Principal of Management Final

MANAGERS IN THE
WORKPLACE
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LEARNING OBJECTIVES
1. Explain why managers are important to organizations.

2. Tell who managers are and where they work.
Know how to manage your time.
3. Describe the functions, roles, and skills of managers.
4. Describe the factors that are reshaping and redefining
the manager’s job.
Develop your skills at being politically aware.
5. Explain the value of studying management.
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WHY ARE MANAGERS IMPORTANT?
Organizations need their managerial skills and abilities
more than ever in these uncertain, complex, and chaotic
times.
Managerial skills and abilities are critical in getting things
done.
The quality of the employee/supervisor relationship is the
most important variable in productivity and loyalty.
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WHO ARE MANAGERS?
Manager – Someone who coordinates and

oversees the work of other people so that
organizational goals can be accomplished.
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EXHIBIT 1-1
LEVELS OF MANAGEMENT
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CLASSIFYING MANAGERS
•First-line Managers - Individuals who manage the work of non-
managerial employees.
•Middle Managers - Individuals who manage the work of first-
line managers.
•Top Managers - Individuals who are responsible for making
organization-wide decisions and establishing plans and goals that
affect the entire organization.
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WHERE DO MANAGERS WORK?
Organization – A deliberate arrangement of people assembled to
accomplish some specific purpose (that individuals independently
could not accomplish alone).
Common Characteristics of Organizations
1)Have a distinct purpose (goal)
2)Are composed of people
3)Have a deliberate structure
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EXHIBIT 1-2
CHARACTERISTICS OF ORGANIZATIONS
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WHAT DO MANAGERS DO?
Management involves coordinating and

overseeing the work activities of others so that
their activities are completed efficiently and
effectively.
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EFFECTIVENESS AND EFFICIENCY
Efficiency Effectiveness
Doing things Doing the right
right things
• Getting the most • Attaining

output for the organizational goals
least inputs
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EXHIBIT 1-3
EFFICIENCY AND EFFECTIVENESS IN
MANAGEMENT
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THE FOUR MANAGEMENT FUNCTIONS
Planning – Defining goals, establishing strategies to achieve

goals, and developing plans to integrate and coordinate
activities
Organizing – Arranging and structuring work to
accomplish organizational goals.
Leading – Working with and through people to accomplish
goals.
Controlling – Monitoring, comparing, and correcting
work.
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EXHIBIT 1-4
FOUR FUNCTIONS OF MANAGEMENT
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MANAGEMENT ROLES
• Roles are specific actions or behaviors

expected of a manager.
• Mintzberg identified 10 roles grouped
around interpersonal relationships, the
transfer of information, and decision-
making.
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THREE TYPES OF ROLES
• Mintzberg identified 10 roles grouped around
interpersonal relationships, the transfer of
information, and decision- making.
• Informational roles
– Monitor, disseminator, spokesperson
• Decisional roles
– Entrepreneur, disturbance handler, resource allocator,
negotiator
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EXHIBIT 1-5
MINTZBERG’S MANAGERIAL ROLES
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SKILLS MANAGERS NEED
• Technical skills
– Knowledge and proficiency in a specific field
• Human skills
– The ability to work well with other people
• Conceptual skills
– The ability to think and conceptualize about abstract
and complex situations concerning the organization
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EXHIBIT 1-6
SKILLS NEEDED AT DIFFERENT
MANAGERIAL LEVELS
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EXHIBIT 1-7
IMPORTANT MANAGERIAL LEVELS
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EXHIBIT 1-8
CHANGES FACING MANAGERS
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THE IMPORTANCE OF
CUSTOMERS
• Customers: the reason that organizations

exist
– Managing customer relationships is the
responsibility of all managers and employees.
– Consistent high quality customer service is
essential for survival.
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THE IMPORTANCE OF SOCIAL
MEDIA
• Social media
– Forms of electronic communication through
which users create online communities to
share ideas, information, personal messages,
and other content.
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THE IMPORTANCE OF
INNOVATION
• Innovation
– Doing things differently, exploring new territory,
and taking risks.
– Managers should encourage employees to be
aware of and act on opportunities for
innovation.
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THE IMPORTANCE OF
SUSTAINABILITY
• Sustainability – a company’s ability to

achieve its business goals and increase long-
term shareholder value by integrating economic,
environmental, and social opportunities into its
business strategies.
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WHY STUDY MANAGEMENT?
• Universality of Management
– The reality that management is needed
• in all types and sizes of organizations
• at all organizational levels
• in all organizational areas
• in all organizations, regardless of location
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EXHIBIT 1-9
UNIVERSAL NEED FOR MANAGEMENT
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CHALLENGES
OF BEING A MANAGER
• Challenges
– Can be a thankless job
– May entail clerical type duties
– Managers also spend significant amounts of time in
meetings
– Managers often have to deal with a variety of
personalities and have to make do with limited
resources
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REWARDS OF BEING A MANAGER
• Rewards
– Responsible for creating a productive work
environment.
– Recognition and status in your organization
and in the community.
– Attractive compensation in the form of
salaries, bonuses, and stock options.
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EXHIBIT 1-10
REWARDS AND CHALLENGES OF BEING A MANAGER
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REVIEW LEARNING OBJECTIVE 1.1
• Explain why managers are important to

organizations.
– Organizations need their managerial skills and
abilities in uncertain, complex, and chaotic times.
– Managers are critical to getting things done in
organizations.
– Managers contribute to employee productivity and
loyalty.
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• Tell who managers are and where they work.

