x100©2008 keaw r1 professor kenneth ea wendeln x100 introduction to business review for exam #1...

X100 ©2008 KEAW R1

Professor Kenneth EA Wendeln Professor Kenneth EA Wendeln

X100Introduction to Business

X100Introduction to Business

Review for Exam #1

Lectures 1 thru 8

Review for Exam #1

Lectures 1 thru 8

X100 Review for Exam #1 R1-2

Business: a Definition The organized effort of

individuals & organizations To produce & sell….

for a profit Goods and services to customers

That satisfy a society’s needs


Goods & ServicesGoods & Services

FinancialFinancialResourcesResources

InformationalInformationalResourcesResources

Fundamental Business Resources

Business must effectively combine all four resources to be successful

Business

HumanHumanResourcesResources

MaterialMaterialResourcesResources


SocialismProfessed aims – equitable distribution of income, elimination of poverty, distribution of social services based on need, eliminate economic waste.

Government – owns & controls key industries. Private ownership of smaller businesses may be permitted.

Command Economy – government decides what will be produced, how it will be produced, who gets what is produced and the price.

Visible Socialism – is present in many democratic governments, the most notable with a high degree of socialism include Sweden, Finland and India.

CapitalismAdam Smith – ‘laissez faire’ economy where society’s interest best served when individuals in that society are allowed to pursue own best interest’.

Individuals - own and operate majority of businesses that provide goods and services & have right to own & sell private property.

Market Economy – businesses & individuals decide what to produce & buy. Market determines the quantity sold and prices.

Mixed Economy – the US economy is a ‘modified capitalist’ or ‘free enterprise’ system with some government participation.

Types of Economic Systems

CommunismKarl Marx – ‘classless society’, where individuals contribute based on their capabilities and receive benefits based on their needs.

Government – owns almost all of the economic resources. Practice a strictly controlled type of socialism.

Command Economy – where emphasis is placed on production of goods that the government needs rather than on products consumers might want.

Communism – has dwindled with breakup of the Soviet Union & economic reforms in China. North Korea & Cuba are the best remaining examples.


Key Features of the U.S. ‘Free Enterprise’ System

Consumers’ freedom of choice – to allocate their own resources and spend their own money as they please

Private ownership of land and real property – by individuals and businesses as governed by laws & covenants

Competition – among businesses for the consumers’ dollars Supply & Demand – determined by consumer demand,

availability, prices and market forces Circular Flow – of money for labor, resources & capital in

exchange for goods & services Business Cycles – driven by economic growth & contraction

System of business in which the individuals are free to decide what to produce, how to produce it and what to sell it for.

$$ Profit Motive $$For reinvestment & reward to investors


Circular Flow of Resources in ‘Free Enterprise’

System

ServicesServicesServicesServices

TaxesTaxes

Govt

Sp

en

dG

ovt

Sp

en

dG

ovt

Sp

en

d

Pro

du

cts

Pro

du

cts

Resou

rces

Goods & Services

Goods & Services

Resources Labor & Capital

Resources Labor & Capital

Consumer Spending

Sales Revenue

Wages Rent & Interest

Income

US & LocalGovernments

Resourcemarkets

Productmarkets

HouseholdsConsumers Businesses

TaxesTaxes


Types of CompetitionCompetition - the rivalry among businesses for

sales to potential customers

Pure Competition – many buyers & many sellers Buyers and sellers must accept going price

Monopolistic Competition – many buyers & relatively large number of sellers

Businesses compete with product differentiation

Oligopoly – market or industry with few sellers Each seller has considerable price control

Monopoly – market or industry with only one seller Business with monopoly has complete control over price Natural monopoly – requiring huge capital investment Legal monopoly – with a patent, copyright or trademark ™©


In the past, primary sources of comparative advantage were better access to: Lower cost Labor Markets Financial Markets Technology Natural Resources Geographic Areas

Principle of a Nation’s ‘Comparative Advantage’

With ‘Globalization’ - these sources of advantage are

becoming less important

Nations engage in international trade – because they own resources that enable a nation to produce some goods better & more efficiently than other nations


Artificial Restrictions on International Trade

Tariff Barriers Import duty (or tariff) – tax that is levied on products

entering the country. Raises the price. Dumping – exportation of large quantities of products at

a price lower than same product in home market. Drives down the price.

