Describe the transition that employees go through when they are promoted to management. 8 Explain how and why companies can create competitive advantage through people.

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What Do Managers Do? 3. Kinds of Managers 3.1 Top Managers 3.2 Middle Managers 3.3 First-Line Managers 3.4 Team Leaders 4. Managerial Roles 4.1 Interpersonal Roles 4.2 Informational Roles 4.3 Decisional Roles

What Does It Take to Be a Manager? 5. What Companies Look for in Managers 6. Mistakes Managers Make 7. The Transition to Management: The First Year Why Management Matters 8. Competitive Advantage through People Key Terms Self Assessment Management Decision Management Team Decision Practice Being a Manager Develop Your Career Potential Reel to Real

© J. P. MOCZULSKI/REUTERS/LANDOV

Chapter 1

What Would

You Do?

N

ortel Headquarters, Toronto, Ontario, Canada.1 When people use the Internet or make calls on their cell phones, the companies providing the Internet and cell phone service are probably using network or CDMA (code division multiple access) products made by Nortel Networks. And with its products used everywhere in the world, Nortel should be performing better. At least that’s what you thought before deciding to become Nortel’s new CEO and began working 100 hours a week to turn around this financially struggling company. You had hoped that your 25 years at GE, where you ran five of its key businesses, and your five years as the president and chief operating officer at Motorola would have prepared you to be Nortel’s new CEO. But you underestimated the magnitude of the problems. The most serious problem occurred six months after you started. After the previous

management team overreported earnings to trigger corporate bonuses, Nortel had supposedly solved the company’s financial-reporting problems. But now, for the third year in a row, Nortel incorrectly overestimated its profits and had to report, yet again, that it had earned substantially less than first reported. A financial analyst summed up the seriousness of the problem this way, “ If you get three speeding tickets in a year, in many states you get your license pulled. . . . It’s a big deal. It’s a red flag.”To no one’s surprise, Wall Street hammered Nortel’s stock price. Soon after, shareholders who had seen the value of Nortel stock lose $30 billion brought two class-action lawsuits against the company, seeking $9 billion in damages. The lawsuits, if successful, would put Nortel out of business. Restating earnings also had demoralizing effects within the company; the percentage of employees highly satisfied with their jobs dropped from 51 percent before to 40 percent after. In addition, Nortel was running out of cash. Your job as CEO was to persuade

Activities + Videos CengageNOW Audio study guide, electronic flashcards, author FAQ videos, On the Job and Biz Flix videos, concept tutorial, and concept exercise Web (academic.cengage.com/management/williams) Quiz, PowerPoint slides, and glossary terms for this chapter

Study Tip

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Use your textbook more like a notebook and less like a reference book. The margins are a great place for writing questions, highlighting important concepts, and adding examples to help you remember the material. Writing in your book makes it a better study tool. Each chapter opener contains an activities and videos list that alerts you to the materials outside your book that can help you better understand assignments, work on group projects, and study for tests and exams.

“W HAT ’S N EW ” C OMPANIES NORTEL NETWORKS GENERAL MOTORS UNITED PARCEL S ERVICE WAL-MART AT&T EXXONMOBIL GOOGLE YAHOO! XEROX CONTINENTAL A IRLINES W HIRLPOOL NORFOLK S OUTHERN LLOYDS PHARMACY HEWLETT-PACKARD K IKKOMAN

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skeptical financial companies to lend Nortel $2 billion to keep the company afloat. But before you could ask for more money, you had to cut costs by reducing retiree benefits and by laying off 1,900 employees and 350 managers. On top of that, Nortel’s key cellular technology, CDMA, was aging, and losing out to newer, more powerful cell phone standards and equipment. With problems mounting, you began losing sleep. Could you, in the end, fix the problems and return Nortel to profitability? With 35 percent of CEOs ultimately fired from their jobs, could you save yours? To do so, Nortel would have to get better, and fast. With billions in losses, and the need for an immediate $2 billion cash infusion, what steps must you take right now to ensure Nortel’s short-term survival? Then, how should you deal with the $9 billion class-action suit that could put you out of business? Finally, if you solve those crises, what does Nortel need to do in the long run to become a more efficient company? If you were the new CEO of Nortel Networks, what would you do?

CDW J.M. SMUCKER A ND OTHERS . . .

5

fundamental

T

he management issues facing Nortel are to any organization: How do we plan to get things done, organize the company to be efficient and effective, lead and motivate employees, and put in place controls to make sure our plans are followed and our goals are met? is basic to starting a business, growing a business, and maintaining a business once it has achieved some measure of . We begin this chapter by defining management and discussing the functions of management. Next, we look at what managers do by examining the four kinds of managers and reviewing the various roles that managers play. Then we investigate what it takes to be a manager by reviewing management skills, what companies look for in their managers, the most serious mistakes managers make, and what it is like to make the tough transition from being a worker to being a manager. We finish this chapter by examining the competitive advantage that companies gain from good management. In other words, we end the chapter by learning how to establish a competitive advantage through people.

Good management

success

What Is Management ? Mistake #1. A high-level bank manager reduces a marketing manager to tears by angrily criticizing her in front of others for a mistake that wasn’t hers.2 Mistake #2. Six months after he attacked a female coworker but wasn’t fired, a Dairy Queen employee sits next to a customer, bites her, and declares, “I am like Dracula.”3 Mistake #3. Guidant recalled 50,000 heart defibrillators after 45 failed and two people died. However, Guidant continued to sell these defective products for three years, knowing that they might short-circuit. Patients were told that if they heard a beeping noise, their defibrillator was malfunctioning and they should see their doctor or go to an emergency room.4 Ah, bad managers and bad management. Is it any wonder that companies pay management consultants nearly $150 billion a year for advice with basic management issues, such as how to lead people effectively, organize the company efficiently, and manage large-scale projects and processes?5 This textbook will help you understand some of the basic issues that management consultants help companies resolve (and it won’t cost you billions of dollars). After reading the next two sections, you should be able to 1 describe what management is. 2 explain the four functions of management.

1 Management Is . . . Many of today’s managers got their start welding on the factory floor, clearing dishes off tables, helping customers fit a suit, or wiping up a spill in aisle 3. Similarly, lots of you will start at the bottom and work your way up. There’s no better way to get to

6

Part 1: Introduction to Management

Review 1: Management Is . . . Good management is working through others to accomplish tasks that help fulfill organizational objectives as efficiently as possible.

“WHAT’S NEW” COMPANY

“WHAT’S NEW” COMPANY

“WHAT’S NEW” COMPANY

management getting work done through others efficiency getting work done with a minimum of effort, expense, or waste effectiveness accomplishing tasks that help fulfill organizational objectives

UPS saves 14 million gallons of fuel each year, not to mention time, by planning its routes to minimize left-hand turns, which take longer to make than righthand turns.

© STEPHEN CHERNIN/GETTY IMAGES

know your competition, your customers, and your business. But whether you begin your career at the entry level or as a supervisor, your job as a manager is not to do the work, but to help others do theirs. Management is getting work done through others. Pat Carrigan, a former elementary school principal who became a manager at a G ENERAL M OTORS car parts plant, says, “I’ve never made a part in my life, and I don’t really have any plans to make one. That’s not my job. My job is to create an environment where people who do make them can make them right, can make them right the first time, can make them at a competitive cost, and can do so with some sense of responsibility and pride in what they’re doing. I don’t have to know how to make a part to do any of those things.”6 Pat Carrigan’s description of managerial responsibilities suggests that managers also have to be concerned with efficiency and effectiveness in the work process. Efficiency is getting work done with a minimum of effort, expense, or waste. For example, U NITED P ARCEL S ER VICE , which delivers over 3.5 billion packages a year, will save 14 million gallons of fuel annually when it fully implements its new PAL software. PAL, which stands for Pre-Load Assistance Label, is part of an overall computerized route and load planning system that shows truck loaders where to put packages on the delivery truck (to maximize the number of packages per truck), determines how many packages and stops a UPS driver has and what routes should be taken (to minimize travel time, distances, and fuel costs), and tells drivers exactly where your package is on the truck when they stop in front of your house (to minimize search time at each stop).7 By itself, efficiency is not enough to ensure success. Managers must also strive for effectiveness, which is accomplishing tasks that help fulfill organizational objectives, such as customer service and satisfaction. WAL -M AR T ’s new computerized scheduling system measures trends in store sales and customer traffic so it can have more employees on the job whenever its stores are busy. Tests in 39 stores indicated that 70 percent of customers reported improved checkout times and service using this scheduling system. Wal-Mart spokesperson Sarah Clark said, “The advantages are simple: We will benefit by improving the shopping experience by having the right number of associates to meet our customers’ needs when they shop our stores.”8 The computerized system also frees managers to manage instead of calculating schedules. Normally, it takes a Wal-Mart manager a full day to schedule the weekly shift for a single store. By contrast, in that time the computerized scheduling system can calculate the schedules for all of Wal-Mart’s 1.3 million workers.

Chapter 1: Management

7

mgmt: fact

2

Management Functions

Henri Fayol, who was a managing director (CEO) of a large steel company in the early 1900s, was one of the founders of the field History of Management of management. You’ll learn more about Fayol Management as a field of study may be just and management’s other key contributors 125 years old, but management ideas and when you read about the history of management practices have actually been used from the in Chapter 2. Based on his 20 years of experience as earliest times of recorded history. Early on, the a CEO, Fayol argued that “the success of an enterGreeks learned that they could improve the prise generally depends much more on the adminproductivity of repetitious tasks by performistrative ability of its leaders than on their technical ing them to music. The basic idea was to use ability.”9 In other words, eBay, the world’s largest a flute, drum, or song lyrics to pace people online auction company, succeeds because of CEO Meg to work in unison using the same efficient Whitman’s capabilities as a manager and not because of her motion, stimulate them to work faster and abilities to write computer code. longer, and make the boring work more fun. According to Fayol, to be successful, managers need to perform five managerial functions: planning, organizing, coordinating, commanding, and controlling.10 Today, though, most management textbooks have dropped the coordinating function and refer to Fayol’s commanding function as “leading.” Consequently, Fayol’s management functions are known today as planning, organizing, leading, and controlling. Studies indicate that managers who perform these management functions well are more successful. For example, the more time that CEOs spend planning, the more profitable their companies are.11 Over a 25-year period, “WHAT’S NEW” AT&T found that employees with better planning and decision-making skills were more COMPANY likely to be promoted into management jobs, to be successful as managers, and to be promoted into upper levels of management.12 The evidence is clear. Managers serve their companies well when they plan, organize, lead, and control. Consequently, as shown in Exhibit 1.1, this textbook is organized based on the functions of management. Furthermore, throughout this text, the major sections within each chapter are numbered using a single digit: 1, 2, 3, and so on. The subsections are consecutively numbered, beginning with the major section number. For example, “2.1” indicates the first subsection under the second major section. This numbering system should help you easily see the relationships among topics and follow the topic sequence. It will also help your instructor refer to specific topics during class discussion.

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Now let’s take a closer look at each of the management functions: 2.1 planning, 2.2 organizing, 2.3 leading, and 2.4 controlling.

2.1 Planning

planning determining organizational goals and a means for achieving them

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Planning is determining organizational goals and a means for achieving them. As you’ll learn in Chapter 5, planning is one of the best ways to improve performance. It encourages people to work harder, to work hard for extended periods, to engage in behaviors directly related to goal accomplishment, and to think of better ways to do their jobs. But most importantly, companies that plan have larger profits and faster growth than companies that don’t plan.

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For example, the question, “What business are we in?” is at the heart of strategic planning, which you’ll learn about in Chapter 6. If you can answer the question “What business are you in?” in two sentences or less, chances are you have a very clear plans for your business. E XXON M OBIL CEO Rex Tillerson states clearly and simply that “conventional oil and gas . . . is the business we are in.” When asked why ExxonMobil is not heavily investing in ethanol, a crop-based renewable source of fuel, he replies, “We are not in those other businesses.”13 Likewise, G OOGLE , which makes its money from search-based Internet advertising, says that it is not in the advertising business. Its business is to “organize the world’s information and make it universally accessible and useful.”14 So when Google spent $1.65 billion to buy YouTube, it was adhering to its business by helping users access and organize video content. You’ll learn more about planning in Chapter 5 on planning and decision making, Chapter 6 on organizational strategy, Chapter 7 on innovation and change, and Chapter 8 on global management.

Part 1: Introduction to Management Chapter 1: Management Chapter 2: The History of Management Chapter 3: Organizational Environments and Cultures Chapter 4: Ethics and Social Responsibility

Part 2: Planning Chapter 5: Planning and Decision Making Chapter 6: Organizational Strategy Chapter 7: Innovation and Change Chapter 8: Global Management

Part 3: Organizing Chapter 9: Designing Adaptive Organizations Chapter 10: Managing Teams Chapter 11: Managing Human Resource Systems Chapter 12: Managing Individuals and a Diverse Work Force

Part 4: Leading Chapter 13: Motivation Chapter 14: Leadership Chapter 15: Managing Communication

Part 5: Controlling Chapter 16: Control Chapter 17: Managing Information Chapter 18: Managing Service and Manufacturing Operations

2.2 Organizing Organizing is deciding where decisions will be made, who will do what jobs and tasks, and who will work for whom in the company. Go to YAHOO ! ’s home page and take a look at the vast number of topics, news, mail, messenger, shopping (from autos and finance to Hot Jobs, music, and real estate), small business, and featured services (downloads, mobile, voice, and personal websites). How would you organize this vast array of topics and activities? Yahoo! does it with two customer groups, audience and advertiser/publisher, and one technology group. The audience group has responsibility for Yahoo!’s products in search, media, communities and communications. The advertising/publishing group helps large advertisers and agencies, small- and medium-sized businesses, local advertisers, resellers, and publishers connect with their target customers across the Internet. Finally, the technology group supports the entire organization by creating technological capabilities and platforms. Yahoo!’s CEO said, “We believe having a more customer-focused organization, supported by robust technology, will speed the development of leading-edge experiences for our most valuable audience segments.”15 You’ll learn more about organizing in Chapter 9 on designing organizations, Chapter 10 on managing teams, Chapter 11 on managing human resources, and Chapter 12 on managing individuals and a diverse work force.

Exhibit 1.1 Management Functions and Organization of the Textbook “WHAT’S NEW” COMPANY

“WHAT’S NEW” COMPANY

“WHAT’S NEW” COMPANY

organizing deciding where decisions will be made, who will do what jobs and tasks, and who will work for whom

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Meta-Analysis

S

ome studies show that having two drinks a day increases life expectancy by decreasing the chances of having a heart attack. Yet other studies show that having two drinks a day shortens life expectancy. For years, we’ve “buttered” our morning toast with margarine instead of butter because margarine was supposed to be better for our health. Now, however, new studies show that the trans-fatty acids in margarine may be just as bad for our arteries as butter. Confusing scientific results like these frustrate ordinary people who want to “eat right” and “live right.” They also make many people question just how useful most scientific research really is. Managers also find themselves questioning the conflicting scientific research published in journals like the Academy of Management Journal, the Academy of Management Review, the Strategic Management Journal, the Journal of Applied Psychology, and Administrative Science Quarterly. The Wall Street Journal may quote a management research article from one of these journals that says that total quality management is the best thing since sliced bread (without butter or margarine). Then, just six months later, the Wall Street Journal will quote a different article from the same journal that says that total quality management doesn’t work. If management professors and researchers have trouble deciding what works and what doesn’t, how can practicing managers know? Thankfully, a research tool called meta-analysis, which is a study of studies, is helping management scholars understand how well their research supports management theories. Meta-analysis is also useful for practicing managers because it shows what works and the conditions under which management techniques may work better or worse in the “real world.” Meta-analysis is based on the simple idea that if one study shows that a management technique doesn’t work and another study shows that it does, an average of those results is probably the best estimate of how well that management practice works (or doesn’t work). For example, medical researchers Richard Peto and Rory Collins averaged all of the different results from several hundred studies investigating the relationship between aspirin and heart attacks. Their analysis, based on more than 120,000 patients from numerous studies, showed that aspirin lowered the incidence of heart attacks by an average of 4 percent. Prior to this study, doctors prescribed aspirin as a preventive measure for only 38 percent of heart-attack victims. Today, because of the meta-analysis results, doctors prescribe aspirin for 72 percent of heart-attack victims. Fortunately, you don’t need a Ph.D. to understand the statistics reported in a meta-analysis. In fact, one primary advantage of meta-analysis over traditional significance tests is that you can

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convert meta-analysis statistics into intuitive numbers that anyone can easily understand. Each meta-analysis reported in the “What Really Works” sections of this textbook is accompanied by an easy-to-understand statistic called the probability of success. As its name suggests, the probability of success shows how often a management technique will work. For example, meta-analyses suggest that the best predictor of a job applicant’s on-the-job performance is a test of general mental ability. In other words, smarter people tend to be better workers. The average correlation (one of those often-misunderstood statistics) between scores on general mental ability tests and job performance is .60. However, very few people understand what a correlation of .60 means. What most managers want to know is how often they will hire the right person if they choose job applicants based on general mental ability test scores. Likewise, they want to know how much difference a cognitive ability test makes when hiring new workers. The probability of success may be high, but if the difference isn’t really that large, is it worth a manager’s time to have job applicants take a general mental ability test? Well, our user-friendly statistics indicate that it’s wise to have job applicants take a general mental ability test. In fact, the probability of success, shown in graphical form here, is 76 percent. This means that an employee hired on the basis of a good score on a general mental ability test stands a 76 percent chance of being a better performer than someone picked at random from the pool of all job applicants. So chances are you’re going to be right much more often than wrong if you use a general mental ability test to make hiring decisions.16 General Mental Ability 10%

20%

30%

40%

50%

probability of success

60%

70%

80%

90%

100%

76%

In summary, each “What Really Works” section in this textbook is based on meta-analysis research, which provides the best scientific evidence that management professors and researchers have about what works and what doesn’t work in management. We will use the easy-to-understand index known as the probability of success to indicate how well a management idea or strategy is likely to work in the workplace. Of course, no idea or technique works every time and in every circumstance. Nevertheless, the management ideas and strategies discussed in the “What Really Works” sections can usually make a meaningful difference where you work. In today’s competitive, fast-changing, global marketplace, few managers can afford to overlook proven management strategies like the ones discussed in “What Really Works.”

2.3 Leading Our third management function, leading, involves inspiring and motivating workers to work hard to achieve organizational goals. When Anne Mulcahy became X EROX ’s CEO, the company was on the brink of bankruptcy—it was $17.1 billion in debt and had only $154 million in cash. In addition, three years of steeply declining revenues and increasing losses had dropped the company’s stock price from $64 a share to just $4.43. Mulcahy admits that the responsibility of turning the company around frightened her: “Nothing spooked me as much as waking up in the middle of the night and thinking about 96,000 people and retirees and what would happen if this thing went south.”17 Still, she took the job. Mulcahy, who traveled to two and sometimes three cities a day to talk to Xerox managers and employees, implored them to “save each dollar as if it were your own.” And at each stop, she reminded them, “Remember, by my calculations, there are [she fills in the number] selling days left in the quarter.”18 Mulcahy said, “One of the things I care most about at Xerox is the morale and motivation at the company. I think it is absolutely critical to being able to deliver results. People have to feel engaged, motivated and feel they are making a contribution to something that is important. I spend the vast majority of my time with customers and employees, and there is nothing more important for any of us to do as leaders than communicate and engage with our two most important constituencies.”19

“WHAT’S NEW” COMPANY

People have to feel engaged, motivated and feel they are making a contribution to something that is important. ANNE MULCAHY,

CEO, XEROX

Today, as a result of Mulcahy’s leadership and the hard work of dedicated Xerox employees, Xerox is back on its feet, having returned to profitability and financial stability.20 You’ll learn more about leading in Chapter 13 on motivation, Chapter 14 on leadership, and Chapter 15 on managing communication.

