Business A Changing World Canadian 6th Edition Ferrell Solutions Manual

Business A Changing World Canadian
6th Edition Ferrell Solutions Manual

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Chapter 06 - The Nature of Management
OBJECTIVES
LO 6-1 Define management, and explain its role in the achievement of organizational objectives.
LO 6-2 Describe the major functions of management.
LO 6-3 Distinguish among three levels of management and the concerns of managers at each level.
LO 6-4 Specify the skills managers need in order to be successful.
LO 6-5 Summarize the systematic approach to decision making used by many business managers.
KEY TERMS AND DEFINITIONS
administrative Those who manage an entire business or a major segment of a business; they
managers are not specialists but coordinate the activities of specialized managers.
agenda A calendar, containing both specific and vague items, that covers short-term
goals and long-term objectives.
analytical skills The ability to identify relevant issues, recognize their importance, understand
the relationships between them, and perceive the underlying causes of a
situation.
conceptual skills The ability to think in abstract terms and to see how parts fit together to form a
whole.
controlling The process of evaluating and correcting activities to keep the organization on
course.
crisis management or An element in planning that deals with how to respond to potential disasters
contingency planning such as product tampering, oil spills, fire, earthquake, computer virus, or
reputation crisis.
directing Motivating and leading employees to achieve organizational objectives.
downsizing The elimination of a significant number of employees from an organization.
financial managers Managers who focus on obtaining the funds needed for the successful operation
of an organization and using those funds to further organizational goals.
first-line managers Managers who supervise both workers and the daily operations of an
organization.
human relations skills The ability to deal with people, both inside and outside the organization.
human resources Managers who handle the staffing function and deal with employees in a
managers formalized manner.
information technology Managers who are responsible for implementing, maintaining, and controlling
(IT) managers technology applications in business, such as computer networks.
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leadership The ability to influence employees to work toward organizational goals.
management A process designed to achieve an organization’s objectives by using its

resources effectively and efficiently in a changing environment.
managers Those individuals in organizations who make decisions about the use of
resources and who are concerned with planning, organizing, leading, and
controlling the organization’s activities to reach its objectives.
marketing managers Managers who are responsible for planning, pricing, and promoting products
and making them available to customers through distribution.
middle managers Managers who are responsible for the tactical planning that implements the
general guidelines established by top management.
mission The statement of an organization’s fundamental purpose and basic philosophy.
networking The building of relationships and sharing of information with colleagues who
can help managers achieve the items on their agendas.
operational plans Very short-term plans that specify what actions individuals, work groups, or
departments need to accomplish in order to achieve the tactical plan and
ultimately the strategic plan.
organizing The structuring of resources and activities to accomplish objectives in an

efficient and effective manner.
planning The process of determining the organization’s objectives and deciding how to
accomplish them; the first function of management.
production and Managers who develop and administer the activities involved in transforming
operations managers resources into goods, services, and ideas ready for the marketplace.
staffing The hiring of people to carry out the work of the organization.
strategic plans Those plans that establish the long-range objectives and overall strategy or
course of action by which a firm fulfills its mission.
tactical plans Short-range plans designed to implement the activities and objectives specified
in the strategic plan.
technical expertise The specialized knowledge and training needed to perform jobs that are related
to particular areas of management.
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top managers The president and other top executives of a business—e.g., the chief executive
officer, chief financial officer, chief operating officer, chief privacy officer—
who have overall responsibility for the organization.
LECTURE OUTLINE AND NOTES
I. The Importance of Management

A. Any organization, small or large, public or private, needs managers to plan,
organize, staff, direct, and control the work that goes on.
1. In short, managers help organizations achieve their objectives.
B. Management is a process designed to achieve an organization’s objectives by
using its resources effectively and efficiently in a changing environment.
1. Effectively means having the intended result.
2. Efficiently means accomplishing the objectives with a minimum of resources.
C. Managers make decisions about the use of the organization’s resources, and are
concerned with planning, organizing, leading, and controlling the organization’s
activities so as to reach its objectives.
D. Every organization, in the pursuit of its objectives, must acquire resources
(employees, suppliers, and financial resources) and coordinate their use to turn
out a final good or service.
1. Employees are one of the most important resources, and successful
companies foster employee loyalty.
2. Suppliers are another important consideration because a good supplier
maximizes efficiencies and reduces costs.
3. Financial resources pay for essential activities.
a. Primary funding comes from owners and shareholders, banks, and other
financial institutions.
4. Managers must carefully coordinate and control all of these resources in order
for the organization to meet its objectives.
E. Management is universal. It takes place not only in business, but also in
government, the military, labor unions, hospitals, schools, and religious groups –
any organization requiring the coordination of resources.
1. For example, Sergio Marchionne, the CEO of Fiat, saved the company from
bankruptcy and, after acquiring Chrysler, saved them as well.
II. Management Functions
A. To harmonize the use of resources so that businesses can develop, produce, and
sell products, managers engage in a series of activities:
B. Planning
1. Planning is the process of determining the organization’s objectives and
deciding how to accomplish them.
a. Designs the map that is the groundwork for all other functions
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b. Involves forecasting events and determining the best course of action

from a set of options or choices.
c. The plan specifies what should be done, by whom, where, when, and
how.
d. All organizations need to develop plans, but before an organization can
plan a course of action, it must first determine what it wants to achieve.
2. An organization’s mission is the statement of an organization’s fundamental
purpose and basic philosophy.
a. Answers the question: What business are we in?
b. Clear and concise statement that describes an organization’s reason for
existence.
3. A goal is the result that a firm wishes to achieve.
a. Companies usually have multiple goals
b. A goal has three key components: An attribute sought, a target to be
achieved, and a time frame in which the goal is to be achieved.
4. Objectives.
a. Objectives, the ends or results desired by the organization, derive from
the organization’s mission.
b. Can be simple or elaborate. Profit, competitive advantage, efficiency, and
growth are examples of objectives.
c. The principal difference between goals and objectives is that objectives
are generally stated in such a way that they are measurable.
d. Objectives provide direction for all managerial decisions and establish
criteria by which performance can be evaluated.
5. There are three general types of plans for meeting objectives.
a. Strategic plans are long-range plans developed by top-level managers.
1) Strategic plans generally cover periods ranging from one year or
longer, and may relate to plans to add products, purchase companies,
sell unprofitable segments of the business, issue stock, and/or move
into new markets.
2) Strategic plans must take into account the firm’s capabilities and
resources, the changing business environment, and organizational
objectives.
a. For example, Southwest Airline’s strategic plan was to expand
operations by acquiring AirTran.
b. Tactical plans are short-range plans designed to implement the activities
and objectives specified in the strategic plan.
1) They usually cover a period of one year or less and help keep the
organization on the course established in the strategic plan.
2) Because tactical plans allow the organization to react to changes in
the environment while continuing to focus on the company’s overall
strategy, management must periodically review and update them.
3) Because of their short-term nature, tactical plans are easier to adjust
or abandon if changes in the environment or the firm’s performance
so warrant.
c. Operational plans are very short term and specify what actions specific
individuals, work groups, or departments need to accomplish in order to
achieve the tactical plan and ultimately the strategic plan.
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1) They apply to details in executing activities in one month, week, or