Non-tariff Barriers Embargo – complete halt to trading of a product. Often

used as a political weapon. Import quota – limits the amount that may be imported. Foreign Exchange control – limits amount of foreign

currency that can be purchased. Has effect of limiting imports.

Currency devaluation – reduction of the value of nation’s currency. Increases cost of foreign sourced goods.

Bureaucratic ‘Red Tape’ – frustrates trade.


8. Joint Ventures

9. Totally Owned Facilities

• Acquisitions

• Subsidiaries

• Overseas Divisions

10.Multinational Companies

International Direct Investments

Trade Arrangements

1. Trading Companies

2. Exporting & Importing

3. Counter Trade

Int’l Contractual Agreements

4. Foreign Licensing

5. Franchising

6. Strategic Alliances

7. Production Agreements

Low

Degree of Control over Business

High

Degree of Financial Risk

Low High

More control usually means more financial risk

Methods of Entering International Business


Globalization . . .. . . In Summary

1. ‘Comparative advantage’ is becoming less & less important

2. Significant reductions in trade tariffs & barriers – encouraged by GATT & WTO

3. Expansion of International Economic Communities – eg NAFTA, EU . . .

The world is ‘getting smaller’ with increasing int’l trade as:

Globalization is a reality today –International trade has tripled since WWII & now accounts for 21% of global income


Forms of Business Ownership

The form of ownership that is selected affects:1. Legal charter & documents needed

2. Regulatory & reporting requirements

3. Financial resources available

4. Owners’ liability & risk of losses

5. Taxes - liabilities & benefits affecting the business affecting the owners (shareholders, partners, or members)

6. Length of life

7. Transfer of ownership

8. Ease of termination

In the United States, an owner can select from a variety of specific forms of business ownership.


General Categories of Business Ownership

2. Partnership General Partnership Limited Partnership Limited Liability Partnership or ‘LLP’

The different forms have evolved in response to the specific needs of business people.

1. Sole Proprietorship

3. Corporation ‘C’ Conventional Corporation ‘S’ Corporation

4. - Limited Liability Company


Relative Business Ownership in the US in 2004-2005

Number of Tax Returns Business Revenues

$1,017 B4.4%

Partnerships$2,569 B11.2%

Source: US Census Bureau, Statistical Abstract of the United States, 2004-05, www.census.gov

Non-Farm SoleProprietorships

18.3 M71.6%

Partnerships2.1 M8.4%

Corporations$19,308 B84.4%

Corporations5.1 M

20.0%


An ‘extension’ of the individual involved:• Easy to form - no legal charter required• UNLIMITED personal liability for the business• Single taxation at personal tax rates

‘Informal Forms’ - SummarySole Proprietorships & Partnerships

IRS Income &

FICA Taxes

Forms of

Ownership

Sole Proprietorships

Partnerships • General

s


‘Formal Forms’ of PartnershipsLimited & Limited Liability Partnerships

IRS Income &

FICA Taxes

STATE Legal

Charters

Forms of

Ownership



• Limited• ‘LLP’

• Limited Partnerships & Limited Liability Partnerships (LLP’s) offer some ‘limited’ liability • Must have a ‘legal charter’ with the state• Single Taxation at personal tax rates

http://www.in.gov/sos...


Entities Governing Forms of Business Ownership

IRS Income &

FICA Taxes

STATE Legal

Charters

SEC Securities

Regulations

Forms of

Ownership



Corporations• ‘C’ Corps • ‘S’ Corps

• Limited• ‘LLP’

• Publicly Traded

Limited Liability Companies• Multi-member • Single-member

http://www.IN.gov/sos/

http://www.sec.gov/


Types of Corporations

1. ‘C’ Corporations ‘Conventional’ or ‘C’ Corp Results in double taxation

‘C’ Corp pays corporate income taxes ‘C’ Corp pays dividends to shareholders -

who may also be taxed on those dividends

2. ‘S’ Corporations A tax elective (subchapter ‘S’) for a conventional

corporation that may be taxed once as a pass- through to each of the shareholders

