Goal displacement satisficing and groupthink are

Please review chapter and discuss/talk about chapter, no less than 2 discussions.

Organizational Decision Making

Individuals and groups make decisions constantly throughout every organization. To understand decision making in organizations, a manager must consider (1) the constraints decision makers face, (2) organizational decision processes, and (3) decision making during a crisis.

Constraints on Decision Makers

Organizations—or, more accurately, the people who make important decisions— cannot do whatever they wish. They face various constraints—financial, legal, market, Page 106human, and organizational—that inhibit certain actions. Capital or product markets may make an expensive new venture impossible. Legal restrictions may constrain the kinds of international business activities in which a firm can participate. Labor unions may defeat a contract proposed by management, and managers and investors may block a takeover attempt. Even brilliant ideas must take into account the practical matters of implementation. 69

Suppose you have a great idea that will provide a revolutionary service for your bank’s customers. You won’t be able to put your idea into action immediately. You will have to sell it to the people who can give you the go-ahead and also to those whose help you will need to carry out the project. You might start by convincing your boss of your idea’s merit. Next, the two of you may have to hash it out with a vice president. Then maybe the president has to be sold. At each stage, you must listen to these individuals’ opinions and suggestions and often incorporate them into your original concept. Ultimately, you will have to derive a proposal acceptable to others.

In addition, ethical and legal considerations must be thought out carefully. Decision makers must consider ethics and the preferences of many constituent groups— the realities of life in organizations. You will have plenty of opportunity to think about ethical issues in Chapter 5.

Bottom Line

You may be an innovator if you come up with a creative idea. But you’re not yet, until you implement it.

Say you’re a manager who dreamed up a great process for cutting costs. Whose buy-in might you need to implement this innovation?

bounded rationality

A less-than-perfect form of rationality in which decision makers cannot be perfectly rational because decisions are complex and complete information is unavailable or cannot be fully processed.

incremental model

Model of organizational decision making in which major solutions arise through a series of smaller decisions.

coalitional model

Model of organizational decision making in which groups with differing preferences use power and negotiation to influence decisions.

garbage can model

Model of organizational decision making depicting a chaotic process and seemingly random decisions.

Organizational Decision Processes

Just as with individuals and groups, organizational decision making historically was described with rational models like the one depicted earlier in Figure 3.2. But Nobel laureate Herbert Simon challenged the rational model and proposed an important alternative called bounded rationality. According to Simon’s bounded rationality, decision makers cannot be truly rational because (1) they have imperfect, incomplete information about alternatives and consequences; (2) the problems they face are so complex; (3) human beings simply cannot process all the information to which they are exposed; (4) there is not enough time to process all relevant information fully; and (5) people, including managers within the same firm, have conflicting goals.

When these conditions hold—and they do for most consequential managerial decisions—perfect rationality will give way to more biased, subjective, messier decision processes. For example, the incremental model of decision making occurs when decision makers make small decisions, take little steps, move cautiously, and move in piecemeal fashion toward a bigger solution. The classic example is the budget process, which traditionally begins with the budget from the previous period and makes incremental decisions from that starting point.

The coalitional model of decision making arises when people disagree on goals or compete with one another for resources. The decision process becomes political as groups of individuals band together and try collectively to influence the decision. Two or more coalitions form, each representing a different preference, and each tries to use power and negotiations to sway the decision.

Organizational politics, in which people try to influence organizational decisions so that their own interests will be served, can reduce decision-making effectiveness. 70 One of the best ways to reduce such politics, and to make sure that constructive cognitive conflict does not degenerate into affective conflict, is to create common goals for members of the team—that is, make the decision-making process a collaborative, rather than a competitive, exercise by establishing a goal around which the group can rally. In one study, top management teams with stated goals like “build the biggest financial war chest” for an upcoming competitive battle, or “create the computer firm of the decade,” or “build the best damn machine on the market” were less likely to have dysfunctional conflict and politics between members. 71 On a personal level, if you find yourself in a conflict, you and your adversary may be focused on the wrong goals. Work to find common ground in the form of an important goal that you both want to achieve.