even day.
d. Another element in planning is the idea of crisis management or
contingency planning, which deals with potential disasters such as
product tampering, oil spills, fire, earthquake, computer virus, or airplane
crash.
1) Companies that have contingency plans tend to respond more
effectively when problems occur than do firms that lack such
planning.
2) Developing a contingency plan quickly is not ideal.
a. When Bank of America bought Merrill Lynch, Bank of
America’s stock price plummeted because investors feared it had
paid too much for Merrill.
3) Crisis management plans cover two elements: maintaining business
throughout a crisis and communicating with the public, employees,
and officials about the problem and the company’s response.
C. Organizing
1. Organizing is the structuring of resources and activities to accomplish
objectives in an efficient and effective manner.
a. Structure helps organizations accomplish goals. Rarely are individuals in
an organization able to achieve common goals without some form of
structure.
2. Managers organize by reviewing plans and determining what activities are
necessary to implement them.
3. Managers divide the work into small units and assign it to specific
individuals, groups, or departments.
a. As companies reorganize for efficiency, they are organizing work into
teams to handle core processes such as new product development instead
of the more traditional departments.
b. Organizing is continuous because change is inevitable.
4. Organizing is important for the following reasons.
a. Helps create synergy.
b. Establishes lines of authority
c. Improves communication
d. Helps avoid duplication of resources
e. Improves effectiveness by speeding up decision making
D. Staffing
1. Staffing is hiring people to carry out the work of the organization. Once
managers have determined what work is to be done and how it is to be
organized, they must ensure the organization has enough employees with
appropriate skills to do the work
2. Requires:
a. Recruiting people for positions within the firm
b. Determining what skills are needed for specific jobs
c. How to motivate and train employees to do their assigned jobs
d. How much to pay employees
e. What benefits to provide
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f. How to prepare employees for higher-level jobs in the firm at a later date
3. Some companies choose to recruit new people through online job websites
like Monster.com, one of the world’s largest. This falls under the staffing
function of management.
4. Another aspect of staffing is downsizing, the elimination of significant
numbers of employees from an organization.
a. Production, sales, and technical positions can be outsourced to countries
with lower labor costs.
b. Staffing itself can be outsourced to companies who focus on hiring and
managing employees.
c. Can help firms reduce costs quickly and become more profitable in a
short period of time.
d. Has painful consequences for those who lose their jobs and for morale
among remaining employees
e. Effective managers will promote optimism and positive thinking and
minimize criticism and fault-finding after downsizing occurs.
E. Directing
1. Directing is motivating and leading employees to achieve organizational
objectives. Managers tell their employees what to do and when to do it using
deadlines, then encourage them to do their work.
2. All managers are involved in directing, but it is especially important to lower-
level managers.
3. Directing also involves determining and administering rewards and
recognition.
4. Managers motivate employees with incentives and in allowing employees to
participate. Recognition and appreciation are often the best motivators.
F. Controlling
1. Controlling is the process of evaluating and correcting activities to keep the
organization on course.
2. Controlling involves five activities:
a. Measuring performance.
b. Comparing present performance with standards or objectives.
c. Identifying deviations from the standards.
d. Investigating the causes of deviations.
e. Taking corrective action when necessary.
3. Controlling and planning are closely linked: Planning establishes goals and
standards for performance, while controlling helps firms ensure that
performance toward those goals is achieved.
4. The control process also helps managers deal with problems arising from
outside of the firm.
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III. Types of Management

A. Levels of Management
1. There are usually three levels of management, which form a pyramid—top
management, middle management, and front-line or supervisory
management.
a. Managers at all three levels perform all five management functions,
but the amount of time they spend on each function varies.
b. For top managers, the most important management function is
planning.
c. For middle managers, the most consuming function is organizing.
d. For front-line managers, the most consuming function is controlling.
2. Top managers include the president, the chief executive officer, the chief
financial officer, the chief operations officer, and other top executives, such
as the chief privacy officer, who have overall responsibility for the
organization.
a. In publicly owned corporations, the CEO’s boss is the board of directors.
b. Top managers also represent their company to the public and to
government regulators.
c. Top managers generally have many years of experience and command
top salaries. In addition to top salaries, top management typically gets
bonuses, long-term incentive awards, stock, and stock options.
1) Executive compensation has been criticized
2) Compensation committees and boards of directors are now seeking
ways to keep compensation commensurate with performance.
a. Not all managers receive high compensation. In 2012
Facebook CEO Mark Zuckerberg announced he would go
from his current salary of $600,000 to $1 per year.
d. Workforce diversity is also an important issue in today’s corporations,
and effective managers have found that diversity is good for workers
and for the bottom line.
1) A diverse workforce is better at making decisions regarding issues
related to consumer diversity.
2) The five rules of successful diversity recruiting include get
everyone involved, showcase your diversity, work with diversity
groups within your community, spend money, and sell, sell, sell—
and measure your return on investment.
3. Middle managers are responsible for tactical planning to implement the
general guidelines established by top management (e.g., plant managers,
division managers, and department managers).
a. Responsibility is more narrowly focused than top managers
b. Middle managers are involved in the specific operations of the
organization and spend more time organizing than other managers.
c. The ranks of middle managers have been shrinking as more companies
downsize to be more productive.
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4. First-line managers supervise workers and day-to-day operations of the