A corporation may apply to IRS for ‘S’ tax status if certain criteria are met:1. No more than 100 stockholders allowed2. All stockholders must agree to the ‘S’ election3. Must be a domestic corporation4. Only one class of stock allowed5. Stockholders must be individuals, estates & certain trusts6. No nonresident alien stockholders


Hierarchy of Corporate Structure

Board of Directors(hire the Officers)

Officers (set corporate objectives &

select Managers)

Managers(supervise Employees/Associates)

Employees/Associates

Incorporators1. Corporate Charter2. Articles of

Incorporation3. Organizational

Meeting4. Elect the initial

Board of Directors

Owners/Stockholders(elect Board of Directors)


Limited Liability CompanyLLC’s are unincorporated legal entities created under state law – providing the benefits of both liability protection & single pass-thru taxation.

Relatively new business form – all 50 states and District of Columbia now have laws authorizing the formation and operation of LLCs within their borders.

LLCs offer owners liability protection – intent of state laws is to allow the formation of entities that are legally more similar to corporations than partnerships.

LLC owners are referred to as ‘members’ – rather than shareholders or partners.

Earning (& losses) allocated to the members – taxed as a corporation, partnership, or sole proprietorship.

LLCs are NOT corporations & NOT partnerships


Types of Limited Liability Companies

1. Single-member LLCs Recognized on most states, including Indiana Pass through taxation - same as sole proprietor

2. Multi-member LLCs Recognized in all states Limited liability for all LLC members Can be treated either as a Partnership or a

Corporation for federal income tax purposes

Member-managed LLCs LLC statute and operating agreement determine

voting rights Any member has authority to legally bind the LLC

in the ordinary course of business Manager-managed LLCs

Non-manager LLC members have very limited management rights similar to stockholders


Summary & Comparison Forms of Business Ownership

Sole

Proprie-torships

General Limited & LLP

‘S’ Corp Conventional

‘C’ Corp

1 Business Formation

none Partnership Agreement

State State State State

2 Regulations, Reporting, Secrecy

none none State State State & SEC

State

3 Liability – Risk of Loss

Unlimited personal

Unlimited personal

Unlimited & Limited

Limited to investment



4 Access to Fin’l Resources

Personal debt

Partners + debt

Partners + debt

Debt & equity

Debt & equity

Debt & equity

5 Income Taxation

Income once Income once

Income once

Income once

Corp Income + Dividends

Choice of Taxation Method

6 Continuity of Business Life

Death of sole

proprietor

Death/ withdrawal of a partner

Death/ withdrawal of G partner

Perpetual life or

Agreement

Perpetual life or

Agreement

Based on agreement

7 Ease of Transfer of Ownership

Limited – asset sale

Partners’ Agreement

Partners’ Agreement

Stock sale, restrictions

Stock sale Limited

8 Management & Responsibilities

Proprietor manages

All Partners manage

GP manages Hired mgmt Hired mgmt Hired or self- mgmt

Neutral

WorstBest

LLCsPartnership

s

Corporations


ö Tracy ö ™

Entertainmentand

Tennis Centers

‘C’ Corp for IPO & stock trading

Evolution of a BusinessCall Tracy

forTennis Lessons

SoleProprietorshipfor simplicity

ö Tracy’s ö Tennis Pro Shop

and Lessons

Single MemberLLC for limitedliability

ö Tracy ö ™Tennis Center

and Pro Shop

Multi-memberLLC or‘S’ Corpfor investors &single taxation


Small Business and Trends

Not large – of the 23 million businesses in the US, only 17,000 employ more than 500 workers – enough to be considered large

High growth – during the past decade, the number of small businesses in the US has increased nearly 50%

Part-time small business – 5 times growth in recent years and now account for one-third of all small businesses

Importance in providing jobs – small businesses provide over 50% of the jobs in the US

Technical Innovation – more than 50% of the major technological advances of the 20th century originated with individual inventors and small companies

One that is independently owned & operated for profit – and is not dominant in its field

Small business is very important to the US economy - and has helped to fuel its growth


