If dow chemical were to emphasize achievement

Management RICHARD L. DAFT

Vanderb i l t Un i ve r s i t y

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Management RICHARD L. DAFT

Vanderb i l t Un i ve r s i t y

NINTH EDITION

© 2010, 2008 South-Western, Cengage Learning

ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, Web distribution, information storage and retrieval systems, or in any other manner—except as may be permitted by the license terms herein.

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With deep appreciation to Dorothy, the playwright and partner in my life, and to my parents, who started my life

toward outcomes that I could not understand at the time.

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vii

About the Author

Richard L. Daft, PhD, is the Brownlee O. Currey, Jr., Pro- fessor of Management in the Owen Graduate School of Management at Vanderbilt University. Professor Daft specializes in the study of organization theory and leadership. Dr. Daft is a Fellow of the Academy of Management and has served on the editorial boards of Academy of Management Journal, Administrative Sci- ence Quarterly, and Journal of Management Education. He was the associate editor-in-chief of Organization Science and served for three years as associate editor of Administrative Science Quarterly. Professor Daft has authored or co-authored 12 books, including Organization Theory and Design (South-Western, 2007), The Leadership Experience (South-Western, 2008), and What to Study: Generating and Developing Research Questions (Sage, 1982). He published Fusion Leadership: Unlocking the Subtle Forces That Change People and Orga-

nizations (Berrett-Koehler, 2000, with Robert Lengel). He has also authored dozens of scholarly articles, papers, and chapters. His work has been published in Administra- tive Science Quarterly, Academy of Management Journal, Academy of Management Review, Strategic Management Journal, Journal of Management, Accounting Organizations and Society, Management Science, MIS Quarterly, California Management Review, and Organi- zational Behavior Teaching Review. Professor Daft is currently working on a new book, The Executive and the Elephant. He also is an active teacher and consultant. He has taught management, leadership, organizational change, organizational theory, and organizational behavior. Professor Daft served as associate dean, produced for-profi t theatrical produc- tions, and helped manage a start-up enterprise. He has been involved in management development and consulting for many companies and government organizations, including the American Banking Association, Bridgestone, Bell Canada, the National Transportation Research Board, Nortel, TVA, Pratt & Whitney, State Farm Insur- ance, Tenneco, the United States Air Force, the United States Army, J. C. Bradford & Co., Central Parking System, Entergy Sales and Service, Bristol-Myers Squibb, First American National Bank, and the Vanderbilt University Medical Center.

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ix

Preface

Managing for Innovation in a Changing World In recent years, organizations have been buffeted by massive and far-reaching social, technological, and economic changes. Any manager who still believed in the myth of stability was rocked out of complacency when, one after another, large fi nancial insti- tutions in the United States began to fail. Business schools, as well as managers and businesses, were scrambling to keep up with the fast-changing story and evaluate its impact. This edition of Management addresses themes and issues that are directly rel- evant to the current, fast-shifting business environment. I revised Management with a goal of helping current and future managers fi nd innovative solutions to the prob- lems that plague today’s organizations—whether they are everyday challenges or once-in-a-lifetime crises. The world in which most students will work as managers is undergoing a tremendous upheaval. Ethical turmoil, the need for crisis management skills, e-business, rapidly changing technologies, globalization, outsourcing, global virtual teams, knowledge management, global supply chains, the Wall Street melt- down, and other changes place demands on managers that go beyond the techniques and ideas traditionally taught in management courses. Managing today requires the full breadth of management skills and capabilities. This text provides comprehensive coverage of both traditional management skills and the new competencies needed in a turbulent environment characterized by economic turmoil, political confusion, and general uncertainty.

In the traditional world of work, management was to control and limit people, enforce rules and regulations, seek stability and effi ciency, design a top-down hier- archy, and achieve bottom-line results. To spur innovation and achieve high per- formance, however, managers need different skills to engage workers’ hearts and minds as well as take advantage of their physical labor. The new workplace asks that managers focus on leading change, harnessing people’s creativity and enthusiasm, fi nding shared visions and values, and sharing information and power. Teamwork, collaboration, participation, and learning are guiding principles that help managers and employees maneuver the diffi cult terrain of today’s turbulent business environ- ment. Managers focus on developing, not controlling, people to adapt to new tech- nologies and extraordinary environmental shifts, and thus achieve high performance and total corporate effectiveness.

My vision for the ninth edition of Management is to present the newest manage- ment ideas for turbulent times in a way that is interesting and valuable to students while retaining the best of traditional management thinking. To achieve this vision, I have included the most recent management concepts and research and have shown the contemporary application of management ideas in organizations. I have added a questionnaire at the beginning of each chapter that draws students personally into the topic and gives them some insight into their own management skills. A chapter feature for new managers, called the New Manager Self-Test, gives students a sense of what will be expected when they become managers. The combination of established scholarship, new ideas, and real-life applications gives students a taste of the energy, challenge, and adventure inherent in the dynamic fi eld of management. The South- Western/Cengage Learning staff and I have worked together to provide a textbook better than any other at capturing the excitement of organizational management.

I revised Management to provide a book of utmost quality that will create in stu- dents both respect for the changing fi eld of management and confi dence that they can

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understand and master it. The textual portion of this book has been enhanced through the engaging, easy-to-understand writing style and the many in-text examples, boxed items, and short exercises that make the concepts come alive for students. The graphic component has been enhanced with several new exhibits and a new set of photo essays that illustrate specifi c management concepts. The well-chosen photographs provide vivid illustrations and intimate glimpses of management scenes, events, and people. The photos are combined with brief essays that explain how a specifi c management concept looks and feels. Both the textual and graphic portions of the textbook help students grasp the often abstract and distant world of management.

Focus on Innovation: New to the Ninth Edition The ninth edition of Management is especially focused on the future of management education by identifying and describing emerging ideas and examples of innovative organizations and by providing enhanced learning opportunities for students.

Learning Opportunities The ninth edition has taken a leap forward in pedagogical features to help students understand their own management capabilities and learn what it is like to manage in an organization today. New to this edition is an opening questionnaire that directly relates to the topic of the chapter and enables students to see how they respond to situations and challenges typically faced by real-life managers. New Manager Self- Tests in each chapter provide further opportunity for students to understand their management abilities. These short feedback questionnaires give students insight into how they would function in the real world of management. End-of-chapter questions have been carefully revised to encourage critical thinking and application of chap- ter concepts. End-of-chapter cases and ethical dilemmas help students sharpen their diagnostic skills for management problem solving.

Chapter Content Within each chapter, many topics have been added or expanded to address the cur- rent issues managers face. At the same time, chapter text has been tightened and sharpened to provide greater focus on the key topics that count for management today. This tightening has resulted in a shortening of the text from 21 to 19 chapters. The essential elements about operations and technology have been combined into one chapter. An appendix on entrepreneurship and small business has been provided for students who want more information on managing in small businesses start-ups.

Chapter 1 includes a section on making the leap from being an individual contribu- tor in the organization to becoming a new manager and getting work done primarily through others. The chapter introduces the skills and competencies needed to manage organizations effectively, including issues such as managing diversity, coping with glo- balization, and managing crises. In addition, the chapter discusses today’s emphasis within organizations on innovation as a response to a rapidly changing environment.

Chapter 2 continues its solid coverage of the historical development of management and organizations. It also examines new management thinking for turbulent times. The chapter includes a new section on systemic thinking and an expanded discussion of post-World War II management techniques. The fi nal part of the chapter looks at issues of managing the technology-driven workplace, including supply chain man- agement, customer relationship management, and outsourcing.

Chapter 3 contains an updated look at current issues related to the environment and corporate culture, including a new section on issues related to the natural environ- ment and managers’ response to environmental advocates. The chapter also illus- trates how managers shape a high–performance culture as an innovative response to a shifting environment.

PREFACE xi

Chapter 4 takes a look at the growing power of China and India in today’s global business environment and what this means for managers around the world. The chapter discusses the need for cultural intelligence, and a new section looks at under- standing communication differences as an important aspect of learning to manage internationally or work with people from different cultures. In addition, the complex issues surrounding globalization are discussed, including a consideration of the cur- rent globalization backlash. A new section on human resources points out the need for evaluating whether people are suitable for foreign assignments.

