Chapter 7

Management and Leadership

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 Learning Objectives
LO 7-1 Describe the changes occurring today in the
management function.
LO 7-2 Describe the four functions of management.
LO 7-3 Relate the planning process and decision making to
the accomplishment of company goals.
LO 7-4 Describe the organizing function of management.
LO 7-5 Explain the differences between leaders and
managers, and describe the various leadership
styles.
LO 7-6 Summarize the five steps of the control function of
management.

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 Managers’ Roles Are Evolving
Managers Today
• Tend to be collaborative
• Emphasize teams and team building
• Guide, train, support, motivate, and coach employees
• Need to be skilled communicators and team players
• Need to be globally prepared

LO 7-1
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 The Four Functions of Management
Management Functions
• Planning
• Organizing
• Leading
• Controlling

LO 7-2
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 Figure 7.1 What Managers Do 1 of 2

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LO 7-2
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 Figure 7.1 What Managers Do 2 of 2

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LO 7-2
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 Planning and Decision Making 1 of 6
Vision — More than a goal; an encompassing explanation
of why the organization exists and where it’s trying to go.
Mission statement — An outline of the fundamental
purposes of an organization, including:
• The organization’s self-concept
• Its philosophy
• Long-term survival needs
• Customer needs
• Social responsibility
• Nature of the product or service

LO 7-3
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 Planning and Decision Making 2 of 6
Goals — The broad, long-term accomplishments an
organization wishes to attain.
Objectives — Specific, short-term statements detailing
how to achieve the organization’s goals.

LO 7-3
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 Planning and Decision Making 3 of 6
Planning Answers Fundamental Questions:
1. What is the situation now?
• SWOT analysis — A planning tool used to analyze an
organization’s strengths, weaknesses, opportunities, and threats.
2. How can we get to our goal from here?
• Strategic planning
• Tactical planning
• Operational planning
• Contingency planning

LO 7-3
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 Figure 7.2 SWOT Matrix

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LO 7-3
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 Figure 7.3 Planning Functions

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LO 7-3
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 Planning and Decision Making 4 of 6
Strategic planning — Determining the major goals of the
organization and the policies and strategies for obtaining
and using resources to achieve those goals.
Tactical planning — Developing detailed, short-term
statements about what is to be done, who is to do it, and
how it is to be done.
Operational planning — Setting work standards and
schedules necessary to implement the company’s tactical
objectives.
Contingency planning — Preparing alternative courses of
action that may be used if the primary plans don’t achieve
the organization’s objectives.

LO 7-3
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 Planning and Decision Making 5 of 6
Decision Making: Finding the Best Alternative
• Decision making — Choosing among two or more alternatives.
• Rational decision-making model
1. Define the situation.
2. Describe and collect needed information.
3. Develop alternatives.
4. Decide which alternative is best.
5. Do what is indicated.
6. Determine whether the decision was a good one, and follow up.

LO 7-3
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 Planning and Decision Making 6 of 6
Decision Making: Finding the Best Alternative continued
• Problem solving — The process of solving the everyday
problems that occur; less formal than decision making and
usually calls for quicker action.
• Problem-solving techniques include brainstorming and PMI —
Listing all the pluses for a solution in one column, all the
minuses in another, and the implications in a third column.

LO 7-3
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 Organizing: Creating a Unified
System 1 of 4

Management Levels
• Top management — Highest level, consisting of the president
and other key company executives who develop strategic plans
• Middle management — Includes general managers, division
managers, and branch and plant managers who are responsible
for tactical planning and controlling
• Supervisory management — Those directly responsible for
supervising workers and evaluating their daily performance

LO 7-4
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 Figure 7.4 Levels of Management

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LO 7-4
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 Organizing: Creating a Unified
System 2 of 4

Top Management
• Chief executive officer (CEO) — Introduces change into an
organization.
• Chief operating officer (COO) — Implements CEO’s changes.
• Chief financial officer (CFO) — Obtains funds, plans budgets,
collects funds, etc.
• Chief information officer (CIO) — Gets the right information to
the right people so decisions can be made.

LO 7-4
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 Organizing: Creating a Unified
System 3 of 4

Tasks and Skills at Different Levels of Management

• Technical skills
• The ability to perform tasks in a specific discipline or department.
• Human relations skills
• Communication and motivation; they enable managers to work
through and with people.
• Conceptual skills
• The ability to picture the organization as a whole and the
relationship among its various parts.

LO 7-4
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 Figure 7.5 Skills Needed at Various
Levels of Management

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LO 7-4
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 Organizing: Creating a Unified
System 4 of 4

Staffing: Getting and Keeping the Right People

• Staffing — Hiring, motivating, and retaining the best people
available to accomplish the company’s objectives.
• Staffing is critical, especially in the Internet and high-tech areas.
• Many people are not willing to work at companies unless they are
treated well with fair pay.

LO 7-4
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 Leading: Providing Continuous
Vision and Values 1 of 4

Leaders must:
• Communicate a vision and rally others around that vision.
• Establish corporate values.
• Promote corporate ethics.
• Embrace change.
• Stress accountability and responsibility.

Transparency — The presentation of the company’s facts

and figures in a way that is clear and apparent to all
stakeholders.

LO 7-5
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 Leading: Providing Continuous
Vision and Values 2 of 4

Leadership Styles
• Autocratic leadership
• Make managerial decisions without consulting others.
• Participative or democratic leadership
• Managers and employees work together to make decisions.
• Free-rein leadership
• Managers set objectives and employees are relatively free to do
whatever it takes to accomplish those objectives.