Small Business Administration SBA ‘Smallness’ Guidelines

Service Industries1. Services

< $2.5m to $22m annual receipts

Distribution Industries 2. Retailing

< $6.5m annual receipts

3. Wholesale Trade< 100 employees

Production Industries4. Manufacturing

< 500 to 1500 employees

5. General & Heavy Construction < $31m annual receipts

6. Special Trade Construction < $13m annual receipts

% of Small Businesses

Service48%

Distribution33%

Production19%


Pros & Cons of Small Businesses

Advantages1. Flexibility

Ability to adapt to change

2. Independence You are your own

boss

3. Service Closer to the

customer

4. Simplified Business form Record keeping

5. Specialization

Disadvantages1. Risk of failure

2 out of 3 close their doors within the first 5 years

2. Limited potential Based on technical and

business skills of the owner

3. Limited ability to raise capital 67% begin with <$10,000

4. Little ‘power’ With big customers With major vendors


Characteristics of a Successful Entrepreneur

1. Vision

2. High energy level

3. Self-confidence

4. Optimism

5. Creativity

6. Tolerance for uncertainty

7. Tolerance for failure


Likelihood of Success

“Statistically, over 70% of new businesses can be expected to fail within their first five years.”

Improve your odds & likelihood of success: Good business plan Good advice (eg the SBA) Franchising


Developing a Business Plan

1. Introduction2. Executive

Summary3. Benefits to

Community4. Company &

Industry5. Management

Team6. Operations Plan

A carefully constructed guide for the person starting the business . . . . also serves as a concise document for potential investors.

7. Labor Force8. Marketing

Plan9. Financial

Plan10. Exit

Strategy11. Assessment

of Risk12. Appendix

For more help from the SBA: http://www.sba.gov/smallbusinessplanner/index.html

Alford Media Video


Small Business Administration

Financial Assistance – Loans via private lenders guaranteed by the SBA SBA guaranteed $19.5 billion in loans in 2006 Current maximum is $1 million via lenders, 85% up to $150,000

Assist with Government Procurement – Small business ‘set-aside’ programs Supplementary programs for minority & female owned businesses

Training and Consulting Assistance – SCORE – Service Corps of Retired Executives ACE – Active Corps of Executives SBI – Small Business Institute

Encourage Legislation & Provide Information

“America’s small business resource” established in 1953 to ‘aid, counsel, assist and

protect the interests of small business’

http://www.sba.gov


Franchising

Franchisor Gains fast & selective

distribution with minimal costs

Collects upfront and ongoing fees from the franchisee

Benefits from the investments made by a highly motivated franchisee

Retains a great deal of control over the brand name, product & service

An agreement between a Franchisor & a Franchisee, to market, sell or license products, services or concepts. Franchisee pays fees to the Franchisor.

Franchisee Opportunity to start a

business with limited capital

Makes use of proven concepts & the business experience of the others

Benefits from brand names and national/local promotional activities

One-time franchise fees and continuing royalties can be a financial burden

Sells franchise to


0 2 0 4 0 6 0 8 0 1 0 0

1 0 y e a r s

5 y e a r s

1 y e a r

Sti

ll O

pera

tin

g a

fter

Franchises

Independents

Franchise Success vs Independent Businesses

Source: US DepartmentOf Commerce

%

90%


The Five-Step Management Process

Review and modifyReview and modify

Management - is the process of leading and coordinating people (along with other resources) to achieve the organization’s goals & objectives.

Controlling• Set standards• Measuring• Corrective action

Directing• Leading• Motivating• Delegating• Prioritizing

Organizing• Resources• Activities• Structure• Chain of Command

Planning• Strategic• Tactical• Operational• Contingency• Goal Setting

Managements’ Focus – ‘Getting the Job Done’


Planning

Strategic planning – the fundamental longer-term strategies and key GOALS of the organization

Tactical planning – specific action-oriented OBJECTIVES related to specific functions & departments

Operational planning – very short-term (weekly & daily) plans, BUDGETS & performance expectations

Contingency planning – ‘WHAT-IF’ plans that address possible ‘downside & upside’ economic & business scenarios

Planning – establishing the organization’s mission, goals & objectives and developing strategies & plans to achieve them


The Organizing Process Defining the Jobs

Major FUNCTIONS and related TASKS Organize into WORK ASSIGNMENTS

Departmentalization Group jobs into manageable units - ‘DEPARTMENTS’ or ‘SECTIONS’ Form by major FUNCTION, PRODUCT, LOCATION, hybrid or matrix

Delegation Distribute RESPONSIBILITY & AUTHORITY within the organization

Span of management WIDE or NARROW – number of subordinates reporting to each manager ORGANIZATIONAL HEIGHT – layers or levels of management

Chain of command LINE positions – with direct authority STAFF positions – support positions

Organizing resources, activities and structure

Organizations Video


Corporate OrganizationLevels of Management

Employees/Associates

Officers& Top

ManagementSet corporate goals& select managers.