Chapter 5 makes the business case for incorporating ethical values in the organi- zation. The chapter includes a new discussion of the bottom-of-the-pyramid business concept and how managers are successfully applying this new thinking. The chapter also has an expanded discussion of ethical challenges managers face today, includ- ing responses to recent fi nancial scandals. It considers global ethical issues, as well, including a discussion of corruption rankings of various countries.

Chapter 6 provides a more focused discussion of the overall planning process and a new discussion of using strategy maps for aligning goals. This chapter also takes a close look at crisis planning and how to use scenarios. The chapter’s fi nal section on planning for high performance has been enhanced by a new discussion of intelli- gence teams and an expanded look at using performance dashboards to help manag- ers plan in a fast-changing environment.

Chapter 7 continues its focus on the basics of formulating and implementing strategy. It includes a new section on diversifi cation strategy, looking at how managers use unrelated diversifi cation, related diversifi cation, or vertical integration as strategic approaches in shifting environments. This chapter also looks at new trends in strat- egy, including the dynamic capabilities approach and partnership strategies.

Chapter 8 gives an overview of managerial decision making with an expanded dis- cussion of how confl icting interests among managers can create uncertainty regard- ing decisions. A new section on why managers often make bad decisions looks at the biases that can cloud judgment. The chapter also includes a new section on innova- tive group decision making and the dangers of groupthink.

Chapter 9 discusses basic principles of organizing and describes both traditional and contemporary organizational structures in detail. The chapter includes a discussion of organic versus mechanistic structures and when each is more effective. Chapter 9 also provides a description of the virtual network organization form.

Chapter 10 includes a more focused discussion of the critical role of managing change and innovation today. The chapter includes a new discussion of the ambidextrous approach for both creating and using innovations and has expanded material on exploration and creativity, the importance of internal and external cooperation, and the growing trend toward open innovation.

Chapter 11 includes an expanded discussion of the strategic role of HRM in building human capital. The chapter has new sections on coaching and mentoring and the trend toward part-time and contingent employment. New ways of doing background checks on applicants, such as checking their pages on social networks, are discussed, and the chapter also looks at the changing social contract between employers and employees.

Chapter 12 has been revised and updated to refl ect the most recent thinking on organiza- tional diversity issues. The chapter looks at how diversity is changing the domestic and global workforce and includes a new section on the traditional versus inclusive models for managing diversity. This chapter also contains new coverage of the dividends of diversity; an expanded discussion of prejudice, discrimination, and stereotypes; and a new look at the difference between stereotyping and valuing cultural differences. The chapter includes a new fi ve-step process for achieving cultural competence.

Chapter 13 continues its solid coverage of the basics of organizational behavior, includ- ing personality, values and attitudes, perception, emotional intelligence, learning and

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problem-solving styles, and stress management. Many exercises and questionnaires throughout this chapter enhance students’ understanding of organizational behavior topics and their own personalities and attitudes.

Chapter 14 has been enriched with a discussion of followership. The chapter empha- sizes that good leaders and good followers share common characteristics. Good lead- ership can make a difference, often through subtle, everyday actions. The discussion of power and infl uence has been expanded to include the sources of power that are available to followers as well as leaders. The discussions of charismatic, transforma- tional, and interactive leadership have all been revised and refocused.

Chapter 15 covers the foundations of motivation and also incorporates recent think- ing about motivational tools for today, including an expanded treatment of employee engagement. The chapter looks at new motivational ideas such as the importance of helping employees achieve work-life balance, incorporating fun and learning into the workplace, giving people a chance to fully participate, and helping people fi nd meaning in their work.

Chapter 16 begins with a discussion of how managers facilitate strategic conversa- tions by using communication to direct everyone’s attention to the vision, values, and goals of the organization. The chapter explores the foundations of good com- munication and includes a new section on gender differences in communication, an enriched discussion of dialogue, and a refocused look at the importance of effective written communication in today’s technologically connected workplace, including the use of new forms of manager communication such as blogs.

Chapter 17 includes a new section on the dilemma of teams, acknowledging that teams are sometimes ineffective and looking at the reasons for this, including such problems as free riders, lack of trust among team members, and so forth. The chapter then looks at how to make teams effective, including a signifi cantly revised discus- sion of what makes an effective team leader. The chapter covers the types of teams and includes a new look at effectively using technology in virtual teams. The chapter also includes a section on managing confl ict, including the use of negotiation.

Chapter 18 provides an overview of fi nancial and quality control, including Six Sigma, ISO certifi cation, and a new application of the balanced scorecard, which views employee learning and growth as the foundation of high performance. The dis- cussion of hierarchical versus decentralized control has been updated and expanded. The chapter also addresses current concerns about corporate governance and fi nding a proper balance of control and autonomy for employees.

Chapter 19 has been thoroughly revised to discuss recent trends in operations man- agement, information technology, and e-business. The chapter begins by looking at the organization as a value chain and includes an expanded discussion of supply chain management and new technologies such a radio frequency identifi cation (RFID). The discussion of information technology has been updated to include the trend toward user-generated content through wikis, blogs, and social networking. The chapter explores how these new technologies are being applied within organizations along with traditional information systems. The chapter also discusses e-commerce strate- gies, the use of business intelligence software, and knowledge management.

In addition to the topics listed above, this text integrates coverage of the Internet and new technology into the various topics covered in each and every chapter.

Organization The chapter sequence in Management is organized around the management functions of planning, organizing, leading, and controlling. These four functions effectively encompass both management research and characteristics of the manager’s job.

Part One introduces the world of management, including the nature of management, issues related to today’s chaotic environment, the learning organization, historical perspectives on management, and the technology-driven workplace.

PREFACE xiii

Part Two examines the environments of management and organizations. This sec- tion includes material on the business environment and corporate culture, the global environment, ethics and social responsibility, and the natural environment.

Part Three presents three chapters on planning, including organizational goal setting and planning, strategy formulation and implementation, and the decision-making process.

Part Four focuses on organizing processes. These chapters describe dimensions of structural design, the design alternatives managers can use to achieve strategic objec- tives, structural designs for promoting innovation and change, the design and use of the human resource function, and the ways managing diverse employees are signifi - cant to the organizing function.

Part Five is devoted to leadership. The section begins with a chapter on organiza- tional behavior, providing grounding in understanding people in organizations. This foundation paves the way for subsequent discussion of leadership, motivation of employees, communication, and team management.

Part Six describes the controlling function of management, including basic principles of total quality management, the design of control systems, information technology, and techniques for control of operations management.

Innovative Features A major goal of this book is to offer better ways of using the textbook medium to convey management knowledge to the reader. To this end, the book includes several innova- tive features that draw students in and help them contemplate, absorb, and comprehend management concepts. South-Western has brought together a team of experts to create and coordinate color photographs, video cases, beautiful artwork, and supplemental materials for the best management textbook and package on the market.

Chapter Outline and Objectives. Each chapter begins with a clear statement of its learning objectives and an outline of its contents. These devices provide an overview of what is to come and can also be used by students to guide their study and test their understanding and retention of important points.

Opening Questionnaire. The text grabs student attention immediately by giving the student a chance to participate in the chapter content actively by completing a short questionnaire related to the topic.

Take a Moment. At strategic places through the chapter, students are invited to Take a Moment to apply a particular concept or think about how they would apply it as a practicing manager. This call to action further engages students in the chapter con- tent. Some of the Take a Moment features also refer students to the associated New Manager Self-Test, or direct students from the chapter content to relevant end-of- chapter materials, such as an experiential exercise or an ethical dilemma.

New Manager Self-Test. A New Manager Self-Test in each chapter of the text provides opportunities for self-assessment as a way for students to experience management issues in a personal way. The change from individual performer to new manager is dramatic, and these self-tests provide insight into what to expect and how students might perform in the world of the new manager.

