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Chapter Six

Understanding the Management Process

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Learning Objectives

• Define management• Describe the four basic management

functions: planning, organizing, leading/motivating, and controlling

• Distinguish between various kinds of managers, with regard to level and area of management

• Identify key management skills and managerial roles

• Discuss different types of leadership• Analyze the steps in the managerial decision-

making process

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Learning Objectives

• Describe how organizations benefit from total quality management

• Summarize the criteria for becoming a successful manager today

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CEO Pay Compared to Average Worker Pay

0

100

200

300

400

500

600

CEO Pay Times

WorkerPay

1980 1990 2000 2006

Source: 2007 Trends in CEO Pay, http://www.aflcio.org/corporatewatch/paywatch/pay/index.cfm, accessed 2/8/09.

http://money.cnn.com/2009/08/14/news/companies/highest_paid_ceos/

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What Is Management?

• The process of coordinating people and other resources to achieve the goals of an organization– Material resources

• The tangible physical resources an organization uses

– Human resources• The people who staff the organization and use the other

resources to achieve the goals of the organization

– Financial resources• The funds the organization uses to meet its obligations to

investors and creditors

– Information resources• The information about internal and external business

environmental conditions that the firm uses to its competitive advantage

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The Four Main Resources of Management

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Basic Management Functions

• The Management Process

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Planning

• Planning– Establishing organizational goals and deciding how

to accomplish them• Mission

– A statement of the basic purpose that makes an organization different from others

• Strategic planning– The process of establishing an organization’s major

goals and objectives and allocating the resources to achieve them

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Planning

• Establishing goals and objectives– Goals/Objectives

• An end result that the organization is expected to achieve over a period of time

• Long-term versus short-term

– Properly set goals are• Set at every level in the organization• Consistent (supportive) with each other• Optimized (balanced) to reduce conflicts

between goals

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Organizing the Enterprise

• Organizing– The grouping of resources and activities to accomplish some

end result in an efficient and effective manner

• Leading and motivating– Leading

• Influencing people to work toward a common goal

– Motivating• Providing reasons for people to work in the best interests of the

organization

– Directing• The combined processes of leading and motivating

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Controlling Ongoing Activities

• Controlling– Evaluating and regulating ongoing activities to

ensure that goals are achieved

• Control function

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Kinds of Managers

• Levels of management– Top manager—guides and controls

the overall fortunes of the organization; responsible for the performance of all departments

– Middle manager—implements the strategy and major policies developed by top management; responsible for finding the best way(s) to organize human and other resources to achieve organizational goals

– First-line manager—coordinates and supervises the activities of operating (nonmanagerial) employees

•The coordinated effort of all three levels of managers is required to implement the goals of any company

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Areas of Management Specialization

• Financial managers– Responsible for the organization’s financial resources

• Operations managers– Manage the systems that convert resources into goods

and services• Marketing managers

– Responsible for facilitating the exchange of products between the organization and its customers or clients

• Human resources managers– Manage the organization’s human resources programs

• Administrative managers (general managers)– Not associated with any specific functional area;

provide overall administrative guidance and leadership

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Areas of Management Specialization

• Other areas may have to be added depending on the nature of the firm and the industry

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What Makes Effective Managers?

• Key management skills– Technical skill

• A special skill needed to accomplish a specialized activity

– Conceptual skill• The ability to think in abstract terms

– Interpersonal skill• The ability to deal effectively with other people

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What Makes Effective Managers?

• Managerial roles– Decisional roles

• Involve various aspects of management decision making

– Entrepreneur, disturbance handler, resource allocator, negotiator

– Interpersonal roles• The manager deals with people

– Figurehead, liaison, leader

– Informational roles• A manager either gathers or provides information

– Monitor, disseminator, spokesperson

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Rules for Leaders

• Audit your company cultures

• Stay informed—informed people don’t fear change

• Beware of “aspirational” accounting (e.g. Enron)

• Empower your people — turn them loose

• Prevent erosion of human assets

• Be generous with what you know

Source: “25 Rules for Leaders, 2006,” Fast Company, http://www.fastcompany.com/articles/2002/05/rtsd_quotes.html

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Class Exercise

• For each skill, provide an example of how a

manager could use it in a real-world situation.

– Technical skill

– Conceptual skill

– Interpersonal skill

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Leadership

• The ability to influence others

• Formal leadership

– Legitimate power of position is the basis for authority

• Informal leadership

– Not recognized formally by the organization authority

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Styles of Leadership

• Authoritarian

– Holds all authority and responsibility, with communication usually moving from top to bottom

• Laissez-faire

– Gives authority to employees and allows subordinates to work as they choose with a minimum of interference; communication flows horizontally among group members

• Democratic

– Holds final responsibility but also delegates authority to others, who help determine work assignments; communication is active upward and downward

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Debate Issue: Should Managers Use the Authoritarian Leadership Style?

