Chapter 7

Management, Leadership and the Internal Organization

Management: The process of achieving organizational goals through people and other
resources

 Managers job is to combine human and technical resources in the best way possible to
achieve the company’s goals
Management Hierarchy
- Top Management
o Highest level of management, which includes CEO, CFO and CIO
o Spend most of their time developing long range plans for their organizations
o Decide whether to:
 Introduce new products
 Enter new geographical markets
 Purchase other companies
o Top managers set a direction for their firm and motivate executives and
employees
- Middle Management
o Second level of management, which includes regional and branch managers
o Focus attention on specific operations, products or consumer groups
o Develop detailed plans and procedures to carry out firm’s strategic plans
o More familiar with day-to-day operations than CEO’s
- Supervisory (First-Line) Management
o Last level of management, which includes supervisors and team leaders
o Assign specific jobs to nonmanagerial employees and assess their performance
o Carry out middle-management plans by motivating employees to achieve goals

Skills Needed for Managerial Success

- Technical Skills
o Manager’s ability to understand and use techniques and skills of a specific
department or area of study
o Not as important at top levels of management, but most executives started as
technical experts
- Human Skills
o Interpersonal skills which help managers to work effectively with people
o Include ability to communicate with, motivate and lead employees to complete
assigned activities
 o Can be used both inside and outside the firm
- Conceptual Skills
o Help a manager to see the organization as a single unit and understand how
each part of overall organization interacts with other parts
o People with conceptual skills can see big picture by acquiring, analyzing and
interpreting information
o Conceptual skills are especially important for top level managers

Managerial Functions
- Planning
o Process of looking forward to future events and conditions and deciding on the
courses of action for achieving goals
o Effective planning helps a firm to:
 Focus its vision
 Avoid costly mistakes
 Seize opportunities
o Planning should be flexible and responsive to change, and involve managers of
all levels
o Planning for future is more important than ever because:
 Global competition is stronger
 Technology continues to expand
 New innovations are coming to market faster
- Organizing
o Process of blending human and material resources through a formal structure of
tasks and authority; arranging work, dividing tasks etc. to ensure plans are
carried out
o Involves classifying and dividing work into manageable units
- Directing
o Involves guiding and motivating employees to accomplish organizational goals
o Directing can include:
 Training
 Setting up schedules
 Monitoring progress
- Controlling
o Function of assessing an organization’s performance against its goals
o Assesses success of planning function, and provides feedback for future rounds
of planning
o Has four basic steps:
 Setting performance standards
 Monitoring actual performance
  Comparing actual performances with standards
 Making corrections if needed
Setting A Vision and Ethical Standards
Vision: The ability to perceive marketplace needs and what an organization must do to satisfy
them

 Vision focuses firm actions and directs company towards opportunities

 Company vision must be focused and flexible so as to adapt to change
 Ethical standards set by top management are also important to a firm’s long-term
relationships
 High ethical standard encourages employees to achieve goals and keeps them from
doing wrong
 Satisfaction can create a more productive, stable workforce that provides a competitive
advantage
 Ethical decisions aren’t always clear, and firms must make difficult decisions
Types of Planning
- Strategic Planning
o Most far-reaching level of planning
o Involves deciding on firm’s primary objectives and setting aside resources to
achieve these
o Generally done by top executives
- Tactical Planning
o Involves implementing activities specified by strategic plans
o Guide current and near-term activities needed to implement strategies
o Done by middle-management and supervisors
- Operational Planning
o Sets the detailed standards that help carry out tactical plans
o Involves choosing specific work targets and assigning employees and teams to
carry out plans
o Deals with developing and implementing tactics in specific functional areas
o Done by middle-management and supervisors
- Contingency Planning
o Helps firms handle major accidents and natural disasters
o Helps firms resume operations as quickly and as smoothly as possible after a
crisis
o Involves two components
 Continuing the business
 Communicating to the public
 o Plan usually outlines a chain of command for crisis management and assigns
specific emergency functions to individuals
Steps in the Strategic Planning Process
1. Define the Organization’s Mission
2. Assess the Organization’s Competitive Position
3. Set Objectives for the Organization
4. Create Strategies for Competitive Differentiation
5. Turn Strategy into Action
6. Evaluate Results and Refine the Plan
Defining the Organization’s Mission
Mission Statement: A written description of an organization’s overall business purpose and
aims

 MS can highlight range of operations, market served and differentiation strategy

 MS can be short or long
Assessing Your Competitive Position
SWOT analysis: SWOT is a short form for Strengths, Weaknesses, Opportunities and Threats. By
assessing all four factors one by one, a firm can then develop the best strategies for gaining a
competitive advantage
Setting Objectives for the Organization
Objectives: Guideposts by which managers define the organization’s desired performance in
areas such as new-product development and sales

 Mission Statement identifies overall goals, but objectives are more concrete
Creating Strategies for Competitive Differentiation

 Firm needs to decide on strategies it will use to reach its target ahead of the
competition
 Competitive differentiation is the unique mix of a company’s abilities and resources that
set it apart from its competitors
 A firm might differentiate itself by being the first to introduce a product
Implementing the Strategy

