Principles of Management

Chapter 1
Understanding the Manager’s Job

principles of management 1
 Learning Goals

• Define management, describe the kinds of managers

found in organizations, and identify and briefly explain
the four basic management functions
• Justify the importance of history and theory to
management and explain the evolution of management
thought
• Discuss contemporary management issues and
challenges

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 Management

• Management is a set of activities

directed at an organization’s
resources with the aim of achieving
organizational goals in an efficient
and effective manner

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 Management

• Activities include the four functions

of management
–Planning (and decision making)
–Organizing
–Leading
–Controlling
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 Management

• Resources include:
–Human
–Financial
–Physical
–Information

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 Management in Organizations

Planning
and decision Organizing
making
Inputs from the environment
• Human resources Goals attained
• Financial resources • Efficiently
• Physical resources • Effectively
• Information resources

Controlling Leading

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 Efficiency
versus
Effectiveness

Source: Van Fleet, David D., Contemporary Management, Second

Edition. Copyright © 1991 by Houghton Mifflin Company. Used with
permissions.

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 Efficiency vs. Effectiveness
Allocates
EFFICIENCY and
Conserves
Doing things Resources

right (effort)

Waste of
Resources

EFFECTIVENESS
Doing the right things (accomplishment)
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 Kinds of Managers by Level and Area

Levels of Management

Top managers

Middle managers

First-line managers

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Areas of Management
 Important Definitions

• Top Managers
• Middle Managers
• First-line Managers
• Operative Employees

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 Managers In Different Areas of The
Organization

• Marketing Managers
• Financial Managers
• Operations Managers
• Human Resource Managers
• Administrative Managers

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 The Management Process
Planning and
Decision Making Organizing
Determining how
Setting the organiza-
best to group
tion’s goals and
activities and
deciding how best
resources
to achieve them

Controlling Leading
Monitoring Motivating members
and correcting of the organization
ongoing activities to work in the best
to facilitate goal interests of the
attainment organization

principles of management
Figure 1.2
12
 The Basic Functions of Management
A Circular Process
Planning and Decision Making

Controlling Organizing

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Leading
 Skills and
the
Manager

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 Fundamental Management Skills
• Management Skill Mixes at Different
Organizational Levels

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 Management: Science or Art?
• Science of Management – some aspects of
management are objective and can be
approached with rationality and logic

• Art of Management – some aspects of

management are subjective and are based on
intuition and experience

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The Evolution of the Study of Management

The importance of history and theory

• Theory
• History

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 The Historical Context of Management
• Management Through the Ages

D Greeks

C Babylonians G Venetians

B Egyptians E Romans

A Sumerians F Chinese

3000 B.C. 2500 B.C. 2000 B.C. 1500 B.C. 1000 B.C. 500 B.C. A.D.500 A.D.1000 A.D.1500

A Used written rules and regulations for governance E Used organized structure for communication and control

B Used management practices to construct pyramids
C Used extensive set of laws and policies for governance
D Used different governing systems for cities and state
F Used extensive organization structure for government
agencies and the arts
G Used organization design and planning concepts to
control the seas

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 An Integrative Framework
of Management Perspectives
Systems Approach
• Recognition of internal
interdependencies
• Recognition of
environmental influences
Contingency Perspective
• Recognition of the situational
nature of management
• Response to particular
characteristics of situation

Classical Behavioral Quantitative

Management Management Management
Perspectives Perspectives Perspectives
Methods for Insights for moti- Techniques for
enhancing vating performance improving decision
efficiency and and understanding making, resource
facilitating planning, individual behavior, allocation, and
organizing, and groups and teams, operations
controlling and leadership

Effective and efficient management

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 Classical Management Perspective

• Scientific Management
– Frederick Taylor
– The Gilbreths
– Henry Gantt

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 Steps in Scientific Management

1 2
Develop a science Scientifically select
for each element of employees and then
the job to replace old train them to do the job
rule-of-thumb methods as described in step 1
3 4
Supervise employees
Continue to plan
to make sure they
follow the prescribed the work, but use
workers to get the
methods for performing
work done
their jobs