– Managers coordinate and oversee the work of other
people so that organizational goals can be
accomplished.
– Managers work in an organization, which is a
deliberate arrangement of people to
accomplish some specific purpose.
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1 – 31
• Describe the functions, roles, and skills of

managers.
– Management involves coordinating and overseeing
the efficient and effective completion of others’ work
activities.
– The four functions of management include planning,
organizing, leading, and controlling.
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REVIEW LEARNING OBJECTIVE 1.3 (CONT.)
• Mintzberg’s managerial roles include:
– Interpersonal, involve people and other
ceremonial/symbolic duties (figurehead, leader, and
liaison).
– Informational, collecting, receiving, and disseminating
information (monitor, disseminator, and
spokesperson).
– Decisional, making choices (entrepreneur,
disturbance handler, resource allocator, and
negotiator).
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• managerial skills include

– Technical (job-specific knowledge and techniques)
– Human (ability to work well with people)
– Conceptual (ability to think and express ideas).
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• Describe the factors that are reshaping and
redefining the manager’s job.
– Managers must be concerned with:
• Customer service because employee attitudes and
behaviors play a big role in customer satisfaction
• Social media because these forms of communication
are becoming important and valuable tools in managing
• Innovation because it is important for organizations to
be competitive.
• Sustainability as business goals are developed
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• Explain the value of studying management.
– The universality of management – managers are
needed in all types and sizes of organizations
– The reality of work – you will manage or be managed
– Significant rewards and challenges
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MAKING
DECISIONS
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LEARNING OBJECTIVES
1. Describe the eight steps in the decision-making
process.
Develop your skill at being creative.
2. Explain the four ways managers make decisions.
3. Classify decisions and decision-making conditions.
4. Describe different decision-making styles and discuss
how biases affect decision-making.
Know how to recognize when you’re using decision-
making errors and biases and what to do about it.
5. Identify effective decision-making techniques.
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A key to success in
management and in your
career is knowing how to be
an effective decision-maker.
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Education, 2-3
• Decision –
making a
choice from THE DECISION-
two or more MAKING PROCESS
alternatives.
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EXHIBIT 2-1
DECISION-MAKING PROCESS
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THE DECISION-MAKING PROCESS (CONT.)
• Step 1: Identify a Problem
– Problem – an obstacle that makes it difficult
to achieve a desired goal or purpose.
– Every decision starts with a problem, a
discrepancy between an existing and a
desired condition.
– Example – Amanda is a sales manager
whose reps need new laptops.
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For our example, Amanda is a sales manager whose
reps need new laptops because their old ones are
outdated and inadequate for doing their job. now we
have a problem—a disparity between the sales reps’
current computers (existing condition) and their need to
have more efficient ones (desired condition). Amanda
has a decision to make.
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• Step 2: Identify Decision Criteria
– Decision criteria are factors that are
important (relevant) to resolving the
problem.
– Example – Amanda decides that memory
and storage capabilities, display quality,
battery life, warranty, and carrying weight
are the relevant criteria in her decision.
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• Step 3: Allocate Weights to the Criteria

– If the relevant criteria aren’t equally
important, the decision maker must
weight the items in order to give them
the correct priority in the decision.
– The weighted criteria for our example is
shown in Exhibit 2-2.
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EXHIBIT 2-2
IMPORTANT DECISION CRITERIA
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• Step 4: Develop Alternatives

– List viable alternatives that could resolve
the problem
– Example – Amanda, identifies eight
laptops as possible choices. (See
Exhibit 2-3.)
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EXHIBIT 2-3
POSSIBLE ALTERNATIVES
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• Step 5: Analyze Alternatives

– Appraising each alternative’s strengths
and weaknesses.
– An alternative’s appraisal is based on its
ability to resolve the issues related to
the criteria and criteria weight.
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• Step 6: Select an Alternative

• Choosing the best alternative
– The alternative with the highest total weight is
chosen.
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EXHIBIT 2-4
EVALUATION OF ALTERNATIVES
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• Step 7: Implement the Alternative

• Putting the chosen alternative into action
• Conveying the decision to and gaining
commitment from those who will carry out the
alternative
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• Step 8: Evaluate Decision Effectiveness

– The soundness of the decision is judged by its
outcomes.
– How effectively was the problem resolved by
outcomes resulting from the chosen
alternatives?
– If the problem was not resolved, what went
wrong?
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EXHIBIT 2-5
DECISIONS MANAGERS MAY MAKE
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EXHIBIT 2-5
DECISIONS MANAGERS MAY MAKE
(CONT.)
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MAKING DECISIONS: RATIONALITY
• Rational Decision-Making – describes choices
that are logical and consistent while maximizing
value.
• Assumptions of Rationality
– The decision maker would be fully objective and
logical
– The problem faced would be clear and unambiguous
– The decision maker would have a clear and specific
goal and know all possible alternatives and
consequences and consistently select the alternative
that maximizes achieving that goal
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MAKING DECISIONS: BOUNDED
RATIONALITY
• Bounded Rationality – decision-making that’s

rational, but limited (bounded) by an individual’s
ability to process information.
• Satisfice – accepting solutions that are “good
enough.”
• Escalation of commitment – an increased
commitment to a previous decision despite
evidence it may have been wrong.
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MAKING DECISIONS: THE ROLE OF
INTUITION
• Intuitive decision-
making
– Making decisions on
the basis of
experience, feelings,
and accumulated
judgment.
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EXHIBIT 2-6
WHAT IS INTUITION?
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MAKING DECISIONS: THE ROLE OF
EVIDENCE-BASED MANAGEMENT
• Evidence-based management (EBMgt) – the

systematic use of the best available evidence to
improve management practice.
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STRUCTURED PROBLEMS AND
PROGRAMMED DECISIONS
• Structured Problems – straightforward,