First-Line ManagementCoordinates & supervises activities of

employees/associates.

Middle ManagementImplements strategy, develops

tactical & operational plans & objectives.Supervises first-line managers.

Board of DirectorsBoard of DirectorsHires the officers.Hires the officers.

CENTRALIZED CENTRALIZED ORGANIZATIONORGANIZATIONManagement Management

systematically works to systematically works to concentrate authority at concentrate authority at the UPPER levels of the the UPPER levels of the

organizationorganization

DECENTRALIZED DECENTRALIZED ORGANIZATIONORGANIZATIONManagement Management consciously consciously attempts to attempts to

spread authority spread authority widely in the widely in the

LOWER levels LOWER levels of the of the

organizationorganization

Delegation

Top Mgm't Video

Middle Mgm't Video


11

33

44

5

Span of Management

‘Organizational Height’ refers to the number of layers or levels of management in an organization

PresidentPresident

Tall Organization-Narrow Span-

Few direct reports

Tall Organization-Narrow Span-

Few direct reports

PresidentPresident

F l a t O r g a n i z a t i o n- W i d e S p a n -

Many direct reports

F l a t O r g a n i z a t i o n- W i d e S p a n -

Many direct reports


Management SKILLS

1.Technical Skills -• Knows the skills needed

to accomplish a job or specialized activity

2.Conceptual Skills –• Ability to think in

abstract ‘holistic’ terms• Vision – the ‘big picture’

3. Interpersonal Skills -• Lead & motivate - deal

effectively with people

DirectingLeading & Motivating …

Effective managers possess certain skills …… and are able to use these skills in a

number of managerial roles.

Managerial ROLES

1.Decision Roles -• Effective management

decision making and delegation

2. Information Roles –• Gathering information• Disseminating and

providing information

3. Interpersonal Roles -• Communicating &

dealing with people


Free reinLaissez-faire

ParticipativeDemocratic

AutocraticBureaucratic

Leadership Styles and Traits

No single leadership trait is effective in all situations.Use a style most appropriate to situation & employees.

Area of FREEDOM for subordinates

Subordinate-centered Subordinate-centered leadershipleadership

Boss-centered Boss-centered leadershipleadership

Use of AUTHORITY by manager

ManagerMAKES

thedecision & announces

it

Manager‘SELLS’

theDecision

ManagerPRESENTS

decision& invites

questions

Managerpresents

‘TENTATIVE’ decision –

but subject to change

based on input from

subordinates

Managerpresentsproblem,

getsSUGGESTIONS,

and makes

the final decision

Manager permits

SUBORDINATES to function

within the LIMITS orGUIDELINES

definedby superior

Adapted from HBR, How to Choose a Leadership Pattern, 6/73


Steps in theDelegation Process

To be successful in an organization, a manager must learn to delegate. No one person can do everything alone.

Manager

Worker

3. Assign accountability3. Assign accountability The OBLIGATION of a worker to accomplish an assigned job or task.The OBLIGATION of a worker to accomplish an assigned job or task.

1. Assign Responsibility1. Assign Responsibility The DUTY to do a job or perform a task.The DUTY to do a job or perform a task.

2. Grant Authority2. Grant Authority The POWER to accomplish an assigned job or task.The POWER to accomplish an assigned job or task.


The Control FunctionControlling - is the process of evaluating and regulating ongoing activities to ensure that goals & objectives are set & achieved.

MeasuringActualPerformance

TakingCorrectiveAction

Setting Goals & Objectives

Evaluating performance to Goals & Objectives


Review & Modify

Review and modifyReview and modify

Review & modify the steps in the process - periodically (usually annually) … or when shortfalls or key economic or competitive events occur.

