Principles of ManagementPrinciples of Management

Principles of ManagementPrinciples of Management

[AUTHORS REMOVED AT REQUEST OF ORIGINAL

PUBLISHER]

UNIVERSITY OF MINNESOTA LIBRARIES PUBLISHING EDITION, 2015. THIS EDITION ADAPTED FROM A WORK ORIGINALLY PRODUCED IN 2010 BY A PUBLISHER WHO HAS REQUESTED THAT IT NOT RECEIVE

ATTRIBUTION. MINNEAPOLIS, MN

Principles of Management by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

Contents

Publisher Information x

Chapter 1: Introduction to Principles of Management

1.1 Introduction to Principles of Management 2 1.2 Case in Point: Doing Good as a Core Business Strategy 5 1.3 Who Are Managers? 8 1.4 Leadership, Entrepreneurship, and Strategy 13 1.5 Planning, Organizing, Leading, and Controlling 20 1.6 Economic, Social, and Environmental Performance 25 1.7 Performance of Individuals and Groups 31 1.8 Your Principles of Management Survivor’s Guide 36

Chapter 2: Personality, Attitudes, and Work Behaviors

2.1 Chapter Introduction 48 2.2 Case in Point: SAS Institute Invests in Employees 50 2.3 Personality and Values 52 2.4 Perception 70 2.5 Work Attitudes 78 2.6 The Interactionist Perspective: The Role of Fit 84 2.7 Work Behaviors 87 2.8 Developing Your Positive Attitude Skills 100

Chapter 3: History, Globalization, and Values-Based Leadership

3.1 History, Globalization, and Values-Based Leadership 104 3.2 Case in Point: Hanna Andersson Corporation Changes for Good 106 3.3 Ancient History: Management Through the 1990s 109 3.4 Contemporary Principles of Management 116 3.5 Global Trends 122

3.6 Globalization and Principles of Management 130 3.7 Developing Your Values-Based Leadership Skills 136

Chapter 4: Developing Mission, Vision, and Values

4.1 Developing Mission, Vision, and Values 143 4.2 Case in Point: Xerox Motivates Employees for Success 145 4.3 The Roles of Mission, Vision, and Values 148 4.4 Mission and Vision in the P-O-L-C Framework 153 4.5 Creativity and Passion 160 4.6 Stakeholders 169 4.7 Crafting Mission and Vision Statements 175 4.8 Developing Your Personal Mission and Vision 182

Chapter 5: Strategizing

5.1 Strategizing 191 5.2 Case in Point: Unnamed Publisher Transforms Textbook Industry 193 5.3 Strategic Management in the P-O-L-C Framework 196 5.4 How Do Strategies Emerge? 204 5.5 Strategy as Trade-Offs, Discipline, and Focus 209 5.6 Developing Strategy Through Internal Analysis 219 5.7 Developing Strategy Through External Analysis 231 5.8 Formulating Organizational and Personal Strategy With the Strategy Diamond 242

Chapter 6: Goals and Objectives

6.1 Goals and Objectives 251 6.2 Case in Point: Nucor Aligns Company Goals With Employee Goals 253 6.3 The Nature of Goals and Objectives 255 6.4 From Management by Objectives to the Balanced Scorecard 260 6.5 Characteristics of Effective Goals and Objectives 269 6.6 Using Goals and Objectives in Employee Performance Evaluation 275 6.7 Integrating Goals and Objectives with Corporate Social Responsibility 281 6.8 Your Personal Balanced Scorecard 289

Chapter 7: Organizational Structure and Change

7.1 Organizational Structure and Change 298 7.2 Case in Point: Toyota Struggles With Organizational Structure 300 7.3 Organizational Structure 303 7.4 Contemporary Forms of Organizational Structures 312

7.5 Organizational Change 317 7.6 Planning and Executing Change Effectively 328 7.7 Building Your Change Management Skills 334

Chapter 8: Organizational Culture

8.1 Organizational Culture 337 8.2 Case in Point: Google Creates Unique Culture 339 8.3 Understanding Organizational Culture 342 8.4 Measuring Organizational Culture 346 8.5 Creating and Maintaining Organizational Culture 356 8.6 Creating Culture Change 370 8.7 Developing Your Personal Skills: Learning to Fit In 375

Chapter 9: Social Networks

9.1 Social Networks 379 9.2 Case in Point: Networking Powers Relationships 381 9.3 An Introduction to the Lexicon of Social Networks 383 9.4 How Managers Can Use Social Networks to Create Value 389 9.5 Ethical Considerations With Social Network Analysis 400 9.6 Personal, Operational, and Strategic Networks 408 9.7 Mapping and Your Own Social Network 414