Concept Connection Photo Essays. A key feature of the book is the use of photo- graphs accompanied by detailed photo essay captions that enhance learning. Each caption highlights and illustrates one or more specifi c concepts from the text to rein- force student understanding of the concepts. Although the photos are beautiful to look at, they also convey the vividness, immediacy, and concreteness of management events in today’s business world.

Contemporary Examples. Every chapter of the text contains several written examples of management incidents. They are placed at strategic points in the chapter and are

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designed to illustrate the application of concepts to specifi c companies. These in-text examples—indicated by an icon in the margin—include well-known U.S. and inter- national companies such as Toyota, Facebook, UPS, LG Electronics, Google, Unilever, Siemens, and eBay, as well as less-well-known companies and not-for-profi t organi- zations such as Red 5 Studios, Strida, Genmab AS, ValueDance, and the U.S. Federal Bureau of Investigation (FBI). These examples put students in touch with the real world of organizations so that they can appreciate the value of management concepts.

Manager’s Shoptalk Boxes. A Manager’s Shoptalk box in each chapter addresses a specifi c topic straight from the fi eld of management that is of special interest to stu- dents. These boxes may describe a contemporary topic or problem that is relevant to chapter content, or they may contain a diagnostic questionnaire or a special example of how managers handle a problem. The boxes heighten student interest in the sub- ject matter and provide an auxiliary view of management issues not typically avail- able in textbooks.

Video Cases. The six parts of the text conclude with video cases, one per chapter, that illustrate the concepts presented in that part. The 19 videos enhance class discussion, because students can see the direct application of the management theories they have learned. Companies discussed in the video package include Recycline, Flight 001, and Numi Organic Teas. Each video case explores the issues covered in the video, allowing students to synthesize the material they’ve just viewed. The video cases culminate with several questions that can be used to launch classroom discussion or as homework. Suggested answers are provided in the Media Case Library.

Exhibits. Several exhibits have been added or revised in the ninth edition to enhance student understanding. Many aspects of management are research based, and some concepts tend to be abstract and theoretical. The many exhibits throughout this book enhance students’ awareness and understanding of these concepts. These exhibits con- solidate key points, indicate relationships among concepts, and visually illustrate con- cepts. They also make effective use of color to enhance their imagery and appeal.

Glossaries. Learning the management vocabulary is essential to understanding con- temporary management. This process is facilitated in three ways. First, key concepts are boldfaced and completely defi ned where they fi rst appear in the text. Second, brief defi nitions are set out in the margin for easy review and follow-up. Third, a glossary summarizing all key terms and defi nitions appears at the end of the book for handy reference.

A Manager’s Essentials and Discussion Questions. Each chapter closes with a sum- mary of the essential points that students should retain. The discussion questions are a complementary learning tool that will enable students to check their understand- ing of key issues, to think beyond basic concepts, and to determine areas that require further study. The summary and discussion questions help students discriminate between main and supporting points and provide mechanisms for self-teaching.

Management in Practice Exercises. End-of-chapter exercises called “Management in Practice: Experiential Exercise” and “Management in Practice: Ethical Dilemma” provide a self-test for students and an opportunity to experience management issues in a personal way. These exercises take the form of questionnaires, scenarios, and activities, and many also provide an opportunity for students to work in teams. The exercises are tied into the chapter through the Take a Moment feature that refers stu- dents to the end-of-chapter exercises at the appropriate point in the chapter content.

Case for Critical Analysis. Also appearing at the end of each chapter is a brief but substantive case that provides an opportunity for student analysis and class discus- sion. Some of these cases are about companies whose names students will recog- nize; others are based on real management events but the identities of companies and managers have been disguised. These cases allow students to sharpen their diagnos- tic skills for management problem solving.

PREFACE xv

Continuing Case. Located at the end of each part, the Continuing Case is a run- ning discussion of management topics appropriate to that part as experienced by General Motors Company. Focusing on one company allows students to follow the managers’ and the organization’s long-term problems and solutions in a sustained manner.

Supplementary Materials Instructor’s Manual. Designed to provide support for instructors new to the course, as well as innovative materials for experienced professors, the Instructor’s Man- ual includes Chapter Outlines, annotated learning objectives, Lecture Notes, and sample Lecture Outlines. Additionally, the Instructor’s Manual includes answers and teaching notes to end-of-chapter materials, including the video cases and the continuing case.

Instructor’s CD-ROM. Key instructor ancillaries (Instructor’s Manual, Test Bank, ExamView, and PowerPoint slides) are provided on CD-ROM, giving instructors the ultimate tool for customizing lectures and presentations.

Test Bank. Scrutinized for accuracy, the Test Bank includes more than 2,000 true/ false, multiple-choice, short-answer, and essay questions. Page references are indi- cated for every question, as are designations of either factual or application so that instructors can provide a balanced set of questions for student exams. Each question is also tagged based on AACSB guidelines.

ExamView. Available on the Instructor’s Resource CD-ROM, ExamView contains all of the questions in the printed Test Bank. This program is an easy-to-use test cre- ation software compatible with Microsoft Windows. Instructors can add or edit ques- tions, instructions, and answers, and select questions (randomly or numerically) by previewing them on the screen. Instructors can also create and administer quizzes online, whether over the Internet, a local area network (LAN), or a wide area network (WAN).

PowerPoint Lecture Presentation. Available on the Instructor’s Resource CD-ROM and the Web site, the PowerPoint Lecture Presentation enables instructors to custom- ize their own multimedia classroom presentation. Containing an average of 27 slides per chapter, the package includes fi gures and tables from the text, as well as outside materials to supplement chapter concepts. Material is organized by chapter and can be modifi ed or expanded for individual classroom use. PowerPoint slides are also easily printed to create customized Transparency Masters.

Study Guide. Packed with real-world examples and additional applications for help- ing students master management concepts, this learning supplement is an excellent resource. For each chapter of the text, the Study Guide includes a summary and com- pletion exercise; a review with multiple-choice, true/false, and short-answer ques- tions; a mini case with multiple-choice questions; management applications; and an experiential exercise that can be assigned as homework or used in class.

Video Package. The video package for Management, ninth edition, contains two options: On the Job videos created specifi cally for the ninth edition of Daft’s Man- agement and BizFlix videos. On the Job videos use real-world companies to illustrate management concepts as outlined in the text. Focusing on both small and large busi- ness, the videos give students an inside perspective on the situations and issues that corporations face. BizFlix are fi lm clips taken from popular Hollywood movies such as Failure to Launch, Rendition, and Friday Night Lights, and integrated into the ninth edition of Daft. Clips are supported by short cases and discussion questions at the end of each chapter.

Web Site (www.cengage.com/management/daft). Discover a rich array of online teaching and learning management resources that you won’t fi nd anywhere else.

www.cengage.com/management/daft
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Resources include interactive learning tools, links to critical management Web sites, and password-protected teaching resources available for download.

Premium Student Web Site (www.cengage.com/login). Give your students access to additional study aides for your management course. With this optional package, stu- dents gain access to the Daft premium Web site. There your students will fi nd inter- active quizzes, fl ashcards, PowerPoint slides, learning games, and more to reinforce chapter concepts. Add the ninth edition of Management to your bookshelf at www .cengage.com/login and access the Daft Premium Web site to learn more.

Acknowledgments A gratifying experience for me was working with the team of dedicated professionals at South-Western who were committed to the vision of producing the best manage- ment text ever. I am grateful to Joe Sabatino, executive editor, whose enthusiasm, creative ideas, assistance, and vision kept this book’s spirit alive. Emma Newsom, managing developmental editor, provided superb project coordination and offered excellent ideas and suggestions to help the team meet a demanding and sometimes arduous schedule. Kimberly Kanakes, executive marketing manager, and Clint Kernen, marketing manager, provided keen market knowledge and innovative ideas for instructional support. Martha Conway, senior content project manager, cheerfully and expertly guided me through the production process. Tippy McIntosh contributed her graphic arts skills to create a visually dynamic design. Ruth Belanger, editorial assistant, and Sarah Rose, marketing coordinator, skillfully pitched in to help keep the project on track. Joe Devine deserves a special thank you for his layout expertise and commitment to producing an attractive, high-quality textbook. Additionally, BJ Parker, Copyshop, USA, contributed the Continuing Case.