Controlling• Set standards• Measuring• Corrective action

Directing• Leading• Motivating• Delegating• Prioritizing

Organizing• Resources• Activities• Structure• Chain of Command

Planning• Strategic• Tactical• Operational• Contingency• Goal Setting


The need to grow & develop – and to become all that we are capable of being

The things we need for survival

The things we require for physical & emotional security

Our requirements for love and affection & a sense of well-being

The need for respect, recognition - sense of our own accomplishment & worth

Motivation – Maslow’s Hierarchy of Needs

A NEED is a personal requirement. Maslow’s Hierarchy provides a useful way of viewing employee motivation.

Physiological needsPhysiological needs

Safety needsSafety needs

Social needsSocial needs

EsteemEsteemneedsneeds

Self-Self-acactualizattualizationion

needsneeds

1.

2.

3.

4.

5.


Life itself must be protectedOur most basic need

Basis for physical & emotional security acceptance & belonging

Either have it . . . . . .or driven to find it

‘Self-validation’ – from the inside . . . . . . or the outside from someone else

‘Uniquely ours’ – mark on the world

Vision beyond personal interest

The pursuit of knowledge or answers

Dr. Phil’s - Hierarchy of Needs & Personal Critical Choices

Lower needs must be fulfilled before the next higher need becomes relevant. External vs internal ‘choices’.

Survival needsSurvival needs

Security needsSecurity needs

Love needsLove needs

Self-EsteemSelf-Esteemneedsneeds

Spiritual FulfillmentSpiritual Fulfillment

1.

2.

3.

4.

5.Intellectual FulfillmentIntellectual Fulfillment

Self-ExpressionSelf-Expression6.7.Self- Self-

actual- actual- izationizationneedsneeds

Adapted from: Self Matters by Dr. Phil McGraw


No

Not MotivatedNot Motivated

Yes MotivatedMotivated !!! !!!Yes

Does the person Does the person thinkthink that the that the outcome is outcome is likelylikely ? ?

No

Not MotivatedNot Motivated

Motivation – Vroom’sExpectancy Theory

Vroom’s theory is based on the idea that motivation depends on:

1st - how much people want something . . . AND 2nd - on how likely they think they are to get it.

Does the personDoes the personwantwant the the outcome ?outcome ?


Motivation Factors – increase job satisfaction.

Herzberg’s Motivation – Hygiene Theory

Hygiene Factors – eliminate job dissatisfaction.

Dis- Satisfied

Hygiene Factors

• Supervision• Company Policy• Relationships• Working Conditions• Salary• Personal life• Status• Security

Motivators

Extremely Satisfied

Neutral No Satisfaction – No Dissatisfaction

• Achievement• Recognition• Work itself• Responsibility• Advancement• Growth


‘Six-Step Action-Oriented’ Decision Making Process

Step 1. RECOGNIZE the need - to make a decision

Step 2. LIST - Generate alternatives

Step 3. RANK - Assess the alternatives

Step 4. SELECT - Choose among the alternatives

Step 5. IMPLEMENT the chosen alternative

Step 6. LEARN from feedback & consequencesStep 6.

C l a

s s

i c

a l


Be Aware of Your Biases !

‘Cognitive Biases’ Leading to Systematic Errors

Errors that managers make over and over again that result in poor decision making - examples:

CognitiveBiases » Errors

1. Prior hypothesis bias Tendency to base decisions on strong prior

beliefs even if evidence shows that those beliefs are wrong.

1. Prior hypothesis bias Tendency to base decisions on strong prior

beliefs even if evidence shows that those beliefs are wrong.

2. Representativeness bias Tendency to generalize inappropriately from a

small sample or from a single vivid event or episode.

2. Representativeness bias Tendency to generalize inappropriately from a

small sample or from a single vivid event or episode.

3. Illusion of control Tendency to overestimate one’s own ability to

control activities and events.

3. Illusion of control Tendency to overestimate one’s own ability to

control activities and events.

4. Escalating commitment Tendency to commit additional resources to a

project even if evidence shows that the project is failing.

4. Escalating commitment Tendency to commit additional resources to a

project even if evidence shows that the project is failing.