2.4 Controlling The last function of management, controlling, is monitoring progress toward goal achievement and taking corrective action when progress isn’t being made. The basic control process involves setting standards to achieve goals, comparing actual performance to those standards, and then making changes to return performance to those standards. Needing to cut costs (the standard) to restore profitability (the goal), C ONTINENTAL A IRLINES started giving passengers small cups of their soft drinks instead of an entire can (one corrective action among many). Company spokesperson Rahsaan Johnson defended the move, saying, “Flight attendants have been telling us that the trash bags they carry were so heavy because of all the [wasted] liquid. We were pouring almost half away.”21 Although Continental will still give entire soft drink cans to customers who request them, serving smaller drinks saves the company $100,000 a year in costs. You’ll learn more about the control function in Chapter 16 on control, Chapter 17 on managing information, and Chapter 18 on managing service and manufacturing operations.

“WHAT’S NEW” COMPANY meta-analysis a study of studies, a statistical approach that provides one of the best scientific estimates of how well management theories and practices work leading inspiring and motivating workers to work hard to achieve organizational goals controlling monitoring progress toward goal achievement and taking corrective action when needed

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Review 2: Management Functions Henri Fayol’s classic management functions are known today as planning, organizing, leading, and controlling. Planning is determining organizational goals and a means for achieving them. Organizing is deciding where decisions will be made, who will do what jobs and tasks, and who will work for whom. Leading is inspiring and motivating workers to work hard to achieve organizational goals. Controlling is monitoring progress toward goal achievement and taking corrective action when needed. Studies show that performing these management functions well leads to better managerial performance.

What Do Managers Do? Not all managerial jobs are the same. The demands and requirements placed on the CEO of Sony are significantly different from those placed on the manager of your local Wendy’s restaurant. After reading the next two sections, you should be able to 3 describe different kinds of managers. 4 explain the major roles and subroles that managers perform in their jobs.

3 Kinds of Managers As shown in Exhibit 1.2, there are four kinds of managers, each with different jobs and responsibilities: 3.1 top managers, 3.2 middle managers, 3.3 first-line managers, and 3.4 team leaders.

3.1 Top Managers

“WHAT’S NEW” COMPANY

top managers executives responsible for the overall direction of the organization

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Top managers hold positions like chief executive officer (CEO), chief operating officer (COO), chief financial officer (CFO), and chief information officer (CIO), and are responsible for the overall direction of the organization. Top managers have the following responsibilities.22 First, they are responsible for creating a context for change. In fact, the CEOs of Walt Disney, Fannie Mae, Boeing, Morgan Stanley, American International Group, Merck, and Pfizer were all fired within a year’s time precisely because they had not moved fast enough to bring about significant changes in their companies. Indeed, in both Europe and the United States, 35 percent of all CEOs are eventually fired because of their inability to successfully change their companies.23 Creating a context for change includes forming a long-range vision or mission for the company. As one CEO said, “The CEO has to think about the future more than anyone.” Second, much more than used to be the case, top managers are responsible for developing employees’ commitment to and ownership of the company’s performance. Trusting that his 61,000 employees could dramatically increase product innovation at W HIRLP O OL appliances, then-CEO David Whitwam put $135 million directly into their hands and told them to come up with new ideas. Furthermore, he encouraged them to go to their bosses with their ideas. And if

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IT

co m

mi

tm e

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L BI SI ON SP RE

their bosses wouldn’t listen, they were to bring their new product ideas directly to him. Employees flocked to an in-house website with a course on innovation and a list of all the new suggestions and ideas, Top racking up 300,000 hits on the site each month. Managers Of the commitment displayed by his workers, A CEO Whitwam says, “I had never seen a stratge nt A COO e an h egy that was so energizing to so many c itm A CFO m A m people.” Today, revenue from innovat co A CIO re en u A tive products has quadrupled. And t m l A Vice Presi cu ron dent instead of cutting prices to maini A v A Cor porate Head en tain sales, Whirlpool’s prices are A s now rising 5 percent per year ce r u because customers are ce n so ives n an tio Middle Man e r ta agers willing to pay more io m ct A General M n A bje nat for en anager io r i m for its innovative is o rd pe le A Plant Manag v r er p A oo it pe products, such as the A Regional M c un im u anager A ub gy rs Duet washer and A Divisional M s te ke r anager o A tra dryer, which were w s al ing i r A designed based in e ag tra n on employees’ d a n First-Line A Office M nm g a ideas.24 Managers s o anager in n A

S IE

D AN

DU

JO BS

ES

TI

ip h ng ac li sh s n te edu n tio hip A ch s tio la ns

A Shift Sup

A

ervisor

A Departm

ent Manag

A Team Le

ader ntact A Group F acilitator A Team Co

er

ta re o ili al lati c fa rn re A xte al e rn A nte i

A

Team Leade rs

A

Third, top managers are responsible for creating a positive organizational culture through language and action. Top managers impart company values, strategies, and lessons through what they do and say to others, both inside and outside the company. One CEO said, “I write memos to the board and our operating committee. I’m sure they get the impression I dash them off, but usually they’ve been drafted 10 or 20 times. The bigger you get, the more your ability to communicate becomes important. So what I write, I write very carefully. I labor over it.”25 Above all, no matter what they communicate, it’s critical for CEOs to send and reinforce clear, consistent messages.26 A former Fortune 500 CEO said, “I tried to [use] exactly the same words every time so that I didn’t produce a lot of, ‘Last time you said this, this time you said that.’ You’ve got to say the same thing over and over and over.”27 Finally, top managers are responsible for monitoring their business environments. This means that top managers must closely monitor customer needs, competitors’ moves, and long-term business, economic, and social trends. Rick Wagoner, CEO of General Motors, reads six daily newspapers, monitors his Internet connections and news sources all

Exhibit 1.2 Jobs and Responsibilities of Four Kinds of Managers

COURTESY, WHIRLPOOL CORPORATION

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right Tell and Show People That Ethics Matter

“WHAT’S NEW” COMPANY

middle managers responsible for setting objectives consistent with top management’s goals and for planning and implementing subunit strategies for achieving these objectives

14

3.2 Middle Managers

Middle managers hold positions like plant manager, regional manager, or divisional manager. They are responsible for setting objectives consistent with top management’s goals and for planning and implementing subunit strategies for achieving those objectives.29 One specific middle management responsibility is to plan and allocate resources to meet objectives. Another major responsibility is to coordinate and link groups, departments, and divisions within a company. After a hurricane destroyed five miles of railroad tracks outside New Orleans, Jeff McCracken, a chief engineer at N OR FOLK S OUTHERN , consulted with three bridge companies, and managed a team of 100 employees and dozens of engineers who, by sleeping in campers and working around the clock, rebuilt the tracks in less than a week. McCracken said, “It was a colossal job that took more than 400 moves with heavy equipment.” But McCracken was happiest about “working with people from all parts of the company—and getting the job done without anyone getting hurt.”31 A third responsibility of middle management is to monitor and manage the performance of the subunits and individual managers who report to them. Graeme Betts is the manager of the Southwest region for L LOYDS P HARMACY in England. While Betts works with people at all levels, from health-care assistants to board directors, he spends most of his time with the nine area managers who report to him. In terms of monitoring and managing the performance of his area managers and, in turn, the store managers who report to them, Betts says, “We have 231 pharmacies, and as a [management] team our task is to ensure that our pharmacies are as good as they can be, and are offering a great service to our customers. To this end we are focused on providing an efficient [drug] dispensing service, and continually developing new professional services such as . . . smoking cessation and medicines-use reviews.”32 Finally, middle managers are also responsible for implementing the changes or strategies generated by top managers. Wal-Mart’s strategy reflects its advertising slogan, “Always Low Prices.” When Wal-Mart began selling groceries in its new 200,000-square-foot supercenters, it made purchasing manager Brian Wilson responsible for buying perishable goods more cheaply than Wal-Mart’s competitors. When small produce suppliers had trouble meeting Wal-Mart’s needs, Wilson worked closely with them and connected them to RetailLink, Wal-Mart’s computer network, “which allows our suppliers immediate access to all information needed

Because managers set the standard for others in the workplace, unethical behavior and practices quickly spread when they don’t do the right thing. One of the most important things managers can do is to tell people that ethics matter. When Charles Holliday, Jr., CEO of DuPont, was a young manager, he was told by DuPont’s then-CEO Dick Heckert, “This company lives by the letter of its contracts and the intent of those contracts.” Says Holliday, “I still remember the expression on his face when he said those words, and I’ve lived by that philosophy ever since.” In today’s business world, however, with one-third of workers reporting that they’ve seen their bosses lie, steal from the company, or break the law, talk clearly isn’t enough. Holliday says, “Just saying you’re ethical isn’t very useful. You have to earn trust by what you do every day.” So, tell the people whom you manage that ethics matter. Then show them by doing the right thing yourself.30

“WHAT’S NEW” COMPANY

day, and skims a variety of magazines from all over the world. Says Wagoner, “You’ve gotta know what the hell is going on in your business. If you’ve got a problem in China, you’ve gotta get into it and make sure that it’s getting fixed. You’ve got to be on top of your business enough to know where are the problems, where are the opportunities.”28

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to help run the business.” Over time, these steps helped the produce suppliers lower costs and deliver the enormous quantities of fresh fruits and vegetables that Wal-Mart’s supercenters need.33 They also helped Wal-Mart become the world’s largest grocer.34

3.3 First-Line Managers First-line managers hold positions like office manager, shift supervisor, or department manager. The primary responsibility of first-line managers is to manage the performance of entry-level employees, who are directly responsible for producing a company’s goods and services. Thus, first-line managers are the only managers who don’t supervise other managers. First-line managers have the following responsibilities. First-line managers encourage, monitor, and reward the performance of their workers. For example, Jeff Dexheimer requires the waiters and waitresses he supervises at the upscale Melting Pot restaurant in St. Louis to memorize a complex menu and a 400-item wine list. Says Dexheimer, “They’ve got to know every liquor, every beer, every food item, as well as the sauces it comes with.” To reduce turnover and keep his 65 employees motivated, Dexheimer gives out $25 nightly rewards for “best attitude” or for selling the most wine. Since his employees are young and mostly single, he makes sure they work only one night each weekend. And once a week, after the restaurant closes, he takes his entire staff out for drinks. Says Dexheimer, as a manager, “I don’t make myself successful. My employees make me successful.”35 First-line managers teach entry-level employees how to do their jobs. Damian Mogavero’s company, Avero LLC, helps restaurants analyze sales data for each member of a restaurant’s wait staff. Restaurant managers who use these data, says Mogavero, will often take their top-selling server to lunch each week as a reward. The best managers, however, will also take their poorest-selling servers out to lunch to talk about what they can do to improve their performance.36 Likewise, Coca-Cola manager Tom Mattia says, “I try to make every interaction I have with someone on my team a teaching experience. There are always specific work issues that need to get addressed, but then I try to explain my thinking behind an approach so people can get more experience.”37 First-line managers also make detailed schedules and operating plans based on middle management’s intermediate-range plans. In fact, in contrast to the long-term plans of top managers (three to five years out) and the intermediate plans of middle managers (6 to 18 months out), first-line managers engage in plans and actions that typically produce results within two weeks.38 For example, consider the typical convenience store manager (for example, 7-Eleven) who starts the day by driving by competitors’ stores to inspect their gasoline prices and then checks the outside of his or her store for anything that might need maintenance, such as burned-out lights or signs, or restocking, like windshield washer fluid and paper towels. Then comes an inside check, where the manager determines what needs to be done for that day (Are there enough coffee and donuts for breakfast or enough sandwiches for lunch?). Once today is planned, the manager turns to weekend orders. After accounting for the weather (hot or cold) and the sales trends at the same time last year, the manager makes sure the store will have enough beer, soft drinks, and Sunday papers on hand. Finally, the manager looks 7 to 10 days ahead for hiring needs. Because of strict hiring procedures (basic math tests, drug tests, and background checks), it can take that long to hire new employees. Said one convenience-store manager, “I have to continually interview, even if I am fully staffed.”39

first-line managers train and supervise the performance of nonmanagerial employees who are directly responsible for producing the company’s products or services

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3.4 Team Leaders

“WHAT’S NEW” COMPANY

team leaders managers responsible for facilitating team activities toward goal accomplishment

© JOE RAIDLE/GETTY IMAGES

Even first-line managers perform the functions of management.

The fourth kind of manager is a team leader. This relatively new kind of management job developed as companies shifted to self-managing teams, which, by definition, have no formal supervisor. In traditional management hierarchies, first-line managers are responsible for the performance of nonmanagerial employees and have the authority to hire and fire workers, make job assignments, and control resources. Team leaders play a very different role because in this new structure, teams now perform nearly all of the functions performed by first-line managers under traditional hierarchies.40 Instead of directing individuals’ work, team leaders facilitate team activities toward goal accomplishment. For example, H EWLETT -P ACKARD ’s ad for a team leader position says, “Job seeker must enjoy coaching, working with people, and bringing about improvement through hands-off guidance and leadership.”41 Team leaders who fail to understand this key difference often struggle in their roles. A team leader at Texas Instruments said, “I didn’t buy into teams, partly because there was no clear plan on what I was supposed to do. . . . I never let the operators [team members] do any scheduling or any ordering of parts because that was mine. I figured as long as I had that, I had a job.”42 Team leaders fulfill the following responsibilities.43 First, team leaders are responsible for facilitating team performance. This doesn’t mean team leaders are responsible for team performance. They aren’t. The team is. Team leaders help their team members plan and schedule work, learn to solve problems, and work effectively with each other. Management consultant Franklin Jonath says, “The idea is for the team leader to be at the service of the group. It should be clear that the team members own the outcome. The leader is there to bring intellectual, emotional, and spiritual resources to the team. Through his or her actions, the leader should be able to show the others how to think about the work that they’re doing in the context of their lives. It’s a tall order, but the best teams have such leaders.”44 Second, team leaders are responsible for managing external relationships. Team leaders act as the bridge or liaison between their teams and other teams, departments, and divisions in a company. For example, if a member of Team A complains about the quality of Team B’s work, Team A’s leader is responsible for solving the problem by initiating a meeting with Team B’s leader. Together, these team leaders are responsible for getting members of both teams to work together to solve the problem. If it’s done right, the problem is solved without involving company management or blaming members of the other team.45 Third, team leaders are responsible for internal team relationships. Getting along with others is much more important in team structures because team members can’t get work done without the help of their teammates. For example, studies show that it’s not the surgeon, but the interactions between the surgeon

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and all operating room team members that determine surgical outcomes. However, at 20 hospitals, 60 percent of the operating room team members—nurses, technicians, and other doctors—agreed with the statement, “In the ORs here, it is difficult to speak up if I perceive a problem with patient care.”46 And when operating room team members don’t speak up, serious mistakes can occur, no matter how talented the surgeon. Consequently, surgeons are using “safety pauses” to better involve members of their surgical teams. The surgeon will pause, ask if anyone has concerns or comments, and address them if need be. Studies show that safety pauses reduce mistakes, such as operating on the wrong leg or beginning surgery with key surgical instruments missing.47 You will learn more about teams in Chapter 10.

Review 3: Kinds of Managers There are four different kinds of managers. Top managers are responsible for creating a context for change, developing attitudes of commitment and ownership, creating a positive organizational culture through words and actions, and monitoring their company’s business environments. Middle managers are responsible for planning and allocating resources, coordinating and linking groups and departments, monitoring and managing the performance of subunits and managers, and implementing the changes or strategies generated by top managers. Firstline managers are responsible for managing the performance of nonmanagerial employees, teaching direct reports how to do their jobs, and making detailed schedules and operating plans based on middle management’s intermediate-range plans. Team leaders are responsible for facilitating team performance, managing external relationships, and facilitating internal team relationships.

4 Managerial Roles So far, we have described managerial work by focusing on the functions of management and by examining the four kinds of managerial jobs. Although those are valid and accurate ways of categorizing managerial work, if you followed managers around as they perform their jobs, you probably would not use the terms planning, organizing, leading, and controlling to describe what they do. In fact, that’s exactly the conclusion that management researcher Henry Mintzberg came to when he followed around five American CEOs. Mintzberg spent a week shadowing each of the CEOs. He analyzed their mail, whom they talked to, and what they did. Mintzberg concluded that managers fulfill three major roles while performing their jobs:48

• • •

interpersonal roles informational roles decisional roles

In other words, managers talk to people, gather and give information, and make decisions. Furthermore, as shown in Exhibit 1.3, these three major roles can be subdivided into 10 subroles. Let’s examine each major role—4.1 interpersonal, 4.2 informational, and 4.3 decisional roles—and their 10 subroles.

