Entrepreneurial Management Prelims 11-18-19

Elective Course 1 – Entrepreneurial Management
Introduction
Entrepreneurial Management --- Entrepreneurial management is discipline that
deals with ventures, innovation, strategies which will take idea into market, and to
make venture a successful business. Entrepreneurship is about overcoming
ambiguity, risk and failure, embracing it, and learning from it.
Peter Drucker remarked that for the existing large company, the controlling
word in the phrase “entrepreneurial management” is “entrepreneurial.” In any new
business venture, the controlling word is “management.” Therefore, for the purposes of
our discussions we lean toward “management” as a discipline for entrepreneurs. We
define entrepreneurial management as the practice of taking entrepreneurial
knowledge and utilizing it for increasing the effectiveness of new business venturing as
well as small- and medium-sized businesses.
A successful entrepreneur has management skills to accurately research his
market and develop a comprehensive, multi-year business plan. This includes
accounting for growth and development, taking on employees, financing operations
and marketing and running or overseeing the day-to-day business functions.
Entrepreneurs vs Managers.
The main difference between Entrepreneur and Manager is their role in
the organization. Entrepreneur is a risk taker, they take financial risk for their
enterprise.
An entrepreneur focuses on business start-up whereas the main focus of
a manager is to manage ongoing operations. Achievements work as a motivation
for entrepreneurs. On the other hand, the primary motivation is the power.
An entrepreneur is the owner of the enterprise while a manager is just an employee of
the company.
Serial entrepreneurs often help reinforce the stereotype
that entrepreneurs don't make good managers.
To be successful, these entrepreneurs need to learn how to build a strong team
that has a passion for the business and want to manage its growth.
Why study management?
The universality of management. The need for management in organizations is
needed in all types and sizes of organizations, at all organizational levels and in all
organizational work areas, and in all organizations, no matter where they are located.
This is known as the universality of management.
The reality of work. Another reason for studying management is the reality
that most of you will begin your career after college. For those who plan to be
managers, an understanding of management forms the foundation upon which to
build your management skills. For those who do not see themselves managing, you
will still likely be working with managers, or you may probably be having managerial
responsibilities even in the supervisory level.
The study of Entrepreneurial Management is designed to help students acquire
an entrepreneurial mindset that will prepare them to launch new ventures or manage
growing companies.
This course will explore entrepreneurship and identify and many contexts in
which entrepreneurship manifests, including start-up, corporate, social, and public
sector. It will prepare students for starting and succeeding in an entrepreneurial
Entrepreneurial Management (EC 1)
Lecture Notes of P.M.C. Aurelio 2nd Semester AY 2019-2020 Prelims Page 1 of 27
venture. The main course deliverable is a complete business plan and a presentation
to an outside group of investors. This course will enable participants to sharpen their
ability to find and evaluate opportunities for a new venture, as well as to think
creatively and solve problems in highly unstructured situations. A broad range of
topics essential to entrepreneurial ventures will be covered, including idea generation,
feasibility analysis, raising capital, marketing strategies, financial modeling, attracting
a capable team, creating a culture, and preparing for growth. In addition, the course
will cover buying a business, franchising, and family business.
Part 1 Management
1.1.1The Management Process: Introduction to Contemporary Management
What are the challenges of working today?
 People and their talents – what they know, what they learn, and what they do
with it – are the ultimate foundations of organizational performance. They
represent what managers call intellectual capital.
 Intellectual Capital is the collective brainpower or shared knowledge of a
workforce.
 IC=Competency x Commitment
 Technology is continuously testing our talents.
 Tech IQ is the ability to use technology and at work and everyday living, and a
commitment to stay informed on the latest technological developments. It is
required in basic operations of organizations, whether one is checking
inventory, making a sales transaction, ordering supplies, or analyzing customer
preferences.
 Globalization is the worldwide interdependence of resource flows, product
markets and business competition that characterizes our economy.
 It is a process in which improvements in technology – especially in
communications and transportation, combine with the deregulations of markets
and open boarders to bring about vastly expanded flows of people, money
goods, services and information.
 Ethics is a set of moral standards of what is “good” and “right” in one’s
behavior. A code of moral principles sets an example of what is “good” and
“right” as opposed to “bad” and “wrong” in the conduct of a person or a group.
 Workforce Diversity describes the differences among workers in gender, race,
age, ethnicity, religion, sexual orientation, and able-bodiedness.
 Prejudice is the display of negative, irrational attitudes toward members of
diverse populations. Prejudice becomes discrimination.
 Discrimination actively denies minority members the full benefits of
organizational membership. A subtle form of discrimination is the glass ceiling
effect.
 The glass ceiling effect is an invisible barrier limiting career advancement of
women and minorities.
 Today’s career challenge is not just finding your first job; it is also successful
career planning.
 Shamrock organization operates with a core group of full-time long-term
workers supported by others who work on contracts and part-time.
 The full-time employees follow standard career paths and they comprise
the core group who are supported by the “freelancers” and “independent
contractors” who provide specialized skills and talents on a contract basis, and
then change employers when projects are completed.
 In a free-agent economy people change jobs more often, and many work on
independent contracts with a shifting mix of employers. Skills must be up-to-
date, portable, and always of value. Job skills must be carefully maintained and
upgraded all the time.
 Early career survival skills:
1. Mastery
2. Networking
3. Entrepreneurship
4. Love of technology
5. Marketing
6. Passion for renewal
 Self-management is the ability to understand oneself, exercise initiative, accept
responsibility, and learn from experience.
1.1.2 Organizations in the New Workplace

What is an organization?
 Organization- is a collection of people working together to achieve a common
purpose. The broad purpose is to provide goods or services of value to
customers and clients.
Sources of Organizational Strengths and Performance Advantage
1. -“quality products and services”
2. -“customer satisfaction”
3. -“social responsibility”
Organizations as Systems
 Open System- transforms resource inputs from the environment into product
outputs. It is the continual process of obtaining resource inputs; people,
information, resources, and capital, and transforming them into outputs in the
form of finished goods and services.