Group Decision MakingGroup decision making is usually superior to

individual decision making in many respects:1. Group are less likely to fall victim to the cognitive

biases & systematic errors.

2. Draws on combined skills, competencies and knowledge of the group.

3. Ability to process more information and correct each others’ errors.

4. Improves ability to generate more feasible alternatives and make better decisions.

5. Increases the probability that the decision will be implemented successfully.

Beware of the perils of ‘Groupthink’:A pattern of faulty and biased decision making that occurs in groups - whose members strive for agreement among themselves - at the

expense of accurately assessing information relevant to a decision.


Permanent

Temporary

Types of Formal Teams

Management TeamsConsisting mainly of managers from various functions like sales & production. Coordinates work among the other types of teams.

Work TeamsWork teams do just that – the daily work. Becoming increasingly popular. When empowered, the can become self-managed teams.

Quality CirclesIn danger of extinctions, this type, typically made up of workers & supervisors, meets intermittently to air workplace problems & solve quality issues.

Project TeamsProblem-solving teams comprised of knowledge workers who gather and solve a specific problem or meet a specific goal – & then disband.

Virtual TeamsA characteristic of this new type of work team: members talk by computer, flying in and out as needed, and take turns as the leader.


COHESIVENESS of the Group

ALIG

NM

EN

T o

f G

rou

p

& O

rgan

izati

on

al G

oals

High Low

Hig

hLow

Group Cohesiveness and Productivity

Cohesiveness is the degree to which members are attracted to one another and share the group’s goals.

Strong increasein productivity

Moderate increasein productivity

No significant effecton productivity

Decrease in productivity


Conflict and Group Performance

Low HighLevel of ConflictHigh

Low

Level of Group

Performance

Level of Conflict

Low or none Optimal High

Type of Conflict Dysfunctional Functional Dysfunctional

Group’s Internal Characteristics

Stagnant, Apathetic

Unresponsive to change & new ideas

ViableSelf-criticalInnovative

DisruptiveChaotic

Uncooperative

Group Performance

Low

High

Low


Personnel LawEmployment-at-Will Doctrine

Collective Bargaining (Unions)

Individuals’ Rights

Workplace Safety & Security

Employment Discrimination


Employment-at-Will Doctrine

Basic doctrine may be modified by:1. Employment contracts

(written & implied)

2. Union contracts

3. Applicable Federal & State laws and regulations

An employer can hire and fire an employee . . . . at ANY time . . . . for ANY reason . . . or NO reason.

An employee can QUIT. . . at any time . . . without notice.


Collective Bargaining National Labor Relations Act (1935) –

Establishes a collective bargaining process & the NLRB

Labor-Management Relations Act (1947) –

Also known as the Taft-Hartley Act

Provides a balance between union power and management power

Worker Adjustment and Retraining Notification (1988) – Also known as the WARN Act

Requires employer to give employees 60 days notice regarding plant closure or layoff of 50 or more employees


Individuals’ Rights Fair Labor Standards Act (1935) –

Establishes a minimum wage & an overtime pay rate for employees working more than 40 hours per week

Equal Pay Act (1963) –

Specifies that men and women who do equal jobs must be paid the same wage

Family and Medical Leave Act (1993) – Affects only organizations with 50 or more employees

Provides up to 12 weeks of leave without pay upon the birth (or adoption) of an employee’s child

Or if an employee, employee’s child, spouse or parent is seriously ill


Workplace Safety & Security

Occupational Safety and Health Act (1970) – OSHA regulates the degree to

which employees can be exposed to hazardous substances

Specifies the safety equipment that the employer must provide

Employment Retirement Income Security Act (1974) – ERISA regulates company retirement programs

Provides a a federal insurance program for retirement plans that go bankrupt


Employment Discrimination Title VII of the Civil Rights Act (1964) –

Outlaws discrimination in employment practices based on sex, race, color, religion or national origin

Age Discrimination in Employment Act (1967) ADEA outlaws personnel practices that discriminate against

people aged 40 and older 1986 amendment eliminated a mandatory retirement age

Americans with Disabilities Act (1990) – ADA prohibits discrimination against qualified individuals with

disabilities in all employment practices (job application procedures, hiring, firing, advancement, compensation, training and terms of employment)

Civil Rights Act (1991) – Facilitates employees’ suing employers for sexual discrimination

and collecting punitive damages


Ethical Behavior in Organizations

Ethics: is the study of right and wrong – and of the morality of choices individuals make.