LO 7-5
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 Figure 7.6 Various Leadership Styles

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LO 7-5
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Source: Robert Tannenbaum and Warren Schmidt, “How to Choose a
 Leading: Providing Continuous
Vision and Values 3 of 4

Empowering Workers
• Progressive leaders give employees the authority to make
decisions on their own without consulting a manager.
• Customer needs are handled quickly.
• Manager’s role becomes less of a boss and more of a coach.
• Enabling — Giving workers the education and tools they need
to make decisions.

LO 7-5
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 Leading: Providing Continuous
Vision and Values 4 of 4

Managing Knowledge
• Knowledge management
• Finding the right information, keeping the information in a readily
accessible place, and making the information known to everyone in
the firm.
• This tries to keep people from reinventing the wheel.

LO 7-5
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 Controlling: Making Sure It Works
Control Function
• Measures performance relative to planned objectives
• Rewards people for work well done
• Takes necessary corrective action

A Key Criterion for Measurement: Customer Satisfaction

• Traditional forms of measuring success are financial.
• Pleasing employees, stakeholders, and customers is important.
• External customers — Dealers, who buy products to sell to others,
and ultimate customers (or end users), who buy products for their
own use.
• Internal customers — Individuals and units within the firm that
receive services from other individuals or units.

LO 7-6
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 Figure 7.7 The Control Process

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LO 7-6
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 Appendix of Long Image
Descriptions

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 Appendix 1 Figure 7.1 What Managers Do
1 of 2
Planning:
• Setting organizational goals
• Developing strategies to reach those goals
• Determining resources needed
• Setting precise standards

Leading:
• Guiding and motivating employees to work effectively to accomplish
organizational goals and objectives
• Giving assignments
• Explaining routines
• Clarifying policies
• Providing feedback on performance
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 Appendix 2 Figure 7.1 What Managers Do
2 of 2
Organizing:
• Allocating resources, assigning tasks, and establishing procedures for
accomplishing goals
• Preparing a structure (organization chart) showing lines of authority and
responsibility
• Recruiting, selecting, training, and developing employees
• Placing employees where they’ll be most effective

Controlling:
• Measuring results against corporate objectives
• Monitoring performance relative to standards
• Rewarding outstanding performance
• Taking corrective action when necessary

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 Appendix 3 Figure 7.2 SWOT Matrix
Potential Internal Strengths:
• Core competencies in key areas
• An acknowledged market leader
• Well-conceived functional area strategies
• Proven management
• Cost advantages
• Better advertising campaigns
Potential Internal Weaknesses:
• No clear strategic direction
• Obsolete facilities
• Subpar profitability
• Lack of managerial depth and talent
• Weak market image
• Too narrow a product line
Potential External Opportunities:
• Ability to serve additional customer groups
• Expand product lines
• Ability to transfer skills/technology to new products
• Falling trade barriers in attractive foreign markets
• Complacency among rival firms
• Ability to grow due to increases in market demand
Potential External Threats:
• Entry of lower-cost foreign competitors
• Rising sales of substitute products
• Slower market growth
• Costly regulatory requirements
• Vulnerability to recession and business cycles
• Changing buyer needs and tastes
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 Appendix 4 Figure 7.3 Planning
Functions

Strategic planning: The setting of broad, long-range goals

by top managers
Tactical planning: The identification of specific, short-range
objectives by lower-level managers
Operational planning: The setting of work standards and
schedules
Contingency planning: Backup plans in case primary plans
fail

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 Appendix 5 Figure 7.4 Levels of
Management
From top to bottom:
Top management includes the president and vice
presidents
Middle management includes plant managers, division
heads, and branch managers
Supervisory (first-line) management includes supervisors,
foremen, department heads, and section leaders
Nonsupervisory includes employees

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 Appendix 6 Figure 7.5 Skills Needed at
Various Levels of Management
Top managers rely mostly on conceptual skills, then human
relations skills, then technical skills.
Middle managers need a good mix of technical, human
relations, and conceptual skills.
First-line managers rely mostly on technical skills, then
human relations skills, then conceptual skills.

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 Appendix 7 Figure 7.6 Various
Leadership Styles
The continuum runs from boss-centered leadership to subordinate-centered leadership.
Boss-centered leadership shows a large amount of authority used by managers, while
subordinate-centered leadership shows a large area of freedom for employees. Along the
continuum, a manager’s authority decreases as it moves toward subordinate-centered
leadership, while an employee’s freedom increases.
From the most boss-centered to the most subordinate-centered, the leadership styles are
as follows:
1. Autocratic leadership: A manager makes a decision and announces it, the manager
then “sells” the decision, and then the manager presents ideas and invites questions.
2. Participative/democratic leadership: A manager presents tentative decisions subject
to change; the manager presents a problem, gets suggestions, and makes a
decision; and the manager defines limits and asks the group to make the decision.
3. Free rein leadership: A manager permits employees to function within limits defined
by their superior.

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 Appendix 8 Figure 7.7 The Control
Process
Step 1: Establish clear standards
Step 2: Monitor and record performance
Step 3: Compare results against standards
Step 4: Communicate results
Step 5: If needed, take corrective action
Feedback results in determining if standards are realistic,
and the process may begin again at step 1.

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