The environment supplies The organization creates The environment consumes
Resource Inputs
People Product outputs
Money
Materials Work
Work activities
activities turn
turn resources
resources Finished goods
Technology into
into inputs
inputs Finished services
Information Transformation
Transformation Process
Process
Transformation
Process
Consumer Feedback
Management Key Concepts

 Organizations - People working together and coordinating their actions to
achieve specific goals.
 Organizational Goal - A desired future condition that the organization seeks
to achieve.
 Organizational Management - The process of using organizational resources
to achieve the organization’s goals by...
o Planning, Organizing, Leading, and Controlling
 Productivity - one of the most common ways to assess performance; through
quantity and quality of work performance, with resource utilization considered.
 Performance Effectiveness
 Performance Efficiency
 Managers- help activate the work efforts and performance accomplishments of
others.
 Planning- process of setting objectives and determining what should be done to
accomplish them.
 Organizing- arranging tasks, people, and other resources to accomplish the
work
 Leading- inspiring people; process or arousing enthusiasm and inspiring efforts
to achieve goals
 Controlling- measuring performance and taking action to ensure desired
results; process of measuring performance and taking action to ensure desired
results
 Agenda Setting- good managers develop action priorities that include goals and
plans spanning long and short time frames; good managers implement their
agendas by working with many people inside and outside the organization.
 Networking- process of creating positive relationships with people

 Skill- ability to translate knowledge into action
 Technical Skill- ability to use a special proficiency or expertise to
perform particular task
 Human Skill- ability to work well in cooperation with other people
Emotional Intelligence- ability to manage ourselves and our
relationships effectively
 Conceptual Skill- ability to think analytically to diagnose and solve
complex problems
Cognitive Intelligence- ability to identify cause and effect patterns
1.1.3 Managers and Managing in the New Workplace

Management Key Concepts
 Resources are organizational assets and include:
 People,
 Machinery,
 Raw materials,
 Information, skills,
 Financial capital.
 Managers are the people responsible for supervising the use of an
organization’s resources to meet its goals.
Achieving High Performance
 Organizations must provide a good or service desired by its customers.
◦ David Johnson of Campbell Soup manages his firm to provide quality
food products.
◦ Physicians, nurses and health care administrators seek to provide
healing from sickness.
◦ McDonald’s restaurants provide burgers, fries and shakes that people
want to buy.
 Organizational Performance - measures how efficiently and effectively
managers use resources to satisfy customers and achieve goals.
 Productivity- is measuring the quantity and quality of outputs relative to
the cost of inputs. It is work performance, with resource utilization considered and is
one of the most common ways to assess performance by and within Organizations.
Organizational Performance
◦ Performance Effectiveness- is an output measure of task or goal
accomplishment. A measure of the appropriateness of the goals chosen (are
these the right goals?), and the degree to which they are achieved.
 Organizations are more effective when managers choose the
correct goals and then achieve them.

◦ Performance Efficiency- an input measure of resource cost associated
with goal accomplishment. A measure of how well resources are used to achieve
a goal.
 Usually, managers must try to minimize the input of resources to
attain the same goal.
What is a manager? Definition

 A Manager is a person who supports, activates, and is responsible for the work
of others.
 Examples: team leader, department head, supervisor, project manager,
president, administrator, etc.
Management Levels Levels of Managers Types of Managers

Top Management Top Managers General Managers
Administrators
Middle Management Middle Managers Functional Managers
First-line Management First-line Managers Line Managers
Staff Managers
Management Levels
 Organizations often have 3 levels of managers:
1. First-line Managers: responsible for day-to-day operation. They supervise
the people performing the activities required to make the good or service. They directly
contribute to producing the organization’s goods or services.
2. Middle Managers: Supervise first-line managers. They are also responsible
to find the best way to use departmental resources to achieve goals. They oversee the
work of large departments or divisions.
3. Top Managers: Responsible for the performance of all departments and
have cross-departmental responsibility. They establish organizational goals and
monitor middle managers. They guide the performance of the organization.
Types of Managers:
1. Line Managers - are directly contributing to producing the organizations
goods and services.
2. Staff Managers - use special technical expertise to advice and support line
workers.
3. Functional Managers – are responsible for one area such as finance,
marketing, production personnel, accounting, or sales.
4. General Managers - are responsible for complex, multifunctional units
5. An Administrator is a manager in a public or non-profit organization.

Three Levels of Management
Typical Business Typical Non Profit
Board of Directors Board of Trustees
Chief Executive Officer Executive Director

President Top President
Vice President Administrator
Managers Vice President
Division Manager Division Manager

Regional Manager Regional Manager
Plant Manager Middle Managers
Department Head First-line Managers Department Head

Supervisor Supervisor
Team Leader Team Leader
Non-management
Managerial Performance
Accountability is the requirement to show performance results to a
supervisor.
Corporate governance occurs when a board of directors hold top
management accountable for organizational performance.
An effective manager helps others achieve high performance and
satisfaction at work.
Quality of work life is the overall quality of human experience in the
workplace.
Changing the Nature of Managerial Work

 The upside-down pyramid view of organization shows customers at the top
being served by workers who are supported by managers.