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4.1 Interpersonal Roles More than anything else, management jobs are people-intensive. Estimates vary with the level of management, but most managers spend between two-thirds and four-fifths of their time in face-to-face communication with others.49 If you’re a loner, or if you consider dealing with people a pain, then you may not be cut out for management work. In fulfilling the interpersonal role of management, managers perform three subroles: figurehead, leader, and liaison. In the figurehead role, managers perform ceremonial duties like greeting company visitors, speaking at the opening of a new facility, or representing the company at a community luncheon to support local charities. For example, when Japan-based K IKKOMAN Text not available due to copyright restrictions Corporation, the world’s largest soy sauce maker, opened its first soy sauce manufacturing plant in Europe (in Hoogezand Sappemeer, the Netherlands), its CEO, Yuzaburo Mogi, gave a speech pledging that Kikkoman would be a good corporate citizen by donating to a local environmental conservation and water quality project and to the Rembrandt House Art Gallery.50 In the leader role, managers motivate and encourage workers to accomplish organizational objectives. At CDW (Computer Discount Warehouse), new CEO John Edwardson promised CDW’s 2,750 workers that he would shave his head if the company met its third-quarter goals. Despite the industry downturn in computer sales, company employees responded. After announcing at a company function that the third-quarter goals had been met, Edwardson, as promised, had his head shaved to the harmonic sounds of a barbershop quartet.51 At J.M. S MUCKER , that’s right, the jelly and jam company, managers regularly thank employees with celebratory lunches and gift certificates. Tonie Williams, director of marketing for peanut butter, says she’s been thanked more in her two years at Smucker than she was in her nine years at Nestlé, Kraft, and Procter & Gamble combined.52 Fortune “WHAT’S NEW” COMPANY magazine recently included both CDW and Smucker in its annual list of the top 100 places to work in the United States.53 In the liaison role, managers deal with people outside their units. Studies con“WHAT’S NEW” sistently indicate that managers spend as much time with “outsiders” as they do COMPANY with their own subordinates and their own bosses. In addition to his normal duties, Rajesh Hukku, chairman of j-Flex Solutions, a maker of financial-services software, regularly goes on sales calls, helps close sales deals, and markets his product to “WHAT’S NEW” COMPANY potential customers at industry conventions and forums.54 The same holds true for the convenience store managers discussed earlier. From dealing with vendors who make store deliveries and set up product displays, to working with computer technicians who help with computer glitches and satellite connections to headquarters, to figurehead role the interpersonal ordering from sales representatives who supply the mops and deli aprons used in the role managers play when they store, to calling the sheriff about stolen credit cards, even first-line managers spend perform ceremonial duties much of their time dealing with outsiders.55 leader role the interpersonal role managers play when they motivate and encourage workers to accomplish organizational objectives liaison role the interpersonal role managers play when they deal with people outside their units

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4.2 Informational Roles Not only do managers spend most of their time in face-to-face contact with others, but they spend time obtaining and sharing information. Indeed, Mintzberg found that the managers in his study spent 40 percent of their time giving and getting

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information from others. In this regard, management can be viewed as processing information, gathering information by scanning the business environment and listening to others in face-to-face conversations, and then sharing that information with people inside and outside the company. Mintzberg described three informational subroles: monitor, disseminator, and spokesperson. In the monitor role, managers scan their environment for information, actively contact others for information, and, because of their personal contacts, receive a great deal of unsolicited information. Besides receiving firsthand information, managers monitor their environment by reading local newspapers and the Wall Street Journal to keep track of customers, competitors, and technological changes that may affect their businesses. Now, managers can also take advantage of electronic monitoring and distribution services that track the news wires (Associated Press, Reuters, and so on.) for stories related to their businesses. These services deliver customized electronic newspapers that include only stories on topics the managers specify. Business Wire (http://www.businesswire.com) offers services such as IndustryTrak, which monitors and distributes daily news headlines from major industries (for example, automotive, banking and financial, health, high tech).56 CyberAlert (http://www.cyberalert.com) keeps round-the-clock track of new stories in categories chosen by each subscriber.57 FNS NewsClips Online (http://www.news-clips .com) provides subscribers daily electronic news clips from more than 5,000 online news sites.58 Because of their numerous personal contacts and their access to subordinates, managers are often hubs for the distribution of critical information. In the disseminator role, managers share the information they have collected with their subordinates and others in the company. Although there will never be a complete substitute for face-to-face dissemination of information, the primary methods of communication in large companies like Continental Airlines and Cisco Systems are e-mail and voice mail. At Continental Airlines, the CEO broadcasts a voice mail message to all employees every Friday.59 John Chambers, Cisco’s CEO, says that 90 percent of his communication with employees is through e-mail and voice mail. Says Chambers, “If you don’t have the ability to interface with customers, employees, and suppliers, you can’t manage your business.”60 In contrast to the disseminator role, in which managers distribute information to employees inside the company, in the spokesperson role, managers share information with people outside their departments and companies. One of the most common ways CEOs serve as spokespeople for their companies is at annual meetings with company shareholders or the board of directors. For example, at a Microsoft annual shareholder meeting, CEO Steve Ballmer told investors that Microsoft intended to offer its own Internet search service, http://www.live.com. Ballmer vowed that although Microsoft was late to the search engine business, “We will catch up, and we will surpass” Google and Yahoo in the Internet search and advertising business.61

4.3 Decisional Roles According to Mintzberg, the time managers spend obtaining and sharing information is not an end in itself. The time spent talking to and obtaining and sharing information with people inside and outside the company is useful to managers because it helps them make good decisions. Mintzberg found that managers engage in four decisional subroles: entrepreneur, disturbance handler, resource allocator, and negotiator. In the entrepreneur role, managers adapt themselves, their subordinates, and their units to change. VETERANS A FFAIRS (VA) HOSPITALS had long had a

More than anything else, management jobs are peopleintensive.

“WHAT’S NEW” COMPANY

monitor role the informational role managers play when they scan their environment for information disseminator role the informational role managers play when they share information with others in their departments or companies spokesperson role the informational role managers play when they share information with people outside their departments or companies entrepreneur role the decisional role managers play when they adapt themselves, their subordinates, and their units to change

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“WHAT’S NEW” COMPANY

“WHAT’S NEW” COMPANY disturbance handler role the decisional role managers play when they respond to severe problems that demand immediate action resource allocator role the decisional role managers play when they decide who gets what resources negotiator role the decisional role managers play when they negotiate schedules, projects, goals, outcomes, resources, and employee raises

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reputation for red tape, inefficiency, and second-class medical treatment. Today, though, independent groups rank VA hospitals as some of the best in the country. Improvements began 15 years ago when the VA’s leadership instituted a culture of accountability and change aimed at improving its entire system. Procedures and outcomes were constantly evaluated. Doctors, nurses, staffers, and administrators met regularly to review possible improvements. For example, after a VA nurse in Topeka, Kansas, noticed that rental car companies used hand held bar-code scanners to check in returned cars, she suggested using bar codes on patients’ ID bracelets and their bottled medicines. Today, the VA’s bar-code scanners are tied to an electronic records system that prevents nurses from handing out the wrong medicines and automatically alerts the hospital pharmacy to possibly harmful drug interactions or dangerous patient allergies.62 In the disturbance handler role, managers respond to pressures and problems so severe that they demand immediate attention and action. Managers often play the role of disturbance handler when the board of a failing company hires a new CEO, who is charged with turning the company around. After F ORD M OTOR C OMPANY ’s market share shrank from 25 percent to 16 percent and the company lost $7 billion in nine months, Alan Mulally came from Boeing to become Ford’s new CEO. Mulally quickly arranged $23.5 billion in financing to cover the losses. He plans to cut costs by reducing the number of cars Ford produces, standardizing the use of shared parts across Ford vehicles, and laying off half of Ford’s 82,000 factory workers. Mulally said, “I’ve seen this movie before [at Boeing]. Some very good and loyal people are going to leave this company between now and next summer, and that’s going to be tough on everyone. [But] As demoralizing as a slide down may be, the ride back up is infinitely more exhilarating.”63 In the resource allocator role, managers decide who will get what resources and how many resources they will get. For instance, E-Trade Financial, which is known for its online stock trading accounts, increased its marketing budget by $46 million to make potential customers more aware of its additional banking, loan, and mortgage services.64 Hoping to revive sales of its luxury cars, General Motors invested $4 billion in its Cadillac division, or nearly 10 percent of its total capital budget for a division that accounts for only 4 percent of GM sales.65 In these instances, top managers acted as resource allocators by changing budgets (E-Trade) or redirecting long-term investment in the company (GM). In the negotiator role, managers negotiate schedules, projects, goals, outcomes, resources, and employee raises. When Sprint bought Nextel (another cell phone company), the Federal Communications Commission required it to buy new radios for police and firefighters because its cell phone tower transmissions were interfering with emergency service communications in hundreds of locations. S PRINT N EXTEL , which will spend $2.8 billion to fix the problem, has, for instance, been negotiating with law-enforcement agencies in Maryland and Washington to replace 35,000 radios. Unfortunately, progress has been slow, as it took Sprint a year to negotiate a $609,000 deal with the city of Fairfax, Virginia, just to develop plans to replace its radios. Furthermore, some emergency service providers don’t want new radios. Instead, they’re requiring Sprint to replace the crystals in their ancient radios, which would retune them to a new communications band. Since no one makes radio crystals any more, Sprint has had to grow the crystals itself in its research and development labs.66 Negotiating, as you can see from Sprint’s dilemma, is a key to success and a basic part of managerial work.

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Review 4: Managerial Roles Managers perform interpersonal, informational, and decisional roles in their jobs. In fulfilling the interpersonal role, managers act as figureheads by performing ceremonial duties, as leaders by motivating and encouraging workers, and as liaisons by dealing with people outside their units. In performing their informational role, managers act as monitors by scanning their environment for information, as disseminators by sharing information with others in the company, and as spokespeople by sharing information with people outside their departments or companies. In fulfilling decisional roles, managers act as entrepreneurs by adapting their units to incremental change, as disturbance handlers by responding to larger problems that demand immediate action, as resource allocators by deciding resource recipients and amounts, and as negotiators by bargaining with others about schedules, projects, goals, outcomes, and resources.

What Does It Take to Be a Manager ? I didn’t have the slightest idea what my job was. I walked in giggling and laughing because I had been promoted and had no idea what principles or style to be guided by. After the first day, I felt like I had run into a brick wall. (Sales Representative #1) Suddenly, I found myself saying, boy, I can’t be responsible for getting all that revenue. I don’t have the time. Suddenly you’ve got to go from [taking care of] yourself and say now I’m the manager, and what does a manager do? It takes a while thinking about it for it to really hit you . . . a manager gets things done through other people. That’s a very, very hard transition to make.67 (Sales Representative #2) The above statements were made by two star sales representatives, who, on the basis of their superior performance, were promoted to the position of sales manager. As their comments indicate, at first they did not feel confident about their ability to do their jobs as managers. Like most new managers, these sales managers suddenly realized that the knowledge, skills, and abilities that led to success early in their careers (and were probably responsible for their promotion into the ranks of management) would not necessarily help them succeed as managers. As sales representatives, they were responsible only for managing their own performance. But as sales managers, they were now directly responsible for supervising all of the sales representatives in their sales territories. Furthermore, they were now directly accountable for whether those sales representatives achieved their sales goals. If performance in nonmanagerial jobs doesn’t necessarily prepare you for a managerial job, then what does it take to be a manager? After reading the next three sections, you should be able to 5 explain what companies look for in managers. 6 discuss the top mistakes that managers make in their jobs. 7 describe the transition that employees go through when they are promoted to management.

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5 What Companies Look for in Managers

Low Importance

High Importance

Broadly speaking, when companies look for employees who would be good managers, they look for individuals who have technical skills, human skills, conceptual skills, and the motivation to manage.68 Exhibit 1.4 shows the relative importance of these four skills to the jobs of team leaders, first-line managers, middle managers, and top managers. Technical skills are the ability to apply the specialized procedures, techniques, and knowledge required to get the job done. For the sales managers described above, technical skills are the ability to find new sales prospects, develop accurate sales pitches based on customer needs, and close the sale. For a nurse supervisor, technical skills include being able to insert an IV or operate a crash cart if a patient goes into cardiac arrest. technical skills the ability to Technical skills are most important for team leaders and lower-level managers apply the specialized procedures, because they supervise the workers who produce products or serve customers. Team techniques, and knowledge required leaders and first-line managers need technical knowledge and skills to train new employto get the job done ees and help employees solve problems. Technical knowledge and skills are also needed human skills the ability to work well with others to troubleshoot problems that employees can’t handle. Technical skills become less important as managers rise through the managerial ranks, but they are still important. conceptual skills the ability to see the organization as a whole, Human skills can be summarized as the ability to work well with others. Manunderstand how the different parts agers with human skills work effectively within groups, encourage others to express affect each other, and recognize how their thoughts and feelings, are sensitive to others’ needs and viewpoints, and are the company fits into or is affected by its external environment good listeners and communicators. Human skills are equally important at all levels of management, from first-line supervisors to CEOs. However, because lower-level managers spend much of their time solving technical problems, upper-level managers may actually spend more time dealing directly with people. On average, first-line Exhibit 1.4 managers spend 57 percent of their time with people, but that percentage increases to 63 percent for middle managers and 78 percent for top managers.69 Relative Importance Conceptual skills are the ability to see the organization as a whole, to understand of Managerial Skills to how the different parts of the company affect each other, and to recognize how the Different Managerial Jobs company fits into or is affected by its external environment, such as the local community, social and economic forces, customers, and the competition. Good managers have to be able to recognize, understand, and reconcile multiple complex problems and perspectives. In other words, managers have to be smart! In fact, intelligence makes so much difference for managerial performance that managers with above-average intelligence typically outperform managers of average intelligence by approximately 48 percent.70 Clearly, companies need to be careful to promote smart workers into management. Conceptual skills increase in importance as managers rise through the Technical Human Conceptual Motivation management hierarchy. Skills Skills Skills to Manage Good management involves much Team Leaders Middle Managers more than intelligence, however. For First-Line Managers Top Managers example, making the department genius a manager can be disastrous if that

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genius lacks technical skills, human skills, or one other factor known as the motivation to manage. Motivation to manage is an assessment of how motivated employees are to interact with superiors, participate in competitive situations, behave assertively toward others, tell others what to do, reward good behavior and punish poor behavior, perform actions that are highly visible to others, and handle and organize administrative tasks. Managers typically have a stronger motivation to manage than their subordinates, and managers at higher levels usually have a stronger motivation to manage than managers at lower levels. Furthermore, managers with a stronger motivation to manage are promoted faster, are rated as better managers by their employees, and earn more money than managers with a weak motivation to manage.71

Companies do not want one-dimensional managers. They want managers with a balance of skills. They want managers who know their stuff (technical skills), are equally comfortable working with blue-collar and white-collar employees (human skills), are able to assess the complexities of today’s competitive marketplace and position their companies for success (conceptual skills), and want to assume positions of leadership and power (motivation to manage). Technical skills are most important for lower-level managers, human skills are equally important at all levels of management, and conceptual skills and motivation to manage increase in importance as managers rise through the managerial ranks.

© CREATAS/JUPITER IMAGES

Review 5: What Companies Look for in Managers

6 Mistakes Managers Make Another way to understand what it takes to be a manager is to look at the mistakes managers make. In other words, we can learn just as much from what managers shouldn’t do as from what they should do. Exhibit 1.5 lists the top 10 mistakes managers make. Several studies of U.S. and British managers have compared “arrivers,” or managers who made it all the way to the top of their companies, with “derailers,” managers who were successful early in their careers but were knocked off the fast track by the time they reached the middle to upper levels of management.72 The researchers found that there were only a few differences between arrivers and derailers. For the most part, both groups were talented and both groups had weaknesses. But what distinguished derailers from arrivers was that derailers possessed two or more “fatal flaws” with respect to the way that they managed people! Although arrivers were by no means perfect, they usually had no more than one fatal flaw or had found ways to minimize the effects of their flaws on the people with whom they worked. The number one mistake made by derailers was that they were insensitive to others by virtue of their abrasive, intimidating, and bullying management style. The authors of one study described a manager who walked into his subordinate’s office and interrupted a meeting by saying, “I need to see you.” When the subordinate tried to explain that he was not available because he was in the middle of a meeting, the

Technical skills are most important at the lower levels of management, but even top managers need technical skills

motivation to manage an assessment of how enthusiastic employees are about managing the work of others

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manager barked, “I don’t give a damn. I said I wanted to see you now.”73 Not surprisingly, 2. Cold, aloof, arrogant. only 25 percent of derailers were rated by others as being good with people, compared with 3. Betrayal of trust. 75 percent of arrivers. 4. Overly ambitious: thinking of next job, playing politics. The second mistake was that derailers were often cold, aloof, or arrogant. Although this 5. Specific performance problems with the business. sounds like insensitivity to others, it has more 6. Overmanaging: unable to delegate or build a team. to do with derailed managers being so smart, 7. Unable to staff effectively. so expert in their areas of knowledge, that they treated others with contempt because they 8. Unable to think strategically. weren’t experts, too. For example, AT&T called 9. Unable to adapt to boss with different style. in an industrial psychologist to counsel its vice 10. Overdependent on advocate or mentor. president of human resources because she had been blamed for “ruffling too many feathers” at Source: M. W. McCall, Jr. & M. M. Lombardo, “What Makes a Top Executive?” Psychology Today, February 1983, 26–31. the company.74 Interviews with the vice president’s coworkers and subordinates revealed Exhibit 1.5 that they thought she was brilliant, was “smarter and faster than other people,” Top 10 Mistakes That “generates a lot of ideas,” and “loves to deal with complex issues.” Unfortunately, Managers Make these smarts were accompanied by a cold, aloof, and arrogant management style. The people she worked with complained that she does “too much too fast,” treats coworkers with “disdain,” “impairs teamwork,” “doesn’t always show her warm “WHAT’S NEW” side,” and has “burned too many bridges.”75 COMPANY The third and fourth mistakes made by the derailers, betraying a trust and being overly ambitious, reflect a lack of concern for coworkers and subordinates. Betraying a trust doesn’t mean being dishonest. Instead, it means making others look bad by not doing what you said you would do when you said you would do it. That mistake, in itself, is not fatal because managers and their workers aren’t machines. Tasks go undone in every company every single business day. There’s always too much to do and not enough time, people, money, or resources to do it. The fatal betrayal of trust is failing to inform others when things will not be done on time. This failure to admit mistakes, quickly inform others of the mistakes, take responsibility for the mistakes, and then fix them without blaming others clearly distinguished the behavior of derailers from arrivers. The fourth mistake, as mentioned above, was being overly political and ambitious. Managers who always have their eye on their next job rarely establish more than superficial relationships with peers and coworkers. In their haste to gain credit for successes that would be noticed by upper management, they make the fatal mistake of treating people as though they don’t matter. An employee with an overly ambitious boss described him this way, “He treats employees coldly, even cruelly. He assigns blame without regard to responsibility, and takes all the credit for himself. I once had such a boss, and he gave me a new definition of shared risk: If something I did was successful, he took the credit. If it wasn’t, I got the blame.”76 The fatal mistakes of being unable to delegate, build a team, and staff effectively indicate that many derailed managers were unable to make the most basic transition to managerial work: to quit being hands-on doers and get work done through others. Two things go wrong when managers make these mistakes. First, when managers meddle in decisions that their subordinates should be making—when they can’t stop being doers—they alienate the people who work for them. Rich Dowd, founder of Dowd Associates, an executive search firm, admits to constantly monitoring and interrupting employees because they weren’t doing the job “in the way I saw fit, even 1. Insensitive to others: abrasive, intimidating, bullying style.

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when their work was outstanding.” According to Richard Kilburg of Johns Hopkins University, when managers interfere with workers decisions, “You . . . have a tendency to lose your most creative people. They’re able to say, ‘Screw this. I’m not staying here.’”77 Indeed, one employee told Dowd that if he was going to do her job for her, she would quit. Second, because they are trying to do their subordinates’ jobs in addition to their own, managers who fail to delegate will not have enough time to do much of anything well.

Review 6: Mistakes Managers Make © INSPIRE STOCK/JUPITER IMAGES

Another way to understand what it takes to be a manager is to look at the top mistakes managers make. Five of the most important mistakes made by managers are being abrasive and intimidating; being cold, aloof, or arrogant; betraying trust; being overly ambitious; and failing to build a team and then delegate to that team.

Transition to Management: 7 The The First Year In her book Becoming a Manager: Mastery of a New Identity, Harvard Business School professor Linda Hill followed the development of 19 people in their first year as managers. Her study found that becoming a manager produced a profound psychological transition that changed the way these managers viewed themselves and others. As shown in Exhibit 1.6, the evolution of the managers’ thoughts, expectations, and realities over the course of their first year in management reveals the magnitude of the changes they experienced. Initially, the managers in Hill’s study believed that their job was to exercise formal authority and to manage tasks—basically being the boss, telling others what to do, making decisions, and getting things done. One manager said, “Being the manager means running my own office, using my ideas and thoughts.” Another said, “[The office is] my baby. It’s my job to make sure it works.” In fact, most of the new managers were attracted to management positions because they wanted to be “in charge.” Surprisingly, the new managers did not believe that their job was to manage people. The only aspects of people management mentioned by the new managers were hiring and firing. After six months, most of the new managers had concluded that their initial expectations about managerial work were wrong. Management wasn’t being “the boss.” It wasn’t just about making decisions and telling others what to do. The first surprise was the fast pace and heavy workload involved in being a manager. Said one manager, “This job is much harder than you think. It is 40 to 50 percent more work than being a producer! Who would have ever guessed?” The pace of managerial work was startling, too. Another manager said, “You have eight or nine people looking for your time . . . coming into and

Managers who fail to delegate will not have enough time to do much of anything well.