Business Ethics: is the motivating force of business behavior (often seen as impositions & constraints).

Level of Business Ethical Behavior

Individual Individual Standards &

Values

Ethical/Unethical Choices in Business

Social Social Factors & Influences

+ Opportunity Opportunity Codes &

Compliance

+

=


Snapshot of anEthical Organization

An ethical company: Treats all stakeholders adequately & fairly Consistently makes fairness the first priority Expects individual, rather than vaguely collective,

accountability Defines objectives & goals that all members value Portrays a clear vision of integrity, exemplified by

management Demands & reward integrity at all times & in all situations

Your role:If you feel good about the company -

you should act in harmony with the firm & its values.

If you feel that the organization is wanting in ethics - you need to make some choices.

The first choice is to act ethically yourself !!!!


Pyramid & Views of Social Responsibility

VoluntaryResponsibilities

Being a ‘good corporatecitizen’ – Contributing to the community & quality of life

Ethical ResponsibilitiesBeing ‘ethical’:

Doing what is right, just & fair;Avoiding harm

Legal ResponsibilitiesObeying the law

(society’s codification of right & wrong)Playing by the ‘rules of the game’

Economic ResponsibilitiesBeing profitable

Source: ‘The Pyramid of Corporate Social Responsibility’, Business Horizons by Carroll, IU

Socio-Economic ModelBusiness should

emphasize not only profits, but also the

impact of its decisions on society

Economic ModelSociety will benefit

most when business is left alone to market

products that society needs – profit focus


General Criteria for Evaluating Courses of

ActionIs the possible course of action:

Legal ?

Ethical ?

Economical ?

Practical ?


Deal & Kennedy’s Corporate ‘Cultural Model’

Corporate culture - the inner rites, rituals and values of a firm

Work-Hard, Play-Hard• Stress comes from quantity of work versus uncertainty• High speed action leads to high speed recreation• Examples: Software Companies, Restaurants

Process Culture• Low stress, plodding work, comfort & security. Stress comes from internal politics & stupidity of the system• Development of bureaucracies & ways to maintain the status quo.• Focus on security of the past & the future• Examples: Banks, Insurance Companies

Tough-Guy ‘Macho’ Culture• Stress comes from high risk & potential loss/gain of reward• Focus on the present … rather than the longer term future• Examples: Surgeons, Police, Sports

Bet-the-Company Culture• Stress coming from high risk and delays before knowing if actions have paid off• The long view is taken, but then much work is put into making sure things happen as planned.• Examples: Aircraft Manufacturers, Oil Companies.

Source: Deal & Kennedy, ‘Corporate Cultures’, 2000 reprinted. ChangingMinds.org

RISK Low High

FEED

BA

CK

& R

EW

AR

DSlo

w

Rapid


Individual Characteristics & ‘Types of Corporate Culture’

Networked Culture• Extrovert energized by relationships• Tolerant of ambiguities & have low needs

for structure• Can spot politics and act to stop negative

politics• Consider yourself easygoing, affable and

loyal to others

Fragmented Culture• Are a reflective & self-contained introvert• Have a high autonomy drive and strong

desire to work independently• Have a strong sense of self• Consider yourself analytical rather than

intuitive

Communal Culture• You consider yourself passionate• Strong need to identify with something

bigger than yourself• You enjoy being in teams• Prepared to make sacrifices for the

greater good

Mercenary Culture• Goal-oriented and have an obsessive desire to complete tasks• Thrive on competitive energy• Keep ‘relationships’ out of work – develop them only to achieve your goals• Keep things clear cut and see the world

in black and white

Solidarity - UnityLow High

Source: ‘Types of Corporate Culture’ from The Character of the Corporation by Goffee & Jones

Socia

bilit

y

Low

High

x100©2008 keaw r1 professor kenneth ea wendeln x100 introduction to business review for exam #1...

Documents

economic resources

goods services business

resources capital

business review

command economy government

circular flow of resources

profit goods

us economy