Figure 1.3

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The Classical Management Perspective

• Administrative Management – focuses on

managing the total organization
– Henry Fayol
– Lyndal Urwick
– Max Weber

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 Fayol’s Guidelines to Effective
Management Practices
• Division of labor • Renumeration
• Authority • Centralization
• Discipline • Scalar chain
• Unity of command • Order
• Unity of direction • Equity
• Subordination of • Stability
individuals to the • Initiative
common good • Esprit de corps

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 Weber’s Theory of Bureaucracy
• Division of labor
• Reliance on rules and regulations
• Hierarchy of authority
• Employment based on expertise
• Inflexible
• Rigid
• Impersonal

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The Classical Management Perspective
• Contributions
– Laid the foundation for management theory
– Identified key processes, functions, and skills of managers
– still important today
– Made management a valid subject of scientific inquiry
• Limitations
– Best used in simple, stable organizations
– Provided universal procedures that are not appropriate in
all settings
– Most viewed employees as tools rather than resources

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 The Behavioral Management
Perspective
• Placed much more emphasis on individual
attitudes and behaviors and on group
processes in organizations.
• Recognized the importance of behavioral
processes in organizations
– Hugo Munsterberg
– Mary Parker Follet
– Elton Mayo

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 Behavioral Management
Perspective

• Elton Mayo – Hawthorne Studies

– Illumination study
– Group study

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 Human Relations Movement
– Grew out of the Hawthorne studies.
– Proposed that workers respond primarily
to the social context of work, including
social conditioning, group norms,
and interpersonal dynamics.
– Assumed that the manager’s
concern for workers would lead to
increased worker satisfaction and
improved worker performance.

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 Behavioral Management
Perspective
• Abraham Maslow
– Advanced a theory that employees are motivated
by a hierarchy of needs that they seek to satisfy.
• Douglas McGregor
– Proposed Theory X and Theory Y concepts
of managerial beliefs about people
and work.

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 Maslow’s Hierarchy of Needs

• Five levels
– Physiological – hunger, thirst, shelter, sex
– Safety – security and protection
– Social – affection, interpersonal relationships
– Esteem – self-respect, achievement status
– Self-actualization – achieving full potential

• Usually thought in the form of a pyramid

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 Maslow’s Hierarchy of Needs

SA

Esteem Needs

Social Needs

Security Needs

Physiological Needs

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 Theory X and Theory Y

• Theory X Assumptions
– People do not like work and try to avoid it.
– Managers have to control, direct, coerce, and
threaten employees to get them to work
toward organizational goals.
– People prefer to be directed,
to avoid responsibility, and
to want security; they have
little ambition.
Source: Douglas McGregor, The Human Side of Enterprise, Copyright © 1960
by McGraw-Hill. Reprinted by permission of The McGraw-Hill Companies.

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 Theory X and Theory Y
• Theory Y Assumptions
– People do not dislike work; work is a natural part
of their lives.
– People are internally motivated to reach
objectives to which they are committed.
– People are committed to goals to the degree that
they receive rewards when they reach their
objectives.
Source: Douglas McGregor, The Human Side of Enterprise, Copyright © 1960
by McGraw-Hill. Reprinted by permission of The McGraw-Hill Companies.

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 Theory X and Theory Y
• Theory Y Assumptions
– People seek both seek responsibility and accept
responsibility under favorable conditions.
– People can be innovative in solving problems.
– People are bright, but under most organizational
conditions their potentials are underutilized.
Source: Douglas McGregor, The Human Side of Enterprise, Copyright © 1960
by McGraw-Hill. Reprinted by permission of The McGraw-Hill Companies.