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MANAGERS’ INITIAL EXPECTATIONS JAN

FEB

MAR

AFTER SIX MONTHS AS A MANAGER APR

MAY

JUN

AFTER A YEAR AS A MANAGER JUL

AUG

SEP

OCT

NOV

A Be the boss

A Initial expectations were wrong

A No longer “doer”

A Have formal authority

A Fast pace

A Communicating, listening, and giving positive reinforcement

A Manage tasks

A Heavy workload

A Learning to adapt to and control stress

A Job is not managing people

A Job is to be problem-solver and troubleshooter for subordinates

A Job is people development

DEC

Source: L. A. Hill, Becoming a Manager: Mastery of a New Identity (Boston: Harvard Business School Press, 1992).

Exhibit 1.6 The Transition to Management: Initial Expectations, after Six Months, and after a Year

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out of your office all day long.” A somewhat frustrated manager declared that management was “a job that never ended . . . a job you couldn’t get your hands around.” Informal descriptions like this are consistent with studies indicating that the average first-line manager spends no more than two minutes on a task before being interrupted by a request from a subordinate, a phone call, or an e-mail. The pace is somewhat less hurried for top managers, who spend an average of approximately nine minutes on a task before having to switch to another. In practice, this means that supervisors may perform 30 different tasks per hour, while top managers perform seven different tasks per hour, with each task typically different from the one that preceded it. A manager described this frenetic level of activity by saying, “The only time you are in control is when you shut your door, and then I feel I am not doing the job I’m supposed to be doing, which is being with the people.” The other major surprise after six months on the job was that the managers’ expectations about what they should do as managers were very different from their subordinates’ expectations. Initially, the managers defined their jobs as helping their subordinates perform their jobs well. For the managers, who still defined themselves as doers rather than managers, assisting their subordinates meant going out on sales calls or handling customer complaints. One manager said, “I like going out with the rep, who may need me to lend him my credibility as manager. I like the challenge, the joy in closing. I go out with the reps and we make the call and talk about the customer; it’s fun.” But when the managers “assisted” in this way, their subordinates were resentful and viewed their help as interference. The subordinates wanted their managers to help them by solving problems that they couldn’t solve. Once the managers realized this contradiction, they embraced their role as problem-solver and troubleshooter. Thus, they could help without interfering with their subordinates’ jobs. After a year on the job, most of the managers thought of themselves as managers and no longer as doers. In making the transition, they finally realized that people management was the most important part of their jobs. One manager summarized the lesson that had taken him a year to learn by saying, “As many demands as managers have on their time, I think their primary responsibility is people development. Not production, but people development.” Another indication of how much their views had changed was that most of the managers now regretted the rather heavy-handed approach they had used in their early attempts to manage their subordinates. “I wasn’t good at managing . . . , so I was bossy like a first-grade teacher.” “Now I see that I started out as a drill sergeant. I was inflexible, just a lot of how-to’s.” By the end of the year, most of the managers had abandoned their authoritarian approach for one based on communication, listening, and positive reinforcement. One manager explained, “Last night at five I handed out an award in the boardroom just to the individual.

Part 1: Introduction to Management

It was the first time in his career that he had [earned] $100,000, and I gave him a piece of glass [a small award] and said I’d heard a rumor that somebody here just crossed over $100,000 and I said congratulations, shook his hand, and walked away. It was not public in the sense that I gathered everybody around. But I knew and he did too.” Finally, after beginning their year as managers in frustration, the managers came to feel comfortable with their subordinates, with the demands of their jobs, and with their emerging managerial styles. While being managers had made them acutely aware of their limitations and their need to develop as people, it also provided them with an unexpected reward of coaching and developing the people who worked for them. One manager said, “It gives me the best feeling to see somebody do something well after I have helped them. I get excited.” Another stated, “I realize now that when I accepted the position of branch manager that it is truly an exciting vocation. It is truly awesome, even at this level; it can be terribly challenging and terribly exciting.”

Review 7: The Transition to Management: The First Year Managers often begin their jobs by using more formal authority and less people management. However, most managers find that being a manager has little to do with “bossing” their subordinates. After six months on the job, the managers were surprised at the fast pace and heavy workload and that “helping” their subordinates was viewed as interference. After a year on the job, most of the managers had come to think of themselves not as doers, but as managers who get things done through others. And because they finally realized that people management was the most important part of their job, most of them had abandoned their authoritarian approach for one based on communication, listening, and positive reinforcement.

Why Management Matters If you walk down the aisle of the business section in your local bookstore, you’ll find hundreds of books that explain precisely what companies need to do to be successful. Unfortunately, the best-selling business books tend to be faddish, changing dramatically every few years. One thing that hasn’t changed, though, is the importance of good people and good management: Companies can’t succeed for long without them. After reading this section, you should be able to 8 explain how and why companies can create competitive advantage through people.

8Competitive Advantage through People In his books, Competitive Advantage through People and The Human Equation: Building Profits by Putting People First, Stanford University business professor Jeffrey Pfeffer contends that what separates top-performing companies from their competitors is the way they treat their work forces—in other words, their management.78 Pfeffer found that managers in top-performing companies used ideas like employment security, selective hiring, self-managed teams and decentralization, high pay contingent

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Exhibit 1.7 Competitive Advantage through People: Management Practices

on company performance, extensive training, reduced status distinctions (between managers and employees), and extensive sharing of financial information to achieve financial performance that, on average, was 40 percent higher than that of other companies. These ideas, which are explained in detail in Exhibit 1.7, help organizations develop work forces that are smarter, better trained, more motivated, and more committed than their competitors’ work forces. And, as indicated by the phenomenal growth and return on investment earned by these companies, smarter, better trained, and more committed work forces provide superior products and service to customers, who keep buying and, by telling others about their positive experiences, bring in new customers. Pfeffer also argues that companies that invest in their people will create longlasting competitive advantages that are difficult for other companies to duplicate. Indeed, other studies clearly demonstrate that sound management practices can produce substantial advantages in four critical areas of organizational performance: sales revenues, profits, stock market returns, and customer satisfaction. In terms of sales revenues and profits, a study of nearly 1,000 U.S. firms found that companies that use just some of the ideas shown in Exhibit 1.7 had $27,044 more sales per employee and $3,814 more profit per employee than companies that didn’t. For a 100-person company, these differences amount to $2.7 million more in sales and nearly $400,000 more in annual profit! For a 1,000-person company, the difference grows to $27 million more in sales and $4 million more in annual profit! Another study investigating the effect of investing in people on company sales found that poorly performing companies that adopted management techniques as

1. Employment Security—Employment security is the ultimate form of commitment that companies can make to their workers. Employees can innovate and increase company productivity without fearing the loss of their jobs. 2. Selective Hiring—If employees are the basis for a company’s competitive advantage, and those employees have employment security, then the company needs to aggressively recruit and selectively screen applicants in order to hire the most talented employees available. 3. Self-Managed Teams and Decentralization—Self-managed teams are responsible for their own hiring, purchasing, job assignments, and production. Self-managed teams can often produce enormous increases in productivity through increased employee commitment and creativity. Decentralization allows employees who are closest to (and most knowledgeable about) problems, production, and customers to make timely decisions. Decentralization increases employee satisfaction and commitment. 4. High Wages Contingent on Organizational Performance—High wages are needed to attract and retain talented workers and to indicate that the organization values its workers. Employees, like company founders, shareholders, and managers, need to share in the financial rewards when the company is successful. Why? Because employees who have a financial stake in their companies are more likely to take a long-run view of the business and think like business owners. 5. Training and Skill Development—Like a high-tech company that spends millions of dollars to upgrade computers or research and development labs, a company whose competitive advantage is based on its people must invest in the training and skill development of its people. 6. Reduction of Status Differences—These are fancy words that indicate that the company treats everyone, no matter what the job, as equal. There are no reserved parking spaces. Everyone eats in the same cafeteria and has similar benefits. The result: much improved communication as employees focus on problems and solutions rather than on how they are less valued than managers. 7. Sharing Information—If employees are to make decisions that are good for the long-run health and success of the company, they need to be given information about costs, finances, productivity, development times, and strategies that was previously known only by company managers. Source: J. Pfeffer, The Human Equation: Building Profits by Putting People First (Boston: Harvard Business School Press, 1996).

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© JUSTIN SULLIVAN/GETTY IMAGES

simple as setting expectations (establishing goals, results, and schedules), coaching (informal, ongoing discussions between managers and subordinates about what is being done well and what could be done better), reviewing (annual, formal discussion about results), and rewarding (adjusting salaries and bonuses based on employee performance and results) were able to improve their average return on investment from 5.1 percent to 19.7 percent and increase sales by $94,000 per employee!79 So, in addition to significantly improving the profitability of healthy companies, sound management practices can turn around failing companies. To determine the effect of investing in people on stock market performance, researchers matched companies on Fortune magazine’s list of “100 Best Companies to Work for in America” with companies that were similar in industry, size, and—this is key—operating performance. In other words, both sets of companies were equally good performers; the key difference was how well they treated their employees. For both sets of companies, the researchers found that employee attitudes such as job satisfaction changed little from year to year. The people who worked for the “100 Best” companies were consistently much more satisfied with their jobs and employers year after year than were employees in the matched companies. More importantly, those stable differences in employee attitudes were strongly related to differences in stock market performance. Over a three-year period, an investment in the “100 Best Companies to Work for” would have resulted in an 82 percent cumulative stock return compared with just 37 percent for the matched companies.80 This difference is remarkable given that both sets of companies were equally good performers at the beginning of the period. Finally, research also indicates that managers have an important effect on customer satisfaction. Many people find this surprising. They don’t understand how managers, who are largely responsible for what goes on inside the company, can affect what goes on outside the company. They wonder how managers, who often interact with customers under negative conditions (when customers are angry or dissatisfied), can actually improve customer satisfaction. It turns out that managers influence customer satisfaction through employee satisfaction. When employees are satisfied with their jobs, their bosses, and the companies they work for, they provide much better service to customers.81 In turn, customers are more satisfied, too. You will learn more about the serviceprofit chain in Chapter 18 on managing service and manufacturing operation.

In 2007, Fortune ranked Google as America’s Best Company to Work for. One of the perks at the Googleplex: Free—and good—food at the cafeteria. And that includes a company sushi chef.

Review 8: Competitive Advantage through People Why does management matter? Well-managed companies are competitive because their work forces are smarter, better trained, more motivated, and more committed. Furthermore, companies that practice good management consistently have greater sales revenues, profits, and stock market performance than companies that don’t. Finally, good management matters because good management leads to satisfied employees who, in turn, provide better service to customers. Because employees tend to treat customers the same way that their managers treat them, good management can improve customer satisfaction.

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SELF ASSESSMENT © VEER

Each chapter has a related self-assessment to help you consider how your own perspectives influence your management skills. Each assessment tool starts with a short description and ends with basic scoring information. (Your instructor will have interpretations of your scores.) As you advance through the book, take time to review your assessment scores together. Doing so will help you see patterns in your own perceptions and behaviors and give you insights into how those perceptions may affect your performance as a manager.

Is Management for You? As you learned in Section 7 of this chapter, many managers begin their careers in management with specific ideas about what it means to be the boss. Although you may want to be a manager because of excitement, status, power, or rewards, knowing how to manage is not automatic; it requires specific skills and competencies, as well as a desire to manage. This assessment is meant to establish your baseline abilKEY TERMS ity in the skills covered in the chapter. It will not tell you conceptual skills 22 controlling 11 whether you should or should disseminator role 19 not be a manager, or whether disturbance handler role 20 you have “what it takes” to effectiveness 7 be a manager. It will, however, efficiency 7 give you feedback on general entrepreneur role 19 skills that influence your overfigurehead role 18 all managerial style. first-line managers 15 Be candid as you complete leader role 18 the assessment by circling the leading 11 82 appropriate responses. liaison role 18 ML  Most like me management 7 SL  Somewhat like me meta-analysis 10 middle managers 14 NS  Not sure monitor role 19 SU  Somewhat motivation to manage 23 unlike me negotiator role 20 MU  Most unlike me organizing 9 1. I can get others to do people skills 22 what I want them to do. planning 8 ML SL NS resource allocator role 20 SU MU spokesperson role 19 2. I frequently evaluate my team leaders 16 job performance. technical skills 22 ML SL NS top managers 12 SU MU

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3. I prefer not to get involved in office politics. ML SL NS SU MU 4. I like the freedom that open-ended goals provide me. ML SL NS SU MU 5. I work best when things are orderly and calm. ML SL NS SU MU 6. I enjoy making oral presentations to groups of people. ML SL NS SU MU 7. I am confident in my abilities to accomplish difficult tasks. ML SL NS SU MU 8. I do not like to write. ML SL NS SU MU 9. I like solving difficult puzzles. ML SL NS SU MU 10. I am an organized person. ML SL NS SU MU 11. I have difficulty telling others they made a mistake. ML SL NS SU MU 12. I like to work set hours each day. ML SL NS SU MU 13. I view paperwork as a trivial task. ML SL NS SU MU 14. I like to help others learn new things. ML SL NS SU MU 15. I prefer to work alone. ML SL NS SU MU 16. I believe it is who you know, not what you know, that counts. ML SL NS SU MU 17. I enjoy doing several things at once. ML SL NS SU MU 18. I am good at managing money. ML SL NS SU MU 19. I would rather back down from an argument than let it get out of hand. ML SL NS SU MU 20. I am computer literate. ML SL NS SU MU

Scoring Start by reversing your scores for items 5, 8, 11, 15, and 16. For example, if you used ML, change it to MU, and vice versa; if you used SL, change it to SU, and vice versa. Now assign each answer a point value.

Number of ML answers ____ times 5 points each = ____ Number of SL answers ____ times 4 points each = ____ Number of NS answers ____ times 3 points each = ____ Number of SU answers ____ times 2 points each = ____

Number of MU answers ____ times 1 point each = ____ TOTAL = ____ You can find the interpretation for your score at: academic.cengage.com/management/williams.

MANAGEMENT DECISION Making decisions is part of every manager’s job. To give you practice at managerial decision making, each chapter contains a “Management Decision” assignment focused on a particular decision. You’ll need to decide what to do in the given situation and then answer several questions to explain your choices.

Betting on an Employee Although you’ve been in your new executive management position for barely a year, you have had abundant opportunities for decision making.83 You have had the final say on a new advertising campaign, an employee washroom remodel, and the selection of the company’s uniform vendor. You’ve met with community leaders to discuss your company’s participation in a fundraiser for the local food pantry and with the press to announce your company’s plan to bring 50 new jobs to the area. Surprisingly, however, you’ve had little experience with human resources issues. But that changed this morning, when a colleague mentioned that a relatively new executive assistant named Andrew had taken a second job with another company in the evenings. Andrew has been at your company for only three months, but in that time has proved to be reliable, resourceful, and intelligent. “He’s doing well, though. Doesn’t he like his job here?” you asked your colleague. “He does, but he can earn an extra $250 a week at the second job. He says he’s saving to go back to school,” she responded.

“Oh,” you replied. “Well, I’ll talk to him.” Andrew is fast becoming a valuable employee, but the company has a policy against moonlighting. You expect your employees to give their best each day on the job. If they spend what would otherwise be leisure time working for someone else, they won’t be fresh, alert, and productive when they come to work for you. At the same time, you remember how you worked several jobs to save money for graduate school. If you had been able to make enough money at one job, you wouldn’t have pushed yourself to work three. You think briefly about giving Andrew a raise, but then recall that the company’s policy is not to review new employees for raises or promotions until they’ve spent at least six months on the job. Andrew is only halfway there. Still, it would be a shame to see such a promising employee lose his spark from overwork and fatigue.

Questions 1. How is this decision emblematic of your job as a manager and your transition into that position? 2. What are the advantages and disadvantages to giving Andrew a raise before the customary period? 3. Do you break the company policy and give Andrew a raise three months early, or not? If not, how do you handle the moonlighting situation? Explain your decision. 4. Regardless of Andrew’s situation, would it be better in the long run for your company to continue or end its “no moonlighting” policy?

MANAGEMENT TEAM DECISION From sports to school to work to civic involvement, working in teams is increasingly part of our experience. But although working in teams is more and more common, making decisions as teams is not necessarily any

easier. You will learn more about managing teams in Chapter 10, but to give you more experience with teamwork, a “Management Team Decision” exercise designed for a group of three to five students is included in each

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chapter. As a group, you must come to a mutually agreeable decision on the scenario presented. Each “Management Team Decision” will focus on a management topic presented in the chapter. For Chapter 1, you’ll work with the management function of planning and organizing, as you decide whether to let a team member have a night off.

Baggage Claims—Is RFID the Ticket? What a trip!84 You’re exhausted from changing planes (three times because of cancellations) and trying to corral your colleagues as well as their luggage. And after all the cramped seats, complaining travelers, long lines, and marginal food, your team still hasn’t come to a decision about what do to—at your own airport. Last month, you and your management team from Hartsfield-Jackson Atlanta International Airport began discussing using radio-frequency identification (RFID) tags in the airport’s baggage-handling operations. Recent reports on lost luggage have caused more than a ripple of concern, with roughly one in every 150 U.S. passengers losing a bag in any given year. U.S. airlines spent an estimated $400 million to replace mishandled luggage in a recent year, yet passengers are regularly incensed that the airlines give only partial reimbursements for lost bags and belongings. The cost of lost luggage, however, is not just the $400 million in reimbursements. There’s the time and expense of staffing large customer-service departments to take complaints, process claims, track down and identify missing baggage, and deliver found bags to either the owner’s travel destination or home. Multiple deliveries are often made, as the bag arrives at the passenger’s destination after he or she has left for another destination or returned home. The International Air Transport Association estimates that airlines worldwide could save $760 million a year by reducing lost luggage. Your team would love to reduce the costs associated with lost luggage at Hartsfield-Jackson (ATL), which consistently wins the title of world’s busiest passenger airport. Nearly 6.5 million travelers pass through the airport in a given month and bring about 75 metric tons of luggage with them. That’s more than the either the monthly amount of mail or commercial freight (think FedEx and UPS) that passes through the airport’s facilities! Thirty-one airlines take off and land at ATL, but Delta accounts for over 58 percent of passenger volume. As (bad) luck would have it, Delta has a dismal ranking for lost luggage, reporting 6.8 mishandled bags per 1,000, second only to US Airways’ 7.7 losses per 1,000. Company-wide, Delta handles 1.3 bags per passenger, and there’s no reason to think this number is any lower in Atlanta, its biggest hub. That means Delta alone puts over 160,000 bags into the ATL system each day!