The garbage can model of decision making occurs when people aren’t sure of their goals, or disagree about the goals, and likewise are unsure of or in disagreement Page 107about what to do. This situation occurs because some problems are so complex that they are not well understood and also because decision makers move in and out of the decision process because they have so many other things to attend to as well. This model implies that some decisions are chaotic and almost random. You can see that this is a dramatic departure from rationality in decision making.

Decision Making in a Crisis

In crises, managers must make decisions under a great deal of pressure. 72 You may know some of the most famous recent crises: the explosion of BP’s oil rig in the Gulf of Mexico, the devastation of hurricanes along the Gulf Coast, the financial crisis that brought turmoil to the housing industry, and the political crises that have shaken many governments in the Middle East.

In two famous cases from the past, Union Carbide’s gas leak in Bhopal, India, killed thousands of people, and several people were killed in the cyanide poisonings using Johnson & Johnson’s Tylenol. As outlined in Table 3.3 , Union Carbide and J&J handled their crises in very different ways. Today J&J is still known for its effective handling of the crisis, as outlined in the table.

Information technology is a new arena for a crisis.

Information technology is a new arena for a crisis. Businesses, homes, government agencies, hospitals, and other organizations send critical information through the Internet and private networks around the clock, and any technical failure—sometimes accidental, sometimes maliciously intentional—could be magnified by the speed and widespread use of information technology. One vulnerable area is the electrical grid, which links utilities and carries power to each user. Information technology systems allow utility employees to control the grid remotely. Recently, information came to light that hackers have gained access to the U.S. electrical grid, leaving behind computer programs that theoretically would permit them to interfere with the grid’s operations. 73 Such programs can be purged, but the biggest challenge is preventing or catching each attempt to gain unauthorized access to the system.

TABLE 3.3 Two Disasters

Page 108The response to IT-related crises must involve senior executives in online communication, both to protect the firm’s reputation and to communicate with outside experts, news sources, and key external and internal stakeholders. Managers can use IT to monitor and respond immediately to problems including scandals, boycotts, rumors, cyberattacks, and other crises. 74

Although many companies don’t concern themselves with crisis management, it is imperative that it be on management’s agenda. An effective plan for crisis management (CM) should include the following elements:75

1. Strategic actions such as integrating CM into strategic planning and official policies.

2. Technical and structural actions such as creating a CM team and dedicating a budget to CM.

3. Evaluation and diagnostic actions such as conducting audits of threats and liabilities, and establishing tracking systems for early warning signals.

4. Communication actions such as providing training for dealing with the media, local communities, and police and government officials.

5. Psychological and cultural actions such as showing a strong top management commitment to CM and providing training and psychological support services regarding the human and emotional impacts of crises.

Ultimately, management should be able to answer the following questions:76

What kinds of crises could your company face?

Can your company detect a crisis in its early stages? How will it manage a crisis if one occurs?

How can it benefit from a crisis after it has passed?

The last question makes an important point: a crisis, managed effectively, can have benefits. For example, a prison riot helped Jerry Heftler create a firm bond with one of his company’s first clients. Heftler set up Integrated Medical Solutions (IMS) to manage medical care for prison inmates who need to visit doctors, hospitals, and rehabilitation centers outside prison walls. The company contacts providers located near prisons to identify who will be willing to serve inmates, and then it makes appointments and handles insurance paperwork for prisons that sign contracts with his company. A few days after IMS had signed a contract with its second customer but a week before the contract was to go into effect, Heftler learned that prisoners at his new client’s facility were rioting. Heftler called the prison’s health services director and offered to be of assistance immediately. Drawing on earlier experience in hostage negotiation, Heftler kept cool as he worked overtime to locate injured prisoners who had been loaded onto medevac helicopters without identification and sent to any hospital that would take them. He set up a system to track them by their tattoos until they could be properly identified, and he stayed in constant touch with the health services director. In the years since then, that prison’s management has had unfailing confidence in IMS’s abilities. 77

And if someone steps in and manages the crisis well, a hero is born.