Customers and Clients: Ultimate beneficiaries to the organization’s efforts
Serve
Frontline operating workers: do work directly affecting client satisfaction

Support
Team Leaders & Managers: help the operating workers do

their jobs & solve problems
Support
Top
Top Managers:
Managers:
Keep
Keep organization’s
organization’s missions
missions and
and strategies
strategies clear
clear
1.1.4 The Management Process

 The management process is planning, organizing, leading, and controlling the
use of resources to accomplish performance goals.
All managers, regardless of title, level, type and organizational setting, are
responsible for the four functions. However, they are not accomplished in a
linear, step-by-step fashion. These functions are continually engaged as a
manager moves from task to task and opportunity to opportunity in his or her
work.
Managerial Functions
 Henri Fayol was the first to describe the four managerial functions when he was
the CEO of a large mining company in the later 1800’s.
 Fayol noted managers at all levels, operating in a for profit or not for profit
organization, must perform each of the functions of management.
Four Functions of Management
1. Planning- process of setting objectives and determining what should be done
to accomplish them.
2. Controlling- measuring performance and taking action to ensure desired
results; process of measuring performance and taking action to ensure desired results.
3. Leading- inspiring people; process or arousing enthusiasm and inspiring
efforts to achieve goals.
4. Organizing- arranging tasks, people, and other resources to accomplish the
work.
Planning
Planning is the process used by managers to identify and select appropriate
goals and courses of action for an organization.
Three steps to good planning:
1. Which goals should be pursued?

2. How should the goal be attained?
3. How should resources be allocated?
◦ The planning function determines how effective and efficient the
organization is and determines the strategy of the organization.
Organizing
 In organizing, managers create the structure of working relationships
between organizational members that best allows them to work together and achieve
goals.
Managers will group people into departments according to the tasks
performed.
Managers will also lay out lines of authority and responsibility for
members.
 An organizational structure is the outcome of organizing. This structure
coordinates and motivates employees so that they work together to achieve
goals.
Leading
 In leading, managers determine direction, state a clear vision for employees to
follow, and help employees understand the role they play in attaining goals.
 Leadership involves a manager using power, influence, vision, persuasion, and
communication skills.
 The outcome of the leading function is a high level of motivation and
commitment from employees to the organization.
Controlling
 In controlling, managers evaluate how well the organization is achieving its
goals and takes corrective action to improve performance.
 Managers will monitor individuals, departments, and the organization to
determine if desired performance has been reached.
◦ Managers will also take action to increase performance as required.
 The outcome of the controlling function is the accurate measurement of
performance and regulation of efficiency and effectiveness.
1.1.5 Management Skills and Competencies

Managerial Roles and Activities
 Described by Mintzberg.
◦ A role is a set of specific tasks a person performs because of the position
they hold.
 Roles are directed inside as well as outside the organization.
There are three broad role categories:
1. Interpersonal Roles- how a manager interacts with other people
2. Informational Roles- how a manager exchanges and processes information
3. Decisional Roles- how a manager uses information in decision making
Interpersonal Roles
 Roles managers assume to coordinate and interact with employees and
provide direction to the organization.
◦ Figurehead role: symbolizes the organization and what it is trying to
achieve.
◦ Leader role: train, counsel, mentor and encourage high employee
performance.
◦ Liaison role: link and coordinate people inside and outside the
organization to help achieve goals.
Informational Roles
 Associated with the tasks needed to obtain and transmit information for
management of the organization.
◦ Monitor role: analyzes information from both the internal and external
environment.
◦ Disseminator role: manager transmits information to influence
attitudes and behavior of employees.
◦ Spokesperson role: use of information to positively influence the way
people in and out of the organization respond to it.
Decisional Roles
 Associated with the methods managers use to plan strategy and utilize
resources to achieve goals.
◦ Entrepreneur role: deciding upon new projects or programs to initiate
and invest.
◦ Disturbance handler role: assume responsibility for handling an
unexpected event or crisis.
◦ Resource allocator role: assign resources between functions and
divisions, set budgets of lower managers.
◦ Negotiator role: seeks to negotiate solutions between other managers,
unions, customers, or shareholders.
Managerial Agendas and Networks
 Agenda Setting- good managers develop action priorities that include goals and
plans spanning long and short time frames; good managers implement their
agendas by working with many people inside and outside the organization.
 Networking is the process of creating positive relationships with people who
can help advance agendas.
 Social capital is a capacity to get things done with the support and help of
others.
Management Skills and Competencies
 Learning is a change in behavior that results from experience. The learning
focus in management is on developing skills and competencies to deal with the
complexities of human behavior and problem solving in organizations.
 Lifelong learning is continuous learning from daily experiences.
 A skill is the ability to translate knowledge into action that results in desired
performance.
There are three skill sets that managers need to perform effectively. All three
skills are enhanced through formal training, reading, and practice.
Essential Managerial Skills
The three skill sets are:
1. Conceptual and Analytical skill is the ability to think analytically to diagnose
and solve complex problems and situations and find the cause and effect.
Cognitive Intelligence is the ability to think systematically and
identify cause-effect patterns in data and events.
2. Human skill also referred to as Interpersonal skills is the ability to work well
in cooperation with other people. It is the ability to understand, alter, lead, and
control people’s behavior.
Emotional Intelligence is the ability to manage ourselves and our
relationships effectively
3. Technical skill is the ability to use a special proficiency or expertise to perform
particular tasks. Common examples include marketing, accounting, and
manufacturing.
Skill Type Needed by Manager Level
Top
Managers
Middle
Managers
Line
Managers
Conceptual Human Technical
In restructuring top management seeks methods to restructure their

organizations and save costs.
In downsizing top management, eliminate jobs at all levels of management.
This can lead to higher efficiency but it often results to low morale and
customer complaints about service.
Management Trends
 Empowerment: expand the tasks and responsibilities of workers.
◦ Supervisors might be empowered to make some resource allocation
decisions.

 Self-managed teams: give a group of employees responsibility for supervising
their own actions.
◦ The team can monitor its members and the quality of the work
performed.
Management Challenges
 Increasing number of global organizations.
 Building competitive advantage through superior efficiency, quality, innovation,
and responsiveness.
 Increasing performance while remaining ethical managers.
 Managing an increasingly diverse work force.
 Using new technologies.
1.3 History of Management Thought and Philosophies
The evolution of modern management began in the late 19th century.