Here at Vanderbilt I want to extend special appreciation to my assistant, Barbara Haselton. Barbara provided excellent support and assistance on a variety of proj- ects that gave me time to write. I also want to acknowledge an intellectual debt to my colleagues, Bruce Barry, Ray Friedman, Neta Moye, Rich Oliver, David Owens, Ranga Ramanujam, Bart Victor, and Tim Vogus. Thanks also to Deans Jim Bradford and Bill Christie who have supported my writing projects and maintained a positive scholarly atmosphere in the school. Another group of people who made a major con- tribution to this textbook are the management experts who provided advice, reviews, answers to questions, and suggestions for changes, insertions, and clarifi cations. I want to thank each of these colleagues for their valuable feedback and suggestions on the ninth edition:

David Alexander Christian Brothers University

Reginald L Audibert California State University—Long Beach

Burrell A. Brown California University of Pennsylvania

Paula Buchanan Jacksonville State University

Diane Caggiano Fitchburg State College

Bruce Charnov Hofstra University

Gloria Cockerell Collin College

Jack Cox Amberton University

Paul Ewell Bridgewater College

Mary M. Fanning College of Notre Dame of Maryland

Merideth Ferguson Baylor University

Karen Fritz Bridgewater College

Yezdi H. Godiwalla University of Wisconsin— Whitewater

James Halloran Wesleyan College

Stephen R. Hiatt Catawba College

Betty Hoge Bridgewater College

Jody Jones Oklahoma Christian University

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Jerry Kinard Western Carolina University

Sal Kukalis California State University—Long Beach

Joyce LeMay Bethel University

Wade McCutcheon East Texas Baptist College

Tom Miller Concordia University

W J Mitchell Bladen Community College

John Okpara Bloomsburg University

Lori A. Peterson Augsburg College

Michael Provitera Barry University

Abe Qastin Lakeland College

Holly Caldwell Ratwani Bridgewater College

Terry L. Riddle Central Virginia Commu- nity College

Thomas Sy California State University—Long Beach

Kevin A. Van Dewark Humphreys College

Noemy Watchel Kean University

Peter Wachtel Kean University

David C. Adams Manhattanville College

Erin M. Alexander University of Houston– Clear Lake

Hal Babson Columbus State Community College

Reuel Barksdale Columbus State Community College

Gloria Bemben Finger Lakes Community College

Pat Bernson County College of Morris

Art Bethke Northeast Louisiana University

Thomas Butte Humboldt State University

Peter Bycio Xavier University, Ohio

Diane Caggiano Fitchburg State College

Douglas E. Cathon St. Augustine’s College

Jim Ciminskie Bay de Noc Community College

Dan Connaughton University of Florida

Bruce Conwers Kaskaskia College

Byron L. David The City College of New York

Richard De Luca William Paterson University

Robert DeDominic Montana Tech

Linn Van Dyne Michigan State University

John C. Edwards East Carolina University

Mary Ann Edwards College of Mount St. Joseph

Janice M. Feldbauer Austin Community College

Daryl Fortin Upper Iowa University

Michael P. Gagnon New Hampshire Community Technical College

Richard H. Gayor Antelope Valley College

Dan Geeding Xavier University, Ohio

James Genseal Joliet Junior College

Peter Gibson Becker College

Carol R. Graham Western Kentucky University

Gary Greene Manatee Community College

Ken Harris Indiana University Southeast

Paul Hayes Coastal Carolina Commu- nity College

Dennis Heaton Maharishi University of Management, Iowa

Jeffrey D. Hines Davenport College

Bob Hoerber Westminster College

James N. Holly University of Wisconsin– Green Bay

Genelle Jacobson Ridgewater College

C. Joy Jones Ohio Valley College

Kathleen Jones University of North Dakota

Sheryl Kae Lynchburg College

Jordan J. Kaplan Long Island University

I would also like to continue to acknowledge those reviewers who have contrib- uted comments, suggestions and feedback on previous editions:

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J. Michael Keenan Western Michigan University

Gloria Komer Stark State College

Paula C. Kougl Western Oregon University

Cynthia Krom Mount St. Mary College

Mukta Kulkarni University of Texas–San Antonio

William B. Lamb Millsaps College

Robert E. Ledman Morehouse College

George Lehma Bluffton College

Cynthia Lengnick-Hall University of Texas–San Antonio

Janet C. Luke Georgia Baptist College of Nursing

Jenna Lundburg Ithaca College

Walter J. MacMillan Oral Roberts University

Myrna P. Mandell California State University, Northridge

Daniel B. Marin Louisiana State University

Michael Market Jacksonville State University

James C. McElroy Iowa State University

Dennis W. Meyers Texas State Technical College

Alan N. Miller University of Nevada–Las Vegas

Irene A. Miller Southern Illinois University

James L. Moseley Wayne State University

Micah Mukabi Essex County College

David W. Murphy Madisonville Community College

Nora Nurre Upper Iowa University

Tomas J. Ogazon St. Thomas University

Allen Oghenejbo Mills College

Linda Overstreet Hillsborough Community College

Ken Peterson Metropolitan State University

Clifton D. Petty Drury College

James I. Phillips Northeastern State University

Linda Putchinski University of Central Florida

Kenneth Radig Medaille College

Gerald D. Ramsey Indiana University Southeast

Barbara Redmond Briar Cliff College

William Reisel St. John’s University–New York

Terry Riddle Central Virginia Commu- nity College

Walter F. Rohrs Wagner College

Meir Russ University of Wisconsin– Green Bay

Marcy Satterwhite Lake Land College

Don Schreiber Baylor University

Kilmon Shin Ferris State University

Daniel G. Spencer University of Kansas

Gary Spokes Pace University

M. Sprencz David N. Meyers College

Shanths Srinivas California State Polytechnic University, Pomona

Jeffrey Stauffer Ventura College

William A. Stower Seton Hall University

Mary Studer Southwestern Michigan College

Bruce C. Walker Northeast Louisiana University

Mark Weber University of Minnesota

Emilia S. Westney Texas Tech University

Stan Williamson Northeast Louisiana University

Alla L. Wilson University of Wisconsin– Green Bay

Ignatius Yacomb Loma Linda University

Imad Jim Zbib Ramapo College of New Jersey

Vic Zimmerman Pima Community College

James Swenson Moorhead State University, Minnesota

Irwin Talbot St. Peter’s College

PREFACE xix

Andrew Timothy Lourdes College

Frank G. Titlow St. Petersburg Junior College

John Todd University of Arkansas

Philip Varca University of Wyoming

Dennis L. Varin Southern Oregon University

Gina Vega Merrimack College

George S. Vozikis University of Tulsa

Bruce C. Walker Northeast Louisiana University

Mark Weber University of Minnesota

Emilia S. Westney Texas Tech University

Stan Williamson Northeast Louisiana University

Alla L. Wilson University of Wisconsin– Green Bay

Ignatius Yacomb Loma Linda University

Imad Jim Zbib Ramapo College of New Jersey

Vic Zimmerman Pima Community College

I’d like to pay special tribute to my long-time editorial associate, Pat Lane. I can’t imagine how I would ever complete such a comprehensive revision on my own. Pat provided truly outstanding help throughout every step of writing the ninth edition of Management. She skillfully drafted materials for a wide range of chapter topics, boxes, and cases; researched topics when new sources were lacking; and did an absolutely superb job with the copyedited manuscript and page proofs. Her commitment to this text enabled us to achieve our dream for its excellence. I also want to pay tribute to Mary Draper, who stepped in to help with the research and revision of this edition. Mary also did a superb job with the copyedited manu- script and page proofs. We could not have completed this revision without Mary’s excellent assistance.