With effective crisis management, old as well as new problems can be resolved, new strategies and competitive advantages may appear, and positive change can emerge. And if someone steps in and manages the crisis well, a hero is born. The ability of Pandora’s managers to steer the company through the nearly devastating period during which it was being required to pay royalty fees that might consume all Page 109its revenues gave many observers hope that the company will continue thriving and transforming the music business. You will read about and evaluate those decisions in “Management Connection: Onward.”

As a leader during a crisis, don’t pretend that nothing happened (as did managers at one firm after a visitor died in the hallway despite employees’ efforts to save him). 78 Communicate and reinforce the organization’s values. Try to find ways for people to support one another, and remember that people will take cues from your behavior. You should be optimistic but brutally honest. Show emotion, but not fear. “You have to be cooler than cool,” says Gene Krantz of Apollo 13 ground control fame. But don’t ignore the problems or downplay them and reassure too much; don’t create false hopes. Give people the bad news straight—you’ll gain credibility, and when the good news comes, it will really mean something.

Management Connection

POSITIONING PANDORA FOR THE FUTURE

Despite all the efforts of Tim Westergren and Pandora Media’s other managers to expand the subscriber base and sign up advertisers, the company endured a financial crisis that almost destroyed Pandora. The problem came not from a competitor but from the Copyright Royalty Board, the music industry nonprofit group that sets royalty rates for performances of sound recordings. Several years ago, the board announced an increase in royalty fees that would be required from Internet radio providers. Unlike AM/FM radio broadcasters, Internet radio providers would be expected to pay a performance royalty to musicians as well as a publishing royalty to recording companies for each song they stream.

Founder Westergren, chief executive officer Joe Kennedy, and other Pandora managers considered their options. Eventually, Westergren recalls, the only option that seemed realistic was to “pull the plug” on Pandora. But they decided to try one more desperate idea: beg their most loyal users to put pressure on their representatives in Congress, asking them to step in. Here the company had some resources—specifically its database of user registrations. Pandora sent out an e-mail that provided information about contacting representatives based on the users’ zip codes. The desperate idea worked: more than a million and a half users contacted Congress, which then pressed for easing the rate schedule. According to Kennedy, the new rate schedule was one that would allow Pandora to survive. That struggle for survival took two years from the announced rate increase until the negotiation of the lower increase.

Even at the lower royalty rates, profitability would be difficult, but managers stepped up to the challenge. In a recent year, performance royalties equaled 60 percent of Pandora’s revenue (compared with 15 percent for satellite radio and zero for AM/FM radio). More recently, the company has been bringing down many of its costs, including licensing fees for music. Managers also decided that Pandora would have to adjust its pricing by asking its heaviest users to help share the burden.

Having weathered that storm, Pandora’s managers felt they were ready to begin enjoying a profitable future. The company, which had invested heavily in building its Music Genome Project, has been narrowing its losses and marked its first operating profits. Management prepared a plan to take the company public, offering stock for sale in an initial public offering.

Risk and uncertainty continue, of course. Apple’s App Store is currently an important source of revenue—iPhone and iPad users go there if they want a paid subscription to Pandora for their devices. Apple recently announced that it would begin taking a 30 percent cut of the payments for those subscriptions. So far, most of Pandora’s revenues come from advertising, but subscription revenues have been growing. In addition, assuming Pandora becomes consistently profitable, other companies will see opportunities in offering similar kinds of services. For example, if Apple were to offer music streaming, it has a contractual right to stop offering a similar, competing service such as Pandora. In that case, Pandora would lose a chunk of its subscriber base— unless creative managers could decide on a plan to make Pandora more attractive to music lovers than an iPhone. Given the company’s track record of innovation (Fast Company recently named it one of the world’s 50 most innovative companies), that could be the next big surprise. 79

• Did the announcement of higher royalties for Internet radio companies amount to a crisis for Pandora? Why or why not? Could Pandora’s managers have planned for it?

•What are some other constraints on decision making at Pandora?