Organizations were seeking ways to better satisfy customer needs. Machinery was
changing the way goods were produced. Managers had to increase the efficiency of the
worker-task mix.
Evolution of Management Theory
Organizational Environment
Management Science
Behavioral Management
Administrative Management
Scientific Management
Industrial Revolution
1830 1890 1900 1920 1940 1950 1970 2000 2005
 Adam Smith, 18th century economist, found firms manufactured pins in two
ways:
◦ Craft -- each worker did all steps.
◦ Factory -- each worker specialized in one-step.
 Smith found that the factory method had much higher productivity.
◦ Each worker became very skilled at one, specific task. Breaking down the
total job allowed for the division of labor.

Smith’s ideas of efficient production through specialized tasks and the
division of labor, accelerated industrial revolution. This was the beginning of job
specialization.
1.2.1 Classical Management Approaches
Classical Approaches
(Assumptions: People are rational)
Scientific Management Administrative Principles Bureaucratic

(Frederick Taylor) (Henry Fayol) Organization
(Max Weber)
Scientific Management theory

 Defined by Frederick Taylor, late 1800’s.
 It is the systematic study of the relationships between people and tasks to
redesign the work for higher efficiency.
Taylor sought to reduce the time a worker spent on each task by optimizing
the way the task was done.
In his publication, The Principles of Scientific Management (1911), Frederick W.
Taylor made the following statement: “the principal object of management should be
to secure maximum prosperity for the employer, coupled with the maximum
prosperity for the employee.” Taylor used the concept of “time study” to analyze the
motions and tasks required in any job and to develop the most efficient ways to
perform them. He then linked these job requirements to both training for the workers
and support from supervisors in the form of proper direction, work assistance, and
monetary incentives. This approach was later known as Scientific Management.
Guiding Action Principles for Scientific Management
1. Develop a “science” for every job to standardize work and it normally
includes rules of motion, standardized work implements and proper working
conditions.
2. Select workers with the right abilities for the job
3. Train workers to do the job and give them the proper incentives to cooperate
with the job “science”.
4. Support workers
Insights from Scientific Management
1. Make results-based compensation
2. Design jobs with efficient work
3. Select workers with the abilities to do these jobs
4. Train workers
5. Train supervisors to support workers
Four Principles to increase efficiency:

1. Study the way the job is performed now & determine new ways to do it.
Gather detailed, time and motion information. Try different methods to see which is
best.
2. Codify the new method into rules and teach the rules to all workers.
3. Select workers whose skills match the rules set in Step 2.
4. Establish a fair level of performance and pay for higher performance.
Workers should benefit from higher output.
Problems of Scientific Management
1. Managers often implemented only the increased output side of Taylor’s plan.
a. They did not allow workers to share in increased output.
b. Specialized jobs became very boring, dull.
c. Workers ended up distrusting Scientific Management.
2. Workers could purposely “under-perform”
3. Management responded with increased use of machines.
The Gilbreths
Frank and Lillian Gilbreth refined Taylor’s methods and made many
improvements to time and motion studies.
 Time and motion studies:
◦ 1. Break down each action into components.
◦ 2. Find better ways to perform it.
◦ 3. Reorganize each action to be more efficient.
Gilbreths also studied fatigue problems, lighting, heating and other worker
issues.
Administrative Principles
After a career in the French industry, Henry Fayol published “Administration
Industrielle et Generale”, which outlines his views on the proper management of
organizations and of the people within them. It identifies the “rules” or “duties” of
management, which are the foundations for the four functions of management –
planning, organizing, leading and controlling.
Five Rules of Management
1. Foresight- a plan of action for the future
2. Organization- to mobilize resources
3. Command- to lead
4. Coordination- diverse efforts together
5. Control- ensure the things happen according to plan
Fayol believed that management could be taught and to improve the quality of
management, he set forth a number of “principles” to guide managerial action. A
number of them are still part of management vocabulary.
Henri Fayol’s developed set of 14 principles:
1. Division of Labor: allows for job specialization. Fayol noted firms could have
too much specialization leading to poor quality and worker involvement.

2. Authority and Responsibility: Fayol included both formal and informal
authority resulting from special expertise.
3. Unity of Command: Employees should receive orders from only one boss.
4. Line of Authority: there should be a clear and unbroken chain of
communication from top to bottom of the firm. This is also known as the scalar chain
principle.
5. Centralization: the degree to which authority rests at the very top.
6. Unity of Direction: One plan of action to guide the organization and one
person to be in charge of all activities that have the same performance objective.
7. Equity: Treat all employees fairly in justice and respect.
8. Order: Each employee is put where they have the most value.
9. Initiative: Encourage innovation.
10. Discipline: obedient, applied, respectful employees needed.
11. Remuneration of Personnel: The payment system contributes to success.
12. Stability of Tenure: Long-term employment is important.
13. General interest over individual interest: The organization takes precedence
over the individual.
14. Esprit de corps: Share enthusiasm or devotion to the organization.
Bureaucratic Organization
Max Weber developed the concept of bureaucracy. It seeks to create an
organization that leads to both efficiency and effectiveness, a formal system of
organization and administration. Weber believes that an ideal, intentionally rational,
and very efficient form of organization founded on principles of logic, order, and
legitimate authority. To him bureaucracies would have the advantage of efficiency in
utilizing resources, and of fairness or equity in the treatment of employees and clients.
Bureaucratic Principles
Written rules
System of task A Bureaucracy Hierarchy of

relationships should have authority
Fair evaluation
and reward
Key points of Bureaucracy