Finally, I want to acknowledge the love and contributions of my wife, Dorothy Marcic. Dorothy has been very supportive during this revision as we share our lives together. I also want to acknowledge the love and support from my fi ve daughters— Danielle, Amy, Roxanne, Solange, and Elizabeth—who make my life special during our precious time together. Thanks also to B. J. and Kaitlyn and Kaci and Matthew for their warmth and smiles that brighten my life, especially during our days together skiing and on the beach.

Richard L. Daft Nashville, Tennessee December 2008

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xxi

Part 1 INTRODUCTION TO MANAGEMENT

1 Innovative Management for Turbulent Times 2

2 The Evolution of Management Thinking 32

Part 2 THE ENVIRONMENT OF MANAGEMENT

3 The Environment and Corporate Culture 62

4 Managing in a Global Environment 94

5 Managing Ethics and Social Responsibility 128

Part 3 PLANNING

6 Managerial Planning and Goal Setting 158

7 Strategy Formulation and Implementation 184

8 Managerial Decision Making 212

Part 4 ORGANIZING

9 Designing Adaptive Organizations 242

10 Managing Change and Innovation 276

11 Managing Human Resources 306

12 Managing Diversity 340

Part 5 LEADING

13 Dynamics of Behavior in Organizations 376

14 Leadership 408

15 Motivating Employees 440

16 Managing Communication 470

17 Leading Teams 502

Part 6 CONTROLLING

18 Managing Quality and Performance 536 19 Managing the Value Chain, Information Technology,

and E-Business 568

APPENDIX A: MANAGING SMALL BUSINESS START-UPS 601

Glossary 625

Indexes 639

Brief Contents

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xxiii

Part 1 INTRODUCTION TO MANAGEMENT

1 Innovative Management for Turbulent Times 2 Are You Ready to Be a Manager? 3 Why Innovation Mat ters 4 The Defi nition of Management 4 The Four Management Functions 5

Planning 5 | Organizing 6 | Leading 6 Controlling 7

Organizational Performance 7 Management Skills 8

Conceptual Skills 8 | Human Skills 9 | Technical Skills 9 | When Skills Fail 10

Management Types 10 Vertical Differences 11 | Horizontal Differences 12

What Is It Like to Be a Manager? 13 Making the Leap: Becoming a New Manager 13

New Manager Self-Test: Manager Achievement 14 Manager’s Shoptalk: Do You Really Want To Be A Manager? 16

Manager Activities 17 | Manager Roles 18 Managing in Small Businesses and Nonprofi t Organizations 20 Management and the New Workplace 21

New Workplace Characteristics 21 | New Management Competencies 23

A Manager’s Essentials: What Have We Learned? 23 Discussion Questions 24 Management in Practice: Experiential Exercise 25 Management in Practice: Ethical Dilemma 26 Case for Critical Analysis 26 ON THE JOB VIDEO CASE 27

BIZ FLIX VIDEO CASE 28 Endnotes 29

2 The Evolution of Management Thinking 32 Are You a New-Style or an Old-Style Manager? 33 Management and Organization 34 Manager’s Shoptalk: Contemporary Management Tools 35 Classical Perspective 36

Scientifi c Management 37 | Bureaucratic Organizations 38 | Administrative Principles 40

Humanistic Perspective 41 Human Relations Movement 42 | Human Resources Perspective 43

New Manager Self-Test: Evolution of Style 44 Behavioral Sciences Approach 45

Management Science Perspective 46 Recent Historical Trends 47

Systems Theory 47 | Contingency View 48 | Total Quality Management 49

Innovative Management Thinking For Turbulent Times 50

The Learning Organization 50 Managing the Technology-Driven Workplace 50

A Manager’s Essentials: What Have We Learned? 52 Discussion Questions 52 Management in Practice: Experiential Exercise 53 Management in Practice: Ethical Dilemma 53 Case for Critical Analysis 54 ON THE JOB VIDEO CASE 55 BIZ FLIX VIDEO CASE 56 Endnotes 57 Continuing Case 60

3 The Environment and Corporate Culture 62 Are You Fit for Managerial Uncertainty? 63 The External Environment 64

General Environment 65

Manager’s Shoptalk: Creating Guanxi in China 67 Task Environment 69

The Organization–Environment Relationship 72 Environmental Uncertainty 72 | Adapting to the Environment 73

Part 2 THE ENVIRONTMENT OF MANAGEMENT

Contents

xxiv

The Internal Environment: Corporate Culture 75 Symbols 77 | Stories 77 | Heroes 77 Slogans 78 | Ceremonies 78

Environment and Culture 78 Adaptive Cultures 79 | Types of Cultures 79

New Manager Self-Test: Culture Preference 82 Shaping Corporate Culture for Innovative Response 82

Managing the High-Performance Culture 83 | Cultural Leadership 85

A Manager’s Essentials: What Have We Learned? 85 Discussion Questions 86 Management in Practice: Experiential Exercise 87 Management in Practice: Ethical Dilemma 87 Case for Critical Analysis 88 ON THE JOB VIDEO CASE 89 BIZ FLIX VIDEO CASE 90 Endnotes 91

4 Managing in a Global Environment 94 Are You Ready To Work Internationally? 95 A Borderless World 96 Getting Started Internationally 98

Exporting 98 | Outsourcing 99 | Licensing 99 Direct Investing 100 | China Inc. 101

The International Business Environment 102 The Economic Environment 103

Economic Development 103 | Resource and Product Markets 103 | Exchange Rates 104

The Legal-Political Environment 104 The Sociocultural Environment 105

Social Values 105 Manager’s Shoptalk: How Well Do You Play The Culture Game? 108

Communication Differences 109 | Other Cultural Characteristics 110

International Trade Alliances 111 GAT T and the World Trade Organization 112 | European Union 112 | North American Free Trade Agreement (NAF TA) 113

The Globalization Backlash 113 Multinational Corporations 114 Managing in a Global Environment 115

Developing Cultural Intelligence 115 | Managing Cross-Culturally 116

New Manager Self-Test: Are You Culturally Intelligent? 117 A Manager’s Essentials: What Have We Learned? 119 Discussion Questions 120 Management in Practice: Experiential Exercise 120 Management in Practice: Ethical Dilemma 121 Case for Critical Analysis 122 ON THE JOB VIDEO CASE 123 BIZ FLIX VIDEO CASE 124 Endnotes 124

5 Managing Ethics and Social Responsibility 128 Will You Be a Courageous Manager? 129 What Is Managerial Ethics? 130 Ethical Dilemmas: What Would You Do? 131 Criteria for Ethical Decision Making 132

Utilitarian Approach 132 Individualism Approach 132 | Moral-Rights Approach 133 | Justice Approach 133

Manager Ethical Choices 134 Manager’s Shoptalk: How to Challenge the Boss on Ethical Issues 136 New Manager Self-Test: Self and Others 137 What Is Corporate Social Responsibility? 138

Organizational Stakeholders 138 | The Bottom of the Pyramid 140

The Ethic of Sustainability 141 Evaluating Corporate Social Responsibilit y 142 Managing Company Ethics and Social Responsibilit y 144

Code of Ethics 144 | Ethical Structures 145 | Whistle-Blowing 146 | The Business Case for Ethics and Social Responsibility 147

A Manager’s Essentials: What Have We Learned? 148 Discussion Questions 148 Management in Practice: Experiential Exercise 149 Management in Practice: Ethical Dilemma 150 Case for Critical Analysis 150 ON THE JOB VIDEO CASE 151 BIZ FLIX VIDEO CASE 152 Endnotes 153 Continuing Case 156

6 Managerial Planning and Goal Setting 158 Does Goal Set ting Fit Your Management Style? 159 Overview of Goals and Plans 160

Levels of Goals and Plans 160 | Purposes of Goals and Plans 160 | The Organizational Planning Process 162

Goals in Organizations 162 New Manager Self-Test: Your Approach to Studying 163

Organizational Mission 163 Goals and Plans 164 | Aligning Goals with Strategy Maps 166

Part 3 PLANNING

CONTENTS

xxv

Operational Planning 167 Criteria for Effective Goals 168 | Management by Objectives 168 | Single-Use and Standing Plans 171