familiar, and easily defined problems.
• Programmed decision – a repetitive
decision that can be handled by a routine
approach.
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STRUCTURED PROBLEMS AND
PROGRAMMED DECISIONS (CONT.)
• Procedure – a series of sequential steps used
to respond to a well-structured problem.
• Rule – an explicit statement that tells managers
what can or cannot be done.
• Policy – a guideline for making decisions.
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UNSTRUCTURED PROBLEMS AND
NONPROGRAMMED DECISIONS
• Unstructured Problems – problems that

are new or unusual and for which
information is ambiguous or incomplete.
• Nonprogrammed decisions – unique
and nonrecurring and involve custom
made solutions.
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EXHIBIT 2-7
PROGRAMMED VERSUS
NONPROGRAMMED DECISIONS
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DECISION-MAKING CONDITIONS
• Certainty – a situation in which a manager can
make accurate decisions because all outcomes
are known.
• Risk – a situation in which the decision maker is
able to estimate the likelihood of certain
outcomes.
• Uncertainty – a situation in which a decision
maker has neither certainty nor reasonable
probability estimates available.
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MANAGING RISK
Managers can use historical data from past experiences or
secondary information that lets them assign probabilities to
different alternatives.
Managers use this information to help make decisions by
calculating the expected value – the expected return from
each possible outcome – by multiplying expected revenues
by (the probability).
This exercise will give the manager an idea of the average
revenue that they can expect over time if everything relative
to the probability remains constant.
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EXHIBIT 2-8
EXPECTED VALUE
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DECISION-MAKING STYLES
• Linear Thinking Style – a person’s tendency to
use external data/facts; the habit of processing
information through rational, logical thinking.
• Nonlinear Thinking Style – a person’s
preference for internal sources of information; a
method of processing this information with
internal insights, feelings, and hunches.
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DECISION-MAKING BIASES AND ERRORS
• Heuristics – using “rules of thumb” to simplify

decision-making.
• Overconfidence Bias – holding unrealistically
positive views of oneself and one’s performance.
• Immediate Gratification Bias – choosing
alternatives that offer immediate rewards and
avoid immediate costs.
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(CONT.)
• Anchoring Effect – fixating on initial information

and ignoring subsequent information.
• Selective Perception Bias – selecting,
organizing and interpreting events based on the
decision maker’s biased perceptions.
• Confirmation Bias – seeking out information
that reaffirms past choices while discounting
contradictory information.
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(CONT.)
• Framing Bias – selecting and highlighting certain

aspects of a situation while ignoring other aspects.
• Availability Bias – losing decision-making objectivity by
focusing on the most recent events.
• Representation Bias – drawing analogies and seeing
identical situations when none exist.
• Randomness Bias – creating unfounded meaning out
of random events.
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(CONT.)
• Sunk Costs Errors – forgetting that current

actions cannot influence past events and relate only
to future consequences.
• Self-Serving Bias – taking quick credit for
successes and blaming outside factors for failures.
• Hindsight Bias – mistakenly believing that an event
could have been predicted once the actual outcome
is known (after-the-fact).
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EXHIBIT 2-11
COMMON DECISION-MAKING BIASES
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EXHIBIT 2-12
OVERVIEW OF MANAGERIAL DECISION-MAKING
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GUIDELINES FOR MAKING EFFECTIVE
DECISIONS
• Understand cultural differences
• Create standards for good decision-making
• Know when it’s time to call it quits
• Use an effective decision-making process
• Build an organization that can spot the
unexpected and quickly adapt to the changed
environment
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DESIGN THINKING AND DECISION
MAKING
• Design thinking –
approaching
management
problems as designers
approach design
problems.
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Education, 2-40
• Describe the eight steps in the decision-making
process.
1. Identify problem
2. Identify decision criteria
3. Weight the criteria
4. Develop alternatives
5. Analyze alternatives
6. Select alternative
7. Implement alternative
8. Evaluate decision effectiveness
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• Explain the four ways managers make
decisions.
– Assumptions of rationality
• The problem is clear and unambiguous
• A single, well-defined goal is to be achieved
• All alternatives and consequences are known
• The final choice will maximize the payoff
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• Satisficing – when decision makers accept solutions that
are good enough.
• Escalation of commitment – managers increase
commitment to a decision, even when they have
evidence it may have been a wrong decision.
• Intuitive decision-making means making decisions on the
basis of experience, feelings, and accumulated
judgment.
• Evidence-based management, a manager makes
decisions based on the best available evidence.
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• Classify decisions and decision-making
conditions.
– Programmed decisions are repetitive decisions that
can be handled by a routine approach and are used
when the problem being resolved is straightforward,
familiar, and easily defined (structured).
– Nonprogrammed decisions are unique decisions that
require a custom-made solution and are used when
the problems are new or unusual (unstructured) and
for which information is ambiguous or incomplete.
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• Classify decisions and decision-making
conditions.
– Certainty is a situation in which a manager can
make accurate decisions because all outcomes
are known.
– Risk is a situation in which a manager can
estimate the likelihood of certain outcomes.
– Uncertainty is a situation in which a manager is
not certain about the outcomes and can’t even
make reasonable probability estimates.
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• Describe different decision-making styles
and discuss how biases affect decision-
making.
– Linear thinking style – characterized by a
person’s preference for using external data and
processing this information through rational,
logical thinking.
– Nonlinear thinking style – characterized by a
preference for internal sources of information and
processing this information with internal insights,
feelings, and hunches.
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• Identify effective decision-making techniques.
– An effective decision-making process
1. Focuses on what’s important
2. Is logical and consistent
3. Acknowledges both subjective and objective thinking
and blends both analytical and intuitive approaches
4. Requires only “enough” information as is necessary
to resolve a problem
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5. Encourages and guides gathering relevant
information and informed opinions
6. Is straightforward, reliable, easy to use, and
flexible
• Design thinking – “approaching management
problems as designers approach design
problems.”
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PLANNING WORK
ACTIVITIES
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LEARNING OBJECTIVES
1. Define the nature and purposes of planning.
2. Classify the types of goals organizations might
have and the plans they use.
3. Compare and contrast approaches to goal-setting
and planning.
Know how to set goals personally and create a
useful, functional to-do list.
Develop your skill at helping your employees set
goals.
1. Discuss contemporary issues in planning.
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WHAT IS PLANNING?
• Planning – defining the organization’s