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To manage this tremendous flow of personal belongings, ATL uses the bar-coding system in use at the majority of U.S. airports. Adhesive paper tags are very economical at 4 cents each, but they also rip, smudge, get misread, or get torn off completely. Scanners even have trouble with twisted tags. Baggage sorting with bar-coded tags is only 80 to 90 percent accurate. And once they’re printed, that’s it. If a passenger’s destination changes due to, say, inclement weather, flight cancellations, or being rerouted, the bar-code label can’t change to reflect the new itinerary. Armed with all this, well, baggage, your team went on a trip to Las Vegas’s McCarran International Airport, which has been using radio-frequency identification tags to manage its bag handling. McCarran is the fifth-busiest airport in the United States, and it handles more than 70,000 outbound bags per day. Using bar-code readers, as many as 7,000 bags per day were not read properly and tossed into an “unknown” pile to be hand sorted. There was also the headache of lost luggage for passengers on quick three- and four-day excursions to consider. In the end, the airport decided to invest in a system based on RFID tags. Tags costs 21 cents apiece, or five times the cost of a bar-code tag, but the accuracy of the RFID system has cut the number of hand-sorted bags by 90 percent, and the tags can be rewritten electronically mid-travel if itineraries change. The RFID system has enabled the airport to let inbound passengers on long flights check their bags all the way to their casino or hotel, so that their luggage is waiting for them when they arrive. What to do? ATL is already in the middle of a $5.4 billion campaign to improve facilities. Management does a great job managing the finances of the airport, and Hartsfield Jackson is considered a good risk (meaning a safe bet) for lenders. The hardware required to start using RFID is cheaper than maintaining the hardware that manages the system of traditional bar-code tags, but the difference in the cost of the tags is substantial if decreasing. And who’s going to foot the bill? Should the airlines, which are nearly all suffering financially, be expected to pay for the program that will ultimately benefit them as well? Delta already stopped paying its $3.4 million annual rent to the airport as part of its bankruptcy restructuring. If they don’t pay for the hardware required to read the tags, should airlines at least pay for the tags themselves? Maybe you need to take another trip, this time to Furth, Germany, where Siemens, a provider of industrial software, has built a mock airport to demonstrate how automated technology can help airports improve efficiencies in nearly every aspect of their organization.

Siemens’s automated luggage belts equipped with RFID readers can move at up to 30 feet per second, which means that passengers wouldn’t have to wait hours for their bags to show up at the carousel, as they often do now. Even though the people at McCarran were helpful, their airport has less than half the traffic of HartsfieldJackson. Perhaps consulting with the folks at Siemens will help you better frame the issues for your massive operations. Or maybe you’d be better off visiting Denver International Airport, which is known for its notoriously flawed—and inefficient—automated baggage handling system. Form a team of four or five students to act as the management team of Hartsfield-Jackson International Airport to determine if the tradeoffs of implementing RFID are worth the costs.

Questions 1. Implementing RFID is a complex situation that draws on many managerial roles. Describe the ways that the management team from Hartsfield-Jackson will fulfill Mintzberg’s managerial roles and subroles (see Exhibit 1.3) as it thinks through the decision. 2. Additional information gathering at Siemens’s mock airport is a good idea, but who to send? Identify how many and which type of managers to recommend for a fact-finding team and to tour the facility at Furth, Germany. Estimate how much money will be required to fund such a trip. 3. Do you implement RFID at Hartsfield-Jackson immediately, or do you schedule a trip to Furth, Germany, before deciding? Or do you decide not to implement RFID at all?

PRACTICE BEING A MANAGER

Finding a Management Job Management is a wide ranging and exciting area of work. One way to gain a sense of the possibilities is to study the advertisements for management job openings. Companies advertise their management openings in a variety of ways, including print advertisements in such newspapers as the Wall Street Journal (especially its Friday career section) and online ads at job sites like Monster.com and CareerBuilder.com. Step 1: Find a job you’d like to have. Search through the newspaper and online ads and locate several detailed job descriptions for management positions. Select the one that you find most appealing—a job that you could picture yourself interviewing for either in the near future or later in your career. Do not be too concerned about your current qualifications in making your selection, but you should see realistic prospects of meeting the qualifications over time (if a job requires an MBA, for example, you should see yourself completing this degree sometime in the future). Print your selected detailed job description and bring it to your next class session. Step 2: Share your job description. In class, your professor will assign you to a pair or group of three. Write your name on your selected management job description, and exchange your job description with your partner(s). Each member of the pair or triad should now have a job description other than their own.

Step 3: Think like a hiring manager. Read the job description you received from your partner. Imagine that you are the manager responsible for hiring someone to fill this position. A human resources specialist in your company has already screened the applicants’ resume and background. Thus, you may assume that your partner has met all the basic qualifications for the job. Your job as a senior manager is to ask questions that might get beyond the resume to the person—what might you ask to learn if someone is well-suited to thrive in this management job, and in your company? Step 4: Take turns interviewing. Each member of the group should be briefly interviewed (5–10 minutes) for the job they selected. Step 5: Debrief. Discuss your experiences with your partner(s). What was it like to be interviewed for your selected position? What was it like to role-play interviewing someone for a management position? Now imagine the real thing. Brainstorm about how you might prepare yourself over time to be the top candidate for an attractive management position, and to be a senior manager responsible for hiring the best qualified managers for your company. Step 6: Discuss with the class. Share your interview experiences and brainstorming ideas with the class. Do you hear any similarities across the pairs/triads? What ideas or questions are most significant to you as you consider management job interviews?

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DEVELOP YOUR C AREER POTENTIAL

Interview Two Managers Welcome to the first “Develop Your Career Potential” activity! These assignments have one purpose: to help you develop your present and future capabilities as a manager. What you will learn through these assignments is not traditional “book learning” based on memorization and regurgitation, but practical knowledge and skills that help managers perform their jobs better. Lessons from some of the assignments—for example, goal setting—can be used for immediate benefit. Other lessons will obviously take time to accomplish, but you can still benefit now by making specific plans for future improvement. Step 1: Interview two practicing managers. In her book Becoming a Manager: Mastery of a New Identity, Harvard Business School professor Linda Hill conducted extensive interviews with 19 people in their first year as managers.85 To learn firsthand what it’s like to be a manager, interview two managers that you know, asking them some of the same questions, listed below, that Hill asked her managers. Be sure to interview managers with different levels of experience. Interview one person with at least five years’ experience as a manager and then interview another

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person with no more than two years’ experience as a manager. Ask the managers these questions: 1. Briefly describe your current position and responsibilities. 2. What do your subordinates expect from you on the job? 3. What are the major stresses and challenges you face on the job? 4. What, if anything, do you dislike about the job? 5. What do you like best about your job? 6. What are the critical differences between average managers and top-performing managers? 7. Think about the skills and knowledge that you need to be effective in your job. What are they, and how did you acquire them? 8. What have been your biggest mistakes thus far? Could you have avoided them? If so, how?

Step 2: Prepare to discuss your findings. Prepare to discuss your findings in class or write a report (if assigned by your instructor). What conclusions can you draw from your interview data?

REEL TO REAL BIZ FLIX

8 Mile

J

immy “B-Rabbit” Smith, Jr. (Eminem), wants to be a successful rapper and to prove that a white man can create moving sounds. He works days at a plant run by the North Detroit Stamping Company and pursues his music at night, sometimes on the plant’s grounds. The film’s title refers to Detroit’s northern boundary, which divides the city’s white and African American populations. This film gives a gritty look at Detroit’s hip-hop culture in 1995 and Jimmy’s desire to be accepted by it. Eminem’s original songs “Lose Yourself” and “8 Mile” received Golden Globe and Academy Award nominations. This scene is an edited composite of two brief sequences that show Jimmy interacting with his manager, Manny, at the stamping plant. What to Watch for and Ask Yourself

© VEER

1. What kind of manager is Manny? 2. What management function is Manny fulfilling when he considers giving Jimmy extra shifts? 3. What managerial roles do you see in the clip?

MANAGEMENT WORKPLACE

Original Penguin

P

enguins have always been cool. But golf shirts with a little flapping bird printed on them experienced a lull in coolness. In fact, their popularity remained frozen for two decades, largely because they were worn by aging golfers. Now the penguins are back, flapping furiously—and, many would argue, coolly—not just on golf shirts but also on a wide array of men’s and women’s clothing and accessories, including shirts, shoes, hats, belts, neckties, handbags, and even bathing suits. These items represent the extreme makeover of a 50-year-old brand of clothing called Original Penguin. Now owned by Perry Ellis International, the Original Penguin brand of clothing is experiencing rejuvenation—thanks largely to Penguin’s vice president, Chris Kolbe. This video allows you to follow Kolbe around the management workplace to see what his job entails. What to Watch for and Ask Yourself

© VEER

1. Describe the conceptual skills you think Chris Kolbe needs for his job as vice president of Original Penguin. 2. Which management roles does Kolbe fulfill in the course of the video segment? 3. What do you think is the most difficult part of Kolbe’s job? Why?

35

The History of Management Learning Outcomes:

In This Chapter:

1 Explain the origins of

In the Beginning 1. The Origins of Management 1.1 Management Ideas and Practice throughout History 1.2 Why We Need Managers Today

management. 2 Explain the history of scientific management. 3 Discuss the history of bureaucratic and administrative management. 4 Explain the history of human relations management. 5 Discuss the history of operations, information, systems, and contingency management.

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The Evolution of Management 2. Scientific Management 2.1 Father of Scientific Management: Frederick W. Taylor 2.2 Motion Studies: Frank and Lillian Gilbreth 2.3 Charts: Henry Gantt 3. Bureaucratic and Administrative Management 3.1 Bureaucratic Management: Max Weber 3.2 Administrative Management: Henri Fayol

4. Human Relations Management 4.1 Constructive Conflict and Coordination: Mary Parker Follett 4.2 Hawthorne Studies: Elton Mayo 4.3 Cooperation and Acceptance of Authority: Chester Barnard 5. Operations, Information, Systems, and Contingency Management 5.1 Operations Management 5.2 Information Management 5.3 Systems Management 5.4 Contingency Management Key Terms Self Assessment Management Decision Management Team Decision Practice Being a Manager Develop Your Career Potential Reel to Real

© STONE/GETTY IMAGES

Chapter 2

What Would

You Do?

I

SG Steelton–International Steel Group, Steelton, Pennsylvania.1 As the day-shift supervisor at the steel plant, you summon the six college students who are working for you this summer doing whatever you need done (sweeping up, sandblasting the inside of boilers that are down for maintenance, running errands, and so forth). You walk them across the plant to a field where the company stores scrap-metal “leftovers.” The area, about the size of a football field, is stacked with organized piles of metal. You explain that everything they see has just been sold. Metal prices, which have been depressed, have finally risen enough that the company can earn a small profit by selling its scrap. You point out that railroad tracks divide the field into parallel sectors, like the lines on a football field, so that each stack of metal is no more than 15 feet from a track. Each stack contains 390

pieces of metal. Each piece weighs 92 pounds and is about a yard long and just over 4 inches high and 4 inches wide. You tell the students that working as a team, they are to pick up each piece, walk up a ramp to a railroad car that will be positioned next to each stack, and then neatly position and stack the metal for shipment. That’s right, you repeat, 92 pounds, walk up the ramp, and carry the metal onto the rail car. Anticipating their questions, you explain that a forklift could be used only if the metal was stored on wooden pallets (it isn’t), if the pallets could withstand the weight of the metal (they would be crushed), and if you, as their supervisor, had forklifts and people trained to run them (you don’t). In other words, the only way to get the metal into the rail cars is for the students to carry it. Based on an old report from the last time the company sold some of the metal, you know that over an eight-hour shift, workers typically loaded about 30 pieces of metal parts per hour. At that pace, though, it will take your six students

Activities + Videos CengageNOW Audio study guide, electronic flashcards, author FAQ videos, On the Job and Biz Flix videos, concept tutorial, and concept exercise

Study Tip

Web (academic.cengage.com/management/williams) Quiz, PowerPoint slides, and glossary terms for this chapter

Build a management time line. On a blank sheet of paper, construct a time line that shows the evolution of management theory. Draw a line that divides the paper down the middle. Then, place management theories on one side and overall historical events on the other. This will help you see what was happening in management as a part of what was happening in the world in general. Examining theories in context can help you identify trends that are likely to emerge in the future.

“W HAT ’S N EW ” C OMPANIES ISG STEELTON FORD MOTOR COMPANY CHICAGO HARVESTER PULLMAN COMPANY M IDVALE STEEL COMPANY COMAMBAULT WESTERN ELECTRIC COMPANY AT&T NEW JERSEY BELL TELEPHONE BERETTA O LDSMOBILE MOTOR WORKS

six weeks to load all of the metal, and the purchasing manager who sold it says it must be shipped in two weeks. That means that without more workers (there’s a hiring freeze) and without forklifts, all of the metal has to be loaded by hand by these six workers in two weeks. But how do you do that? What would motivate the students to work much, much harder than they have all summer? They’ve gotten used to a leisurely pace and easy job assignments. Motivation might help, but motivation will only get so much done. After all, short of illegal steroids, nothing is going to work once muscle fatigue kicks in from carrying those 92-pound pieces of metal up a ramp all day long. What can you change about the way the work is done to deal with the unavoidable physical fatigue? If you were the supervisor in charge, what would you do?

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c

ertainly, the problems that the ISG steel plant supervisor is facing in the What Would You Do? case are difficult, but they aren’t unique. Each day, managers are asked to solve and are given only a limited amount of time, people, or resources. Yet it’s still their responsibility to get things done on time and within budget. Furthermore, most of the management practices and ideas that today’s managers use to solve their daily problems have their roots in the people and ideas you’ll read about in this chapter on the history of management. Indeed, by reading the theories in this chapter, you will be able to to the ISG supervisor’s problems. We begin this chapter by reviewing the origins of management ideas and practice throughout history and the historical changes that produced the need for managers. Next, you’ll learn about various schools of management thought. Beginning with scientific management, you’ll learn about the key contributions made by Frederick Taylor, Frank and Lillian Gilbreth, and Henry Gantt. Next, you’ll read about Max Weber and bureaucratic management and then about Henri Fayol and administrative management. Following that, you’ll learn about human relations management and the ideas of Mary Parker Follett (constructive conflict and coordination), Elton Mayo (Hawthorne Studies), and Chester Barnard (cooperation and acceptance of authority). Finally, you’ll learn about the history of operations management, information management, systems management, and contingency management.

challenging problems

figure out a solution

In the Beginning In this textbook, you learn that management is getting work done through others, that strategic plans are overall plans that clarify how a company will serve customers and position itself against competitors over the next two to five years, and that justin-time inventory is a system in which the parts needed to make something arrive from suppliers just as they are needed at each stage of production. Today’s managers would undoubtedly view those ideas and many of the others presented in the book as self-evident. For example, tell today’s managers to “reward workers for improved production or performance,” “set specific goals to increase motivation,” or “innovate to create and sustain a competitive advantage,” and they’ll respond, “Duh! Who doesn’t know that?” A mere 125 years ago, however, business ideas and practices were so different that today’s widely accepted management ideas would have been as “self-evident” as space travel, cell phones, and the Internet. In fact, 125 years ago, management wasn’t yet a field of study, and there were no management jobs and no management careers. Now, of course, managers and management are such an integral part of the business world that it’s hard to imagine organizations without them. So if there were no managers 125 years ago, but you can’t walk down the hall today without bumping into one, where did management come from?

After reading the next section, you should be able to 1 explain the origins of management.

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1 The Origins of Management Management as a field of study may be just 125 years old, but management ideas and practices have actually been used from the earliest times of recorded history. For example, 2,500 years before management researchers called it job enrichment, the Greeks learned that they could improve the productivity of boring repetitious tasks by performing them to music. The basic idea was to use a flute, drum, or song lyrics to pace people to work in unison using the same efficient motions, stimulate them to work faster and longer, and make the boring work more fun.2 Although we can find the seeds of many of today’s management ideas throughout history, not until the last two centuries did systematic changes in the nature of work and organizations create a compelling need for managers. Let’s begin our discussion of the origins of management by learning about 1.1 management ideas and practice throughout history and 1.2 why we need managers today.

1.1 Management Ideas and Practice throughout History Examples of management thought and practice can be found throughout history.3 For example, as shown in Exhibit 2.1, in 5000 bc in an early instance of managing information, which is part of the control function, Sumerian priests developed a formal system of writing (scripts) that allowed them to record and keep track of the goods, flocks and herds of animals, coins, land, and buildings that were contributed to their temples. Furthermore, to encourage honesty in such dealings, the Sumerians instituted managerial controls that required all priests to submit written accounts of the transactions, donations, and payments they handled to the chief priest. And just like clay or stone tablets and animal-skin documents, these scripts were first used to manage the business of Sumerian temples.4 Only later were the scripts used for religious purposes. A thousand years after the Sumerians, the Egyptians recognized the need for planning, organizing, and controlling; for submitting written requests; and for consulting staff for advice before making decisions. The practical problems they encountered while building the great pyramids no doubt led to the development of these management ideas. The enormity of the task they faced is evident in the pyramid of King Cheops, which contains 2.3 million blocks of stone. Each block had to be quarried, cut to precise size and shape, cured (hardened in the sun), transported by boat for two to three days, moved onto the construction site, numbered to identify where it would be placed, and then shaped and smoothed so that it would fit perfectly into place. It took 20,000 workers 23 years to complete this pyramid; more than 8,000 were needed just to quarry the stones and transport them. A typical “quarry expedition” might include 100 army officers, 50 government and religious officials, and 200 members of the king’s court to lead the expedition; 130 stonemasons to cut the stones; and 5,000 soldiers, 800 barbarians, and 2,000 bond servants to transport the stones on and off the ships.5 The remainder of Exhibit 2.1 shows how other management ideas and practices throughout history are clearly related to the management functions in the textbook. Besides the achievements of the Sumerians and Egyptians, we might note King Hammurabi, who established controls by using witnesses and written documents; King Nebuchadnezzar, who pioneered techniques for producing goods and using wages to motivate workers; Sun Tzu, author of The Art of War, who emphasized the importance of strategy and identifying and attacking an opponent’s weaknesses;

Chapter 2: The History of Management

39

Exhibit 2.1 Management Ideas and Practice throughout History Time

Individual or Group

Planning

5000 BC

Sumerians

4000 BC to 2000 BC

Egyptians

1800 BC

Hammurabi

600 BC

Nebuchadnezzar

500 BC

Sun Tzu

√

400 BC

Xenophon

√

400 BC

√

Organizing

Leading Controlling Contributions to Management Thought and Practice

√

√

√

Record keeping.

√

Recognized the need for planning, organizing, and controlling when building the pyramids. Submitted requests in writing. Made decisions after consulting staff for advice.

√

Established controls by using witnesses (to vouch for what was said or done) and writing to document transactions.

√

Wage incentives and production control.

√

Strategy; identifying and attacking opponent’s weaknesses.

√

√

√

Recognized management as a separate art.

Cyrus

√

√

√

Human relations and motion study.

175 BC

Cato the Elder

√

Job descriptions.

284

Diocletian

√

Delegation of authority.

900

Alfarabi

√

Listed leadership traits.

1100

Ghazali

√

Listed managerial traits.

1418

Barbarigo

1436

Venetians

1500

Sir Thomas More

1525

Machiavelli

√

Different organizational forms/structures. √

√

Numbering, standardization, and interchangeability of parts.

√

Critical of poor management and leadership.

√

Cohesiveness, power, and leadership in organizations.

Source: C. S. George, Jr., The History of Management Thought (Englewood Cliffs, NJ: Prentice-Hall, 1972).