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 Theory X – Theory Y

Think of these theories as a continuum

Theory X Theory Y

Employees fall somewhere in between the two ends

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 The Behavioral Management
Perspective

• Contemporary behavioral science in

management – emerged because of the too
simplistic descriptions of work behavior by
the human relations theorists.
• Organizational behavior takes a holistic view
of behavior, including individual, group, and
organization processes

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 Organizational Behavior
• Important topics in organizational behavior
research:
– Job satisfaction and job stress
– Motivation and leadership
– Group dynamics and organizational politics
– Interpersonal conflict
– The structure and design of organizations

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 The Behavioral Management
Perspective
• Contributions
– Gave insights into interpersonal processes such as motivation and
group dynamics in organizations
– Focused managerial attention on these processes
– Challenged the view of employees as tools and not resources
• Limitations
– The complexity of human behavior makes prediction difficult
– Managers may be reluctant to adopt some of the behavioral concepts
– Contributions are often not communicated to the practicing
managers in an understandable form

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 The Quantitative Management
Perspective
• Focuses on decision making, economic
effectiveness, mathematical models, and the
use of computers in organizations
– Management science
– Operations management

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 The Quantitative Management
Perspective
• Contributions
– Developed sophisticated quantitative techniques to assist decision
making
– Models have increased our awareness of complex organizational
processes and have aided in the planning and controlling processes
• Limitations
– Cannot fully explain or predict behavior
– Mathematical sophistication may come at the expense of other
important skills
– Models may require unrealistic or unfounded assumptions

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 Contemporary Management Theory
• The Systems Perspective
– A system is an interrelated set of elements
functioning as a whole. An organization as a
system is composed of four elements:
• Inputs (material and/or human resources)
• Transformation processes (technical and managerial
processes)
• Outputs (products and services)
• Feedback (reactions from the environment)

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 The Integrated Systems Model

Inputs Processing Outputs

From the Transformation Into the
environment:
process: environment
Human
Technology Product
Material Operating systems Services
Financial Administrative Profit/loss
Information systems Employee behavior
Control systems Information

Feedback

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 Systems Perspective
• Open systems interact with one another and
other environments
• Closed systems do not interact with their
environment
• Subsystems recognizes the importance of
subsystems because of their
interdependence

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 Systems Perspective
• Synergy
– Subsystems are more successful working
together than working alone. The whole,
working together, is greater than the sum of its
parts.
• Entropy
– A natural process leading to system decline
which can be avoided through organizational
change and renewal.
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 The Universal Perspective vs The
Contingency Perspective

• The Universal Perspective tries to identify the one

best way to manage an organization, includes
classical, behavioral and quantitative approaches
• The Contingency Perspective suggests that universal
theories cannot be applied to organizations because
each organization is unique – what works in one
situation may not work in another

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 Contemporary Management Issues &
Challenges
• Downsizing
• Diversity and the New Workforce
• Information Technology
• New Ways of Managing
• Globalization
• Ethics and Social Responsibility
• Managing for Quality
• Service Economy
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 Principles of Management

Chapter 2
The Environment of Organizations
and Managers

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 Learning Goals
• Discuss the environment of organizations and identify the
components of the general, task, and internal environments
• Describe the ethical and social environment of management
• Describe the international environment of management
• Discuss the importance and determinants of an
organization’s culture

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 The Organization’s Environment
• External Environment
– General environment
– Task environment
• Internal Environment
– Conditions and forces within an organization.

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The Organization and Its Environments

International Technological
dimension dimension

Competitors

Regulators Owners Customers

Employees
Physical environment
Board of directors
Culture
Political-
Economic
legal
Strategic dimension
dimension Suppliers
partners

Internal environment
Task environment Sociocultural
External dimension
General environment environment

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 Five Dimensions of the
General Environment

• The economic dimension - the overall health and vitality of the

economic system in which the organization operates
• The technological dimension - the methods available for converting
resources into products or services
• The political-legal dimension - government regulation of business
and the relationship between business and the government
• The socio-cultural dimension — the general societal/cultural norms
that the organization functions under
• The international dimension — the extent to which an organization
is involved in or affected by business in other countries.