organization.
a. They spend most of their time directing and controlling.
b. Foremen, supervisors, and office managers are examples of first-line
management.
B. Areas of Management
1. At each level of management, managers specialize in the areas of finance,
production and operations, human resources, marketing, and
administration.
2. Financial Management
a. Financial managers focus on obtaining the funds needed for the
successful operation of the organization and using that money in
accordance with organizational goals.
1) For example, a financial manager at Ford may be asked to analyze
the costs and revenues of a car model to determine its contribution
to Ford’s profitability.
b. Responsibilities involve:
1) Projecting income and expenses
2) Determining short- and long-term financing needs and finding
sources to fill those needs
3) Identifying and selecting appropriate ways to invest extra funds
4) Monitoring the flow of financial resources
5) Protecting the firm’s financial resources.
3. Production and Operations Management
a. Production and operations managers are concerned with
transforming resources into goods, services, and ideas for the
marketplace.
b. They are typically involved in:
1) Planning and designing production facilities
2) Purchasing raw materials and supplies
3) Managing inventory
4) Scheduling processes to meet demand
5) Ensuring that products meet quality standards.
4. Human Resources Management
a. Human resources managers handle the staffing function and deal with
employees in a formalized manner.
b. They are responsible for:
1) Determining an organization’s human resource needs
2) Recruiting and hiring new employees
3) Developing and administering employee benefits
4) Training and performance appraisal programs
5) Dealing with government regulations concerning employment
practices.
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5. Marketing Management
a. Marketing managers are responsible for planning, pricing, and
promoting products and making them available to customers.
b. Areas of specialization include product development and management,
pricing, promotion, and distribution. Specific jobs are found in such areas
as marketing research, advertising, personal selling, retailing, and digital
marketing.
6. Information Technology Management
a. Information technology (IT) managers are responsible for
implementing, maintaining, and controlling technology applications such
as computer networks.
b. One major task of IT management is securing computer systems from
unauthorized users while making the system easy to use for authorized
users; they are also charged with protecting the systems’ data during
crises.
c. IT managers are also responsible for teaching and helping employees use
technology resources efficiently through training and support.
7. Administrative Management
a. Administrative managers are not specialists; instead, they manage an
entire business or a major segment of a business.
b. They are often called general managers because they coordinate the
activities of specialized managers.
IV. Skills Needed by Managers
A. Managers are typically evaluated on how effective and efficient they are.
Necessary skills include leadership, technical expertise, conceptual skills,
analytical skills, and human relations skills.
B. Leadership is the ability to influence employees to work toward
organizational goals.
1. There are three basic styles of leadership.
a. Autocratic leaders make all the decisions and then tell employees what
must be done and how to do it.
b. Democratic leaders allow their employees to get involved in decisions.
Employees involved in decision making generally require less
supervision.
c. Free-rein leaders let their employees work without much interference.
2. The effectiveness of each leadership style depends on several factors.
a. An autocratic style is generally needed to stimulate unskilled,
unmotivated employees.
b. Highly skilled, trained, and motivated employees may respond better
to democratic or free-rein leaders.
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c. Other considerations are the manager’s abilities and the situation itself.
1) When a situation requires a quick decision, for example, an
autocratic style of leadership may be best because the manager
does not have to consider input from a lot of people.
d. The “best” style depends on specific circumstances, and effective
managers strive to adapt their style as warranted.
3. Tips for successful leadership include building effective relationships,
communicating effectively, building the team and enabling employees to
collaborate effectively, understanding the financial aspects of business,
knowing how to create an environment of positive morale and recognition,
leading by example, and helping people to grow and develop.
C. Technical expertise is the specialized knowledge and training required to

perform jobs related to an area of management
1. Important for managers
2. Technical skills are most needed by first-line managers and least critical to
top-level managers.
3. Increasingly, computer expertise is essential for being a good manager.
D. Conceptual skills involve the ability to think in abstract terms and to see how
parts fit together to form a whole. It is an important skill for top-level
managers.
1. Top management must be able to evaluate continually where the company
will be in the future.
E. Analytical skills refer to the ability to identify relevant issues and recognize
their relative importance, understand the relationships between them, and
perceive the underlying cause of a situation.
1. All managers need to think logically, but this skill is probably the most
important to the success of top-level managers.
2. Managers should be able to process a broad range of issues and to weigh
different options before taking action.
3. Resolving ethical dilemmas requires analytical skills.
F. Human relations skills are the ability to deal with people.
1. Those who can relate to others, communicate well with others, understand
the needs of others, and show a true appreciation for others are generally
more successful than managers who lack such skills.
2. HR skills are especially important in high-contact service industry jobs
(hospitals, airlines, etc.).
3. For example, Southwest Airlines has excellent human relations skills.
V. Where do Managers Come From?
A. Managers are made three ways:
1. Promoting from within
2. Hiring externally from other organizations
3. Hiring straight out of universities
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B. Promoting people within the organization into management positions tends to

increase motivation by showing employees that those who work hard and are
competent can advance in the company.
C. Hiring managers from other organizations can be expensive to relocate the new
managers, and it may cause resentment with employees.
D. Finding managers with the right skills, knowledge, and experience can be
difficult. Headhunters are specialized executive employment agencies that can
help locate candidates from other companies.
E. People with specialized management skills such as those with an MBA degree
may be good candidates.
1. On-the-job training and socialization can help new recruits achieve success
in their position and can help them reach their objectives.
a. General Electric’s excellent managerial training programs, for
instance, are renowned across the world.
2. Companies look for people who are trainable and will be a good fit with
their corporate culture.
VI. Decision Making
A. Decision making is important in all management functions and all levels, whether
the decisions are on a strategic, tactical, or operational level.
B. A systematic approach includes a six-step process.
1. Recognizing and Defining the Decision Situation
a. The first step in decision making is recognizing and defining the
situation—whether the situation is positive or negative.
b. Situations calling for small-scale decisions often occur without warning;
situations requiring large-scale decisions generally occur after some
warning signals.
c. Once a situation has been recognized, managers must define it.
2. Developing Options
a. The next step is to develop a list of possible courses of action.
b. Creativity is very important.
3. Analyzing Options
a. Next, managers should analyze the practicality and appropriateness of
each option.
b. When assessing appropriateness, a decision maker should consider
whether the proposed option adequately addresses the situation.
4. Selecting the Best Option
a. Selection is often a subjective procedure because many situations do not
lend themselves to mathematical analysis.
b. It may be possible to select a combination of several options.
5. Implementing the Decision
a. Implementation can be fairly simple or very complex, depending on the
action.
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b. Managers should be ready to deal with unexpected consequences.