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© SUPERSTOCK

Xenophon, who recognized management as a distinct and separate art; King Cyrus, who recognized the importance of human relations and used motion study to eliminate wasteful steps and improve productivity; Cato the Elder, who espoused the importance of job descriptions; Diocletian, a Roman emperor, who mastered the art of delegation by dividing the widespread Roman Empire into 101 provinces, which were then grouped into 13 dioceses, which were in turn grouped into four geographic divisions; Alfarabi and Ghazali, who began defining what it takes to be a good leader or manager; Barbarigo, who discussed the different ways in which organizations could be structured; the Venetians, who used numbering and standardization to make parts interchangeable; Sir Thomas More, who, in his book Utopia, emphasized the negative societal consequences associated with poor leadership; and Machiavelli, who wrote about the importance of cohesion, power, and leadership in organizations.

Management ideas have been in use from well before the Romans, but only recently has management become a profession and a topic of study.

1.2 Why We Need Managers Today Working from 8 am to 5 pm, coffee breaks, lunch hours, crushing rush hour traffic, and punching a time clock are things we associate with today’s working world. Work hasn’t always been this way, however. In fact, the design of jobs and organizations has changed dramatically over the last 500 years. For most of humankind’s history, people didn’t commute to work. In fact, travel of any kind was arduous and extremely rare.6 Work usually occurred in homes or on farms. For example, in 1720, almost 80 percent of the 5.5 million people in England lived and worked in the country. Indeed, as recently as 1870, two-thirds of Americans earned their living from agriculture. Even most of those who didn’t earn their living from agriculture didn’t commute to work. Blacksmiths, furniture makers, leathergoods makers, and other skilled tradesmen or craftsmen, who formed trade guilds (the historical predecessors of labor unions) in England as early as 1093, typically worked out of shops in or next to their homes.7 Likewise, cottage workers worked with each other out of small homes that were often built in a semicircle. A family in each cottage would complete a different production step with work passed from one cottage to the next until production was complete. For example, textile work was a common “cottage industry”: Families in different cottages would shear the sheep; clean the wool; comb, bleach, and dye it; spin it into yarn; and weave the yarn into cloth. Yet with no commute, no bosses (workers determined the amount and pace of their work), and no common building (from the time of the ancient Egyptians, Greeks, and Romans through the middle of the 19th century, it was rare for more than 12 people to work together under one roof), cottage work was very different from today’s jobs and companies.8 And because these work groups were small and typically self-organized, there wasn’t a strong need for management. During the Industrial Revolution (1750–1900), however, jobs and organizations changed dramatically.9 First, thanks to the availability of power (steam engines and later electricity) and numerous inventions, such as Darby’s coke-smelting process and Cort’s puddling and rolling process (both for making iron) and Hargreave’s spinning jenny

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HAT’SS NEW EW” “WHAT OMPANY COMPANY

“WHAT’S NEW” COMPANY “WHAT’S NEW” COMPANY

The number of people working in manufacturing quintupled from 1860 to 1890.

and Arkwright’s water frame (both for spinning cotton), low-paid, unskilled laborers running machines began to replace high-paid, skilled artisans. Whereas artisans made entire goods by themselves by hand, this new production system was based on a division of labor: Each worker, interacting with machines, performed separate, highly specialized tasks that were but a small part of all the steps required to make manufactured goods. Mass production was born as rope- and chain-driven assembly lines moved work to stationary workers who concentrated on performing one small task over and over again. While workers focused on their singular tasks, managers were needed to effectively coordinate the different parts of the production system and optimize its overall performance. Productivity skyrocketed at companies that understood this. For example, at FORD M OTOR C OMPANY , the time required to assemble a car dropped from 12.5 man-hours to just 93 minutes after switching to mass production.10 Second, instead of being performed in fields, homes, or small shops, jobs occurred in large, formal organizations where hundreds, if not thousands, of people worked under one roof.11 In 1849, for example, with just 123 workers, C HICAGO H ARVESTER (the predecessor of International Harvester) ran the largest factory in the United States. In 1870, the P ULLMAN COMPANY , a manufacturer of railroad sleeping cars, was the largest factory, with only 200 employees. Yet by 1913, Henry Ford employed 12,000 employees in his Highland Park, Michigan, factory alone. With the number of people working in manufacturing having quintupled from 1860 to 1890, and with individual factories employing so many workers under one roof, companies now had a strong need for disciplinary rules (to impose order and structure). For the first time, they needed managers who knew how to organize large groups, work with employees, and make good decisions.

Review 1: The Origins of Management Management as a field of study may be just 125 years old, but management ideas and practices have actually been used since the beginning of recorded history. From the Sumerians in 5000 bc to 16th-century Europe, there are historical antecedents for each of the functions of management discussed in this textbook: planning, organizing, leading, and controlling. Despite these early examples of management ideas, there was no compelling need for managers until systematic changes in the nature of work and organizations occurred during the last two centuries. As work shifted from families to factories, from skilled laborers to specialized, unskilled laborers, from small, self-organized groups to large factories employing thousands under one roof, and from unique, small batches of production to large standardized mass production, managers were needed to impose order and structure, to motivate and direct large groups of workers, and to plan and make decisions that optimized overall company performance by effectively coordinating the different parts of organizational systems.

The Evolution of Management Before 1880, business educators taught only basic bookkeeping and secretarial skills, and no one published books or articles about management.12 Over the next 25 years, however, things changed dramatically. In 1881, Joseph Wharton gave the University of Pennsylvania $100,000 to establish a department to educate students for careers in

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management. By 1911, 30 business schools, including those at Harvard, the University of Chicago, and the University of California, had been established to teach managers how to run businesses.13 In 1886, Henry Towne, president of the Yale and Towne Manufacturing Company, presented his ideas about management to the American Society of Engineers. In his talk, entitled “The Engineer as Economist,” he emphasized that managing people and work processes was just as important as engineering work, which focused on machines.14 Towne also argued that management should be recognized as a separate field of study with its own professional associations, journals, and literature where management ideas could be exchanged and developed. Today, because of the forethought and efforts of Joseph Wharton and Henry Towne, if you have a question about management you can turn to dozens of academic journals (such as the Academy of Management’s Journal or Review, Administrative Science Quarterly, the Strategic Management Journal, and the Journal of Applied Psychology), hundreds of business school and practitioner journals (such as Harvard Business Review, Sloan Management Review, and the Academy of Management Perspectives), and thousands of books and articles. In the next four sections, you will learn about other important contributors to the field of management and how their ideas shaped our current understanding of management theory and practice. After reading the next four sections, which review the different schools of management thought, you should be able to 2 3 4 5

explain the history of scientific management. discuss the history of bureaucratic and administrative management. explain the history of human relations management. discuss the history of operations, information, systems, and contingency management.

2 Scientific Management Before scientific management, organizational decision making could best be described as “seat of the pants.” Decisions were made haphazardly without any systematic study, thought, or collection of information. Customer orders were transmitted verbally from sales representatives to shop floor supervisors. They were not written down. If the “managers” hired by the company founder or owner decided that workers should work twice as fast, little or no thought was given to worker motivation. If workers resisted, “managers” often resorted to physical beatings to get workers to work faster, harder, or longer. In general, with no incentives for “managers” to cooperate with workers and vice versa, managers and workers gamed the system trying to systematically take advantage of each other. Likewise, nothing was standardized. Each worker did the same job in his or her own way with different methods and different tools. In short, there were no procedures to standardize operations, no standards by which to judge whether performance was good or bad, and no follow-up to determine if productivity or quality actually improved when changes were made.15 This all changed, however, with the advent of scientific management, which, in contrast to the unsystematic “seat-of-the-pants” approach, thoroughly studied and tested different work methods to identify the best, most efficient ways to complete a job. Let’s find out more about scientific management by learning about 2.1 Frederick W. Taylor, the father of scientific management; 2.2 Frank and Lillian Gilbreth and motion studies; and 2.3 Henry Gantt and his Gantt charts.

scientific management thoroughly studying and testing different work methods to identify the best, most efficient way to complete a job

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2.1 Father of Scientific Management: Frederick W. Taylor

© BETTMANN/CORBIS

Frederick W. Taylor (1856–1915), the “father of scientific management,” began his career as a worker at M IDVALE S TEEL C OMPANY . He was later promoted to patternmaker, supervisor, and then chief engineer. At Midvale, Taylor was deeply affected by his three-year struggle to get the men who worked for him to do, as he called it, “a fair day’s work.” Taylor, who had worked alongside the men as a coworker before becoming their boss, said, “We who were the workmen of that shop had the quantity output carefully agreed upon for everything that was turned out in the shop. We limited the output to about, I should think, one-third of what we could very well have done.” Taylor explained that as soon as he became the boss, “the men who were working under me . . . knew that I was onto the whole game of soldiering, or deliberately restricting output.”16 When Taylor told his workers, “I have accepted a job under the management of this company and I am on the other side of the fence . . . I am going to try to get a bigger output,” the workers responded, “We warn you, Fred, if you try to bust any of these rates [a rate buster was someone who worked faster than the group] we will have you over the fence in six weeks.”17 Over the next three years, Taylor tried everything he could think of to improve output. By doing the job himself, he showed workers that it was possible to produce more output. He hired new “intelligent” workers and trained them himself, hoping they would produce more. But they would not because of “very heavy social pressure” from the other workers. Pushed by Taylor, the workers began breaking their machines so that they couldn’t produce. Taylor responded by fining them every time they broke a machine and for any violation of the rules, no matter how small, such as being late to work. Tensions became so severe that some of the workers threatened to shoot him. Looking back at the situation, Taylor reflected, “It is a horrid life for any man to live, not to be able to look any workman in the face all day long without seeing hostility there and feeling that every man around one is his virtual enemy.” He said, “I made up my mind either to get out of the business entirely and go into some other line of work, or to find some remedy for this unbearable condition.”18 The remedy that Taylor eventually developed was scientific management. Taylor, who once described scientific management as “seventy-five percent science and twenty-five percent common sense,” emphasized that the goal of scientific management was to use systematic study to find the “one best way” of doing each task. To do that, managers must follow the four principles shown in Exhibit 2.2.19 First, “develop a science” for each element of work. Study it. Analyze it. Determine the “one best way” to do the work. For example, one of Taylor’s controversial proposals at the time was to give rest breaks to factory workers doing physical labor. We take morning, lunch, and

Frederick Taylor is known today as the “father of scientific management.” One of his many contributions to modern management is the common practice of giving employees rest breaks throughout the day. “WHAT’S NEW” COMPANY

soldiering when workers deliberately slow their pace or restrict their work outputs rate buster a group member whose work pace is significantly faster than the normal pace in his or her group

Exhibit 2.2 Taylor’s Four Principles of Scientific Management First

Develop a science for each element of a man’s work, which replaces the old rule-of-thumb method.

Second

Scientifically select and then train, teach, and develop the workman, whereas in the past he chose his own work and trained himself as best he could.

Third

Heartily cooperate with the men so as to ensure all of the work being done is in accordance with the principles of the science which has been developed.

Fourth

There is an almost equal division of the work and the responsibility between the management and the workmen. The management take over all the work for which they are better fitted than the workmen, while in the past almost all of the work and the greater part of the responsibility were thrown upon the men.

Source: F. W. Taylor, The Principles of Scientific Management (New York: Harper, 1911).

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afternoon breaks for granted, but in Taylor’s day, factory workers were expected to work without stopping.20 When Taylor said that breaks would increase worker productivity, no one believed him. Nonetheless, through systematic experiments, he showed that workers receiving frequent rest breaks were able to greatly increase their daily output. Second, scientifically select, train, teach, and develop workers to help them reach their full potential. Before Taylor, supervisors often hired on the basis of favoritism and nepotism. Who you knew was often more important than what you could do. By contrast, Taylor instructed supervisors to hire “first class” workers on the basis of their aptitude to do a job well. In one of the first applications of this principle, physical reaction times were used to select bicycle ball-bearing inspectors who had to be able to examine and reject poor-quality ball bearings as fast as they were produced on a production line. For similar reasons, Taylor also recommended that companies train and develop their workers—a rare practice at the time. Third, cooperate with employees to ensure implementation of the scientific principles. Labor unrest was widespread at the time; the number of labor strikes against companies doubled between 1893 and 1904. As Taylor knew from personal experience, more often than not workers and management viewed each other as the enemy. Taylor’s advice ran contrary to the common wisdom of the day. He said, “The majority of these men believe that the fundamental interests of employees and employers are necessarily antagonistic. Scientific management, on the contrary, has for its very foundation the firm conviction that the true interests of the two are one and the same; that prosperity for the employer cannot exist through a long term of years unless it is accompanied by prosperity for the employee and vice versa; and that it is possible to give the workman what he most wants—high wages—and the employer what he wants—a low labor cost—for his manufactures.”21 The fourth principle of scientific management was to divide the work and the responsibility equally between management and workers. Prior to Taylor, workers alone were held responsible for productivity and performance. But, said Taylor, “Almost every act of the workman should be preceded by one or more preparatory acts of the management which enable him to do his work better and quicker than he otherwise could. And each man should daily be taught by and receive the most friendly help from those who are over him, instead of being, at the one extreme, driven or coerced by his bosses, and at the other left to his own unaided devices.”22 Above all, Taylor felt these principles could be used to determine a “fair day’s work,” that is, what an average worker could produce at a reasonable pace, day in and day out. Once that was determined, it was management’s responsibility to pay workers fairly for that fair day’s work. In essence, Taylor was trying to align management and employees so that what was good for employees was also good for management. In this way, he felt, workers and managers could avoid the conflicts that he had experienced at Midvale Steel. And one of the best ways, according to Taylor, to align management and employees was to use incentives to motivate workers. As Taylor wrote: In order to have any hope of obtaining the initiative of his workmen the manager must give some special incentive to his men beyond that which is given to the average of the trade. This incentive can be given in several different ways, as, for example, the hope of rapid promotion or advancement; higher wages, either in the form of generous piecework prices or of a premium or bonus of some kind for good and rapid work; shorter hours of labor; better surroundings and working conditions than are ordinarily given, etc., and, above all, this special incentive should be accompanied by that personal consideration for, and friendly contact with, his workmen which comes only from a genuine and kindly interest in the welfare of those under him. It is only by giving a special inducement or “incentive” of this kind that the employer can hope even approximately to get the “initiative” of his workmen.23

Almost every act of the workman should be preceded by one or more preparatory acts of the management. FREDERICK W. TAYLOR, MIDVALE STEEL COMPANY

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Although Taylor remains a controversial figure among some academics who believe that his ideas were bad for workers, nearly a century later it is inarguable that his key ideas have stood the test of time.24 These include using systematic analysis to identify the best methods; scientifically selecting, training, and developing workers; promoting cooperation between management and labor; developing standardized approaches and tools; setting specific tasks or goals and then rewarding workers with financial incentives; and giving workers shorter work hours and frequent breaks. In fact, his ideas are so well accepted and widely used that we take most of them for granted. As eminent management scholar Edwin Locke says, “The point is not, as is often claimed, that he was ‘right in the context of his time,’ but is now outdated, but that most of his insights are still valid today.”25

2.2 Motion Studies: Frank and Lillian Gilbreth

time study timing how long it takes good workers to complete each part of their jobs motion study breaking each task or job into its separate motions and then eliminating those that are unnecessary or repetitive

46

The husband and wife team Frank and Lillian Gilbreth are best known for their use of motion studies to simplify work, but they also made significant contributions to the employment of disabled workers and industrial psychology. Like Frederick Taylor, their early experiences significantly shaped their interests and contributions to management. Though admitted to MIT, Frank Gilbreth (1868–1924) began his career as an apprentice bricklayer. While learning the trade, he noticed the bricklayers using three different sets of motions—one to teach others how to lay bricks, a second to work at a slow pace, and a third to work at a fast pace.26 Wondering which was best, he studied the various approaches and began eliminating unnecessary motions. For example, by designing a stand that could be raised to waist height, he eliminated the need to bend over to pick up each brick. Turning to grab a brick was faster and easier than bending down. By having lower-paid workers place all the bricks with their most attractive side up, bricklayers didn’t waste time turning a brick over to find it. By mixing a more consistent mortar, bricklayers no longer had to tap each brick numerous times to put it in the right position. Together, Gilbreth’s improvements raised productivity from 120 to 350 bricks per hour and from 1,000 bricks to 2,700 bricks per day. As a result of his experience with bricklaying, Gilbreth and his wife Lillian developed a long-term interest in using motion study to simplify work, improve productivity, and reduce the level of effort required to safely perform a job. Indeed, Frank Gilbreth said, “The greatest waste in the world comes from needless, illdirected, and ineffective motions.”27 The Gilbreths’ motion study, however, is different from Frederick W. Taylor’s time study.28 Taylor developed time study to put an end to soldiering and to determine what could be considered a fair day’s work. Time study worked by timing how long it took a “first-class man” to complete each part of his job. After allowing for rest periods, a standard time was established, and a worker’s pay would increase or decrease depending on whether the worker exceeded or fell below that standard. By contrast, motion study, as we saw in Frank Gilbreth’s analysis of bricklaying, broke each task or job into separate motions and then eliminated those that were unnecessary or repetitive. Because many motions were completed very quickly, the Gilbreths used motion-picture films, then a relatively new technology, to analyze jobs. Most film cameras, however, were handcranked and thus variable in their film speed, so Frank Gilbreth invented the microchronometer, a large clock that could record time to 1/2,000th of a second. By placing the microchronometer next to the worker in the camera’s field of vision and attaching a flashing strobe light to the worker’s hands to better identify the direction and sequence of key movements, the Gilbreths could use film to detect and precisely time even the slightest, fastest movements. Motion study typically yielded

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Chapter 2: The History of Management

© TONG RO/JUPITER IMAGES

production increases of 25 to 300 percent.29 It is even used in hospitals to clearly identify the large amount of time that surgeons wasted looking for the next surgical instrument they needed. Frank Gilbreth improved this process by making a nurse responsible for organizing, retrieving, and handing surgical instruments to surgeons, a process still in use today.30 One of the Gilbreths’ most overlooked accomplishments was the critical role they played in rehabilitating and employing disabled workers.31 After World War I, there were 13 million wounded and disabled soldiers in the United States and Europe. Frank Gilbreth worried, “What is to be done with the millions of cripples, when their injuries have been remedied as far as possible, and when they are obliged to become again a part of the working community?”32 Sensitive to this issue because of Frank’s recovery from a rheumatism attack that had left him temporarily paralyzed from the neck down, the Gilbreths applied motion study to identify the kinds of tasks that disabled workers could effectively perform. Nearly 75 years before the Americans with Disabilities Act became law (see Chapter 12 for more information), the Gilbreths argued that the government, employers, and engineers had an important role to play in employing disabled workers. The government’s job, they said, was to provide vocational training. Indeed, in 1918, the U.S. Congress passed the Vocational Rehabilitation Act, adopting most of the Gilbreths’ key recommendations. Employers, they said, should identify jobs that disabled people could perform. To help employers do this, the Gilbreths created a large slide show of pictures documenting the hundreds of ways in which disabled people could effectively perform jobs. Also, according to the Gilbreths, engineers had a responsibility to adapt and design machines so that disabled workers could use them. Lillian Gilbreth (1878– 1972) was an important contributor to management as well. She was the first woman to receive a Ph.D. in Industrial Psychology, as well as the first woman to become a member of the Society of Industrial Engineers and the American Society of Mechanical Engineers. When Frank died in 1924, she continued the work of their management consulting company (which they had shared for over a dozen years) on her own. Lillian, who was concerned with the human side of work, was one of the first contributors to

47

industrial psychology, originating ways to improve office communication, incentive programs, job satisfaction, and management training. Her work also convinced the government to enact laws regarding workplace safety, ergonomics, and child labor.