Manager’s Shoptalk: Regulating E-Mail in the Workplace 171 Planning for a Turbulent Environment 172

Contingency Planning 172 | Building Scenarios 173 | Crisis Planning 173

Planning for High Performance 175 Traditional Approaches to Planning 175 | High- Performance Approaches to Planning 175

A Manager’s Essentials: What Have We Learned? 178 Discussion Questions 178 Management in Practice: Experiential Exercise 179 Management in Practice: Ethical Dilemma 179 Case for Critical Analysis 180 ON THE JOB VIDEO CASE 181 BIZ FLIX VIDEO CASE 182 Endnotes 182

7 Strategy Formulation and Implementation 184 What Is Your Strategy Strength? 185 Thinking Strategically 186 New Manager Self-Test: Your Approach to Studying, Part 2 187 What Is Strategic Management? 188

Purpose of Strategy 188 | Levels of Strategy 190 The Strategic Management Process 191

Strategy Formulation Versus Execution 191 | SWOT Analysis 192

Formulating Corporate-Level Strategy 194 Portfolio Strategy 194 | The BCG Matrix 194 | Diversifi cation Strategy 195

Formulating Business-Level Strategy 196 Porter’s Five Competitive Forces 196 | Competitive Strategies 198

New Trends in Strategy 199 Innovation from Within 200 | Strategic Partnerships 200

Global Strategy 200 Globalization 201 | Multidomestic Strategy 202 | Transnational Strategy 202

Strategy Execution 203 Manager’s Shoptalk: Tips for Effective Strategy Execution 204

A Manager’s Essentials: What Have We Learned? 205 Discussion Questions 206 Management in Practice: Experiential Exercise 206 Management in Practice: Ethical Dilemma 207 Case for Critical Analysis 207 ON THE JOB VIDEO CASE 208 BIZ FLIX VIDEO CASE 209 Endnotes 210

8 Managerial Decision Making 212 How Do You Make Decisions? 213 Types of Decisions and Problems 214

Programmed and Nonprogrammed Decisions 214 | Facing Certainty and Uncertainty 215

Decision-Making Models 217 The Ideal, Rational Model 217 | How Managers Actually Make Decisions 218

New Manager Self-Test: Making Important Decisions 220

Political Model 221 Decision-Making Steps 222

Recognition of Decision Requirement 222 | Diagnosis and Analysis of Causes 222 | Development of Alternatives 223 | Selection of Desired Alternative 224 | Implementation of Chosen Alternative 224 | Evaluation and Feedback 225

Personal Decision Framework 226 Why Do Managers Make Bad Decisions? 227 Innovative Group Decision Making 228 Manager’s Shoptalk: Evidence-Based Management 229

Start with Brainstorming 229 Engage in Rigorous Debate 230 | Avoid Groupthink 230 | Know When to Bail 231

A Manager’s Essentials: What Have We Learned? 231 Discussion Questions 232 Management in Practice: Experiential Exercise 232 Management in Practice: Ethical Dilemma 233 Case for Critical Analysis 234 ON THE JOB VIDEO CASE 235 BIZ FLIX VIDEO CASE 236 Endnotes 237 Continuing Case 240

9 Designing Adaptive Organizations 242 What Are Your Leadership Beliefs? 243 Organizing the Vertical Structure 244

Work Specialization 244 | Chain of Command 245 | Span of Management 247

Manager’s Shoptalk: How to Delegate 248 Centralization and Decentralization 250

Departmentalization 250 Vertical Functional Approach 252 | Divisional Approach 252 | Matrix Approach 254 | Team

Part 4 ORGANIZING

CONTENTS

xxvi

Approach 255 | The Virtual Network Approach 256 | Advantages and Disadvantages of Each Structure 258

Organizing for Horizontal Coordination 260 The Need for Coordination 260 | Task Forces, Teams, and Project Management 262 Reengineering 263

Struc ture Follows Strategy 264 New Manager Self-Test: Authority Role Models 266 A Manager’s Essentials: What Have We Learned? 268 Discussion Questions 268 Management in Practice: Experiential Exercise 269 Management in Practice: Ethical Dilemma 270 Case for Critical Analysis 270 ON THE JOB VIDEO CASE 272 BIZ FLIX VIDEO CASE 272 Endnotes 273

10 Managing Change and Innovation 276 Are You Innovative? 277 Innovation and the Changing Workplace 278 Changing Things: New Products and Technologies 279

Exploration 279 | Cooperation 281 Entrepreneurship 284

New Manager Self-Test: Taking Charge of Change 286 Changing People and Culture 287

Training and Development 287 | Organization Development 287

Implementing Change 291 Need for Change 291 | Resistance to Change 291

Manager’s Shoptalk: Making Change Stick 292 Force-Field Analysis 293 | Implementation Tactics 294

A Manager’s Essentials: What Have We Learned? 296 Discussion Questions 296 Management in Practice: Experiential Exercise 297 Management in Practice: Ethical Dilemma 298 Case for Critical Analysis 299 ON THE JOB VIDEO CASE 300 BIZ FLIX VIDEO CASE 301 Endnotes 301

11 Managing Human Resources 306 Getting the Right People on the Bus 307 The Strategic Role of HRM Is to Drive Organizational Performance 308

The Strategic Approach 308 | Building Human Capital to Drive Performance 309 | Globalization 311

The Impac t of Federal Legislation on HRM 311 New Manager Self-Test: What Is Your HR Work Orientation? 313 The Changing Nature of Careers 314

The Changing Social Contract 314 | Innovations in HRM 315

Finding the Right People 316 Human Resource Planning 317 | Recruiting 318 Selecting 321

Manager’s Shoptalk: What Makes a Good Interview Go Bad? 323 Managing Talent 324

Training and Development 324 | Performance Appraisal 326

Maintaining an Effective Workforce 329 Compensation 329 | Benefi ts 330 Termination 330

A Manager’s Essentials: What Have We Learned? 331 Discussion Questions 332 Management in Practice: Experiential Exercise 332 Management in Practice: Ethical Dilemma 333 Case for Critical Analysis 334 ON THE JOB VIDEO CASE 335 BIZ FLIX VIDEO CASE 336 Endnotes 336

12 Managing Diversity 340 Do You Know Your Biases? 341 The Changing Workplace 342

Diversity in the United States 343 | Diversity on a Global Scale 345

Manager’s Shoptalk: A Guide for Expatriate Managers in America 346 Managing Diversity 346

What Is Diversity? 346 | Dividends of Workplace Diversity 348

Factors Shaping Personal Bias 350 Prejudice, Discrimination, and Stereotypes 350 | Ethnocentrism 352

Factors Affecting Women’s Careers 353 Glass Ceiling 353 | Opt-Out Trend 354

New Manager’s Self-Test: Are You Tuned Into Gender Differences? 355

The Female Advantage 356 Cultural Competence 356 Diversity Initiatives and Programs 358

Changing Structures and Policies 358 | Expanding Recruitment Efforts 358 | Establishing Mentor Relationships 358 | Accommodating Special Needs 360 | Providing Diversity Skills Training 360 | Increasing Awareness of Sexual Harassment 361

New Diversity Initiatives 362 Multicultural Teams 362 | Employee Network Groups 362

A Manager’s Essentials: What Have We Learned? 363 Discussion Questions 364 Management in Practice: Experiential Exercise 365 Management in Practice: Ethical Dilemma 366 Case for Critical Analysis 367 ON THE JOB VIDEO CASE 368 BIZ FLIX VIDEO CASE 369 Endnotes 370 Continuing Case 374

CONTENTS

xxvii

13 Dynamics of Behavior in Organizations 376 Are You Self-Confi dent? 377 Organizational Behavior 378 Attitudes 378

Components of Attitudes 379 | High-Performance Work Attitudes 380 | Confl icts Among Attitudes 382

Perception 382 Perceptual Selectivity 383 | Perceptual Distortions 384 | Attributions 384