goals, establishing strategies for achieving
those goals, and developing plans to
integrate and coordinate work activities.
• Formal planning
– Specific goals covering a specific time period
– Written and shared with organizational members
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WHY DO MANAGERS PLAN?
Four reasons for planning

– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling
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PLANNING AND PERFORMANCE
Formal planning is associated with:

• Positive financial results – higher profits, higher return
on assets, and so forth.
• The quality of planning and implementation affects
performance more than the extent of planning.
• The external environment can reduce the impact of
planning on performance.
• The planning-performance relationship seems to be
influenced by the planning time frame.
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GOALS AND PLANS
Goals (objectives) – desired

outcomes or targets.
• Plans – documents that outline
how goals are going to be met.
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TYPES OF GOALS
Financial Goals – related to the expected

internal financial performance of the
organization.
Strategic Goals – related to the performance
of the firm relative to factors in its external
environment (e.g., competitors).
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TYPES OF GOALS (CONT.)
Stated Goals – official statements of what an

organization says, and what it wants its various
stakeholders to believe its goals are.
Real goals – goals that an organization actually
pursues, as defined by the actions of its members.
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TYPES OF PLANS
Strategic plans – plans that apply to the

entire organization and establish the
organization’s overall goals.
Operational plans – plans that encompass
a particular operational area of the
organization.
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TYPES OF PLANS (CONT.)
Long-term plans – plans with a time frame

beyond three years.
Short-term plans – plans covering one year or
less.
Specific plans – plans that are clearly defined and
leave no room for interpretation.
Directional plans – plans that are flexible and set
out general guidelines.
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TYPES OF PLANS (CONT.)
Single-use plan – a one-time plan

specifically designed to meet the needs of a
unique situation.
Standing plans – ongoing plans that
provide guidance for activities performed
repeatedly.
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EXHIBIT 8-1
TYPES OF PLANS
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APPROACHES TO SETTING GOALS
Traditional goal-setting – an approach to setting

goals in which top managers set goals that then
flow down through the organization and become
subgoals for each organizational area.
Means-ends chain – an integrated network of
goals in which the accomplishment of goals at one
level serves as the means for achieving the goals, or
ends, at the next level.
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EXHIBIT 8-2
THE DOWNSIDE OF TRADITIONAL GOAL-
SETTING
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APPROACHES TO SETTING GOALS
(CONT.)
Management by objectives (MBO) – a
process of setting mutually agreed upon goals
and using those goals to evaluate employee
performance.
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EXHIBIT 8-3
STEPS IN MBO
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STEPS IN GOAL-SETTING
1. Review the organization’s mission, or purpose.

2. Evaluate available resources.
3. Determine the goals individually or with input from
others.
4. Write down the goals and communicate them to
all who need to know.
5. Review results and whether goals are being met.
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EXHIBIT 8-4
WELL-WRITTEN GOALS
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CONTINGENCY FACTORS IN PLANNING
Length of future commitments

– Commitment Concept: Current plans
affecting future commitments must be
sufficiently long-term in order to meet those
commitments.
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EXHIBIT 8-5
PLANNING AND ORGANIZATIONAL LEVEL
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CONTINGENCY FACTORS IN PLANNING
(CONT.)
Environmental Uncertainty
– When uncertainty is high, plans should be
specific, but flexible.
– Managers must be prepared to change or
amend plans as they’re implemented.
– At times, they may even have to abandon the
plans.
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APPROACHES TO PLANNING
In the traditional approach, planning is done

entirely by top-level managers, often assisted by
a formal planning department.
• Formal planning department – a group of
planning specialists whose sole
responsibility is helping to write
organizational plans.
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CONTEMPORARY ISSUES IN PLANNING
How Can Managers Plan Effectively in Dynamic

Environments?
– In an uncertain environment, managers
should develop plans that are specific, but
flexible.
– Managers need to recognize that planning is
an ongoing process.
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CONTEMPORARY ISSUES IN PLANNING
(CONT.)
• How Can Managers Use Environmental

Scanning?
– Environmental scanning – screening
information to detect emerging trends.
– Competitor intelligence – gathering
information about competitors that allows
managers to anticipate competitors’ actions
rather than merely reacting to them.
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• Define the nature and purposes of

planning.
– Planning involves defining the organization’s goals,
establishing an overall strategy for achieving those
goals, and developing plans for organizational work
activities.
– The four purposes of planning include providing
direction, reducing uncertainty, minimizing waste
and redundancy, and establishing the goals or
standards used in controlling.
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• Classify the types of goals organizations

might have and the plans they use.
– Goals are desired outcomes.
– Plans are documents that outline how goals are
going to be met.
– Strategic plans apply to the entire organization
while operational plans encompass a particular
functional area.
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• Long-term plans are those with a time

frame beyond three years. Short-term
plans cover one year or less.
• Specific plans are clearly defined and leave
no room for interpretation.
• Directional plans are flexible and set out
general guidelines.
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• A single-use plan is a one-time plan

designed to meet the needs of a unique
situation.
• Standing plans are ongoing plans that
provide guidance for activities performed
repeatedly.
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• Compare and contrast approaches to goal-

setting and planning.
– In traditional goal-setting, goals are set at the top of
the organization and then become subgoals for
each organizational area.
– MBO (management by objectives) is a process of
setting mutually agreed-upon goals and using those
goals to evaluate employee performance.
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• Well-written goals have six characteristics:

1. Written in terms of outcomes.
2. Measurable and quantifiable.
3. Clear as to time frame.
4. Challenging but attainable.
5. Written down.
6. Communicated to all organizational members who
need to know them.
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• Goal-setting involves these steps:

- Review the organization’s mission
- Evaluate available resources
- Determine the goals individually or with input from
others
- Write down the goals and communicate them to all
who need to know them
- Review results and change goals as needed
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• The two main approaches to planning include:

– The traditional approach, which has plans
developed by top managers that flow down through
other organizational levels and which may use a
formal planning department.
– The other approach is to involve more
organizational members in the planning process.
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• Discuss contemporary issues in planning.

– Dynamic environments – usually means developing
plans that are specific but flexible.
– Contemporary planning issue involves using
environmental scanning to help do a better analysis
of the external environment.
– One form of environmental scanning, competitive
intelligence, can be especially helpful in finding out
what competitors are doing.
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MANAGING
STRATEGY
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LEARNING OBJECTIVES
1. Define strategic management and explain why it’s
important.
2. Explain what managers do during the six steps of the
strategic management process.
• Know how to identify your own personal strengths and
weaknesses and deal with them.
• Develop your skill at strategic planning.
3. Describe the three types of corporate strategies.
4. Describe competitive advantage and the competitive
strategies organizations use to get it.
5. Discuss current strategic management issues.
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WHAT IS STRATEGIC MANAGEMENT?
Strategic management – what managers do

to develop the organization’s strategies.
• Strategies – the plans for how the
organization will do what it’s in business to
do, how it will compete successfully, and how
it will attract and satisfy its customers in order
to achieve its goals.
• Business model – how a company is going
to make money.
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WHY IS STRATEGIC MANAGEMENT
IMPORTANT?
1. It results in higher organizational
performance.
2. It requires that managers examine and
adapt to business environment
changes.
3. It coordinates diverse organizational
units, helping them focus on
organizational goals.
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THE STRATEGIC MANAGEMENT PROCESS
Strategic management process – a six-

step process that encompasses strategic
planning, implementation, and evaluation.
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EXHIBIT 9-1
STRATEGIC MANAGEMENT PROCESS
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(CONT.)
Step 1: Identifying the organization’s
current mission, goals, and strategies:
– Mission: a statement of the purpose of an
organization.
• The scope of its products and services
– Goals: the foundation for further planning.
• Measurable performance targets
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EXHIBIT 9-2:
COMPONENTS OF A MISSION STATEMENT
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(CONT.)
Step 2: Doing an external analysis
– The environmental scanning of specific and
general environments.
• Focuses on identifying opportunities and threats
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(CONT.)
Step 3: Doing an internal analysis
– Assessing organizational resources, capabilities, and
activities:
• Strengths create value for the customer and
strengthen the competitive position of the firm.
• Weaknesses can place the firm at a competitive
disadvantage.
– Steps 2 and 3 combined are called a SWOT analysis.
(Strengths, Weaknesses, Opportunities, and Threats)
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SWOT ANALYSIS
SWOT analysis – an analysis of the

organization’s strengths, weaknesses,
opportunities, and threats.
• Resources – an organization’s assets that
are used to develop, manufacture, and deliver
a product to its customers.
• Capabilities – an organization’s skills and
abilities in doing the work activities needed in
its business.
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STRENGTHS AND WEAKNESSES
Strengths- any activities the organization

does well or any unique resources that it has.
• Weaknesses – activities the organization
does not execute well or needed resources
it does not possess.
• Core competencies – the organization’s
major value-creating capabilities that
determine its competitive weapons.
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(CONT.)
Step 4: Formulating strategies
– Develop and evaluate strategic alternatives.
– Select appropriate strategies for all levels in the
organization that provide relative advantage
over competitors.
– Match organizational strengths to environmental
opportunities.
– Correct weaknesses and guard against threats.
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(CONT.)
Step 5: Implementing strategies
– Implementation – effectively fitting organizational
structure and activities to the environment.
– The environment dictates the chosen strategy; effective
strategy implementation requires an organizational
structure matched to its requirements.
Step 6: Evaluating results

– How effective have strategies been?
– What adjustments, if any, are necessary?
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WHAT IS CORPORATE STRATEGY?
Corporate strategy – an organizational

strategy that determines what businesses a
company is in or wants to be in, and what it
wants to do with those businesses.
Strategic Business Unit (SBU) – the
single independent businesses of an
organization that formulate their own
competitive strategies.
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TYPES OF CORPORATE STRATEGIES
Growth – expansion into new products and

markets.
Stability – maintenance of the status quo.
Renewal – examination of organizational
weaknesses that are leading to performance
declines.
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EXHIBIT 9-3
TYPES OF ORGANIZATIONAL STRATEGIES
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GROWTH STRATEGIES
Growth Strategy – a corporate strategy that’s

used when an organization wants to expand
the number of markets served or products
offered, through either its current business(es)
or new business(es).
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TYPES OF GROWTH STRATEGIES
Concentration – focuses on its primary line of
business and increases the number of products
offered or markets served in this primary
business.
Vertical integration
– Backward vertical integration – the
organization becomes its own supplier.
– Forward vertical integration – the
organization becomes its own distributor.
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TYPES OF GROWTH STRATEGIES (CONT.)
Horizontal integration – a company grows