2.3 Charts: Henry Gantt

Gantt chart a graphical chart that shows which tasks must be completed at which times in order to complete a project or task

Exhibit 2.3 Gantt Chart for Starting Construction on a New Headquarters

Henry Gantt (1861–1919) was first a protégé and then an associate of Frederick Taylor. Gantt is best known for the Gantt chart, but he also made significant contributions to management with respect to pay-for-performance plans and the training and development of workers. As shown in Exhibit 2.3, a Gantt chart, which shows time in various units on the x-axis and tasks on the y-axis, visually indicates what tasks must be completed at which times in order to complete a project. For example, Exhibit 2.3 shows that to start construction on a new company headquarters by the week of November 18, the following tasks must be completed by the following dates: architectural firm selected by October 7, architectural planning done by November 4, permits obtained from the city by November 11, site preparation finished by November 18, and loans and financing finalized by November 18. Though simple and straightforward, Gantt charts were revolutionary in the era of “seat of the pants” management because of the detailed planning information they provided to managers. As Gantt wrote, “By using the graphical forms [the Gantt chart] its value is very much increased, for the general appearance of the sheet is sufficient to tell how closely the schedule is being lived up to; in other words, whether the plant is being run efficiently or not.” Gantt said, “Such sheets show at a glance where the delays occur, and indicate what must have our attention in order to keep up the proper output.” Today, the use of Gantt charts is so widespread that nearly all project management software and computer spreadsheets have the capability to create charts that track and visually display the progress being made on a project.

Current W eek W eeks

23 Sep to 30 Sep

30 Sep to 7 Oct

7 Oct to 14 Oct

14 Oct to 21 Oct

21 Oct to 28 Oct

28 Oct to 4 Nov

4 Nov to 11 Nov

11 Nov to 18 Nov

18 Nov to 25 Nov

Tasks

Interview and select architectural firm Hold weekly planning meetings with architects Obtain permits and approval from city Begin preparing site for construction Finalize loans and financing

Architect by October 7 Weekly planning with architects by November 4 Permits & approval by oval by November 11 Site construction done by November 18 Financing finalized by November 18 Start building

Begin construction Tasks W eeks

23 Sep to 30 Sep

30 Sep to 7 Oct

Current W eek

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7 Oct to 14 Oct

14 Oct to 21 Oct

21 Oct to 28 Oct

28 Oct to 4 Nov

4 Nov to 11 Nov

11 Nov to 18 Nov

18 Nov to 25 Nov

Gantt, who was much more sympathetic toward workers than Frederick Taylor was, introduced a significant change to Taylor’s well-known piece-rate reward system. Unlike Taylor’s system, in which payment was completely dependent on production—if you produced at substandard levels, you got substandard pay— Gantt’s task and bonus system did not punish workers for not achieving higher levels of production. Workers who produced more received a daily bonus, but those who didn’t simply received their standard daily pay. The key, according to Gantt, was that his task and bonus system didn’t punish workers for lower production as they took time to learn how to increase their production efficiency. Production usually doubled under Gantt’s system.33 Finally, Gantt, along with Taylor, was one of the first to strongly recommend that companies train and develop their workers.34 In his work with companies, he found that workers achieved their best performance levels if they were trained first. At the time, however, supervisors, fearing that they could lose their jobs to more knowledgeable workers, were reluctant to teach workers what they knew. Gantt overcame the supervisors’ resistance by rewarding them with bonuses for properly training all of their workers. Said Gantt, “This is the first recorded attempt to make it in the financial interest of the foreman to teach the individual worker, and the importance of it cannot be overestimated, for it changes the foreman from a driver of men to their friend and helper.”35 Thus, Gantt’s approach to training was straightforward: “(1) a scientific investigation in detail of each piece of work, and the determination of the best method and the shortest time in which the work can be done. (2) A teacher capable of teaching the best method and the shortest time. (3) Reward for both teacher and pupil when the latter is successful.”36

Review 2: Scientific Management In contrast to “seat of the pants” management, scientific management recommended studying and testing different work methods to identify the best, most efficient ways to complete a job. According to Frederick W. Taylor, the “father of scientific management,” managers should follow four scientific management principles. First, study each element of work to determine the “one best way” to do it. Second, scientifically select, train, teach, and develop workers to reach their full potential. Third, cooperate with employees to ensure implementation of the scientific principles. Fourth, divide the work and the responsibility equally between management and workers. Above all, Taylor felt these principles could be used to align managers and employees by determining a “fair day’s work,” what an average worker could produce at a reasonable pace, and “a fair day’s pay,” what management should pay workers for that effort. Taylor felt that incentives were one of the best ways to align management and employees. The husband and wife team of Frank and Lillian Gilbreth are best known for their use of motion studies to simplify work. Whereas Taylor used time study to determine “a fair day’s work,” based on how long it took a “first-class man” to complete each part of his job, Frank Gilbreth used film cameras and microchronometers to conduct motion study to improve efficiency by categorizing and eliminating unnecessary or repetitive motions. The Gilbreths also made significant contributions to the employment of disabled workers, encouraging the government to rehabilitate them, employers to identify jobs that they could perform, and engineers to adapt and design machines they could use. Lillian Gilbreth, one of the first contributors to industrial psychology, originated ways to improve office communication, incentive programs, job satisfaction, and

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management training. She also convinced the government to enact laws regarding workplace safety, ergonomics, and child labor. Henry Gantt is best known for the Gantt chart, which graphically indicates when a series of tasks must be completed to perform a job or project, but he also developed ideas regarding pay-for-performance plans (where workers were rewarded for producing more, but were not punished if they didn’t) and worker training (all workers should be trained and their managers should be rewarded for training them).

Bureaucratic and Administrative 3 Management The field of scientific management, which quickly developed in the United States between 1895 and 1920, focused on improving the efficiency of manufacturing facilities and their workers. At about the same time, equally important ideas were developing in Europe. German sociologist Max Weber’s ideas about bureaucratic management, which presented a new way to run entire organizations, were published in The Theory of Economic and Social Organization in 1922. Henri Fayol, an experienced French CEO, published his ideas about administrative management, including how and what managers should do in their jobs, in General and Industrial Management in 1916. Though developed at the same time as scientific management, the ideas of Weber and Fayol would not begin to influence American ideas about management until after World War II, when their books were translated into English and published in the United States in 1947 and 1949, respectively. Let’s find out more about Weber’s and Fayol’s contributions to management by learning about 3.1 bureaucratic management and 3.2 administrative management.

3.1 Bureaucratic Management: Max Weber

bureaucracy the exercise of control on the basis of knowledge, expertise, or experience

50

Today, when we hear the term bureaucracy, we think of inefficiency and red tape, incompetence and ineffectiveness, and rigid administrators blindly enforcing nonsensical rules. When German sociologist Max Weber (1864–1920) first proposed the idea of bureaucratic organizations, however, monarchies and patriarchies, not bureaucracies, were associated with these problems. In monarchies, where kings, queens, sultans, and emperors ruled, and patriarchies, where a council of elders, wise men, or male heads of extended families ruled, the top leaders typically achieved their positions by virtue of birthright. For example, when the queen died, her oldest son became king, regardless of his intelligence, experience, education, or desire. Likewise, promotion to prominent positions of authority in monarchies and patriarchies was based on who you knew, who you were (heredity), or ancient rules and traditions. In short, for much of humankind’s history, people often rose to positions of wealth and power because of family, political connections, or personal loyalty. It was against this historical background of monarchical and patriarchic rule that Weber proposed the then new idea of bureaucracy. Bureaucracy comes from the French word bureaucratie. Since bureau means desk or office and cratie or cracy means to rule, bureaucracy literally means to rule from a desk or office. According to Weber, however, bureaucracy is “the exercise of control on the basis of knowledge.”37 So, in a bureaucracy, rather than ruling by virtue of favoritism, or personal or family connections, people would lead by virtue of their rational-legal authority—in other words, their knowledge, expertise, or experience. Furthermore,

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the aim of bureaucracy is to achieve an organization’s goals in the most efficient way possible. Exhibit 2.4 shows the seven elements that, according to Weber, characterize bureaucracies. First, instead of hiring people because of their family or political connections, or personal loyalty, they should be hired because their technical training or education qualifies them to do their jobs well. Second, along the same lines, promotion within the company would no longer be based on who you knew or who you were (heredity), but on your experience or achievements. And to further limit the influence of personal connections in the promotion process, managers, rather than organizational owners, should decide who gets promoted. Third, each position or job is part of a chain of command that clarifies who reports to whom throughout the organization. Those higher in the chain of command have the right, if they so choose, to give commands, take action, and make decisions concerning activities occurring anywhere below them in the chain. Unlike many monarchies or patriarchies, however, those lower in the chain of command are protected by a grievance procedure that gives them the right to appeal the decisions of those in higher positions. Fourth, to increase efficiency and effectiveness, tasks and responsibilities are separated and assigned to those best qualified to complete them. Furthermore, authority is vested in positions, not people. If you move to a different job, your authority increases or decreases commensurate with the responsibilities of that job. And, to reduce confusion and conflict, the authority of each position or job is also clearly divided and defined. Fifth, because of his strong distaste for favoritism, Weber felt that an organization’s rules and procedures should apply to all members, regardless of their position or status. Sixth, to ensure consistency and fairness over time and across different leaders and supervisors, all rules, procedures, and decisions should be recorded in writing. Finally, to reduce favoritism, “professional” managers rather than company owners should manage or supervise the organization. When viewed in historical context, Weber’s ideas about bureaucracy represent a tremendous improvement in how organizations should be run. Fairness supplanted favoritism, the goal of efficiency replaced the goal of personal gain, and logical rules and procedures took the place of traditions or arbitrary decision making. Today, however, after more than a century of experience we recognize that bureaucracy has limitations as well. In bureaucracies, managers are supposed to influence employee behavior by fairly rewarding or punishing employees for compliance or noncompliance with organizational policies, rules, and procedures. In reality, however, most employees would

Exhibit 2.4 Elements of Bureaucratic Organizations

Qualification-based hiring

Employees are hired on the basis of their technical training or educational background.

Merit-based promotion

Promotion is based on experience or achievement. Managers, not organizational owners, decide who is promoted.

Chain of commands

Each job occurs within a hierarchy, the chain of command, in which each position reports and is accountable to a higher position. A grievance procedure and a right to appeal protect people in lower positions.

Division of labor

Tasks, responsibilities, and authority are clearly divided and defined.

Impartial application of rules and procedures

Rules and procedures apply to all members of the organization and will be applied in an impartial manner, regardless of one’s position or status

Recorded in writing

All administrative decisions, acts, rules, or procedure will be recorded in writing.

Managers separate from owners

The owners of an organization should not manage or supervise the organization.

Source: M. Weber, The Theory of Economic and Social Organization, trans. A. Henderson & T. Parsons (New York: Free Press, 1947), 329–334.

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argue that bureaucratic managers emphasize punishment for noncompliance much more than rewards for compliance. Ironically, bureaucratic management was created to prevent just this type of managerial behavior. By encouraging managers to apply wellthought-out rules, policies, and procedures impartially and consistently to everyone in the organization, bureaucratic control is supposed to make companies more efficient, effective, and fair. Perversely, as you’ll read in Chapter 16 on control, it can sometimes have just the opposite effect. Managers who use bureaucratic control often put following the rules above all else. Another limitation of bureaucratically controlled companies is that due to their rule- and policy-driven decision making, they can be highly resistant to change and slow to respond to customers and competitors. Despite its advantages over monarchical and patriarchic organizational forms, even Weber recognized bureaucracy’s limitations. He called it the “iron cage” and said, “Once fully established, bureaucracy is among those social structures which are the hardest to destroy.”38

Once fully established, bureaucracy is among those social structures which are the hardest to destroy. MAX WEBER,

SOCIOLOGIST

3.2 Administrative Management: Henri Fayol

© ROGER VIOLLET/THE IMAGE WORKS

Henri Fayol conceived of the principles which today have been distilled into the four functions of management.

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Though his work was not translated and widely recognized in the United States until 1949, Frenchman Henri Fayol (1841–1925) was as important a contributor to the field of management as Frederick Taylor. Like Taylor and Frank and Lillian Gilbreth, Fayol’s work experience significantly shaped his thoughts and ideas about management. But whereas Taylor’s ideas changed companies from the shop floor up, Fayol’s ideas, which were shaped by his experience as a managing director (CEO), generally changed companies from the board of directors down.39 Fayol is best known for developing five functions of managers and 14 principles of management, as well as for his belief that management could and should be taught to others. Like his father, Henri Fayol enrolled in France’s National School of Mines, graduating with an engineering degree at the age of 19.40 His first job as a mining engineer was spent learning how to contain and put out underground fires. In this job, he began the valuable habit of recording notes about actions or happenings that either improved or decreased the productivity of the mine and its workers.41 For instance, he wrote this note to himself about the cause of a work stoppage that occurred when his boss, the managing director, was gone: “May 1861. The horse on the sixth level of the St. Edmund pits broke its leg this morning. I made out an order for its replacement. The stableman refused to accept the order because it did not bear the Director’s signature. The Director was absent. No one was designated to replace him. Despite my entreaties, the stableman persisted in his refusal. He had express orders, he said [not to provide a replacement horse unless the managing director ordered]. The injured horse was not replaced and production at the sixth level was lost.”42 It’s very possible that this experience helped him form the now widely accepted management principle that a manager’s authority should equal his or her responsibility.43 In other words, because he was responsible for the productivity and production of coal at the St. Edmund’s pit, his boss, the managing director, should have given him the authority to take actions, such as signing for a replacement horse, commensurate with that responsibility (see Chapter 9 for more on delegation, authority, and responsibility).

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It’s likely, however, that the most formative events in Fayol’s business career came during his 20 plus years as the managing director (CEO) of Compagnie de Commentry-Fourchambault-Decazeville, commonly known as C OMAMBAULT , a vertically integrated steel company that owned several coal and iron ore mines and employed 10,000 to 13,000 workers. Fayol was initially hired by the board of directors to shut the “hopeless” steel company down. The company was facing increased competition from English and German steel companies, which had lower costs, and from new steel mills in northern and eastern France, which were closer to major markets and thus could avoid the large shipping costs incurred by Fayol’s company, which was located in central France.44 In the five years before Fayol became CEO, production had dropped more than 60 percent, from 38,000 to 15,000 annual metric tons. The company had exhausted a key supply of coal needed for steel production, had already shut one steel mill down, and was losing money at another.45 The company had quit paying dividends to shareholders and had no cash to invest in new technology, such as blast furnaces, that could lower its costs and increase productivity. Therefore, the board hired Fayol as CEO to quickly dissolve and liquidate the business. But after “four months of reflection and study,” he presented the board with a plan, backed by detailed facts and figures, to save the company.46 With little to lose, the board agreed. Fayol then began the process of turning the company around by obtaining supplies of key resources, such as coal and iron ore; using research to develop new steel alloy products; carefully selecting key subordinates in research, purchasing, manufacturing, and sales and then delegating responsibility to them; and cutting costs by moving the company to a better location closer to key markets.47 Looking back 10 years later, Fayol attributed his and the company’s success to changes in management practices. He wrote, “When I assumed the responsibility for the restoration of Decazeville, I did not rely on my technical superiority. . . . I relied on my ability as an organizer [and my] skill in handling men (manoeuvrier des hommes).”48 Fayol concluded, “With the same [coal] mines, the same [steel] mills, the same financial resources, the same markets, the same Board of Directors and the same personnel, solely with the application of a new way of running the company [italics added], the firm experienced a rise [in its performance] comparable to its earlier decline.”49 Based on his experience as a CEO, Fayol argued that “the success of an enterprise generally depends much more on the administrative ability of its leaders than on their technical ability.”50 And, as you learned in Chapter 1, Fayol argued that this means that if managers are to be successful, they need to perform five managerial functions or elements: planning, organizing, coordinating, commanding, and controlling.51 Today, though, most management textbooks have dropped the coordinating function and now refer to Fayol’s commanding function as “leading.” Consequently, Fayol’s management functions are widely known as planning (determining organizational goals and a means for achieving them), organizing (deciding where decisions will be made, who will do what jobs and tasks, and who will work for whom), leading (inspiring and motivating workers to work hard to achieve organizational goals), and controlling (monitoring progress toward goal achievement and taking corrective action when needed). In addition, according to Fayol, effective management is based on the 14 principles in Exhibit 2.5. Finally, along with Joseph Wharton, Fayol was one of the first to argue that management could and should be taught to others. In short, Fayol believed that the principles of management could be taught in colleges and universities and that managers are not born but can be made through a combination of education and experience.

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1.

Division of work

Increase production by dividing work so that each worker completes smaller tasks or job elements.

2.

Authority and responsibility

A manager’s authority, which is the “right to give orders,” should be commensurate with the manager’s responsibility. However, organizations should enact controls to prevent managers from abusing their authority.

3.

Discipline

Clearly defined rules and procedures are needed at all organizational levels to ensure order and proper behavior.

4.

Unity of command

To avoid confusion and conflict, each employee should report to and receive orders from just one boss.

5.

Unity of direction

One person and one plan should be used in deciding the activities to be used to accomplish each organizational objective.

6.

Subordination of individual interests to the general interest

Employees must put the organization’s interests and goals before their own.

7.

Remuneration

Compensation should be fair and satisfactory to both the employees and the organization; that is, don’t overpay or underpay employees.

8.

Centralization

Avoid too much centralization or decentralization. Strike a balance depending on the circumstances and employees involved.

9.

Scalar chain

From the top to the bottom of an organization, each position is part of a vertical chain of authority in which each worker reports to just one boss. For the sake of simplicity, communication outside normal work groups or departments should follow the vertical chain of authority.

10.

Order

To avoid conflicts and confusion, order can be obtained by having a place for everyone and having everyone in their place; in other words, there should be no overlapping responsibilities.

11.

Equity

Kind, fair, and just treatment for all will develop devotion and loyalty. This does not exclude discipline, if warranted, and consideration of the broader general interest of the organization.

12.

Stability of tenure of personnel

Low turnover, meaning a stable work force with high tenure, benefits an organization by improving performance, lowering costs, and giving employees, especially managers, time to learn their jobs.

13.

Initiative

Because it is a “great source of strength for business,” managers should encourage the development of initiative, the ability to develop and implement a plan, in others.

14.

Esprit de corps

Develop a strong sense of morale and unity among workers that encourages coordination of efforts.

Sources: H. Fayol, General and Industrial Management (London: Pittman & Sons, 1949); M. Fells, “Fayol Stands the Test of Time,” Journal of Management History 6 (2000): 345–360; C. Rodrigues, “Fayol’s 14 Principles of Management Then and Now: A Framework for Managing Today’s Organizations Effectively,” Management Decision 39 (2001): 880–889.