Chapter 10: Leading People and Organizations

10.1 Leading People and Organizations 421 10.2 Case in Point: Indra Nooyi Draws on Vision and Values to Lead 424 10.3 Who Is a Leader? Trait Approaches to Leadership 427 10.4 What Do Leaders Do? Behavioral Approaches to Leadership 434 10.5 What Is the Role of the Context? Contingency Approaches to Leadership 439 10.6 Contemporary Approaches to Leadership 447 10.7 Developing Your Leadership Skills 461

Chapter 11: Decision Making

11.1 Decision Making 467 11.2 Case in Point: Bernard Ebbers Creates Biased Decision Making at WorldCom 469 11.3 Understanding Decision Making 472 11.4 Faulty Decision Making 485 11.5 Decision Making in Groups 490 11.6 Developing Your Personal Decision-Making Skills 498

Chapter 12: Communication in Organizations

12.1 Communication in Organizations 501 12.2 Case in Point: Edward Jones Communicates Caring 503 12.3 Understanding Communication 505 12.4 Communication Barriers 511 12.5 Different Types of Communication 523 12.6 Communication Channels 530 12.7 Developing Your Personal Communication Skills 539

Chapter 13: Managing Groups and Teams

13.1 Managing Groups and Teams 545 13.2 Case in Point: General Electric Allows Teamwork to Take Flight 547 13.3 Group Dynamics 549 13.4 Understanding Team Design Characteristics 558 13.5 Organizing Effective Teams 573 13.6 Barriers to Effective Teams 579 13.7 Developing Your Team Skills 582

Chapter 14: Motivating Employees

14.1 Motivating Employees 585 14.2 Case in Point: Zappos Creates a Motivating Place to Work 588 14.3 Need-Based Theories of Motivation 590 14.4 Process-Based Theories 598 14.5 Developing Your Personal Motivation Skills 620

Chapter 15: The Essentials of Control

15.1 The Essentials of Control 624 15.2 Case in Point: Newell Rubbermaid Leverages Cost Controls to Grow 626 15.3 Organizational Control 628 15.4 Types and Levels of Control 636 15.5 Financial Controls 642 15.6 Nonfinancial Controls 651 15.7 Lean Control 659 15.8 Crafting Your Balanced Scorecard 665

Chapter 16: Strategic Human Resource Management

16.1 Strategic Human Resource Management 671 16.2 Case in Point: Kronos Uses Science to Find the Ideal Employee 674

16.3 The Changing Role of Strategic Human Resource Management in Principles of Management

677

16.4 The War for Talent 683 16.5 Effective Selection and Placement Strategies 689 16.6 The Roles of Pay Structure and Pay for Performance 696 16.7 Designing a High-Performance Work System 702 16.8 Tying It All Together—Using the HR Balanced Scorecard to Gauge and Manage Human Capital, Including Your Own

709

Please share your supplementary material! 714

Publisher Information

Principles of Management is adapted from a work produced and

distributed under a Creative Commons license (CC BY-NC-SA) in 2010

by a publisher who has requested that they and the original author not

receive attribution. This adapted edition is produced by the University

of Minnesota Libraries Publishing through the eLearning Support Initiative.

This adaptation has reformatted the original text, and replaced some images and figures to make the resulting

whole more shareable. This adaptation has not significantly altered or updated the original 2010 text. This work

is made available under the terms of a Creative Commons Attribution-NonCommercial-ShareAlike license.

x

Chapter 1: Introduction to Principles of Management

1.1 Introduction to Principles of Management

1.2 Case in Point: Doing Good as a Core Business Strategy

1.3 Who Are Managers?

1.4 Leadership, Entrepreneurship, and Strategy

1.5 Planning, Organizing, Leading, and Controlling

1.6 Economic, Social, and Environmental Performance

1.7 Performance of Individuals and Groups

1.8 Your Principles of Management Survivor’s Guide

1

1.1 Introduction to Principles of Management

Figure 1.1

Managers make things happen through strategic and entrepreneurial leadership.

Unsplash – CC0 Public Domain.

What’s in It for Me?