by combining with competitors.
Diversification
– Related diversification – when a company
combines with other companies in different,
but related industries.
– Unrelated diversification – when a
company combines with firms in different
and unrelated industries.
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CORPORATE STRATEGIES (CONT.)
Stability Strategy – a corporate strategy

in which an organization continues to do
what it is currently doing.
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CORPORATE STRATEGIES (CONT.)
Renewal Strategy – a corporate strategy

designed to address declining
performance.
– Retrenchment strategy – a short-run
renewal strategy used for minor
performance problems.
– Turnaround strategy – when an
organization’s problems are more serious,
more drastic action is needed.
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HOW ARE CORPORATE
STRATEGIES MANAGED?
BCG matrix – a strategy tool that guides
resource allocation decisions on the basis of
market share and growth rate of SBUs.
Four Categories
– Stars
– Cash Cows
– Question Marks
– Dogs
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COMPETITIVE STRATEGIES
Competitive strategy – an organizational

strategy for how an organization will
compete in its business(es).
Competitive advantage – what sets an
organization apart; its distinctive edge.
– Quality as a Competitive Advantage
– Design Thinking as a Competitive Advantage
– Sustaining Competitive Advantage
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FIVE FORCES MODEL
Five forces determine industry attractiveness
and profitability:
1. Threat of new entrants. How likely is it that
new competitors will come into the industry?
2. Threat of substitutes. How likely is it that
other industries’ products can be substituted
for our industry’s products?
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FIVE FORCES MODEL (CONT.)
3. Bargaining power of buyers. How much

bargaining power do buyers (customers)
have?
4. Bargaining power of suppliers. How much
bargaining power do suppliers have?
5. Current rivalry. How intense is the rivalry
among current industry competitors?
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CHOOSING A COMPETITIVE STRATEGY
Cost leadership strategy – when an

organization competes on the basis of having
the lowest costs (costs or expenses, not
prices) in its industry.
Differentiation strategy – a company that
competes by offering unique products that are
widely valued by customers.
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CHOOSING A COMPETITIVE STRATEGY
(CONT.)
Focus strategy – involves a cost advantage
(cost focus) or a differentiation advantage
(differentiation focus) in a narrow segment or
niche.
Stuck in the middle – when costs are too high
to compete with the low-cost leader or when its
products and services aren’t differentiated
enough to compete with the differentiator.
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FUNCTIONAL STRATEGY
Functional strategy – the strategies used

by an organization’s various functional
departments to support the competitive
strategy.
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CURRENT STRATEGIC MANAGEMENT
ISSUES
Strategic leadership – the ability to
anticipate, envision, maintain flexibility, think
strategically, and work with others in the
organization to initiate changes that will
create a viable and valuable future for the
organization.
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EXHIBIT 9-4
EFFECTIVE STRATEGIC LEADERSHIP
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CURRENT STRATEGIC MANAGEMENT
ISSUES (CONT.)
Strategic flexibility – the ability to
recognize major external changes, to
quickly commit resources, and to
recognize when a strategic decision was a
mistake.
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EXHIBIT 9-5
DEVELOPING STRATEGIC FLEXIBILITY
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IMPORTANT ORGANIZATIONAL
STRATEGIES FOR TODAY’S ENVIRONMENT
e-Business strategies
– Cost Leadership – online activities: bidding,
order processing, inventory control, recruitment
and hiring.
– Differentiation – Internet-based knowledge
systems, online ordering and customer support.
– Focus – chat rooms and discussion boards,
targeted Web sites.
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IMPORTANT ORGANIZATIONAL
STRATEGIES FOR TODAY’S ENVIRONMENT
(CONT.)
Customer Service Strategies – companies
emphasizing excellent customer service
need strategies that cultivate that
atmosphere from top to bottom.
Innovation Strategies
First Mover – an organization that brings a
product innovation to the market or uses new
process innovations.
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EXHIBIT 9-6
FIRST-MOVER ADVANTAGES AND
DISADVANTAGES
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• Explain strategic management and

explain why it’s important.
– Strategies are the plans for how the
organization will do whatever it’s in business to
do, how it will compete successfully, and how it
will attract and satisfy its customers in order to
achieve its goals.
– A business model is how a company is going to
make money.
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• Explain what managers do during the

six steps of the strategic management
process.
1. Identify the current mission, goals, and strategies.
2. Do an external analysis.
3. Do an internal analysis (steps 2 and 3 collectively
are known as SWOT analysis).
4. Formulate strategies.
5. Implement strategies.
6. Evaluate strategies.
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- Weaknesses – activities the organization doesn’t

do well or resources it needs.
- Opportunities are positive trends in the external
environment.
- Strengths – any activities the organization does
well or its unique resources.
- Threats are negative trends.
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• Describe the three types of corporate

strategies.
– Growth strategy – when an organization
expands the number of markets served or
products offered, either through current or new
businesses.
• Concentration, vertical integration (backward
and forward), horizontal integration, and
diversification (related and unrelated).
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(CONT.)
- Stability strategy – when an organization makes
no significant changes in what it’s doing.
- Renewal strategies—retrenchment and
turnaround – address organizational weaknesses
leading to performance declines.
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(CONT.)
• The BCG matrix is a way to analyze a company’s
portfolio of businesses by looking at a business’s
market share and its industry’s anticipated growth
rate. The four categories of the BCG matrix are:
– Cash cows
– Stars
– Question marks
– Dogs
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• Describe competitive advantage and the

competitive strategies organizations use to
get it.
– Competitive advantage is what sets an
organization apart, its distinctive edge.
– Porter’s five forces model assesses the five
competitive forces that dictate competition in an
industry:
• Threat of new entrants, threat of substitutes,
bargaining power of buyers, bargaining power of
suppliers, and current rivalry
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• Porter’s three competitive strategies are as