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KEY TERMS

affective conflict

bounded rationality

brainstorming

certainty

coalitional model

cognitive conflict

conflict

contingency plans

custom-made solutions

devil’s advocate

dialectic

discounting the future

framing effects

garbage can model

goal displacement

groupthink

illusion of control

incremental model

maximizing

nonprogrammed decisions

optimizing

programmed decisions

ready-made solutions

risk

satisficing

uncertainty

vigilance

SUMMARY OF LEARNING OBJECTIVES

Now that you have studied Chapter 3 , you should be able to :

Describe the kinds of decisions you will face as a manager.

Most important managerial decisions are ill structured and characterized by uncertainty, risk, and conflict. Yet managers are expected to make rational decisions in the face of these challenges.

Summarize the steps in making “rational” decisions.

The ideal decision-making process involves six stages. The first, identifying and diagnosing the problem (or opportunity), requires recognizing a discrepancy between the current state and a desired state and then delving below surface symptoms to uncover the underlying causes of the problem. The second stage, generating alternative solutions, requires adopting ready-made or designing custom-made solutions. The third, evaluating alternatives, means predicting the consequences of different alternatives, sometimes through building scenarios of the future. Fourth, a solution is chosen; the solution might maximize, satisfice, or optimize. Fifth, people implement the decision; this stage requires more careful planning than it often receives. Finally, managers should evaluate how well the decision is working. This means gathering objective, valid information about the impact the decision is having. If the evidence suggests the problem is not getting solved, either a better decision or a better implementation plan must be developed.

Recognize the pitfalls you should avoid when making decisions.

Situational and human limitations lead most decision makers to satisfice rather than maximize. Psychological biases, time pressures, and the social realities of organizational life may prevent rational execution of the six decision-making stages. But vigilance and an understanding of how to manage decision-making groups and organizational constraints will improve the process and result in better decisions.

Evaluate the pros and cons of using a group to make decisions.

Advantages of using groups include more information, perspectives, and approaches brought to bear on problem solving; intellectual stimulation; greater understanding by all of the final decision; and higher commitment to the decision once it is made. Potential dangers or disadvantages of using groups include individual domination of discussions, satisficing, groupthink, and goal displacement.

Identify procedures to use in leading a decision-making group.

Effective leaders in decision-making teams avoid dominating the discussion; encourage people’s input; avoid groupthink and satisficing; and stay focused on the group’s goals. They encourage constructive conflict via devil’s advocacy and the dialectic, posing opposite sides of an issue or solutions to a problem. They also encourage creativity through a variety of techniques.

Explain how to encourage creative decisions.

When creative ideas are needed, leaders should set a good example by being creative themselves. They should recognize the almost infinite “little” opportunities for creativity and have confidence in their own creative abilities. They can inspire creativity in others by pushing for creative freedom, rewarding creativity, and not punishing creative failures. They should encourage interaction with customers, stimulate discussion, and protect people from managers who might squelch the creative process. Brainstorming is one of the most popular techniques for generating creative ideas.

Discuss the processes by which decisions are made in organizations.

Decision making in organizations is often a highly complex process. Individuals and groups are constrained by a variety of factors and constituencies. In practice, decision makers are boundedly rational rather than purely rational. Some decisions are made on an incremental basis. Coalitions form to represent different preferences. The process is often chaotic, as depicted in the garbage can model. Politics can also enter the process, decisions are negotiated, and crises come and go.

Describe how to make decisions in a crisis.

Crisis conditions make sound, effective decision making more difficult. However, it is possible for crises to be managed well. A strategy for crisis management can be developed beforehand, and the mechanisms readied, so that if crises do arise, decision makers are prepared.

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DISCUSSION QUESTIONS

1. Discuss Pandora Media in terms of risk, uncertainty, and how its managers handled the company’s challenges. What is the current news on this company?

2. Identify some risky decisions you have made. Why did you take the risks? How did they work out? Looking back, what did you learn?

3. Identify a decision you made that had important unexpected consequences. Were the consequences good, bad, or both? Should you, and could you, have done anything differently in making the decision?

4. What effects does time pressure have on your decision making? In what ways do you handle it well and not so well?

5. Recall a recent decision that you had difficulty making. Describe it in terms of the characteristics of managerial decisions.