Personality and Behavior 385 Personality Traits 386 | Emotional Intelligence 388 | Attitudes and Behaviors Infl uenced by Personality 388

New Manager Self-Test: What’s Your EQ? 389 Manager’s Shoptalk: Bridging the Personality Gap 390

Person–Job Fit 393 Learning 394

The Learning Process 394 | Learning Styles 395 Stress and Stress Management 396

Type A and Type B Behavior 397 | Causes of Work Stress 397 | Innovative Responses to Stress Management 398

A Manager’s Essentials: What Have We Learned? 399 Discussion Questions 400 Management in Practice: Experiential Exercise 400 Management in Practice: Ethical Dilemma 403 Case for Critical Analysis 403 ON THE JOB VIDEO CASE 405 BIZ FLIX VIDEO CASE 405 Endnotes 406

14 Leadership 408 What’s Your Personal Style? 409 The Nature of Leadership 410 Contemporary Leadership 410

Level 5 Leadership 411 | Interactive Leadership 412

New Manager Self-Test: Interpersonal Patterns 413 From Management to Leadership 414 Leadership Traits 415 Behavioral Approaches 415

Ohio State Studies 416 | Michigan Studies 416 The Leadership Grid 417

Contingency Approaches 418 Hersey and Blanchard’s Situational Theory 418 | Fiedler’s Contingency Theory 419 | Matching Leader Style to the Situation 420 | Substitutes for Leadership 421

Charismatic and Transformational Leadership 422 Charismatic and Visionary Leadership 422

Manager’s Shoptalk: Are You a Charismatic Leader? 423

Transformational Versus Transactional Leadership 424 Followership 424 Power and Infl uence 426

Position Power 426 | Personal Power 427 | Other Sources of Power 427 | Interpersonal Infl uence Tactics 428

Leadership as Service 429 Servant Leadership 429 | Moral Leadership 430

A Manager’s Essentials: What Have We Learned? 431 Discussion Questions 432 Management in Practice: Experiential Exercise 432 Management in Practice: Ethical Dilemma 433 Case for Critical Analysis 434 ON THE JOB VIDEO CASE 435 BIZ FLIX VIDEO CASE 436 Endnotes 437

15 Motivating Employees 440 Are You Engaged or Disengaged? 441 The Concept of Motivation 442 Content Perspectives on Motivation 443

The Hierarchy of Needs 443 | ERG Theory 445 | A Two-Factor Approach to Motivation 446 | Acquired Needs 447

Process Perspectives on Motivation 448 Goal-Setting 448 | Equity Theory 449 | Expectancy Theory 450

New Manager Self-Test: Your Approach to Motivating Others 452 Reinforcement Perspective on Motivation 452 Job Design for Motivation 454

Job Simplifi cation 454 | Job Rotation 455 Manager’s Shoptalk: The Carrot-and-Stick Controversy 455

Job Enlargement 456 | Job Enrichment 456 | Job Characteristics Model 457

Innovative Ideas for Motivating 458 Empowering People to Meet Higher Needs 459 Giving Meaning to Work Through Engagement 460

A Manager’s Essentials: What Have We Learned? 462 Discussion Questions 463 Management in Practice: Experiential Exercise 463 Management in Practice: Ethical Dilemma 464 Case for Critical Analysis 465 ON THE JOB VIDEO CASE 466 BIZ FLIX VIDEO CASE 467 Endnotes 468

Part 5 LEADING

CONTENTS

xxviii

16 Managing Communication 470 Are You Building a Personal Network? 471 Communication Is the Manager’s Job 472

What Is Communication? 473 | The Communication Process 474

Communicating Among People 475 Manager’s Shoptalk: Breaking Down Language Barriers 475

Communication Channels 476 | Communicating to Persuade and Infl uence Others 478 | Gender Differences in Communication 479 | Nonverbal Communication 480 | Listening 480

New Manager Self-Test: What Is Your Social Disposition? 482 Organizational Communication 483

Formal Communication Channels 483 | Team Communication Channels 486 | Personal Communication Channels 487

Innovations in Organizational Communication 489 Dialogue 489 | Crisis Communication 490 | Feedback and Learning 491 | Climate of Trust and Openness 492

A Manager’s Essentials: What Have We Learned? 492 Discussion Questions 493 Management in Practice: Experiential Exercise 494 Management in Practice: Ethical Dilemma 495 Case for Critical Analysis 496 ON THE JOB VIDEO CASE 497 BIZ FLIX VIDEO CASE 498 Endnotes 499

17 Leading Teams 502 How Do You Like to Work? 503 Why Teams at Work? 504

What Is a Team? 504 | The Dilemma of Teams 505

How to Make Teams Effective 506 Model of Team Effectiveness 506 | Effective Team Leadership 507

Types of Teams 507 Formal Teams 507 | Self-Directed Teams 508

Innovative Uses of Teams 509 Virtual Teams 509 | Global Teams 511

Team Characteristics 512 Size 512 | Diversity 512 | Member Roles 513

Team Processes 513 Stages of Team Development 514 | Team Cohesiveness 516 | Team Norms 517

Managing Team Confl ict 517 Balancing Confl ict and Cooperation 518 | Causes of Confl ict 519 | Styles to Handle Confl ict 519 Negotiation 520

New Manager Self-Test: Managing Confl ict 522 Work Team Effectiveness 522

Productive Output 523 | Satisfaction of Members 523 | Capacity to Adapt and Learn 523

Manager’s Shoptalk: How to Run a Great Meeting 524 A Manager’s Essentials: What Have We Learned? 525 Discussion Questions 525 Management in Practice: Experiential Exercise 526 Management in Practice: Ethical Dilemma 526 Case for Critical Analysis 527 ON THE JOB VIDEO CASE 529 BIZ FLIX VIDEO CASE 530 Endnotes 531 Continuing Case 534

18 Managing Quality and Performance 536 What Is Your Attitude Toward Organizational Regulation and Control? 537 The Meaning of Control 538 Manager’s Shoptalk: Cyberslackers Beware: The Boss Is Watching 539

Choosing Standards and Measures 539 The Balanced Scorecard 540

Feedback Control Model 541 Steps of Feedback Control 541 | Application to Budgeting 544

Financial Control 546 Financial Statements 546 | Financial Analysis: Interpreting the Numbers 547

The Changing Philosophy of Control 548 Hierarchical versus Decentralized Approaches 548 | Open-Book Management 550

New Manager Self-Test: What Is Your Control Approach? 551 Total Quality Management 552

TQM Techniques 553 | TQM Success Factors 556

Trends in Quality and Financial Control 557 International Quality Standards 557 | New Financial Control Systems 557

A Manager’s Essentials: What Have We Learned? 559 Discussion Questions 560

Part 6 CONTROLLING

CONTENTS

xxix

Management in Practice: Experiential Exercise 561 Management in Practice: Ethical Dilemma 561 Case for Critical Analysis 562 ON THE JOB VIDEO CASE 564 BIZ FLIX VIDEO CASE 565 Endnotes 565

19 Managing the Value Chain, Information Technology, and E-Business 568 Which Side of Your Brain Do You Use? 569 The Organization As a Value Chain 570

Manufacturing and Service Operations 571 | Supply Chain Management 572

Facilities Layout 573 Process Layout 573

New Manager Self-Test: Political Skills 574 Product Layout 574 | Cellular Layout 576 | Fixed-Position Layout 576

Technology Automation 576 Radio-Frequency Identifi cation (RFID) 577 | Flexible Manufacturing Systems 577 | Lean Manufacturing 578

Inventory Management 578 The Importance of Inventory 579 | Just-in-Time Inventory 579

Information Technology Has Transformed Management 580

Boundaries Dissolve; Collaboration Reigns 580 | Knowledge Management 580 | Management Information Systems 581 | Enterprise Resource Planning Systems 582

Manager’s Shoptalk: Putting Performance Dashboards to Work 583 A New Generation of Information Technology 585 The Internet and E-Business 586

E-Business Strategy: Market Expansion 588 | E-Business Strategy: Increasing Effi ciency 589

A Manager’s Essentials: What Have We Learned? 589 Discussion Questions 590 Management in Practice: Experiential Exercise 591 Management in Practice: Ethical Dilemma 591 Case for Critical Analysis 592 ON THE JOB VIDEO CASE 593 BIZ FLIX VIDEO CASE 594 Endnotes 595 Continuing Case 598

Appendix A: Managing Small Business Start-Ups 601 Glossary 625 Name Index 639 Company Index 653 Subject Index 657

CONTENTS

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Management RICHARD L. DAFT

Vanderb i l t Un i ve r s i t y

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e After studying this chapter, you should be able to: 1. Describe the four management functions and the type of management

activity associated with each.