1. Authority is the power to hold people accountable for their actions.
2. Positions in the firm should be held based on performance not social
contacts.
3. Position duties are clearly identified. People should know what is expected of
them.
4. Lines of authority should be clearly identified. Workers know who reports to
whom.
5. Rules, Standard Operating Procedures (SOPs), & Norms used to determine
how the firm operates. Sometimes, these lead to “red-tape” and other problems.
Characteristics of a Bureaucratic Organization
1. Clear division of labor – jobs are well defined, and workers become highly
skilled at performing them.
2. Clear hierarchy of authority – authority and responsibility are well defined for
each position, and each position reports to a higher-level one.
3. Formal rules and procedures – written guidelines direct behavior and decisions
in jobs, and written files are kept for historical record.
4. Impersonality – rules and procedures are impartially and uniformly applied,
with no one receiving preferential treatment.
5. Careers based on merit – workers are selected and promoted on ability,
competency, and performance, and managers are career employees of the
organization.
This is the ideal side of bureaucracy. However, the terms bureaucracy and
bureaucrats are now often used with negative connotations. Bureaucracy most likely
cause problems for organizations that must be flexible and quick in adapting to
changing circumstances, which is common today.
Disadvantages of bureaucracy
1. Excessive paper work or “red tape.”
2. Slowness in handling problems.
3. Rigidity in the face of shifting customer or client needs.
4. Resistance to change
5. Employee apathy.
1.2.2 Behavioral Management Approaches

In the 1920’s, an emphasis on the human side of the workplace began to
influence management thinking. The behavioral approaches maintain that people are
social and self-actualizing. People at work are assumed to seek satisfying social
relationships, respond to group pressures, and search for personal fulfillment. These
approaches focus on the way a manager should personally manage to motivate
employees. The historical foundations set by these approaches are now well evidenced
in the field of organizational behavior.
Organizational Behavior- study of individuals and groups in organizations.

Foundations of the behavioral or human resource approaches to management
Organizations
Organizations as
as communities
communities
(Mary
(Mary Parker
Parker Follett)
Follett)
Hawthorne
Hawthorne studies
studies Theory
Theory X
X and
and Theory
Theory Y
Y
(Elton
(Elton Mayo)
Mayo) (Douglas
(Douglas McGregor)
McGregor)
Human resource approaches
Assumptions: People are
social and self-actualizing
Theory
Theory of
of Human
Human Needs
Needs Personality
Personality &
& organizations
organizations
(Abraham
(Abraham Maslow)
Maslow) (Chris
(Chris Argyris)
Argyris)
Mary Parker Follett

The work of Mary Parker Follett was part of an important transition from
classical thinking into behavioral management. She was an influential leader in early
managerial theory. Her work, “Prophet of Management: A Celebration of Writings from
the 1920’s”, is a good reminder of the wisdom of history. She espoused the ideas that:
 If workers have the knowledge of the task, then they should control the task.
 The worker knows the best way to improve the job.
 Suggested workers help in analyzing their jobs for improvements.
Mary Parker Follet believes in:
 Organizations as “communities” in which managers and workers should
labor in harmony without one party dominating the other, and with the freedom to
talk over truly reconcile conflicts and differences.
 Groups are mechanisms through which diverse individuals could combine
their talents for greater good.
 It is the manager’s job to help people in organizations cooperate with one
another and achieve an integration of interests.
 Making every employee an owner in a business would create feelings of
collective responsibility - “employee ownership”, “profit sharing”, “gain-sharing plans”.
 Business problems involve a wide variety of factors that must be considered
in relationship to one another.
 Businesses were service organizations and that private profits should always
be considered vis-a-vis the public good – “managerial ethics” and “corporate social
responsibility”
The Hawthorne Studies
The Hawthorne study was a research program commissioned by the Western
Electric Company in 1924. It was a study of worker efficiency at the Hawthorne Works
of the Western Electric Co. from 1924 to 1932. Its initial scientific management
perspective was to determine how economic incentives and physical conditions of the
workplace affected the output of the workers.
The initial focus was on the level of illumination in the manufacturing facilities
where worker productivity was measured at various levels of light illumination to prove

that better lighting would improve performance. However, researchers found that
regardless of whether the light levels were raised or lowered, productivity rose.
Actually, it appears that the workers enjoyed the attention they received as part of the
study and were more productive. The researcher concluded that unforeseen
“psychological factors” somehow interfered with their illumination experiments. This
prompted the researchers to direct their attention toward better understanding human
interactions in the workplace.
A team led by Elton Mayo of Harvard University set out to examine the effect
of worker fatigue on output unfortunately they failed to find any direct relationship
between changes in physical working conditions and output. Productivity increased
regardless of the changes made. Instead, they concluded that the new “social setting”
created for workers accounted for the increased productivity. They concluded that
good “human relations” resulted in higher productivity.
Special Factors that influenced increased productivity:
1. Group atmosphere
2. More participative supervision
Other conclusions reached by the Hawthorne studies include:
1. The new “social setting” created for workers accounted for the increased
productivity and therefore good “human relations” results in higher productivity.
2. Employee attitudes - Work conditions or wages could be sources of
satisfaction for some workers and of dissatisfaction for others.
3. Group processes - Groups can have strong negative as well as positive
influences on individual productivity.
Lessons of the Hawthorne studies
Hawthorne Effect – is the tendency of people who are singled out for special
attention to perform as anticipated because of expectations created by the situations.
The human relations movement suggested that managers using good
human relations would achieve productivity.
Abraham Maslow
The work of psychologist Abraham Maslow in the area of human needs has
also had a major impact on the behavioral approach to management.
Need – is a physiological or psychological deficiency that a person wants to
satisfy.
Two underlying principle of the Maslow theory
1. Deficit principle – a satisfied nee does not motivate behavior. People act to
satisfy “deprived” needs, those for which a satisfaction “deficit” exist.
2. Progression principle – the five needs exist in a hierarchy of “prepotency”. A
need is activated only when the next lower level need is satisfied.
At the level of self-actualization, the deficit and progression principles cease
to operate. The more this need is satisfied, the stronger it grows.