Reading this chapter will help you do the following:

1. Learn who managers are and about the nature of their work.

2. Know why you should care about leadership, entrepreneurship, and strategy.

3. Know the dimensions of the planning-organizing-leading-controlling (P-O-L-C) framework.

4. Learn how economic performance feeds social and environmental performance.

5. Understand what performance means at the individual and group levels.

6. Create your survivor’s guide to learning and developing principles of management.

2

We’re betting that you already have a lot of experience with organizations, teams, and leadership. You’ve been

through schools, in clubs, participated in social or religious groups, competed in sports or games, or taken on

full- or part-time jobs. Some of your experience was probably pretty positive, but you were also likely wondering

sometimes, “Isn’t there a better way to do this?”

After participating in this course, we hope that you find the answer to be “Yes!” While management is both art

and science, with our help you can identify and develop the skills essential to better managing your and others’

behaviors where organizations are concerned.

Before getting ahead of ourselves, just what is management, let alone principles of management? A manager’s

primary challenge is to solve problems creatively, and you should view management as “the art of getting things

done through the efforts of other people.”1 The principles of management, then, are the means by which you

actually manage, that is, get things done through others—individually, in groups, or in organizations. Formally

defined, the principles of management are the activities that “plan, organize, and control the operations of the basic

elements of [people], materials, machines, methods, money and markets, providing direction and coordination,

and giving leadership to human efforts, so as to achieve the sought objectives of the enterprise.”2 For this reason,

principles of management are often discussed or learned using a framework called P-O-L-C, which stands for

planning, organizing, leading, and controlling.

Managers are required in all the activities of organizations: budgeting, designing, selling, creating, financing,

accounting, and artistic presentation; the larger the organization, the more managers are needed. Everyone

employed in an organization is affected by management principles, processes, policies, and practices as they are

either a manager or a subordinate to a manager, and usually they are both.

Managers do not spend all their time managing. When choreographers are dancing a part, they are not managing,

nor are office managers managing when they personally check out a customer’s credit. Some employees perform

only part of the functions described as managerial—and to that extent, they are mostly managers in limited

areas. For example, those who are assigned the preparation of plans in an advisory capacity to a manager, to that

extent, are making management decisions by deciding which of several alternatives to present to the management.

However, they have no participation in the functions of organizing, staffing, and supervising and no control over

the implementation of the plan selected from those recommended. Even independent consultants are managers,

since they get most things done through others—those others just happen to be their clients! Of course, if advisers

or consultants have their own staff of subordinates, they become a manager in the fullest sense of the definition.

They must develop business plans; hire, train, organize, and motivate their staff members; establish internal

policies that will facilitate the work and direct it; and represent the group and its work to those outside of the firm.

1We draw this definition from a biography of Mary Parker Follett (1868–1933) written by P. Graham, Mary

Parker Follett: Prophet of Management (Boston: Harvard Business School Press, 1995). Follett was an American

social worker, consultant, and author of books on democracy, human relations, and management. She worked as a

management and political theorist, introducing such phrases as “conflict resolution,” “authority and power,” and

“the task of leadership.”

2The fundamental notion of principles of management was developed by French management theorist Henri

Fayol (1841–1925). He is credited with the original planning-organizing-leading-controlling framework (P-O-L-

C), which, while undergoing very important changes in content, remains the dominant management framework

1.1 INTRODUCTION TO PRINCIPLES OF MANAGEMENT • 3

in the world. See H. Fayol, General and Industrial Management (Paris: Institute of Electrical and Electronics

Engineering, 1916).

4 • PRINCIPLES OF MANAGEMENT

1.2 Case in Point: Doing Good as a Core Business Strategy

Figure 1.2

Timothy Brown – Browsing – CC BY 2.0.

Goodwill Industries International (a nonprofit organization) has been an advocate of diversity for over 100 years. In 1902, in Boston, Massachusetts, a young missionary set up a small operation enlisting struggling immigrants in his parish to clean and repair clothing and goods to later sell. This provided workers with the opportunity for basic education and language training. His philosophy was to provide a “hand up,” not a “hand out.” Although today you can find retail stores in over 2,300 locations worldwide, and in 2009 more than 64 million people in the United States and Canada donated to Goodwill, the organization has maintained its core mission to respect the dignity of individuals by eliminating barriers to opportunity through the power of work. Goodwill accomplishes this goal, in part, by putting 84% of its revenue back

5

into programs to provide employment, which in 2008 amounted to $3.23 billion. As a result of these programs, every 42 seconds of every business day, someone gets a job and is one step closer to achieving economic stability.