Exhibit 2.5 Fayol’s 14 Principles of Management

Review 3: Bureaucratic and Administrative Management Today, when we hear bureaucracy, we think of inefficiency and red tape. Yet according to German sociologist Max Weber, bureaucracy, that is, running organizations on the basis of knowledge, fairness, and logical rules and procedures, would accomplish organizational goals much more efficiently than monarchies and patriarchies, where decisions were made on the basis of personal or family connections, personal gain, and arbitrary decision making. Bureaucracies are characterized by seven elements: qualification-based hiring;

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merit-based promotion; chain of command; division of labor; impartial application of rules and procedures; recording rules, procedures, and decisions in writing; and separating managers from owners. Nonetheless, bureaucracies are often inefficient and can be highly resistant to change. The Frenchman Henri Fayol, whose ideas were shaped by his 20-plus years of experience as a CEO, is best known for developing five management functions (planning, organizing, coordinating, commanding, and controlling) and 14 principles of management (division of work, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interests to the general interest, remuneration, centralization, scalar chain, order, equity, stability of tenure of personnel, initiative, and esprit de corps). He is also known for his belief that management could and should be taught to others.

4 Human Relations Management As we have seen, scientific management focused on improving the efficiency of manufacturing facilities and their workers; bureaucratic management focused on using knowledge, fairness, and logical rules and procedures to increase the efficiency of the entire organization; and administrative management focused on how and what managers should do in their jobs. In contrast, the human relations approach to management focused on the psychological and social aspects of work. Under the human relations management approach, people were more than just extensions of machines; they were valuable organizational resources whose needs were important and whose efforts, motivation, and performance were affected by the work they did and their relationships with their bosses, coworkers, and work groups. In other words, according to human relations management, efficiency alone is not enough to produce organizational success. Success also depends on treating workers well. Let’s find out more about human relations management by learning about 4.1 Mary Parker Follett’s theories of constructive conflict and coordination; 4.2 Elton Mayo’s Hawthorne Studies; and 4.3 Chester Barnard’s theories of cooperation and acceptance of authority.

4.1 Constructive Conflict and Coordination: Mary Parker Follett Mary Parker Follett (1868–1933) was a social worker with a degree in political science who, in her 50s, after 25 years of working with schools and nonprofit organizations, began lecturing and writing about management and working extensively as a consultant for business and government leaders in the United States and Europe. Although her contributions were overlooked for decades, perhaps because she was a woman or perhaps because they were so different, many of today’s “new” management ideas can clearly be traced to her work. Follett is known for developing ideas regarding constructive conflict and coordination. Constructive conflict, also called cognitive conflict, which is discussed in Chapter 5 on decision making and Chapter 10 on teams, is one of Follett’s most important contributions. Unlike most people, then and now, who view conflict as bad, Follett believed that conflict could be beneficial. She said that conflict is “the appearance of difference, difference of opinions, of interests. For that is what conflict means—difference.” She went on to say, “As conflict—difference—is here in this

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world, as we cannot avoid it, we should, I think, use it to work for us. Instead of condemning it, we should set it to work for us. Thus we shall not be afraid of conflict, but shall recognize that there is a destructive way of dealing with such moments and a constructive way.”52 Follett believed that managers could deal with conflict in three ways: domination, compromise, and integration. She said, “Domination, obviously, is a victory of one side over the other. This is the easiest way of dealing with conflict, the easiest for the moment but not usually successful in the long run. . . . As for the second way of dealing with conflict, that of compromise, we understand [it] well, for it is the way we settle most of our controversies; each side gives up a little in order to have peace, or, to speak more accurately, in order that the activity which has been interrupted by the conflict may go on.” Follett continued, “Yet no one really wants to compromise, because that means a giving up of something. Is there then any other method of ending conflict? There is a way beginning now to be recognized at least, and even occasionally followed: when two desires are integrated, that means that a solution has been found in which both desires have found a place that neither side has had to sacrifice anything.” So, rather than one side dominating the other or both sides compromising, the point of integrative conflict resolution is to have both parties indicate their preferences and then work together to find an alternative that meets the needs of both. According to Follett, “Integration involves invention, and the clever thing is to recognize this, and not to let one’s thinking stay within the boundaries of two alternatives which are mutually exclusive.” Indeed, Follett’s ideas about the positive use of conflict and an integrative approach to conflict resolution predate accepted thinking in the negotiation and conflict resolution literature by six decades (see the best-selling book Getting to Yes: Negotiating Agreement without Giving In by Roger Fisher, William Ury, and Bruce Patton). Follett’s writing on the role of coordination in organizations is another of her important contributions. According to Follett, there are four fundamental principles of organizations:

domination an approach to dealing with conflict in which one party satisfies its desires and objectives at the expense of the other party’s desires and objectives compromise an approach to dealing with conflict in which both parties give up some of what they want in order to reach agreement on a plan to reduce or settle the conflict integrative conflict resolution an approach to dealing with conflict in which both parties indicate their preferences and then work together to find an alternative the meets the needs of both

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1.

Coordination as reciprocal relating all the factors in a situation.

2.

Coordination by direct contact of the responsible people concerned.

3.

Coordination in the early stages.

4.

Coordination as a continuing process.

Follett’s first principle recognizes that most things that occur in organizations are interrelated. Make just one change in an organization, and other changes, some expected but some not, will occur. Cut costs, and quality may be affected. Change the raw ingredients used to make a product, and manufacturing procedures may no longer work. Marketing offers customers special incentives to buy more products, and operations has to work overtime to keep up with the increased demand. Accordingly, because of these interrelations, leaders at different levels and in different parts of the organization must coordinate their efforts to solve problems and produce the best overall outcomes in an integrative way. In short, managers cannot manage their part of the organization while ignoring its other parts. What each manager does affects other parts of the organization and vice versa. Follett explains her second principle, coordination by direct contact of the people concerned, and her third principle, coordination in the early stages, this way: “Direct contact must begin in the earliest stages of the process. . . . If the heads of departments confront each other with finished policies, agreement will be found difficult. . . . But if these heads meet while they are forming their policies, meet and discuss the questions

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involved, a successful co-relation is far more likely to be reached. Their thinking has not become crystallized. They can still modify one another.”53 In other words, better outcomes will be achieved if the people affected by organizational issues and problems meet early and directly to address them. Working with those involved or affected will produce more effective solutions than will isolating or ignoring them. With respect to her fourth principle, coordination as a continuing process, Follett said: “It is a fallacy to think that we can solve problems—in any final sense. The belief that we can do so is a drag upon our thinking. What we need is a process for meeting problems. When we think we have solved one, well, by the very process of solving, new elements or forces come into the situation and you have a new problem on your hands to be solved.” Consequently, there is always a need for early, integrative coordination of the people affected by organizational situations, problems, or issues. The need for coordination never goes away. Exhibit 2.6 summarizes, in Follett’s own words, her contributions to management regarding power (“with” not “over” others), the giving of orders (discussing instructions and resentment), authority (flowing from job knowledge and experience, not position), leadership (that leaders make the team and that aggressive, dominating leaders may be harmful), coordination, and control (should be based on facts, information, and coordination). In the end, Follett’s contributions added significantly to our understanding of the human, social, and psychological sides of management. Peter Parker, the former chairman of the London School of Economics, said about Follett: “People often puzzle about who is the father of management. I don’t know who the father was, but I have no doubt about who was the mother.”54

4.2 Hawthorne Studies: Elton Mayo Australian-born Elton Mayo (1880–1948) is best known for his role in the famous Hawthorne Studies at the WESTERN E LECTRIC C OMPANY . His ideas became popular during the early 20th century when labor unrest, dissatisfaction, and protests (some of them violent) were widespread in the United States, Europe, and Asia. In 1919 alone, for example, more than four million American workers went on strike.55 Working conditions contributed to the unrest. Millions of workers in large factories toiled at boring, repetitive, unsafe jobs for low pay. Employee turnover was high and absenteeism was rampant. With employee turnover approaching 380 percent in his automobile factories, Henry Ford had to double the daily wage of his manufacturing workers from $2.50, the going wage at the time, to $5.00 to keep enough workers at their jobs. Workers joined labor unions to force companies to improve their pay and working conditions. In 1913, the federal government created the U.S. Department of Labor “to foster, promote and develop the welfare of working people, to improve their working conditions and to enhance their opportunities for profitable employment.” In 1935, Congress passed the National Labor Relations Act (also known as the Wagner Act), which gave workers the legal right to form unions and collectively bargain with their employers, but prevented companies from engaging in unfair labor practices to “bust” unions. In this historical context, Mayo’s work on the Hawthorne Studies proved highly relevant as managers looked for ways to increase productivity and also to improve worker satisfaction and working conditions.56 The Hawthorne Studies were conducted in several stages between 1924 and 1932 at a Western Electric plant in Chicago. Although Mayo didn’t join the studies until 1928, he played a significant role thereafter, writing about the results in his book, The Human Problems of an Industrial Civilization.57 The first stage of the Hawthorne Studies investigated the effects of lighting levels and incentives on employee productivity in the Relay Test Assembly Room, where workers took approximately a minute to

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Exhibit 2.6 Some of Mary Parker Follett’s Key Contributions to Management Constructive conflict

• “As conflict—difference—is here in this world, as we cannot avoid it, we should,I think, use it to work for us. Instead of condemning it, we should set it to work for us.”

Power

• “Power might be defined as simply the ability to make things happen, to be a causal agent, to initiate change.” • “It seems to me that whereas power usually means power-over, the power of some person or group over some other person or group, it is possible to develop the conception of power-with, a jointly developed power, a co-active, not a coercive power.”

The giving of orders

• “Probably more industrial trouble has been caused by the manner in which orders have been given than in any other way.” • “But even if instructions are properly framed, are not given in an overbearing manner, there are many people who react violently against anything that they feel is a command. It is often the command that is resented, not the thing commanded.” • “An advantage of not exacting blind obedience, of discussing your instructions with your subordinates, is that if there is any resentment, any come-back, you get it out into the open, and when it is in the open you can deal with it.”

Authority

• “Indeed there are many indications in the present reorganization of industry that we are beginning to rid ourselves of the over and under idea, that we are coming to a different conception of authority, many indications that there is an increasing tendency to let the job itself, rather than the position occupied in a hierarchy, dictate the kind and amount of authority.” • “Authority should go with knowledge and experience, that is where obedience is due, no matter whether it is up the line or down.”

Leadership

• “Of the greatest importance is the ability to grasp a total situation. . . . Out of a welter of facts, experience, desires, aims, the leader must find the unifying thread. He must see a whole, not a mere kaleidoscope of pieces. . . . The higher up you go, the more ability you have to have of this kind.” • “The leader makes the team. This is pre-eminently the leadership quality—the ability to organize all the forces there are in an enterprise and make them serve a common purpose.” • “[It is wrong to assume] that you cannot be a good leader unless you are aggressive, masterful, dominating. But I think not only that these characteristics are not the qualities essential to leadership but, on the contrary, that they often militate directly against leadership.”

Coordination

• “One which I consider a very important trend in business management is a system of cross-functioning between the different departments. . . . Each department is expected to get in touch with certain others.” • “Many businesses are now organized in such a way that you do not have an ascending and descending ladder of authority. You have a degree of cross-functioning, of inter-relation of departments, which means a horizontal rather than a vertical authority.” • “The most important thing to remember about unity is—that there is no such thing. There is only unifying. You cannot get unity and expect it to last a day—or five minutes. Every man in a business should be taking part in a certain process and that process is unifying.”

Control

• “Control is coming more and more to mean fact-control rather than man-control.” • “Central control is coming more and more to mean the co-relation of many controls rather than a superimposed control.”

Source: M. P. Follett, Mary Parker Follett—Prophet of Management: A Celebration of Writings from the 1920s, ed. P. Graham (Boston: Harvard Business School Press, 1995).

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put “together a coil, armature, contact springs, and insulators in a fixture and secure the parts by means of four machine screws.”58 Two groups of six experienced female workers, five to do the work and one to supply needed parts, were separated from the main part of the factory by a 10-foot partition and placed at a standard work bench with the necessary parts and tools. Over the next five years, the experimenters introduced various levels and combinations of lighting, financial incentives, and rest pauses (work breaks) to study the effect on productivity. Curiously, however, whether they increased or decreased the lighting, paid workers based on individual production or group production, or increased or decreased the number and length of rest pauses, production levels increased. In fact, Mayo and his fellow researchers were surprised that production steadily increased from 2,400 relays per day at the beginning of the study to 3,000 relays per day five years later. The question, however, was why? Mayo and his colleagues eventually concluded that two things accounted for the results. First, substantially more attention was paid to these workers than to workers in the rest of the plant. Mayo wrote, “Before every change of program [in the study], the group is consulted. Their comments are listened to and discussed; sometimes their objections are allowed to negate a suggestion. The group unquestionably develops a sense of participation in the critical determinations and becomes something of a social unit.”59 The “Hawthorne Effect” cannot be understood, however, without giving equal importance to the “social units,” which became intensely cohesive groups. (For years, the “Hawthorne Effect” has been incorrectly defined as increasing productivity by paying more attention to workers.60) Mayo said, “What actually happened was that six individuals became a team and the team gave itself wholeheartedly and spontaneously to cooperation in the experiment. The consequence was that they felt themselves to be participating freely and without afterthought, and were happy in the knowledge that they were working without coercion from above or limits from below.”61 Together, the increased attention from management and the development of a cohesive work group led to significantly higher levels of job satisfaction and productivity. Mayo and his research colleagues concluded:

• • • •

“There has been an important increase in contentment among the girls working in the test-room conditions.” “There has been a decrease in absences of about 80 percent among the girls since entering the test-room group.” “The changed working conditions have resulted in creating an eagerness on the part of the operators to come to work in the morning.” “The operators have no clear idea as to why they are able to produce more in the test room; but as shown in the replies to the questionnaires . . . there is the feeling that better output is in some way related to the distinctly pleasanter, freer, and happier work conditions.” 62

For the first time, human factors related to work were found to be more important than the physical conditions or design of the work. In short, workers’ feelings and attitudes affected their work.

Although Mayo’s studies used several variables, like lighting and incentives to increase productivity, it turned out that productivity increased no matter what changes were made. Mayo concluded that paying more attention to the workers and the development of the workers into a cohesive group produced higher levels of productivity and job satisfaction.

Workers’ feelings and attitudes affected their work.

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The next stage of the Hawthorne Studies was conducted in the Bank Wiring Room, where “the group consisted of nine wiremen, three solderers, and two inspectors. Each of these groups performed a specific task and collaborated with the other two in completion of each unit of equipment. The task consisted of setting up the banks of terminals side-by-side on frames, wiring the corresponding terminals from bank to bank, soldering the connections, and inspecting with a test set for short circuits or breaks in the wire. One solderman serviced the work of the three wireman.”63 In contrast to the results from the Relay Test Assembly Room, where productivity increased no matter what the researchers did, productivity dropped in the Bank Wiring Room. Again, the question was why? Interestingly, Mayo and his colleagues found that group effects were just as responsible for the decline in performance in the Bank Wiring Room as they were for the increased performance in the Relay Test Assembly Room. The difference was that the workers in the Bank Wiring Room had been an existing work group for some time and had already developed strong negative norms that governed their behavior. For instance, despite a group financial incentive for production, the group members decided that they would wire only 6,000 to 6,600 connections a day (depending on the kind of equipment they were wiring), well below the production goal of 7,300 connections that management had set for them. Individual workers who worked at a faster pace were socially ostracized from the group, or “binged,” hit on the arm, until they slowed their work pace. Thus, the group’s behavior was reminiscent of the soldiering that Frederick Taylor had observed. Mayo concluded, “Work [was] done in accord with the group’s conception of a day’s work; this was exceeded by only one individual who was cordially disliked.”64 In the end, the Hawthorne Studies demonstrated that the workplace was more complex than previously thought, that workers were not just extensions of machines, and that financial incentives weren’t necessarily the most important motivator for workers. By highlighting the crucial role, positive or negative, that groups, group norms, and group behavior play at work, Mayo strengthened Mary Parker Follett’s point about reciprocal relating—make just one change in an organization and others, some expected and some unexpected, will occur. Thanks to Mayo and his colleagues and their work on the Hawthorne Studies, managers better understood the effect that group social interactions and employee satisfaction and attitudes had on individual and group performance.

4.3 Cooperation and Acceptance of Authority: Chester Barnard

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organization a system of consciously coordinated activities or forces created by two or more people

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Like Henri Fayol, Chester Barnard (1886–1961) had experiences as a top executive that shaped his views of management. Barnard began his career in 1909 as an engineer and translator for AT&T , becoming a general manager at Pennsylvania Bell Telephone in 1922 and then president of N EW J ERSEY B ELL TELEPHONE in 1927.65 Furthermore, like Fayol’s views, Barnard’s ideas, published in his classic book, The Functions of the Executive, influenced companies from the board of directors down. Barnard is best known for his ideas about cooperation, the executive functions that promote it, and the acceptance of authority. In The Functions of the Executive, Barnard proposed a comprehensive theory of cooperation in formal organizations. In fact, he defines an organization as a “system of consciously coordinated activities or forces of two or more persons.”66 In other words, “organization” occurs whenever two people work together for some purpose. Thus, organization occurs when classmates work together to complete a class project, when Habitat for Humanity volunteers donate their time to build a house, and when managers work with subordinates to reduce costs, improve quality, or increase sales. Why did Barnard place so much emphasis on cooperation? Because, he said, it is the

Part 1: Introduction to Management

“abnormal, not the normal, condition.” “Failure to cooperate, failure of cooperation, failure of organization, disorganization, disintegration, destruction of organization—and reorganization—are characteristic facts of human history.”67 Barnard argued that managers can gain others’ cooperation by completing three executive functions: securing essential services from individuals, A Dangerous Mix: Power, Authority, formulating an organization’s purpose and objecand Autonomy tives, and providing a system of communication. By “securing essential services from individuals,” Because of their authority to hire, fire, and reward Barnard meant that managers must find ways to employees, nearly all managers have the power encourage workers to willingly cooperate with to influence those who work for them. With jobs, each other and management to achieve organizapromotions, or pay raises on the line, few will tional goals. According to Barnard, managers can challenge what the boss wants, unless, as Chester gain workers’ willing cooperation by offering them Barnard suggested, they’re asked to do somematerial incentives, such as money or tangible thing wrong. Even then, the boss’s power and rewards; nonmaterial incentives, such as recogniauthority can be enough to get some subordition, prestige, personal power, improved working nates to comply. Most dangerous of all, though, conditions, or satisfaction of personal ideals or are managers who have power, authority, and needs; and associational incentives, such as the autonomy. Adding the freedom and indepenchance to work with people they like or to be more dence of autonomy to power and authority is directly involved or associated with key events or like dropping a tank of gasoline on an already processes in the organization.68 burning fire. An explosion is sure to result. Why? By “formulating an organization’s purpose and The reason is that managers with autonomy may objectives,” top executives unify people in the combegin to believe that the “rules” don’t apply to pany by making clear what needs to be accomplished. them. When that happens, they’re much more If the organization’s purpose is clear, then each perlikely to engage in questionable, unethical, son in each job at each level of the company should or illegal behavior. According to Wake Forest understand how his or her daily activities, behaviors, University professors John Dunkelberg and Debra and choices contribute to the accomplishment of that Ragin Jessup, who studied six managers who purpose. This is the ultimate form of cooperation engaged in spectacular cases of unethical and in an organization