follows:
– Cost leadership (competing on the basis of having
the lowest costs in the industry).
– Differentiation (competing on the basis of having
unique products that are widely valued by
customers).
– Focus (competing in a narrow segment with either a
cost advantage or a differentiation advantage).
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• Discuss current strategic management
issues.
– Strategic leadership is the ability to anticipate,
envision, maintain flexibility, think strategically,
and work with others in the organization to initiate
changes that will create a viable and valuable
future for the organization.
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- Strategic flexibility – that is, the ability to

recognize major external environmental
changes, to quickly commit resources, and to
recognize when a strategic decision isn’t
working.
- Managers can use e-business strategies to
reduce costs, to differentiate their firm’s
products and services, to target (focus on)
specific customer groups, or to lower costs by
standardizing certain office functions.
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MONITORING
AND
CONTROLLING
18
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18 - 1
LEARNING OBJECTIVES
1. Explain the nature and importance of control.
2. Describe the three steps in the control process.
3. Explain how organizational and employee performance are
measured.
Know how to be effective at giving feedback.
4. Describe tools used to measure organizational
performance.
5. Discuss contemporary issues in control.
Develop your skill at dealing with difficult people.
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18 - 2
WHAT IS CONTROLLING?
Controlling – the process of monitoring,

comparing, and correcting work performance.
• The Purpose of Control
– To ensure that activities are completed in ways
that lead to the accomplishment of
organizational goals.
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18 - 3
WHY IS CONTROLLING IMPORTANT?
As the final link in management functions:

– Planning – controls let managers know whether their
goals and plans are on target and what future actions
to take.
– Empowering employees – control systems provide
managers with information and feedback on
employee performance.
– Protecting the workplace – controls enhance physical
security and help minimize workplace disruptions.
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EXHIBIT 18-1
PLANNING-CONTROLLING LINK
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18 - 5
THE CONTROL PROCESS
Control process – a three-step process of

measuring actual performance, comparing
actual performance against a standard, and
taking managerial action to correct deviations or
inadequate standards.
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18 - 6
EXHIBIT 18-2
THE CONTROL PROCESS
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18 - 7
THE CONTROL PROCESS (CONT.)
Step 1: Measuring Actual Performance

– How We Measure – personal observations,
statistical reports, oral reports, and written
reports.
– What We Measure – what is measured is
probably more critical to the control process than
how it’s measured.
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18 - 8
EXHIBIT 18-3
SOURCES OF INFORMATION FOR
MEASURING PERFORMANCE
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18 - 9
Step 2: Comparing Actual Performance

Against the Standard:
– Determining the degree of variation between
actual performance and the standard.
– Range of variation – the acceptable
parameters of variance between actual
performance and the standard.
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18 - 10
EXHIBIT 18-4
ACCEPTABLE RANGE OF VARIATION
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EXHIBIT 18-5
GREEN EARTH GARDENING SUPPLY—JUNE
SALES
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Step 3: Taking Managerial Action

– Immediate corrective action – corrective
action that corrects problems at once in order
to get performance back on track.
– Basic corrective action – corrective action
that looks at how and why performance
deviated before correcting the source of
deviation.
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Step 3 (cont.)
– Revise the Standard – if performance
consistently exceeds the goal, then a
manager should look at whether the goal is
too easy and needs to be raised.
– Managers must be cautious about revising a
standard downward.
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EXHIBIT 18-6
MANAGERIAL DECISIONS
IN THE CONTROL PROCESS
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WHAT IS ORGANIZATIONAL
PERFORMANCE?
Performance – the end result of an
activity.
• Organizational performance – the
accumulated results of all the organization’s
work activities.
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MEASURES OF ORGANIZATIONAL
PERFORMANCE
Productivity– the amount of goods or services
produced divided by the inputs needed to
generate that output.
• Organizational effectiveness – a measure of
how appropriate organizational goals are and
how well those goals are being met.
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EXHIBIT 18-7
POPULAR INDUSTRY AND
COMPANY RANKINGS
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CONTROLLING FOR EMPLOYEE
PERFORMANCE
Disciplinary actions – actions taken by a
manager to enforce the organization’s work
standards and regulations.
• Delivering Effective Performance Feedback –
managers need to provide their employees with
feedback so that the employees know where
they stand in terms of their work.
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EXHIBIT 18-8
TYPES OF DISCIPLINE PROBLEMS AND
EXAMPLES OF EACH
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TOOLS FOR MEASURING ORGANIZATIONAL
PERFORMANCE
• Feed forward control – control that takes place

before a work activity is done.
• Concurrent control – control that takes place
while a work activity is in progress.
• Management by walking around – a term used
to describe when a manager is out in the work
area interacting directly with employees.
• Feedback control – control that takes place after
a work activity is done.
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EXHIBIT 18-9
TYPES OF CONTROL
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FINANCIAL CONTROLS
Traditional Controls
– Ratio analysis
• Liquidity
• Leverage
• Activity
• Profitability
– Budget Analysis
• Quantitative standards
• Deviations
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EXHIBIT 18-10
POPULAR FINANCIAL RATIOS
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INFORMATION CONTROLS
Management Information System(MIS) – a

system used to provide management with
needed information on a regular basis.
• Data – an unorganized collection of raw,
unanalyzed facts (e.g., an unsorted list of customer
names).
• Information – data that has been analyzed and
organized such that it has value and relevance to
managers.
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THE BALANCED SCORECARD
Balanced scorecard – a performance

measurement tool that examines more
than just the financial perspective.
– Measures a company’s performance in four
areas:
• Financial
• Customer
• Internal processes
• People/innovation/growth assets
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BENCHMARKING OF BEST PRACTICES
Benchmarking – the search for the best

practices among competitors or non-competitors
that lead to their superior performance.
• Benchmark – the standard of excellence to
measure and compare against.
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EXHIBIT 18-11
SUGGESTIONS FOR INTERNAL
BENCHMARKING
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CONTEMPORARY ISSUES IN CONTROL
Adjusting Controls for Cross-Cultural Differences and