 Middle managers or supervisors are often the people who actually implement strategies
 Companies that are willing to empower employees usually profit from that decision
 Many firms have a strategy of cutting costs and maintaining high level of customer
service
  Can be done through cross-training call centre representatives
 This can reduce cost of running call centre and increase employee morale
Monitoring and Adapting Strategic Plans

 Involves gathering feedback about performance

 Managers might:
o Compare actual sales against forecast sales
o Compile information from surveys
o Listen to complaints from customer hotlines

Managers as Decision Makers

Decision Making: The process of seeing a problem of opportunity, assessing possible solutions,
selecting and carrying out the best suited plan, and assessing the results
- Programmed Decision
o Involves simple, common and frequently occurring problems that already have
solutions
o Include
 Reordering supplies
 Renewing a lease
o Programmed decisions save manager’s time and company’s money
- Nonprogrammed Decision
o Involves a complex and unique problem or opportunity and has important
results for the organization
o Include:
 Entering a new market
 Deleting a product from the line
 Developing a new product
Steps in the Decision Making Process
1. See Problem or Opportunity
2. Develop Possible Ways of Taking Action
3. Evaluate Options
4. Select and Carry out One Option
5. Assess Outcome
Managers as Leaders
Leadership: The ability to direct or inspire people to reach goals

 Three important qualities to be a good leader are:

o Empathy
 o Self-Awareness
o Objectivity

Leadership Styles
- Autocratic Leadership
o Form of leadership that is centred on a boss
o Autocratic leaders make decisions on their own without consulting employees
o Make decisions, communicate decision and expect it to be carried out right away
- Democratic Leadership
o Includes employees in the decision making process
o Centres on employees contributions and empowerment
o Democratic Leaders:
 Assign projects
 Ask employees for suggestions
 Encourage participation
- Free-Rein Leadership
o Free-Rein leaders believe in minimal supervision and allow employees to make
most of their own decisions
o Free-Rein leaders communicate with employees frequently

Corporate Culture
Corporate Culture: An organization’s collection of principles, beliefs and values

 Corporate Culture is typically shaped by leaders of the company

 CC’s can be very strong and lasting, but may need to change to meet new demands in
the business world
 Firm that is traditional and bureaucratic may need to shift to a leaner, more flexible
culture in light of shifts in technology/consumer preferences
 In an organization with a strong culture, everyone knows and supports same principles,
beliefs and values
Steps in Organizing Process
Organization: A structured group of people working together to achieve common goals
1. Decide on Specific Work Activites
2. Group all Work Activities into a Pattern or Structure
3. Assign Activites to Specific Employees
4. Coordinate Activities of Different Groups and Individuals
5. Evaluate Results of Organizing Process
Organizational Structures
  As a company grows, its structure becomes more complex, often means more
specialization and more employees
 An effective structure is clear and easy to understand
Five Major Forms of Departmentalization
Departmentalization: Process of dividing work activities into units within the organization
- Product Departmentalization
o Organizes work units based on goods and services offered by company
- Geographical Departmentalization
o Organizes units by geographical units within a country or by region throughout
the world
- Customer Departmentalization
o Organizes units by different types of consumer served
- Functional Departmentalization
o Organizes work units according to business function e.g. finance/marketing
- Process Departmentalization
o Organizes work units according to role in production process

Delegation
Delegation: Managerial process of assigning work to employees

 Delegation can make employees happier and satisfy consumers

 However it means employees must be held accountable for their actions
 Managers must also decide on best ways to delegate responsibilities when employees
belong to different age groups
Span of Management

 SOM is the number of employees a manager supervises

 First line managers often have the widest spans of management
 SOM varies depending on work performed and employee training
Centralization: Keeping decision making at the top of the management hierarchy
Decentralization: Pushing decision making down towards operating employees
Types of Organization Structures
- Line Organizations
o Sets up a direct flow of authority from chief executive to employees
o Defines a simple, clear Chain of Command (hierarchy of managers and workers)
o Decisions can be made quickly and is effective in crisis
o Each manager has complete responsibility for a range of activities
 o May be inefficient in smaller businesses
- Line-and-Staff Organizations
o Combines direct flow of authority of a line organization with staff departments
that support line departments
o Staff departments lend specialized technical support e.g. finance, engineering
and HR departments
o Staff managers don’t have authority to give orders outside their own department
o Common in mid-size and large organizations
o Combines rapid decision making and direct communication of line organization
with expert knowledge of staff departments
- Committee Organizations
o Places authority and responsibility in a group of individuals, rather than one
manager
o Often appears as part of a regular line-and-staff structure
o New Product Committee can include managers from accounting, engineering,
finance etc.
o Usually improves planning process and employee morale
o Slow decision-making speed and conservative decisions are drawbacks
- Matrix Organizations
o Links employees from different parts of the organization who work together on
specific projects
o Project manager assembles a group of employees from different functional areas
o Ties to line-and-staff structure are kept, when project is completed the
employees return to ‘regular’ jobs
o Each employee reports to line manager and project manager
o Popular at high-tech and multinational firms
o Flexible and adaptable system, and provides an outlet for employee creativity
o Challenges project managers to take skills of specialists from many departments
and form coordinated ream