6. Monitoring the Consequences
a. Without proper monitoring, the consequences of decisions may not be
known quickly enough to make efficient changes.
b. If the desired result was not achieved, managers may discover that the
situation was incorrectly defined, or the decision was good even though
the desired result has not yet shown up, or that implementation was
flawed.
VII.The Reality of Management
A. Management is not a cut-and-dried process.
B. John P. Kotter says that management functions can be condensed into two basic
activities:
1. Figuring out what to do despite uncertainty, great diversity, and an enormous
amount of potentially relevant information.
2. Getting things done by a large and diverse set of people without having direct
control over most of them.
C. Managers spend as much as 75 percent of their time working with others.
1. Managers spend a lot of time establishing and updating an agenda of vague
and specific items that pertain to short-term goals and long-term objectives.
2. Managers also spend a lot of time networking—building relationships and
sharing information with colleagues.
a. Networks are not limited to immediate subordinates and bosses; they
include other people in the company as well as customers, suppliers, and
friends.
b. Networking helps managers carry out their responsibilities.
c. Websites like LinkedIn are helping managers and employees network
with one another to achieve their professional goals.
D. Managers spend a great deal of time confronting the complex and difficult
challenges facing business today.
E. It is only through creativity and imagination that managers can make effective
decisions that benefit their organizations.
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BOXED TEXT DISCUSSION QUESTIONS
OPENING CASE DESTINATION CEO, Facebook Chief Operating Officer: Sheryl Sandberg
As chief operating officer, Sandberg is charged with controlling Facebook’s massive user growth and
increasing the site’s earnings. As second in command, Sandberg deals with lawsuits, privacy issues,
potential legislation and more, all while maintaining positive relationships with important stakeholders.
Sandberg announced her next big task: attract more small businesses to Facebook. She hopes they will
become hooked when they see how Facebook can grow their customer base.
1. Why is Sheryl Sandberg’s job as Chief Operating Officer so important?

Sheryl Sandberg’s job as Chief Operating Officer is so important because she is in charge of
controlling Facebook's massive user growth and increasing the site's earning capacity. Without
retaining and attracting new users, Facebook would quickly diminish. She also deals with lawsuits,
privacy issues, potential legislation to regulate the collection of user information, the decision over
whether to enter China, and more. One of her important tasks is interacting with stakeholders and
maintaining positive relationships with the company.
2. How do you think that Sandberg’s job as a Google executive prepared her to help run
Facebook?
Students’ answers may vary. At Google Sandberg was the Vice President of Global Online Sales &
Operations, so she received experience in working with global consumers and in selling products
that would appeal to a large number of consumers. Because Google is such an advertising
powerhouse,
Sandberg likely learned the ropes of advertising over the Internet. These skills will likely prove to
be very important as Facebook tries to get small businesses to pay for advertising on the site.
3. Why do you think Facebook is trying to attract small businesses?

There are many more small businesses than large businesses, yet firms tend to focus more on larger
corporations. Sheryl Sandberg sees small businesses as a largely untapped resource. Many of them
have free Facebook pages, so they are already using the site to grow their businesses. Sandberg
hopes to take this one step further. She believes that establishing relationships with small
businesses will benefit both stakeholders. Facebook will benefit from increased revenue, and small
businesses can benefit by creating more targeted advertising for their markets.
Going Green Box, Patagonia Strives to Save the Planet

Patagonia sells durable and eco-friendly outdoor gear and clothing. Its adoption of organic cotton and
its recycling efforts are a few of the reasons consumers are loyal. Patagonia founder and owner Yvon
Chouinard sees saving the planet as an ongoing and evolving quest. The decisions he makes to promote
sustainability reinforces the values upon which the company was founded. He recently established the
Patagonia Music Collective, a group of artists who donate their 99 cent iTunes fees to various
environmental causes. Patagonia takes no cut. Under Chouinard’s strong leadership, Patagonia shows
what can happen when high ethical and social standards are maintained.
1. What initiatives has Patagonia taken to promote its value of sustainability?
Students may list the following:
 Patagonia sells durable and eco-friendly outdoor gear and clothing using organic cotton
and other eco-friendly materials.
 Its “cradle to cradle” Common Threads recycling program allows consumers to return
many of their products at the end of their lifespans to be turned into new products.
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 Patagonia is creating a sustainability index for clothing.

 The proceeds from the Patagonia Music Collective will be donated to various
environmental groups.
 Patagonia Provisions is partnering with British Columbia fishermen to harvest local
wild salmon to be turned into smoked and jerky products under sustainable conditions.
2. Describe why consumers tend to be more loyal to “green” environmentally friendly
companies.
Consumers have begun to care more about the environment and social responsibility. When
purchasing from “green” companies, they can feel more comfortable that their purchases are
not harmful to the environment. At Patagonia customers can also feel reassured that their
business with the company could actually help the planet because Patagonia donates to
environmental organizations and other socially responsible initiatives.
3. Under Yvon Chouinard’s leadership, Patagonia launched the Patagonia Music

Collective. How does this new venture relate back to the company’s green values?
The Patagonia Music Collective is a group of over 100 artists (many of them A-listers) who
donate their 99 cent iTunes fees to various environmental groups. Patagonia takes no cut. By
spearheading this collective, Patagonia is helping to make a difference in global sustainability.
This relates directly to Patagonia’s value of conducting business sustainably.
CEO Leads Rona’s Recovery
1. How was Sawyer a strong leader in helping Rona’s recovery?
Sawyer developed strong and simple plans including cutting costs and closing unprofitable stores.
2. What areas of management do you think Sawyer emphasized in his attempt to re-establish
Rona as a leader in home improvement products?
Answers will vary.
3. What are the challenges for a new CEO when trying to ensure a company such as Rona
continues to stay successful?
Answers will vary.
Responding to Business Challenges, Managers and Employees See Different Corporate Cultures
Many top managers believe they have values-based cultures where employees can grow and make ethical
decisions. However, employees disagree. 43% of employee respondents described the workplace as
“command-and-control” or “top-down management.” As views toward management change and employees
are expected to take on greater roles, stakeholders are advocating for a self-governance approach. This
approach calls for employee engagement, a greater emphasis on employee well-being, and the adoption of a
culture that inspires through values rather than rules.
1. How does a values-based culture differ from a top-down chain of command?