6. What do you think are some advantages and disadvantages to using computer technology in decision making?

7. Do you think that when managers make decisions they follow the decision-making steps as presented in this chapter? Which steps are apt to be overlooked or given inadequate attention? What can people do to make sure they do a more thorough job?

8. Discuss the potential advantages and disadvantages of using a group to make decisions. Give examples from your experience.

9. Suppose you are the CEO of a major corporation and one of your company’s oil tanks has ruptured, spilling thousands of gallons of oil into a river that empties into the ocean. What do you need to do to handle the crisis?

10. Identify some problems you want to solve. Brainstorm with others a variety of creative solutions.

EXPERIENTIAL EXERCISES

3.1 COMPETITIVE ESCAL ATION: THE DOLL AR AUCTION

OBJECTIVE

To explore the effects of competition on decision making.

INSTRUCTIONS

Step 1: 5 minutes. The instructor will play the role of auctioneer. In this auction, the instructor will auction off $1 bills (the instructor will inform you whether this money is real or imaginary). All members of the class may participate in the auction at the same time.

The rules for this auction are slightly different from those of a normal auction. In this version, both the highest bidder and the next highest bidder will play their last bids even though the dollar is awarded only to the highest bidder. For example, if Bidder A bids 15 cents for the dollar and Bidder B bids 10 cents, and there is no further bidding, then A pays 15 cents for the dollar and receives the dollar, while B pays 10 cents and receives nothing. The auctioneer will lose 75 cents on the dollar just sold.

Bids must be made in multiples of 5 cents. The dollar will be sold when there is no further bidding. If two individuals bid the same amount at the same time, ties are resolved in favor of the bidder located physically closest to the auctioneer. During each round, there is to be no talking except for making bids.

Step 2: 15 minutes. The instructor (auctioneer) will auction off five individual dollars to the class. Any student may bid in an effort to win the dollar. A record sheet of the bidding and winners can be kept in the worksheet that follows.

DISCUSSION QUESTIONS

1. Who made the most money in this exercise—one of the bidders or the auctioneer? Why?

2. As the auction proceeded, did bidders become more competitive or more cooperative? Why?

3. Did two bidders ever pay more for the money being auctioned than the value of the money itself? Explain how and why this happened.

4. Did you become involved in the bidding? Why?

a. If you became involved, what were your motivations? Did you accomplish your objectives?

b. If not, why didn’t you become involved? What did you think were the goals and objectives of those who did become involved?

5. Did people say things to one another during the bidding to influence their actions? What was said, and how was it influential?

Dollar Auction Worksheet

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3.2 GROUP PROBLEM - SOLVING MEETING AT THE COMMUNIT Y AGENCY

OBJECTIVE

To understand the interactions in group decision making through role playing a meeting between a chairman and his subordinates.

INSTRUCTIONS

1. Gather role sheets for each character and instructions for observers.

2. Set up a table in front of the room with five chairs around it arranged in such a way that participants can talk comfortably and have their faces visible to observers.

3. Read the introduction and cast of characters.

4. Five members from the class are selected to role-play the five characters. All other members act as observers. The participants study the roles. All should play their roles without referring to the role sheets.

5. The observers read the instructions for observers.

6. When everyone is ready, John Cabot enters his office, joins the others at the table, and the scene begins. Allow 20 minutes to complete the meeting. The meeting is carried to the point of completion unless an argument develops and no progress is evident after 10 or 15 minutes of conflict.

DISCUSSION QUESTIONS

1. Describe the group’s behavior. What did each member say? Do?

2. Evaluate the effectiveness of the group’s decision making.

3. Did any problems exist in leadership, power, motivation, communication, or perception?

4. How could the group’s effectiveness be increased?

INTRODUCTION

The Community Agency is a role-play exercise of a meeting between the chairman of the board of a social service agency and four of his subordinates. Each character’s role is designed to re-create the reality of a business meeting. Each character comes to the meeting with a unique perspective on a major problem facing the agency as well as some personal impressions of the other characters developed over several years of business and social associations.