Maslow’s Hierarchy of Needs
1. Physiological Needs - These include the most basic needs that are vital to
survival, such as the need for water, air, food, and sleep. They are the need for
biological maintenance and physical well-being.
2. Security Needs - These include needs for safety and security. Security needs
are important for survival, but they are not as demanding as the physiological needs.
It is includes the need for protection and the stability in the events of day-to-day life.
3. Social Needs - These include needs for belonging, love, and affection. Maslow
described these needs as less basic than physiological and security needs.
4. Esteem Needs - After the first three needs have been satisfied, esteem needs
becomes increasingly important. These include the need for things that reflect on self-
esteem, personal worth, social recognition, and accomplishment. It also includes the
need for respect, prestige, recognition, personal sense of competency and mastery.
5. Self-actualization Needs - This is the highest level of Maslow’s hierarchy of
needs. People are self-aware, concerned with personal growth, less concerned with the
opinions of others, and interested fulfilling their potential. There is the need for self-
fulfilment and to grow and use abilities to the fullest and most creative extent.
Douglas McGregor
He was heavily influenced by both the Hawthorne studies and Maslow. His
classic book, “The Human Side of Enterprise”, advances the thesis that managers
should give more attention to the social and self-actualization needs of people at work.
Theory X and Y
 Douglas McGregor proposed the two different sets of worker assumptions.
◦ Theory X - Assumes the average worker is lazy, dislikes work and will do
as little as possible. They lack ambition, act irresponsibly and prefer to be led.
 Managers must closely supervise and control through reward and
punishment.
◦ Theory Y - Assumes workers are not lazy, want to do a good job and the
job itself will determine if the worker likes the work. People are willing to work,
likes responsibility and are creative and self-directed.
 Managers should allow the worker great latitude, and create an
organization to stimulate the worker.
Theory X vs Theory Y
Theory X Theory Y
Employee is lazy Employee is not lazy
Managers must closely supervise Must create work setting to build initiative
Create strict rules & define rewards Provide authority to workers
Theory Z
 William Ouchi researched the cultural differences between Japan and USA.

◦ USA culture emphasizes the individual, and managers tend to feel
workers follow the Theory X model.
◦ Japan culture expects worker committed to the organization first and
thus behave differently than USA workers.
 Theory Z combines parts of both the USA and Japan structure.
◦ Managers stress long-term employment, work-group, and organizational
focus.
 Self-fulfilling prophecy – occurs when a person acts in ways that confirm
another’s expectations.
In contrast to Theory X, managers with theory Y assumptions tend to
behave in “participative ways” that allow subordinates more job involvement,
freedom, and responsibility. This creates opportunities to satisfy esteem and
self-actualization needs, workers tend to perform as expected with initiative and
high performance.
Chris Argyris
Ideas set forth by Chris Argyris also reflect the belief in human nature
advanced by Maslow and McGregor. He is known for his Theory of Adult Personality.
In his book “Personality and Organization”, Argyris contrasts the management
practices found in traditional and hierarchical organizations with the needs and
capabilities of mature adults. He concludes that some practices, especially those
influenced by the classical management approaches, are inconsistent with the mature
adult personality.
Contrasts
Management Approach Other’s Philosophy Argyris’ Thought
Scientific management Principle of specialization He believes that this limits
assumes that people will opportunities for self-
work efficiently as tasks actualization.
become better defined.
Bureaucracy People work in clear He worries that this creates
hierarchy of authority, with dependent, passive workers
higher levels directing and who feel that they have
controlling lower levels. little control over their
work environments.
Administrative principles The concept of unity He suggests that this may
direction assumes that create conditions for
efficiency will increase psychological failure;
when a person’s work is conversely, psychological
planed and directed by a success occurs when
supervisor. people define their own
goals.
Argyris believes that:

 managers who treat people positively and as responsible adults will achieve
the highest productivity

 common problems of employee absenteeism, turnover, apathy, alienation,
and low morale may be a sign of mismatch between management practices and
mature adult personalities
Argyris advocates that:
1. Expand job responsibilities
2. Allow more task varieties
3. Adjust supervisory styles to allow more participation
4. Adjust supervisory styles to promote better human relations
1.2.3 Modern Management Foundations

Management Science
 Uses rigorous quantitative techniques to maximize resources.
1. Quantitative management: utilizes linear programming, modeling,
simulation systems.
2. Operations management: techniques to analyze all aspects of the
production system.
3. Total Quality Management (TQM): focuses on improved quality.
4. Management Information Systems (MIS): provides information about the
organization.
 Analytics – is the systematic use and analysis of data to solve problems and
make informed decisions.
 Management science and operations research – use quantitative analysis
and applied mathematics to solve problems.
 Operations management – is the study of how organizations produce goods
and services.
Quantitative applications are often described in academic programs and
management practice by the terms management science, operations research
and operations management.
Procedure in typical quantitative approach to managerial problem solving:
1. Problem is encountered
2. It is systematically analyzed
3. Appropriate mathematical models and computations are applied
Illustrations of real management problems and how they can be addressed:
1. An oil exploration company is worried about future petroleum reserves in
various parts of the world. Quantitative approach – use mathematical forecasting to
project reserve sizes and depletion rates in the planning process.
2. A “big box” retailer is trying to deal with pressures on profit margins by
minimizing costs of inventories, but must also avoid going “out of stock” for
customers. Quantitative approach – use inventory analysis to control inventories by
mathematically determining how much to automatically order and when.