In a traditional top-down chain of command, managers perform most of the planning, organizing,
and directing functions of the firm. In a values-based culture employees are given more decision
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making authority. Such an approach calls for employee engagement, a greater emphasis on
employee well-being, and the adoption of a culture that inspires through values rather than strictly
rules.
2. Why do you think more managers want to adopt a values-based corporate culture?
Students’ answers may vary. Likely answers would include the fact that as organizational decision
making becomes more complex, employee input is needed to remain innovative. Many of the most
innovative companies solicit ideas and input from their employees. Another possibility is that a
values-based culture might hinder misconduct. With more people making decisions and taking
responsibility, there might be a greater chance that employees will feel empowered to report
misconduct when they observe it. Many major scandals have occurred when power and decision
making authority was centralized to one or two individuals (e.g. the Madoff Ponzi scandal, The
News Corp.).
3. How can managers make sure that they are successfully implementing a values-based
managerial approach?
Better communication is needed to understand employee concerns, disseminate corporate values
throughout the company, and create an incentives system that rewards the successful practice of
these values in the workplace.
SUPPLEMENTAL LECTURE
The Mystique of Leadership
The textbook defines leadership as the “ability to influence employees to work toward organizational
goals.” The text also indicates that there are different kinds of leadership styles that are effective at
particular times and places and in the hands of certain leaders.
There is a mystique about the very word leadership. Leadership abilities may very well be in the eye of the
beholder. Why are some individuals considered to be leaders? These individuals exhibit charisma, courage,
charm, intelligence, and inspiration. Yet, people very close to the leader may know of many weaknesses
possessed by the distinguished leader.
Prime Minister Winston Churchill is an example of a leader who was able to obtain the respect and loyalty
of the British people during the six long years of war. Churchill had the ability to perk up the spirits of the
people; his speeches, broadcast over the BBC, are considered classics. In Churchill’s words, there was a
strong, quiet confidence that Great Britain would prevail against all enemies and that this would be for all
time referred to as “her finest hour.”
Despite the horrendous burden of government weighing heavily on his shoulders, Churchill found time to
be out among the people and when he did so, he was an inspirational model for those lucky Britons who
actually saw him. Winston Churchill appeared to be the perfect example of a leader.
John Colville was a personal secretary to Churchill for a long period, including the years from 1939 to
1945, during World War II. He kept a diary during those years, and in 1985 Colville’s notes were published
by W. W. Norton and Company as the Fringes of Power, 10 Downing Street Diaries 1939-1955. Colville’s
references to Churchill make his diary compelling reading.
Colville was aware of how popular Churchill was with the public. It should be noted that Colville admired
6-15
Churchill. Nevertheless, Colville witnessed—at extremely close range—some traits that showed Churchill
to be very much a normal human with normal failings. In fact, some of Churchill’s behavior would appear
to be the opposite of that which would influence others to work toward the achievement of organizational
goals. For example, there were times when Churchill could be extremely inconsiderate of those who
worked for him. Churchill often worked until 2:00 or 3:00 in the morning and expected his staff to do the
same. There is the example in which Churchill told his staff that they would need to rise at 5:00 in the
morning so the prime minister and his party could be off to their next assignment by 7:00. The staff arose as
told, but the prime minister proceeded to sleep very late without giving so much as a fleeting thought to
notifying his staff of the change in his plans, causing his entire staff to lose some three hours of sleep. If the
prime minister came to realize that he had been inconsiderate, he would never apologize. Instead, he would
be overly friendly to those he had wronged; they were supposed to get the message.
Churchill, according to Colville, could be very petty and would hold grudges against political enemies far
beyond normal lengths of time. In private conversation, Churchill would say frightful things about those
political foes. If an idea came from the wrong person, Churchill would immediately criticize it. There were
times when his staff and even Mrs. Churchill had to step in and show the prime minister the error of his
ways.
In the early days of his prime ministership, Churchill got personally involved in far too many things,
sending memos to numerous people in the government and the military on small matters that a good
sergeant could have taken care of. There were days when the staff surrounding Churchill felt that the
government was operating in a well-advanced state of confusion because of Churchill’s apparent lack of
administrative skill. Some felt that Churchill drank too much.
Despite the incidents that Colville reveals in his masterful diary, Churchill is still classified by most
historians as a great leader. And Colville—despite all he knows about the real Churchill—also concludes
that he was a truly great man. The mystery of the secret of leadership remains. How many faults can one
possess and still be effective at leading others? And can one be an effective leader in certain times and
places? It should be noted that shortly after the war ended, the British voted against Churchill’s party, and
he left his position of prime minister.
Discussion Questions:
1. Can you think of other well-known individuals who were perceived as great leaders, persons also
known for personal faults or frailties that could have led to a loss of leadership? What made
these individuals great leaders?
Student responses will vary.
2. Which leadership style did the great leaders mentioned above exhibit? Autocratic style?
Democratic style? Free-rein style?
Responses will vary depending on what the students wrote for Question #1. Churchill’s style would
most likely be autocratic.
CONTROVERSIAL ISSUE
Conflicting Communications of Managers
Managers need good human relations, or people, skills. They must be able to communicate goals, and they
have to understand their employees’ needs so that they can motivate them to perform. Managers must also
6-16
provide appropriate leadership.
Managers are not always very good at their jobs. Usually, poor management results from poor
communication or interpersonal skills. Typical of some employees’ experience is this one, told by David
Manning, a college student who worked as a radio announcer for a small station in a college town. The
manager-owner of the radio station, Greg Smith, had often told the members of his staff: “I want you to
know that my door is always open. Come in anytime if you have a suggestion to make our station the best
on the air. Come see me.”
The young announcer took the manager at his word. David noticed that the music staff gave the announcer
a list of numbers (such as 88745, 98432, 72341, etc.) of CDs to be pulled from the files and played on a
classical music program. The announcer observed that it would take the music staff just a few more seconds
to type after each number a notation, such as “Symphony #4 by Beethoven, Chicago Symphony Orchestra,
Bruno Walter conducting.” Such notations would save David (and other announcers) a lot of time and
would make the classical music program sound much better on the air.
David decided to make his suggestion to the manager. He went through the manager’s “open door” and
presented his ideas. Greg Smith, the manager, replied: “I don’t want you kids coming in here complaining.
If you can’t do the work, then quit. Your nitwit ideas are of no value to my radio station.” The manager
went on and on for several minutes. At the conclusion of his tirade, the manager said to David: “My door is
always open; come back and see me with an idea anytime!”
Needless to say, David never returned to the manager’s office with any more suggestions.
Discussion Questions:
1. Did the manager give mixed signals to his employees? Why?