CAST OF CHARACTERS

John Cabot, the chairman, was the principal force behind the formation of the Community Agency, a multiservice agency. The agency employs 50 people, and during its 19 years of operations has enjoyed better client relations, a better service record, and a better reputation than other local agencies because of a reputation for high-quality service at a moderate cost to funding agencies. Recently, however, competitors have begun to overtake the Community Agency, resulting in declining contracts. John Cabot is expending every possible effort to keep his agency comfortably at the top.

Ron Smith, director of the agency, reports directly to Cabot. He has held this position since he helped Cabot establish the agency 19 years ago.

Joan Sweet, head of client services, reports to Smith. She has been with the agency 12 years, having worked before that for the government as a contracting officer.

Tom Lynch, head community liaison, reports to Joan Sweet. He came to the Community Agency at Sweet’s request, having worked with Sweet previously.

Jane Cox, head case worker, also works for Joan Sweet. Cox was promoted to this position two years ago. Prior to that time, Jane had gone through a year’s training program after receiving an MSW from a large urban university.

TODAY’S MEETING

John Cabot has called the meeting with these four managers to solve some problems that have developed in meeting service schedules and contract requirements. Cabot must catch a plane to Washington in half an hour; he has an appointment to negotiate a key contract that means a great deal to the future of the Community Agency. He has only 20 minutes to meet with his managers and still catch the plane. Cabot feels that getting the Washington contract is absolutely crucial to the future of the agency.

SOURCE: Judith R. Gordon, A Diagnostic Approach to Organizational Behavior. Copyright © 1983 Pearson Education, Inc. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

CONCLUDING CASE

THE WALLINGFORD BOWLING CENTER

A group of 12 lifelong friends put together $1,200,000 of their own funds and built a $6,000,000, 48-lane bowling alley near Norfolk, Virginia. Two of the investors became employees of the corporation. Ned Flanders works full-time as general manager, and James Ahmad, a licensed CPA, serves as controller on a part-time basis.

The beautiful, modern-day facility features a multilevel spacious interior with three rows of 16 lanes on two separate levels of the building, a full-service bar, a small restaurant, a game room (pool, videogames, pinball), and two locker rooms. The facility sits on a spacious lot with plenty of parking and room to grow.

The bowling center is located in the small blue-collar town of Wallingford. There is no direct competition within the town. The surrounding communities include a wide-ranging mix of ethnic groups, professionals, middle- to upper-middle-class private homes, and apartment and condominium complexes ranging from singles to young married couples to senior citizen retirement units. Nearly 200,000 people live within 15 miles of Wallingford.

Page 113The bowling center is open 24 hours per day and has a staff of 27 part- and full-time employees. After four years of operation, the partners find themselves frustrated with the low profit performance of the business. While sales are covering expenses, the partners are not happy with the end-of-year profit-sharing pool. The most recent income statement follows:

The bowling center operates at 100 percent capacity on Sunday through Thursday nights from 6:00 p.m. until midnight. Two sets of men’s leagues come and go on each of those nights, occupying each lane with mostly five-person teams. Bowlers from each league consistently spend money at both the bar and restaurant. In fact, the men’s leagues combine to generate about 60 percent of total current sales.

The bowling center operates at about 50 percent capacity on Friday and Saturday nights and on Saturday morning. The Friday and Saturday “open bowling” nights include mostly teenagers, young couples, and league members who come to practice in groups of two or three. The Saturday morning group is a kids’ league, ages 10 through 14.

There are four women’s leagues that bowl on Monday and Wednesday afternoons.

Business is extremely slow at the bowling center on Monday through Friday and Sunday mornings, and on the afternoons of Tuesday, Thursday, Friday, Saturday, and Sunday. It is not uncommon to have just three or four lanes in operation during those time periods.

The owners have taken a close look at the cost side of their business as a way to improve profitability. They concluded that while the total operating expense of $1,466,000 might appear to be high, there was in fact little room for expense cutting.

At a recent meeting of the partners, James Ahmad reported on the results of his three-month-long investigation into the operating cost side of other bowling alleys and discovered that the Wallingford Bowling Center was very much in keeping with their industry. James went on to report that bowling alleys were considered to be “heavy fixed cost operations” and that the key to success and profitability lies in maximizing capacity and sales dollars.