YES

• Some employees need the close supervision that authoritarian leaders provide.

• When authoritarian leadership is used, communication moves from top (supervisor) to bottom (employees).

• An authoritarian leader assigns workers to specific tasks and expects precise results, so workers know exactly what is expected.

NO

• Workers resent the close supervision that results from the authoritarian leadership style.

• The democratic and laissez-faire leadership styles allow workers to communicate with the supervisor and other members of their group.

• Authoritarian leaders stifle the workers’ creativity and their ability to solve problems.

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Which Leadership Style Is Best?

• Matching style to the situation• Effective leadership depends on

– Interaction among the employees

– Characteristics of the work situation

– The manager’s personality

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0%

5%

10%

15%

20%

25%

30%

35%

40%

SustainedTop-LineGrowth

ProfitGrowth

ConsistentExecution of

Stratey

Adaptabilityto Change

ConsumerRetention

Source: Data from The Conference Board 2006; Challenge survey of 658 CEOs and chairmen.

CEOs’ Top Concerns

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Managerial Decision Making

• The act of choosing one alternative from among a set of alternatives

• Major steps in the managerial decision-making process

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Managerial Decision Making

• Identifying the problem or opportunity– Problem

• The discrepancy between an actual condition and a desired condition

– Opportunity• A “positive” problem

– Problem-solving impediments• Preconceptions about the problem• Focusing on unimportant matters while

overlooking significant issues• Analyzing symptoms rather than causes• Failing to look ahead

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Managerial Decision-Making Process

• Generating alternatives– Brainstorming

• Encouraging participants to come up with new ideas

– “Blast! then refine”• Reevaluating objectives, modifying them if necessary,

and devising a new solution

• Selecting an alternative– Satisficing

• Choosing an alternative that is not the best possible solution, but one that adequately solves the problem

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Managerial Decision-Making Process

• Implementing and evaluating the solution

– Requires time, planning, preparation of personnel, and evaluation of the results

– An effective decision removes the difference between the actual condition and the desired condition

– If a problem still exists, managers may

• Decide to give the chosen alternative more time

• Adopt a different alternative

• Start the process all over again

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Managing Total Quality

• Total Quality Management (TQM)– The coordination of efforts directed at

• Improving customer satisfaction• Increasing employee participation• Strengthening supplier partnerships• Facilitating an organizational atmosphere of

continuous quality improvement

• Issues crucial to TQM– Top management commitment– Coordination of efforts

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What It Takes to Become a Successful Manager

• Personal skills – Oral communication

– Written communication

– Computer skills

– Critical thinking

• Education and experience– A solid academic background

– Practical work experience

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Chapter Quiz

1. People in an organization are what type of resources?a) Materialb) Informationalc) Inventoryd) Humane) Financial

2. In executing their functions, managers must firsta) organize activities.b) establish goals.c) motivate employees.d) evaluate activities.e) select employees.

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Chapter Quiz

3. Roles such as entrepreneur, disturbance handler, and resource allocator are types of _______ roles.a) interpersonalb) informationalc) decisionald) leadershipe) ownership

4. One type of leadership style isa) laissez-faire.b) CEO.c) entrepreneur.d) negotiator.e) bureaucratic.

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Chapter Quiz 5. All of the following are reasons for a greater

focus on quality by U.S. firms except a) competition from foreign firms.b) customers that are more demanding.c) unpredictability on Wall Street.d) poorer financial performance.e) reduced market share.

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Answers to Chapter Quiz

1. People in an organization are what type of resources?a) Materialb) Informationalc) Inventoryd) Human (Correct)e) Financial

2. In executing their functions, managers must firsta) organize activities.b) establish goals. (Correct)c) motivate employees.d) evaluate activities.e) select employees.

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Answers to Chapter Quiz

3. Roles such as entrepreneur, disturbance handler, and resource allocator are types of _____________roles.a) interpersonalb) informationalc) decisional (Correct)d) leadershipe) ownership

4. One type of leadership style isa) laissez-faire. (Correct)b) CEO.c) entrepreneur.d) negotiator.e) bureaucratic.

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Answers to Chapter Quiz

5. All of the following are reasons for a greater focus on quality by U.S. firms except a) competition from foreign firms.b) customers that are more demanding.c) unpredictability on Wall Street. (Correct)d) poorer financial performance.e) reduced market share.