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 McDonald’s General Environment

Technological
International Dimension Dimension
• Restaurants in 115 • Improved information
countries technology
• About two-thirds of • More efficient
sales from outside operating systems
the United
States

Political-Legal
Dimension McDonald’s Economic
• Government Dimension
food standards • Strong economic
• Local zoning growth
climate • Low unemploy-
• General posture ment
toward business • Low inflation
regulation
Internal environment Sociocultural Dimension
• Demographic shifts in
Task environment number of single adults
External environment
General environment
and dual-income families
• Growing concerns about
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52
 Five Dimensions of the Task
Environment
• Specific groups affecting the organization
• Competitors seeking the same resources as the organization.
• Customers who acquire an organization’s products or resources.
• Suppliers that provide resources for the organization.
• Regulators (agencies and interest groups) that control, legislate, or
influence the organization’s policies and practices.
• Strategic partners (allies) who are in a joint venture or partnership
with the organization.

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 McDonald’s Task Environment

Competitors
• Burger King
• Wendy’s
• Subway
Regulators • Dairy Queen
• Food and Drug
Administration Customers
• Securities • Individual
Exchange
and consumers
Commission • Institutional
• Environmental McDonald’s customers
Protection
Agency

Suppliers
Strategic Partners • Coca-Cola
• Wal-Mart • Wholesale food
• Disney processors
• Foreign partners • Packaging
manufacturers

Internal environment
Task environment

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 How
Organizations
and
Environments
Interact

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 How Business and Government
Influence Each Other
The government influences business
through direct and indirect regulation:
The • Environmental protection legislation
Government • Consumer protection legislation
• Employee protection legislation
• Securities legislation
• The tax codes

Business influences the government

through:
• Personal contacts and networks
Business
• Lobbying
• Political action committees (PACs)
• Favors and other influence tactics

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 The Internal Environment

• Conditions and stakeholder forces within

an organization
– Owners
– Board of Directors
– Employees
– Physical Work Environment - the actual
physical environment of the organization and
the work that people do.

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 Individual Ethics

• Ethical Behavior
– An individual’s personal beliefs regarding what
is right and wrong or good and bad.

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 Determinants of Individual Ethics

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 Managerial Ethics

Are the standards of behavior that guide

individual managers in their work

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 • Conflicts of interest
• Secrecy and
confidentiality
• Honesty
Managerial Employees Organization

Ethics • Hiring and firing

Three areas of concern
for managerial ethics
• The relationships of
the firm to the
employee.
• The employee to the
firm.
• Wages and working
conditions
• Privacy and respect
Subject to ethical ambiguities
• Advertising and promotions
• Ordering and purchasing
• Bargaining and negotiation
• Financial disclosure
• Shipping and solicitation
• Other business relationships

• The firm to other

economic agents. Economic Agents
• Customers
• Competitors
• Stockholders
• Suppliers
• Dealers
• Unions

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 Ethics in Organizations

Organizational Values
+
Individual Values
=
Managerial Values

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 Ethics in Organizations
• Managing Ethical Behavior
– Must begin with top management
– Training on how to handle different ethical
dilemmas.
– Code of Ethics
• A formal, written statement of the values and
ethical standards that guides a firm’s actions
– Individual behavior

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Social Responsibility and Organizations
• Social Responsibility
– The set of obligations (to behave responsibly) that
an organization has to protect and enhance the
social context in which it functions.

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Social Responsibility and Organizations
• Areas of Social Responsibility
– Stakeholders: customers, employees, and
investors.
– The natural environment: environmentally
sensitive products, recycling, and public safety.
– The general social welfare: charitable
contributions, and support for social issues such
as child labor and human rights.

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 Social Responsibility

Voluntary
Responsibilities
being a
“good corporate citizen”;
contributing to the
community and quality of life

Ethical Responsibilities
being ethical; doing what is right, just,
and fair; avoiding harm
Legal Responsibilities
obeying the law (society’s codification of right
and wrong); playing by the rules of the game
Economic Responsibilities
being profitable

Source: Adapted from Archie B. Carroll, “The Pyramid of Corporate

Social Responsibility: Toward the Moral Management of
Organizational Stakeholders.” Business Horizons 34 (July/August 1991): 42.
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 Arguments For and Against
Social Responsibility
Arguments For Social Responsibility Arguments Against Social Responsibility

1. Business creates problems and 1. Business lacks the expertise to

should therefore help solve them. manage social programs.