QUESTIONS

1. Apply the decision-making process described in the chapter to this case. What is the major problem facing Wallingford? List five specific alternative solutions that could be implemented to solve that major problem.

2. As general manager of this company, how could you utilize and manage the group decision-making process and technique to improve company profits? Which employees would you include in the group?

PART ONE SUPPORTING CASE

SSS Software In-Basket Exercise

One way to assess your own strengths and weaknesses in management skills is to engage in an actual managerial work experience. The following exercise gives you a realistic glimpse of the tasks faced regularly by practicing managers. Complete the exercise, and then compare your own decisions and actions with those of classmates.

SSS Software designs and develops customized software for businesses. It also integrates this software with the customer’s existing systems and provides system maintenance. SSS Software has customers in the following industries: airlines, automotive, finance/banking, health/hospital, consumer products, electronics, and government. The company has also begun to attract important international clients. These include the European Airbus consortium and a consortium of banks and financial firms based in Kenya.

SSS Software has grown rapidly since its inception just over a decade ago. Its revenue, net income, and earnings per share have all been above the industry average for the past several years. However, competition in this technologically sophisticated field has grown very rapidly. Recently, it has become more difficult to compete for major contracts. Moreover, although SSS Software’s revenue and net income continue to grow, the rate of growth declined during the last fiscal year.

SSS Software’s 250 employees are divided into several operating divisions with employees at four levels: nonmanagement, technical/professional, managerial, and executive. Nonmanagement employees take care of the clerical and facilities support functions. The technical/professional staff perform the core technical work for the firm. Most managerial employees are group managers who supervise a team of technical/professional employees working on a project for a particular customer. Staff who work in specialized areas such as finance, accounting, human resources, nursing, and law are also considered managerial employees. The executive level includes the 12 highest-ranking employees at SSS Software. An organization chart in Figure A illustrates SSS Software’s structure. There is also an employee classification report that lists the number of employees at each level of the organization.

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FIGURE A Partial Organization Chart of the Health and Financial Services Division

Page 115In this exercise, you will play the role of Chris Perillo, vice president of operations for health and financial services. You learned last Wednesday, October 13, that your predecessor, Michael Grant, has resigned and gone to Universal Business Solutions, Inc. You were offered his former job, and you accepted it. Previously, you were the group manager for a team of 15 software developers assigned to work on the Airbus consortium project in the Airline Services Division. You spent all of Thursday and Friday and most of the weekend finishing up parts of the project, briefing your successor, and preparing for an interim report you will deliver in Paris on October 21.

It is now 7 a.m. Monday, and you are in your new office. You have arrived at work early so you can spend the next two hours reviewing material in your in-basket (including some memos and messages to Michael Grant), as well as your voice mail and e-mail. Your daily planning book indicates that you have no appointments today or tomorrow but will have to catch a plane for Paris early Wednesday morning. You have a full schedule for the remainder of the week and all of next week.

ASSIGNMENT

During the next two hours, review all the material in your in-basket, as well as your voice mail and e-mail. Take only two hours. Using the following response form as a model, indicate how you want to respond to each item (that is, via letter/memo, e-mail, phone/voice mail, or personal meeting). If you decide not to respond to an item, check “no response” on the response form. All of your responses must be written on the response forms. Write your precise, detailed response (do not merely jot down a few notes). For example, you might draft a memo or write out a message that you will deliver via phone/voice mail. You may also decide to meet with an individual (or individuals) during the limited time available on your calendar today or tomorrow. If so, prepare an agenda for a personal meeting and list your goals for the meeting. As you read through the items, you may occasionally observe some information that you think is relevant and want to remember (or attend to in the future) but that you decide not to include in any of your responses to employees. Write down such information on a sheet of paper titled “note to self.”

SOURCE: D. Whetten and K. Cameron, Developing Management Skills, 6th ed. Copyright 2005. Reproduced by permission of Pearson Education, Inc., Upper Saddle River, New Jersey.