The manager definitely gave mixed signals to his employees. He probably wanted his leadership style
to appear democratic, but he had no idea how to do it. He didn’t want to give up control, even though
he wanted to appear to be a fair manager.
2. Can managers improve their management styles? How?

Students’ answers may vary.
SO YOU WANT TO BE A MANAGER—WHAT KIND OF MANAGER DO YOU WANT TO

BE?
What factors are leading to the increasing difficulty of management jobs?
The requirements for management jobs become more demanding with every passing year—with the speed
of technology and communication increasing by the day, and the stress of global commerce increasing
pressures to perform. There is also the consideration of restructuring and downsizing, which has changed
where jobs are available and has in some cases reduced the number of available positions.
CHECK YOUR PROGRESS
1. Why is management so important, and what is its purpose?
Management is the process of coordinating human, physical, and financial resources to achieve an
6-17
organization’s objectives. Management is important because people in an organization must work

together to achieve some stated or implied objective. Management takes place in any organization
calling for the coordination of resources.
2. Explain why the Canadian Red Cross would need management, even though its goal is not
profit-related.
All organizations, whether profit or nonprofit organizations, are involved with the process of
coordinating human, physical, and financial resources to achieve their objectives. Managers and
employees of nonprofit organizations work together to achieve the objectives of their organizations.
3. Why must a company have financial resources before it can use human and physical resources?
An organization must have financial resources in order to purchase human resources (hire people) and
to purchase physical resources.
4. Name the five functions of management and briefly describe each function.
The five functions of management include planning, organizing, staffing, directing, and controlling.
Planning is the process of selecting a course of action to achieve organizational objectives. Organizing
consists of structuring all resources and activities to accomplish objectives in an efficient and effective
manner. Staffing is hiring people to carry out the work of the organization. Directing is motivating and
leading employees to achieve organizational objectives. Controlling is evaluating and correcting
activities to keep the organization on course.
5. Identify the three levels of management. What is the focus of managers at each level?
The three levels of management include top management, middle management, and first-line
management. Top management includes the president and other top executives who have overall
responsibility for the organization. Middle management includes plant managers, division managers,
and other managers who have a narrower focus under top managers. First-line management includes all
the managers who supervise workers. These managers are involved in the everyday operations of the
organization.
6. In what areas can managers specialize? From what area do top managers typically come?
The areas of management include financial management, production and operations management,
human resources (personnel) management, marketing management, information technology
management, and administrative management. Financial managers deal primarily with an
organization’s financial resources. Production and operations managers are concerned with the
transformation of an organization’s resources into goods, services, and ideas. Human resources
managers deal with employees in a formalized manner as related to hiring, training, and benefits.
Marketing managers are responsible for planning, pricing, and promoting products and making them
available to customers. Information technology managers deal primarily with establishing, maintaining,
and controlling computer networks. Administrative managers do not specialize in any particular area
but manage an entire business or major segment of a business.
Many top executives come from financial management, production and operations management, or
marketing management. Most top managers are actually administrative managers.
6-18
7. What skills do managers need? Give examples of how managers use these skills to do their jobs.
Skills needed by managers include leadership, technical expertise, conceptual skills, analytical skills,
and human relations skills. Leadership is the ability to influence and motivate employees to work
toward the achievement of organizational goals. Technical expertise is the specialized knowledge
needed to perform a job, such as managing an auto production line. Conceptual skills are the ability to
think in abstract terms so that a manager can fit parts together to form a whole perspective of a business
operation. Analytical skills are the ability to identify relevant issues and recognize their importance,
understand the relationships between them, and perceive their underlying causes. Human relations
skills involve dealing with people both inside and outside the organization.
8. What are three styles of leadership? Describe situations in which each style would be
appropriate.
There are three styles of leadership: autocratic, democratic, and free-rein.
Autocratic leaders make all decisions and then tell employees what must be done and how to do it.
Autocratic leaders work best when dealing with lower-level employees who are poorly motivated and
require more supervision to accomplish the task.
Democratic leaders allow their employees to get involved in decision making. Democratic leaders work
well in organizations that allow people to participate in decisions, such as accounting firms, consulting
agencies, middle- and upper-management areas, or corporations.
Free-rein leaders let their employees work without much interference. Free-rein leaders work well in
research and development firms where employees are highly educated and need freedom to conduct
research projects.
9. Explain the steps in the decision-making process.
Decision making is a six-step process that occurs at all management levels. The first step involves
recognizing and defining the situation. Step two involves developing possible courses of action, both
standard and creative ones. Step three involves analyzing the feasibility, appropriateness, and
consequences of each option. Step four involves selecting the best option from the list of options. The
decision is implemented in step five. Step six requires the monitoring of the decision’s consequences.
These steps in decision making should be viewed only as a broad framework to help people in their
approaches to decision making.
10. What is the mathematical formula for perfect management? What do managers spend most of
their time doing?
There is no mathematical formula for perfect management. Most management decisions are largely
subjective.
Most managers spend as much as 75 percent of their time working with others. They also spend a lot of
time establishing and updating an agenda of goals, networking with their colleagues, and confronting
the complex and difficult challenges in the business world today.
6-19
GET INVOLVED
1. Give examples of the activities that each of the following managers might be involved in if he or
she worked for the Coca-Cola Company:
 Financial manager
 Production and operations manager
 Personnel manager
 Marketing manager
 Administrative manager
 Information technology manager
 Foreman
Sample student answer (answers will vary):