3. A grocery store is getting complaints from customers waiting times are too
long for checkouts during certain times of the day. Quantitative approach – use
queuing theory to allocate service personnel and work stations based on alternative
workload demands and in a way that minimizes both customer waiting times and cost
of service workers.
4. A manufacturer wants to maximize profits for producing three different
products on three different machines, each of which can be used for different periods
of time and run at different costs. Quantitative approach – use linear programming to
calculate how best to allocate production among different machines.
5. A real estate developer wants to control costs and finish building a new
condominium on time. Quantitative approach – use network models such as the
simplified Gantt chart and break large tasks into smaller components. This allows
project managers to better analyze, plan, and control timetables for completion of
many different activities.
Organization-Environment Theory
 Considers relationships inside and outside the organization.
◦ The environment consists of forces, conditions, and influences outside
the organization.
 System – is a collection of interrelated parts working together for a purpose.
 Subsystem – is a smaller component of a large system.
 Systems theory considers the impact of stages:
1. Input: acquire external resources.
2. Conversion: inputs are processed into goods and services.
3. Output: finished goods are released into the environment.
Systems Considerations
 An open system interacts with the environment. It transforms inputs -
people, technology, information, money, and supplies- into outputs- goods and
services for their customers and clients
 A closed system is self-contained. Closed systems often undergo entropy
and lose the ability to control itself, and fail.
 Synergy - performance gains of the whole, surpass the components.
Synergy is only possible in a coordinated system.
The Organization as an Open System
Contingency Thinking
Contingency Thinking- tries to match managerial responses with the problems
and opportunities specific to different settings
Assumes there is no one best way to manage.
 The environment affects the organization and managers must be flexible to
react to environmental changes.
 The way the organization is designed, control systems selected, depend on
the environment.
Technological environments change rapidly, so must managers.
Structures
 Mechanistic: Authority is centralized at the top. (Theory X)
◦ Employees closely monitored and managed.
◦ Very efficient in a stable environment.
 Organic: Authority is decentralized throughout employees. (Theory Y)
◦ Much looser control than mechanistic.
◦ Managers can react quickly to changing environment.
Quality Management
W. Edwards Deming – his work is a cornerstone of the quality movement in
management. Deming’s approach to quality emphasizes constant innovation, use of
statistical methods and commitment to training in the fundamentals of quality
assurance.
Total Quality Management – it is the process that makes quality principles part
of the organization’s strategic objectives, applying them to all aspects of operations
and striving to meet customer’s needs by doing things right the first time. It is an
organization-wide commitment to continuous improvement, product quality, and
customer needs.
Joseph Juran – a contemporary of Deming who is known for his slogan, “there
is always a better way” and his three guiding principles are – “plan, control, improve”.
Continuous improvement – involves always searching for new ways to improve
work quality and performance.
ISO certification – indicates conformance with rigorous sets of international
quality standards.
Knowledge Management and Organizational Learning
Knowledge Management- is the process of using intellectual capital for
competitive advantage. It is also the use of information technology to develop,
organize, and share knowledge to achieve performance success.
Peter Senge – popularized learning organizations in his book, “The Fifth
Discipline”. The advocates that there should be continuous change based upon the
lessons of experience.
Learning organization – is one that “by virtue of the people, values, and systems
is able to continuously change and improve its performance based upon the lessons of
experience. It is the encouragement of all members to learn continuously, while
emphasizing information sharing, teamwork, empowerment, and participation.
Evidence-based Management
Evidence-based Management- process of making management decisions on
“hard facts”, rather than on “dangerous half-truths”; sources of information:
practitioner expertise and judgement, evidence from the local context, a critical
evaluation of the best available research evidence, and the perspectives of those people
who might be affected by the decision.
Tom Peters and Robert Waterman kindled the interest in the attributes of
organizations that achieve performance excellence in their book “In Search of
Excellence: Lessons from America’s Best-Run Companies” (1982).

1.3 Ethical Behavior and Social Responsibility
1.3.1 Ethics, Ethical Behavior and Standards
 Ethics- establish standards of good or bad, right or wrong, in one’s conduct.

 Ethical Behavior- is “right” or “good” in the context of a governing moral
code.
 Values – broad beliefs about what is appropriate individual behavior.
 Terminal values – are preferences about desired ends, such as the goals one
strives to achieve in life. (Examples: self-respect, family security, freedom, and
happiness.
 Instrumental values – are preferences regarding the means for
accomplishing these ends. (Examples: honesty, ambition, imagination and self-
discipline.
Alternative Views of Ethics
Four Views of Ethical Behavior
1. Utilitarian View - Considers ethical behavior to be, that which delivers
greatest good to the greatest number of people.
2. Individualism View - it is based on the belief that one’s primary commitment
is to the long-term advancement of self-interests.
3. Moral Rights View - is that which respects and protects the fundamental
rights of people.
4. Justice View - is based on the belief that ethical decisions treat people
impartially and fairly, according to the legal rules and standards.
a. Procedural Justice - Involves the degree to which policies and rules
are fairly applied to all individuals.
b. Distributive Justice - Involves the degree to which outcome are
located fairly among people and without respect to individual characteristics
based on ethnicity, race, gender, age, or other particularistic criteria.
c. Interactional Justice - Involves the degree to which people treat one
another with dignity and respect.
d. Commutative Justice - Focuses on the fairness of exchanges or
transactions.
Contrasts and Drawbacks
 The Utilitarian view relies on the assessment of future outcomes that are
often difficult to predict and that are tough to measure accurately.
 The Individualism view presumes that individuals are self-regulating;
however, not everyone has the same capacity or desired to control their behaviors.
 The Moral rights view provides the individual rights, but does not ensure
that the outcomes associated with protecting those rights are beneficial to the majority
of society.
 Finally, the Justice view places an emphasis on fairness and equity, but this
viewpoint raises the question of which type of justice is paramount.
Cultural Issues in Ethical Behavior
 Cultural relativism - is the belief that there is no one right way to behave and
that ethical behavior is always determined by its cultural context.