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CRITICAL INCIDENTS

Employee Raiding

Litson Cotton Yarn Manufacturing Company, located in Murray, New Jersey, decided as a result of increasing labor costs to relocate its plant in Fairlee, a southern community of 4,200. Plant construction was started, and a human resources office was opened in the state employment office, located in Fairlee.

Because of ineffective HR practices in the other three textile mills located within a 50-mile radius of Fairlee, Litson was receiving applications from some of the most highly skilled and trained textile operators in the state. After receiving applications from approximately 500 people, employment was offered to 260 male and female applicants. These employees would be placed immediately on the payroll with instructions to await final installation of machinery, which was expected within the following six weeks.

The managers of the three other textile companies, faced with resignations from their most efficient and best-trained employees, approached the Litson managers with the complaint that their labor force was being “raided.” They registered a strong protest to cease such practices and demanded an immediate cancellation of the employment of the 260 people hired by Litson.

Litson managers discussed the ethical and moral considerations involved in offering employment to the 260 people. Litson clearly faced a tight labor market in Fairlee, and management thought that if the 260 employees were discharged, the company would face cancellation of its plans and large construction losses. Litson management also felt obligated to the 260 employees who had resigned from their previous employment in favor of Litson.

The dilemma was compounded when the manager of one community plant reminded Litson that his plant was part of a nationwide chain supplied with cotton yarn from Litson. He implied that Litson’s attempts to continue operations in Fairlee could result in cancellation of orders and the possible loss of approximately 18 percent market share. It was also suggested to Litson managers that actions taken by the nationwide textile chain could result in cancellation of orders from other textile companies. Litson’s president held an urgent meeting of his top subordinates to (1) decide what to do about the situation in Fairlee, (2) formulate a written policy statement indicating Litson’s position regarding employee raiding, and (3) develop a plan for implementing the policy.

How would you prepare for the meeting, and what would you say at the meeting?

SOURCE: J. Champion and J. James, Critical Incidents in Management: Decision and Policy Issues, 6th ed. McGraw-Hill/Irwin, 1989. Copyright © 1989 The McGraw-Hill Companies.

Effective Management

Dr. Sam Perkins, a graduate of the Harvard University College of Medicine, had a private practice in internal medicine for 12 years. Fourteen months ago, he was persuaded by the Massachusetts governor to give up private practice to be director of the State Division of Human Services.

After one year as director, Perkins recognized he had made little progress in reducing the considerable inefficiency in the division. Employee morale and effectiveness seemed even lower than when he had assumed the position. He realized his past training and experiences were of a clinical nature with little exposure to effective management techniques. Perkins decided to research literature on the subject of management available to him at a local university.

Perkins soon realized that management scholars are divided on the question of what constitutes effective management. Some believe people are born with certain identifiable personality traits that make them effective managers. Others believe a manager can learn to be effective by treating subordinates with a personal and considerate approach and by giving particular attention to their need for favorable working conditions. Still others emphasize the importance of developing a management style characterized by an authoritarian, democratic, or laissez-faire approach. Perkins was further confused when he learned that a growing number of scholars advocate that effective management is contingent on the situation.

Because a state university was located nearby, Perkins contacted the dean of its college of business administration. The dean referred him to the director of the college’s management center, Professor Joel McCann. Discussions between Perkins and McCann resulted in a tentative agreement that the management center would organize a series of management training sessions for the State Division of Human Services. Before agreeing on the price tag for the management conference, Perkins asked McCann to prepare a proposal reflecting his thoughts on the following questions:

1. How will the question of what constitutes effective management be answered during the conference?

2. What will be the specific subject content of the conference?

3. Who will the instructors be?

4. What will be the conference’s duration?

5. How can the conference’s effectiveness be evaluated?

6. What policies should the State Division of Human Services adopt regarding who the conference participants should be and how they should be selected? How can these policies be best implemented?

SOURCE: J. Champion and J. James, Critical Incidents in Management: Decision and Policy Issues, 6th ed. McGraw-Hill/Irwin, 1989. Copyright © 1989 The McGraw-Hill Companies.