 Financial manager: Project income and expenses over Coca-Cola’s next quarter; project income
and expenses for the next year; investigate feasibility of new Coca-Cola projects and investments
from a financial standpoint; collect data on company finances and operations; develop financial
and operational reports; determine long-term and short-term financing needs for Coca-Cola and its
different subsidiaries; analyze the financial contributions of Coca-Cola’s product lines to ensure
and provide recommendations to top management.
 Production and operations manager: Develop business plans to support objectives of various
product lines; purchase necessary supplies for product development; plan and design new plants
and Coca-Cola production facilities; improve production and operational performance efficiency at
different facilities; ensure that Coca-Cola products meets relevant quality standards.
 Personnel manager: Engage in the recruiting of new employees; interview and hire qualified
individuals to be a part of Coca-Cola’s various teams; oversee Coca-Cola’s performance appraisal
system; properly store and retrieve personnel files; oversee Coca-Cola benefit systems; ensure
confidentiality of employee information.
 Marketing manager: Plan the promotion of new Coca-Cola products; select relevant media for
promotional campaigns; appropriate the costs of advertising and other promotional campaigns;
develop pricing objectives of Coca-Cola products; determine effectiveness of pricing strategies;
determine product features; aid in product development and test marketing; oversee
commercialization of new Coca-Cola products; delete products that do not reach certain profit
objectives.
 Administrative manager: Oversee the work performance of one of Coca-Cola’s companies; collect
and distribute information throughout the company; manage quality and cost control of the
company; frequently meet with managers from the different departments to go over planning and
forecasting; direct the different administrative functions within the company.
 IT manager: Create safeguards to protect company information in computer systems from
unauthorized sources; create a streamlined process for people inside the company who have
legitimate reasons to use the system; create contingency plans for protecting the system’s data
during a crisis situation; develop efficient methods to communicate to global employees, partners,
and suppliers though Coca-Cola’s IT system; provide support for training to help employees
understand how to use the system.
 Foreman: Supervise and direct workers in a particular department or business segment; implement
plans by top and middle managers; evaluate performance of Coca-Cola employees; develop plans
for correcting performance shortcomings; support employees in their daily operations.
2. Interview a small sample of managers, attempting to include representatives from all three levels
and all areas of management. Discuss their daily activities and relate these activities to the
6-20
management functions of planning, organizing, staffing, directing, and controlling. What skills
do the managers say they need to carry out their tasks?
Students’ answers will vary depending upon the sample of managers they choose.
3. You are a manager of a firm that manufactures conventional ovens. Over the past several years,
sales of many of your products have declined; this year your losses may be quite large. Using the
steps of the decision-making process, briefly describe how you arrive at a strategy for correcting
the situation.
First, students will have to recognize and define the decision situation. Students should recognize that
the problem is that sales of conventional ovens have declined. They might define the decision situation
as something like, “Investigate options to reduce the losses from decreasing sales of conventional
ovens.” The second step is to develop options to resolve the situation. As part of this process, students
might choose to launch an investigation to find out why sales have declined. Are there new substitutes
for the conventional overs that consumers are choosing instead? Depending upon the why, students
might come up with alternatives such as investigate ways to upgrade the conventional oven, engage in
heavier promotion to increase awareness of the benefits of the conventional oven, look into changing
the current pricing strategy, etc. They must then analyze the options, the third step of the process. After
analyzing the options, including the advantages and disadvantages of each, students will choose the
option they think is best. They should provide support for why they feel a particular option is the best
choice. Then they must implement the decision. Students should be detailed regarding how they plan
on implementing the proposed solution. Afterwards, they should state how they plan to monitor the
consequences of the decision. For instance, they might investigate whether sales are beginning to rise
again, whether sales are meeting the company’s sales goals, etc.
ADDITIONAL DISCUSSION QUESTIONS AND EXERCISES
1. Canada Goose recently announced the firm was being taken over by an American
company. Part of this takeover was a gaurantee to continue manufacturing in Canada.
Given the discussion in the Chapter and the book so far what are some of the advantages
and disadvantages of the takeover. Are you surprised the company was sold.
Answers may vary. Students should likely note the takeover will lead to additional investment
dollars to fuel growth and further geographic expansion. Students should be concerned about the
impact of the takeover on the brand.
2. How do vision and value statements impact planning?
When planning, most companies start with a vision statement and decide on the organization's
values. A vision statement often explains why an organization exists and discusses long range
goals or direction for the company. Values are guiding principles that direct an organization's
decisions. The vision and values provide direction through an organization's planning process
and help both managers and workers strive toward a purpose.
3. Briefly define a mission statement.
A mission statement describes an organization's fundamental purpose and basic philosophy.
6-21
4. Define and describe some of the characteristics of a strategic plan.
Sstrategic plans, establish the long-range objectives and overall strategy or course of action by which
the firm fulfills its mission and vision statement while attempting to stay true to its values.
Strategic plans generally cover periods ranging from 2 to 10 years or even longer. They include
plans to add products, purchase companies, sell unprofitable segments of the business, issue
stock, and move into international markets
5. Define contingency or crisis planning and explain why it is important.
Crisis management or contingency planning is an element in planning that deals with potential
disasters such as product tampering, oil spills, fire, earthquake, computer virus, or airplane crash.
Businesses that have contingency and crisis management plans tend to respond more effectively
when problems occur than do businesses who lack such planning.
6. Define leadership and explain how it helps a firm succeed.
Leadership is the ability to motivate employees to work toward organizational goals. Strong leaders
establish a vision or a shared set of goals, and then create an organizational culture to achieve
these goals.
7. What five things do effective leaders do well?
Successful leaders act the way they want their employees to act; inspire a shared vision; challenge
conventional processes; enable employees to act, and encourage people to act kindly toward
others.
CHAPTER 6 QUIZ
6-22
1. All of the following are functions of management except