Goodwill is a pioneer of social enterprise and has managed to build a culture of respect through its diversity programs. If you walk into a local Goodwill retail store you are likely to see employees from all walks of life, including differences in gender and race, physical ability, sexual orientation, and age. Goodwill provides employment opportunities for individuals with disabilities, lack of education, or lack of job experience. The company has created programs for individuals with criminal backgrounds who might otherwise be unable to find employment, including basic work skill development, job placement assistance, and life skills. In 2008, more than 172,000 people obtained employment, earning $2.3 billion in wages and gaining tools to be productive members of their community. Goodwill has established diversity as an organizational norm, and as a result, employees are comfortable addressing issues of stereotyping and discrimination. In an organization of individuals with such wide-ranging backgrounds, it is not surprising that there are a wide range of values and beliefs.

Management and operations are decentralized within the organization with 166 independent community- based Goodwill stores. These regional businesses are independent, not-for-profit human services organizations. Despite its decentralization, the company has managed to maintain its core values. Seattle’s Goodwill is focused on helping the city’s large immigrant population and those individuals without basic education and English language skills. And at Goodwill Industries of Kentucky, the organization recently invested in custom software to balance daily sales at stores to streamline operations so managers can spend less time on paperwork and more time managing employees.

Part of Goodwill’s success over the years can be attributed to its ability to innovate. As technology evolves and such skills became necessary for most jobs, Goodwill has developed training programs to ensure that individuals are fully equipped to be productive members of the workforce, and in 2008 Goodwill was able to provide 1.5 million people with career services. As an organization, Goodwill itself has entered into the digital age. You can now find Goodwill on Facebook, Twitter, and YouTube. Goodwill’s business practices encompass the values of the triple bottom line of people, planet, and profit. The organization is taking advantage of new green initiatives and pursuing opportunities for sustainability. For example, at the beginning of 2010, Goodwill received a $7.3 million grant from the U.S. Department of Labor, which will provide funds to prepare individuals to enter the rapidly growing green industry of their choice. Oregon’s Goodwill Industries has partnered with the Oregon Department of Environmental Quality and its Oregon E-Cycles program to prevent the improper disposal of electronics. Goodwill discovered long ago that diversity is an advantage rather than a hindrance.

Based on information from Goodwill Industries of North Central Wisconsin. (2009). A brief history of Goodwill Industries International. Retrieved March 3, 2010, from http://www.goodwillncw.org/ goodwillhistory1.htm; Walker, R. (2008, November 2). Consumed: Goodwill hunting. New York Times Magazine, p. 18; Tabafunda, J. (2008, July 26). After 85 years, Seattle Goodwill continues to improve lives. Northwest Asian Weekly. Retrieved March 1, 2010, from http://www.nwasianweekly.com/old/ 2008270031/goodwill20082731.htm; Slack, E. (2009). Selling hope. Retail Merchandiser, 49(1), 89–91; Castillo, L. (2009, February 24). Goodwill Industries offers employment programs. Clovis News Journal. Retrieved April 22, 2010, from http://www.cnjonline.com/news/industries-32474-goodwill- duttweiler.html; Information retrieved April 22, 2010, from the Oregon E-Cycles Web site: http://www.deq.state.or.us/lq/ecycle.

6 • PRINCIPLES OF MANAGEMENT

Discussion QuestionsDiscussion Questions

1. How might the implications of the P-O-L-C framework differ for an organization like Goodwill Industries versus a firm like Starbucks?

2. What are Goodwill’s competitive advantages?

3. Goodwill has found success in the social services. What problems might result from hiring and training the diverse populations that Goodwill is involved with?

4. Have you ever experienced problems with discrimination in a work or school setting?

5. Why do you think that Goodwill believes it necessary to continually innovate?

1.2 CASE IN POINT: DOING GOOD AS A CORE BUSINESS STRATEGY • 7

1.3 Who Are Managers?

Learning Objectives

1. Know what is meant by “manager”.

2. Be able to describe the types of managers.

3. Understand the nature of managerial work.

ManagersManagers

We tend to think about managers based on their position in an organization. This tells us a bit about their

role and the nature of their responsibilities. The following figure summarizes the historic and contemporary

views of organizations with respect to managerial roles (Ghoshal & Barlett, 1999). In contrast to the traditional,

hierarchical relationship among layers of management and managers and employees, in the contemporary view,

top managers support and serve other managers and employees (through a process called empowerment), just

as the organization ultimately exists to serve its customers and clients. Empowerment is the process of enabling

or authorizing an individual to think, behave, take action, and control work and decision making in autonomous

ways.

8

Figure 1.3

Communication is a key managerial role.

Adrian Gaskell – Women In Management Eleanor McDonald Lecture – CC BY 2.0.