Global Turmoil:
– Control techniques can be quite different for different
countries.
– Differences are primarily in the measurement and
corrective action steps of the control process.
– Managers in foreign countries also need to be aware
of constraints on corrective actions they can take.
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CONTEMPORARY ISSUES IN CONTROL (CONT.)
Workplace privacy
– Employers can (and do)
• read your e-mail
• tap your telephone
• monitor your work by computer
• store and review computer files
• monitor you in an employee bathroom or dressing
room
• track your whereabouts in a company vehicle
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(CONT.)
Employee theft – any unauthorized taking of

company property by employees for their
personal use.
• Workplace Violence – the U.S. National Institute
of Occupational Safety and Health still says that
each year, some 2 million American workers are
victims of some form of workplace violence.
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EXHIBIT 18-12
CONTROLLING EMPLOYEE THEFT
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EXHIBIT 18-13
CONTROLLING WORKPLACE VIOLENCE
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EXHIBIT 18-13
CONTROLLING WORKPLACE VIOLENCE (CONT.)
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(CONT.)
Controlling Customer Interactions
• Service profit chain – the service sequence
from employees to customers to profit.
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CONTEMPORARY ISSUES IN CONTROL (CONT.)
Corporate Governance – the system used to

govern a corporation so that the interests of
corporate owners are protected.
• The Role of Boards of Directors – a group,
independent from management, looking out for
the interests of shareholders who were not
involved in the day-to-day management of the
organization.
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• Explain the nature and importance of control

– Controlling is the process of monitoring, comparing,
and correcting work performance.
– Control is important because
1. It’s the only way to know if goals are being met, and
if not, why.
2. It provides information and feedback so managers
feel comfortable empowering employees.
3. It helps protect an organization and its assets.
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• Describe the three steps in the control
process.
1. Comparing involves looking at the variation
between actual performance and the standard
(goal).
2. Taking action can involve doing nothing,
correcting the actual performance, or revising
the standards.
3. Measuring involves deciding how to measure
actual performance and what to measure.
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• Explain how organizational and employee

performance are measured.
1. Productivity, the output of goods or services
produced divided by the inputs needed to
generate that output.
2. Effectiveness, a measure of how appropriate
organizational goals are and how well those
goals are being met.
3. Industry and company rankings compiled by
various business publications.
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• Describe tools used to measure

organizational performance.
– Feedforward controls take place before a work
activity is done.
– Concurrent controls take place while a work
activity is being done.
– Feedback controls take place after a work
activity is done.
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• Financial controls that managers can use include

financial ratios (liquidity, leverage, activity, and
profitability) and budgets.
• Mangers can use an MIS, which provides
managers with needed information on a regular
basis.
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• Balanced scorecards – provide a way to evaluate

an organization’s performance in four different
areas rather than just from the financial
perspective.
• Benchmarking – provides control by finding the
best practices among competitors or
noncompetitors and from inside the organization
itself.
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• Discuss contemporary issues in control.

– Cross-cultural differences may be needed
primarily in the areas of measuring and taking
corrective actions.
– Workplace concerns include workplace privacy,
employee theft, and workplace violence.
– Corporate governance is the system used to
govern a corporation so that the interests of
corporate owners are protected.
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MANAGERS IN THE

1. Explain why managers are important to organizations.

Manager – Someone who coordinates and

Management involves coordinating and

• Getting the most • Attaining

Planning – Defining goals, establishing strategies to achieve

• Roles are specific actions or behaviors

• Customers: the reason that organizations

• Sustainability – a company’s ability to

• Explain why managers are important to

• Tell who managers are and where they work.

• Describe the functions, roles, and skills of

• managerial skills include

• Step 3: Allocate Weights to the Criteria

• Step 4: Develop Alternatives

• Step 5: Analyze Alternatives

• Step 6: Select an Alternative

• Step 7: Implement the Alternative

• Step 8: Evaluate Decision Effectiveness

• Bounded Rationality – decision-making that’s

• Evidence-based management (EBMgt) – the

• Structured Problems – straightforward,

• Unstructured Problems – problems that

• Heuristics – using “rules of thumb” to simplify

• Anchoring Effect – fixating on initial information

• Framing Bias – selecting and highlighting certain

• Sunk Costs Errors – forgetting that current

• Planning – defining the organization’s

Four reasons for planning

Formal planning is associated with:

Goals (objectives) – desired

Financial Goals – related to the expected

Stated Goals – official statements of what an

Strategic plans – plans that apply to the

Long-term plans – plans with a time frame

Single-use plan – a one-time plan

Traditional goal-setting – an approach to setting

1. Review the organization’s mission, or purpose.

Length of future commitments

In the traditional approach, planning is done

How Can Managers Plan Effectively in Dynamic

• How Can Managers Use Environmental

• Define the nature and purposes of

• Classify the types of goals organizations

• Long-term plans are those with a time

• A single-use plan is a one-time plan

• Compare and contrast approaches to goal-

• Well-written goals have six characteristics:

• Goal-setting involves these steps:

• The two main approaches to planning include:

• Discuss contemporary issues in planning.

Strategic management – what managers do

Strategic management process – a six-

SWOT analysis – an analysis of the

Strengths- any activities the organization

Step 6: Evaluating results

Corporate strategy – an organizational

Growth – expansion into new products and