 Universalism - is an absolutist ethical position suggesting that if a behavior or
practice is not okay in one’s home environment, it is not an acceptable practice
anywhere else.
 Ethical imperialism - an attempt to impose one’s ethical standards on others.
Ethics in the Workplace
Ethical Dilemma - is a situation that requires a choice regarding a possible
course of action that, although offering the potential for personal or organizational
benefit, or both, may be considered unethical.
Some examples of ethical dilemmas that managers face include:
 Discrimination
 Sexual harassment
 Conflicts of interest
 Product safety
 Use of organizational resources
Influences on the Ethical Decision Making
1. Personal Factors and Moral Development
Ethical Framework - ones that provide personal rules or strategies for ethical
decision-making will act more consistently and confidently.
Different levels of Moral Development
1. Preconventional level- the individual is self-centered. Stage 1-Avoid
harm or punishment. Stage 2- Make deals for personal gain
2. Conventional level-the individual is more social-centered. Stage 3- act
consistently with peers, others. Stage 4- follow rules to help society run
smoothly.
3. Postconventional level- the individual is strongly principle-centered.
Stage 5- live up to societal agreement concerning individual rights. Stage 6- act
according internal principles.
2. Situational Context and Ethics Intensity
Ethics intensity or issue intensity to describe the extent to which a situation is
perceived to pose important ethics challenges. It indicates the degree to which an
issue or situation is recognized to pose significant ethical issues.
3. Organizational Culture
Some organizations try to set the ethics culture by issuing formal policy
statements and guidelines. Dame Anita Roddick built an organizational culture
around the value of “profits with principles.” She created an 11-point charter to guide
the company’s employees
4. External Environment, government regulation and Industry norms.
Government laws and regulations as well as social norms and expectations
influence organizations, wherever they operate, may that be domestic or international.
 Laws interpret social values to define appropriate behaviors for
organizations and their members.
 Regulations help governments monitor these behaviors and keep them
within acceptable standards.
Maintaining High Ethical Standards

1. Ethics Training – seeks to help people understand the ethical aspects of
decision-making and to incorporate high ethical standards in to their daily behavior.
2. Codes of Ethical Conduct - A code of ethics is a formal statement of values
and ethical standards.
3. Moral Management
- Management scholar Archie Carroll makes a distinction between immoral,
amoral, and moral managers.
a. Immoral manager chooses to behave unethically.
b. Amoral manager fails to consider the ethics of her or his behavior.
c. Moral manager makes ethical behavior a personal goal.
4. Whistleblower Protection - A whistleblower exposes the misdeeds of others in
organizations.
1.3.2 Social Responsibility and Corporate Governance
Sustainability - in management means in ways that support a high quality of
life for present and future generation.
Corporate Social Responsibility - is the obligation of an organization to serve the
interest of society in addition to its own interests.
Triple Bottom line - evaluates organization performance on economic, social,
and environmental criteria.
STAKEHOLDER MANAGEMENT
The Stakeholder Map
 Stakeholders - are the person, groups, and other organizations that are
directly affected by the behavior of the organization and that hold a stake in its
performance.
 Stakeholders Power - refers to the capacity of the stakeholder to positively or
negatively affect the operation of the organization.
 Demand Legitimacy - indicates the validity and legitimacy of a stakeholder’s
interest in the organization.
 Issue Urgency - indicates the extent to which stakeholders concerns need
immediate attention.

Perspectives on Corporate Social Responsibility
1. Classical view of CSR- is that business should focus on profit. It holds that
management’s only responsibility in running a business is to maximize profits. This
view takes a very narrow stakeholder perspective and puts the focus on the single
bottom line of financial performance. (Milton Friedman)
2. Socioeconomic view of CSR- is that business should focus on board social
welfare as well as profit. It holds that managers must be concerned with the
organization’s effect on the broader social welfare and not just with corporate profits.
This view takes a broad stakeholder perspective and puts the focus on an expanded
(triple) bottom line that includes not just financial performance but also social and
environmental performance. (Paul Samuelson)
Virtuous Circle- occur when CSR improves financial performance, which
leads to more CSR. Corporate social responsibility leads to improved financial
performance for the firm, and this in turn leads to more socially responsible actions in
the future.
Evaluating Corporate Social Performance

Criteria for Social Performance
1. Economic Responsibility- Is the organization profitable?
2. Legal Responsibility- Is the organization obeying the law?
3. Ethical Responsibility- Is the organization doing what is “Right”.
4. Discretionary Responsibility- Is the organization contributing to the broader
community?
Social Responsibility Strategies
1. Obstruction Strategy- avoids social responsibility and reflects mainly
economic priorities.
2. Defensive Strategy- seeks protection by doing the minimum legally required.
3. Accommodative strategy- accepts social responsibility and tries to satisfy
economic, legal, and ethical criteria.
4. Proactive Strategy- meets all the criteria of social responsibility, including
discretionary performance.
Corporate Governance - Is the responsibility of a board of directors to oversee
the performance of the organization’s top management.


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Elective Course 1 – Entrepreneurial Management

1.1.2 Organizations in the New Workplace

Entrepreneurial Management (EC 1)

Management Key Concepts

Entrepreneurial Management (EC 1)

1.1.3 Managers and Managing in the New Workplace

Entrepreneurial Management (EC 1)

What is a manager? Definition

Management Levels Levels of Managers Types of Managers

Entrepreneurial Management (EC 1)

Typical Business Typical Non Profit

Board of Directors Board of Trustees

Chief Executive Officer Executive Director

Division Manager Division Manager

Department Head First-line Managers Department Head

Changing the Nature of Managerial Work

Entrepreneurial Management (EC 1)

Frontline operating workers: do work directly affecting client satisfaction

Team Leaders & Managers: help the operating workers do

1.1.4 The Management Process

Entrepreneurial Management (EC 1)

1.1.5 Management Skills and Competencies

Conceptual Human Technical

In restructuring top management seeks methods to restructure their

Entrepreneurial Management (EC 1)

1.3 History of Management Thought and Philosophies

The evolution of modern management began in the late 19th century.

1830 1890 1900 1920 1940 1950 1970 2000 2005

Entrepreneurial Management (EC 1)

1.2.1 Classical Management Approaches

Scientific Management Administrative Principles Bureaucratic

Scientific Management theory

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

System of task A Bureaucracy Hierarchy of

Key points of Bureaucracy

Entrepreneurial Management (EC 1)

1.2.2 Behavioral Management Approaches

Entrepreneurial Management (EC 1)

Mary Parker Follett

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

Argyris believes that:

Entrepreneurial Management (EC 1)

1.2.3 Modern Management Foundations

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

 Ethics- establish standards of good or bad, right or wrong, in one’s conduct.

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

Entrepreneurial Management (EC 1)

Evaluating Corporate Social Performance

Entrepreneurial Management (EC 1)

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