In both the traditional and contemporary views of management, however, there remains the need for different

types of managers. Top managers are responsible for developing the organization’s strategy and being a steward

for its vision and mission. A second set of managers includes functional, team, and general managers. Functional

managers are responsible for the efficiency and effectiveness of an area, such as accounting or marketing.

Supervisory or team managers are responsible for coordinating a subgroup of a particular function or a team

composed of members from different parts of the organization. Sometimes you will hear distinctions made

between line and staff managers.

A line manager leads a function that contributes directly to the products or services the organization creates. For

example, a line manager (often called a product, or service manager) at Procter & Gamble (P&G) is responsible

for the production, marketing, and profitability of the Tide detergent product line. A staff manager, in contrast,

leads a function that creates indirect inputs. For example, finance and accounting are critical organizational

functions but do not typically provide an input into the final product or service a customer buys, such as a box of

Tide detergent. Instead, they serve a supporting role. A project manager has the responsibility for the planning,

execution, and closing of any project. Project managers are often found in construction, architecture, consulting,

computer networking, telecommunications, or software development.

A general manager is someone who is responsible for managing a clearly identifiable revenue-producing unit,

such as a store, business unit, or product line. General managers typically must make decisions across different

functions and have rewards tied to the performance of the entire unit (i.e., store, business unit, product line, etc.).

General managers take direction from their top executives. They must first understand the executives’ overall

plan for the company. Then they set specific goals for their own departments to fit in with the plan. The general

manager of production, for example, might have to increase certain product lines and phase out others. General

managers must describe their goals clearly to their support staff. The supervisory managers see that the goals are

met.

1.3 WHO ARE MANAGERS? • 9

Figure 1.4 The Changing Roles of Management and Managers

The Nature of Managerial WorkThe Nature of Managerial Work

Managers are responsible for the processes of getting activities completed efficiently with and through other

people and setting and achieving the firm’s goals through the execution of four basic management functions:

planning, organizing, leading, and controlling. Both sets of processes utilize human, financial, and material

resources.

Of course, some managers are better than others at accomplishing this! There have been a number of studies on

what managers actually do, the most famous of those conducted by Professor Henry Mintzberg in the early 1970s

(Mintzberg, 1973). One explanation for Mintzberg’s enduring influence is perhaps that the nature of managerial

work has changed very little since that time, aside from the shift to an empowered relationship between top

managers and other managers and employees, and obvious changes in technology, and the exponential increase in

information overload.

After following managers around for several weeks, Mintzberg concluded that, to meet the many demands

of performing their functions, managers assume multiple roles. A role is an organized set of behaviors, and

Mintzberg identified 10 roles common to the work of all managers. As summarized in the following figure, the 10

roles are divided into three groups: interpersonal, informational, and decisional. The informational roles link all

managerial work together. The interpersonal roles ensure that information is provided. The decisional roles make

significant use of the information. The performance of managerial roles and the requirements of these roles can

be played at different times by the same manager and to different degrees, depending on the level and function of

management. The 10 roles are described individually, but they form an integrated whole.

The three interpersonal roles are primarily concerned with interpersonal relationships. In the figurehead role, the

manager represents the organization in all matters of formality. The top-level manager represents the company

legally and socially to those outside of the organization. The supervisor represents the work group to higher

10 • PRINCIPLES OF MANAGEMENT

management and higher management to the work group. In the liaison role, the manager interacts with peers and

people outside the organization. The top-level manager uses the liaison role to gain favors and information, while

the supervisor uses it to maintain the routine flow of work. The leader role defines the relationships between the

manager and employees.

Figure 1.5 Ten Managerial Roles

The direct relationships with people in the interpersonal roles place the manager in a unique position to get

information. Thus, the three informational roles are primarily concerned with the information aspects of

managerial work. In the monitor role, the manager receives and collects information. In the role of disseminator,

the manager transmits special information into the organization. The top-level manager receives and transmits

more information from people outside the organization than the supervisor. In the role of spokesperson, the

manager disseminates the organization’s information into its environment. Thus, the top-level manager is seen as

an industry expert, while the supervisor is seen as a unit or departmental expert.

The unique access to information places the manager at the center of organizational decision making. There are

four decisional roles managers play. In the entrepreneur role, the manager initiates change. In the disturbance

handler role, the manager deals with threats to the organization. In the resource allocator role, the manager chooses

where the organization will expend its efforts. In the negotiator role, the manager negotiates on behalf of the

organization. The top-level manager makes the decisions about the organization as a whole, while the supervisor

makes decisions about his or her particular work unit.

The supervisor performs these managerial roles but with different emphasis than hig