2. Corporations are citizens in our 2. Involvement in social programs

society. gives business too much power.
Social
Responsibility
3. Business often has the resources 3. There is potential for conflicts
necessary to solve problems. of interest.

4. Business is a partner in our 4. The purpose of business in U.S.

society, along with the govern- society is to generate profit
ment and the general population. for owners.

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 Approaches
to Social
Responsibility

Source: Barney, Jay B. and Ricky W. Griffin, The

Management of Organizations. Copyright © 1992 by
Houghton Mifflin Company. Used with permissions.

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 Managing Social Responsibility
Formal Organizational Dimensions

• Legal Compliance
– Extent to which the organization conforms to local, state,
federal, and international laws
• Ethical Compliance
– Extent to which members of the organization follow
basic ethical/legal standards of behavior
• Philanthropic Giving
– Awarding of funds or gifts to charities and other social
programs

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 Trends in International Business

• Technological advances make this a very small

world
• Decreasing Isolation from Foreign Competition
– U.S. consumer goods markets are open to
overseas competitors.

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 Levels of International Business
Activity
• Exporting
• Importing
• Licensing
• Strategic Alliance and Joint Ventures
• Direct Investment

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 Advantages and Disadvantages of Various
Approaches to Internationalization
Approaches to
Internationalization Advantages Disadvantages

Importing or 1. Small cash outlay 1. Tariffs and taxes

Exporting 2. Little risk 2. High transportation costs
3. No adaptation necessary 3. Government restrictions

Licensing 1. Increased profitability 1. Inflexibility

2. Extended profitability 2. Helps competitors

Strategic Alliance/ 1. Quick market entry 1. Shared ownership (limits

Joint Venture 2. Access to materials and technology control and profits)

Direct Investment 1. Enhances control 1. Complexity

2. Existing infrastructure 2. Greater economic and
political risk
3. Greater uncertainty

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 Environmental Challenges
of International Management

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 Controls on International Trade
• Key Concepts
– Tariffs are collected on goods shipped across national
boundaries.
– Quotas are limits placed on the number or value of
goods that can be traded as exports or imports.
– Export restraint agreements
are voluntary limits on the volume
or value of goods exported to,
or imported from, another country.

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 The Structure of the Global Economy
• Economic Communities
– Sets of countries that engage in high levels
of trade with each other through the elimination
of trade barriers such as quotas and tariffs.
• European Union (EU)
• North American Free Trade Agreement (NAFTA)
• Latin American Integration Association
• Caribbean Common Market

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European Union
(EU)
Member Nations
Source: Lucas, George H.,
Robert P. Bush, and Larry R.
Gresham, Retailing. Copyright ©
1994 by Houghton Mifflin
Company. Used with
permissions.

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76
 The Cultural Environment of International
Buisness
• Language
• The Meaning of Colors
• Nonverbal cues

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 The Organization’s Culture
• Organization Culture – collection of values, beliefs,
behaviors, customs, and attitudes that characterize
a community of people.
• Determinants of Organization Culture
– Organization’s founder
– Articulate the culture through symbols, stories, heroes,
slogans, and ceremonies that embody and personify
the spirit of the organization.
– Corporate success strengthens the culture.

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 Organization Culture
• Managing Organization Culture
– Understand the current culture to understand whether
to maintain or change it.
– Reward and promote people
whose behaviors are
consistent with desired
cultural values.
– Promote shared experiences
that bond organizational members
together.

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 Organization Culture
• Changing Organization Culture
– Develop a clear idea of what kind of
culture you want to create.
– Bring in outsiders to important
managerial positions.
– Adopt new slogans, stories,
ceremonies, and purposely
break with tradition.

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