A. directing.
B. staffing.
C. promoting.
D. organizing.
E. controlling.
2. Crisis management plans generally cover maintaining business operations during a crisis
and
A. Firing those responsible for the crisis.
B. Avoiding responsibility for the crisis.
C. Communicating with others about the situation and the company's response to it.
D. Preventing the situations from occurring.
E. All of the answers are correct.
3. Peter and Taylor have just finished interviewing four candidates who want to work for 3M.
They are involved in which of the following management functions?
A. Planning
B. Analyzing
C. Staffing
D. Controlling
E. Directing
4. When Xiang pointed out to the supervisor that the number of nails used by the table
assemblers had increased by 35 percent from the preceding month, she was involved in
A. planning.
B. organizing.
C. staffing.
D. controlling.
E. directing.
5. Abdullah has been put in charge of a group of new employees. He has told them they must
use the table equipment exactly as he says with no exceptions. Abdullah is using
A. democratic leadership.
B. autocratic leadership.
C. free-rein leadership.
D. creative leadership.
E. good leadership.
6-23
Answers: 1. c 2. c 3. c 4. d 5. b
BUILD YOUR BUSINESS PLAN
Commence a discussion on what leadership skills are necessary to be an effective leader. What national
figures (government official or corporate figure) do students believe are the best example of a true leader? If
students have a hard time thinking of someone, use Jack Welch of GE as an example. Jack Welch led GE
for 20 years utilizing the strategy of retaining only GE divisions that are #1 or #2 in the market, and
growing the company by an aggressive acquisition strategy. Jack instituted creative and revolutionary ideas
such as Six Sigma, the 70/20/10 employee evaluation process, and an open dialog within the management
structure.
While it may be difficult for students to relate to Welch’s successes, all students can relate to bosses who
have exhibited strong leadership skills. Query students on what those leadership skills were and how their
bosses were able to command and not demand respect.
TEAM EXERCISE
Students will form groups and assign the responsibility of locating examples of crisis management
implementation for companies dealing with natural disasters (explosions, fires, earthquakes, etc.),
technology disasters (viruses, plane crashes, compromised customer data, etc.), or ethical or legal
disasters. They should ask themselves the following questions: How did these companies communicate
with key stakeholders? What measures did the company take to provide support to those involved in the
crisis? Report your findings to the class.
Term Paper or Project Topics
These topics can be assigned as individual or collaborative projects:

1. The Team Concept in Management
2. Management Training
3. The Importance of Computers for Modern Managers
4. Frederick Smith, CEO of Federal Express (or some other CEO)
5. Frederick Taylor, Father of Scientific Management
GUEST SPEAKER SUGGESTIONS
1. A professor or teacher to talk about careers in management.

2. A manager from a local firm representing top-level management, middle management, or first-line
management.
6-24
TEACHING SUGGESTIONS
1. Use the “Lecture Outline and Notes” and PowerPoint slides to highlight the main points of the chapter.
2. Discuss the opening vignette and other boxed material. Use the “Boxed Text Discussion Questions” to
review some of this boxed material. Ask students how the boxed material relates to the major functions
of management, the three levels of management, and the skills managers need to be successful.
3. Go over the “Check Your Progress” in the textbook.
4. Divide the class into six teams. (Large sections may require more than six teams.) Using the “Build
Your Skills” exercise in the textbook, assign each team one managerial function. The team should
decide on some examples of activities for which the managers might be involved. Have a team
representative report or write the examples on the chalkboard.
6-25

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6th Edition Ferrell Solutions Manual

KEY TERMS AND DEFINITIONS

directing Motivating and leading employees to achieve organizational objectives.

downsizing The elimination of a significant number of employees from an organization.

leadership The ability to influence employees to work toward organizational goals.

management A process designed to achieve an organization’s objectives by using its

mission The statement of an organization’s fundamental purpose and basic philosophy.

organizing The structuring of resources and activities to accomplish objectives in an

LECTURE OUTLINE AND NOTES

I. The Importance of Management

b. Involves forecasting events and determining the best course of action

1) They apply to details in executing activities in one month, week, or

III. Types of Management

4. First-line managers supervise workers and day-to-day operations of the

C. Technical expertise is the specialized knowledge and training required to

B. Promoting people within the organization into management positions tends to

b. Managers should be ready to deal with unexpected consequences.

BOXED TEXT DISCUSSION QUESTIONS

1. Why is Sheryl Sandberg’s job as Chief Operating Officer so important?

3. Why do you think Facebook is trying to attract small businesses?

Going Green Box, Patagonia Strives to Save the Planet

 Patagonia is creating a sustainability index for clothing.

3. Under Yvon Chouinard’s leadership, Patagonia launched the Patagonia Music

CEO Leads Rona’s Recovery

1. How was Sawyer a strong leader in helping Rona’s recovery?

Answers will vary.

Answers will vary.

1. How does a values-based culture differ from a top-down chain of command?

The Mystique of Leadership

Conflicting Communications of Managers

provide appropriate leadership.

1. Did the manager give mixed signals to his employees? Why?

2. Can managers improve their management styles? How?

SO YOU WANT TO BE A MANAGER—WHAT KIND OF MANAGER DO YOU WANT TO

What factors are leading to the increasing difficulty of management jobs?

CHECK YOUR PROGRESS

1. Why is management so important, and what is its purpose?

organization’s objectives. Management is important because people in an organization must work

There are three styles of leadership: autocratic, democratic, and free-rein.

9. Explain the steps in the decision-making process.

Sample student answer (answers will vary):

ADDITIONAL DISCUSSION QUESTIONS AND EXERCISES

2. How do vision and value statements impact planning?

3. Briefly define a mission statement.

A mission statement describes an organization's fundamental purpose and basic philosophy.

4. Define and describe some of the characteristics of a strategic plan.

5. Define contingency or crisis planning and explain why it is important.

6. Define leadership and explain how it helps a firm succeed.

7. What five things do effective leaders do well?

1. All of the following are functions of management except

BUILD YOUR BUSINESS PLAN

Term Paper or Project Topics

These topics can be assigned as individual or collaborative projects:

GUEST SPEAKER SUGGESTIONS

1. A professor or teacher to talk about careers in management.

3. Go over the “Check Your Progress” in the textbook.