2. Explain the difference between effi ciency and effectiveness and their importance for organizational performance.

3. Describe conceptual, human, and technical skills and their relevance for managers.

4. Describe management types and the horizontal and vertical differences between them.

5. Defi ne ten roles that managers perform in organizations.

6. Appreciate the manager’s role in small businesses and nonprofi t organizations.

7. Understand the personal challenges involved in becoming a new manager.

8. Discuss characteristics of the new workplace and the new management competencies needed to deal with today’s turbulent environment.

Are You Ready to Be a Manager? Why Innovation Matters The Defi nition of Management The Four Management Functions

Planning Organizing Leading Controlling

Organizational Performance Management Skills

Conceptual Skills Human Skills Technical Skills When Skills Fail

Management Types Vertical Differences Horizontal Differences

What Is It Like to Be a Manager? Making the Leap: Becoming a

New Manager New Manager Self-Test: Manager

Achievement Manager Activities Manager Roles

Managing in Small Businesses and Nonprofi t Organizations

Management and the New Workplace New Workplace Characteristics New Management Competencies

3

Innovative Management for Turbulent Times

C ontrolling

6

P lanning

3

Environm ent

2

4O rganizing

5Leading Introduction

1

ARE YOU READY TO BE A MANAGER?1

Welcome to the world of management. Are you ready for it? This questionnaire will help you see whether your pri- orities align with the demands placed on today’s manag- ers. Rate each of the following items based on what you think is the appropriate emphasis for that task to your success as a new manager of a department. Your task is to rate the top four priority items as “High Priority” and the other four as “Low Prioity.” You will have four of the items rated high and four rated low.

High Priority

Low Priority

1. Spend 50 percent or more of your time in the care and feeding of people.

2. Make sure people understand that you are in control of the department.

3. Use lunches to meet and network with peers in other departments.

4. Implement the changes you believe will improve department performance.

5. Spend as much time as possible talking with and listening to subordinates.

6. Make sure jobs get out on time.

7. Reach out to your boss to discuss his expectations for you and your department.

8. Make sure you set clear expec- tations and policies for your department.

SCORING & INTERPRETATION: All eight items in the list may be important, but the odd-numbered items are considered more important than the even-numbered items for long-term success as a manager. If you checked three or four of the odd-numbered items, consider your- self ready for a management position. A successful new manager discovers that a lot of time has to be spent in the care and feeding of people, including direct reports and colleagues. People who fail in new management jobs often do so because they have poor working relationships or they misjudge management philosophy or cultural values. Developing good relationships in all directions is typically more important than holding on to old work skills or emphasizing control and task outcomes. Success- ful outcomes typically will occur when relationships are solid. After a year or so in a managerial role, successful people learn that more than half their time is spent net- working and building relationships.

Many new managers expect to have power, to be in control, and to be personally responsible for departmental outcomes. A big surprise for many people when they fi rst step into a management role is that they are much less in control of things than they expected. Managers are dependent on subordinates more than vice-versa because they are evaluated on the work of other people rather than on their own work. In a world of rapid change, unexpected events, and uncertainty, organizations need man- agers who can build networks and pull people together toward common goals.

The nature of management is to motivate and coordinate others to cope with diverse and far-reaching challenges. For example, Bruce Moeller, CEO of DriveCam, begins his work day by walking around visiting managers in operations, market- ing, sales, engineering, fi nance, and so forth. Those managers, in turn, walk around talking with their direct reports, and on down the line. Moeller believes continual, free-fl owing communication keeps everyone “on the same page” and helps employ- ees meet goals at DriveCam, a company that sells and installs video recorders that monitor the behavior of commercial drivers.2

PART 1 INTRODUCTION TO MANAGEMENT4

In the past, many managers did exercise tight control over employees. But the fi eld of management is undergoing a revolution that asks managers to do more with less, to engage whole employees, to see change rather than stability as natural, and to inspire vision and cultural values that allow people to create a truly collaborative and produc- tive workplace. In today’s work environment, managers rely less on command and con- trol and more on coordination and communication. This approach differs signifi cantly from a traditional mind-set that emphasizes tight top-down control, employee separa- tion and specialization, and management by impersonal measurement and analysis.

This textbook introduces and explains the process of management and the chang- ing ways of thinking about the world that are critical for managers. By reviewing the actions of some successful and not-so-successful managers, you will learn the fundamentals of management. By the end of this chapter, you will already recognize some of the skills managers use to keep organizations on track, and you will begin to understand how managers can achieve astonishing results through people. By the end of this book, you will understand fundamental management skills for planning, organizing, leading, and controlling a department or entire organization.

WHY INNOVATION MAT TERS The theme of this text is innovation. To gain or keep a competitive edge, managers have renewed their emphasis on innovation, shifting away from a relentless focus on controlling costs toward investing in the future. In a survey of nearly 1,000 executives in North America, Europe, South America, and Asia, 86 percent agreed that “innova- tion is more important than cost reduction for long-term success.”3

Why does innovation matter? Innovations in products, services, management sys- tems, production processes, corporate values, and other aspects of the organization are what keeps companies growing, changing, and thriving. Without innovation, no company can survive over the long run. The growing clout and expertise of compa- nies in developing countries, particularly China and India, have many Western man- agers worried. In a hypercompetitive global environment, companies must innovate more—and more quickly—than ever. Throughout this text, we will spotlight various companies that refl ect this new innovation imperative. In addition, Chapter 10 dis- cusses innovation and change in detail. First, let’s begin our adventure into the world of management by learning some basics about what it means to be a manager.

THE DEFINITION OF MANAGEMENT Every day, managers solve diffi cult problems, turn organizations around, and achieve astonishing performances. To be successful, every organization needs good managers.

What characteristic do all good managers have in common? They get things done through their organizations. Managers are the executive function of the organization, responsible for building and coordinating an entire system rather than performing specifi c tasks. That is, rather than doing all the work themselves, good managers cre- ate the systems and conditions that enable others to perform those tasks. As a boy, Wal-Mart founder Sam Walton made $4,000 a year at his paper route. How? Walton had a natural talent for management, and he created a system whereby he hired and coordinated others to help deliver papers rather than simply delivering what he could on his own.4

By creating the right systems and environment, managers ensure that the depart- ment or organization will survive and thrive beyond the tenure of any specifi c super- visor or manager. Consider that Jack Welch was CEO of General Electric through 20 amazingly successful years, but the leadership transition to Jeff Immelt in 2001 was as smooth as silk, and GE has stayed at or near the top of lists such as Fortune mag- azine’s “Most Admired Companies,” the Financial Times “most respected” survey,

CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 5 Introduction

1 and Barron’s most admired companies. People who have studied GE aren’t surprised. The company has thrived for more than a century because managers created the right environment and systems. In the late 1800s, CEO Charles Coffi n emphasized that GE’s most important product was not lightbulbs or transformers, but managerial talent. Managers at GE spend a huge amount of time on human resources issues—recruiting, training, appraising, men- toring, and developing leadership talent for the future.5

Recognizing the role and importance of other people is a key aspect of good management. Early twentieth-century management scholar Mary Parker Follett defi ned manage- ment as “the art of getting things done through people.”6

More recently, noted management theorist Peter Drucker stated that the job of managers is to give direction to their organizations, provide leadership, and decide how to use organizational resources to accomplish goals.7 Getting things done through people and other resources and pro- viding leadership and direction are what managers do. These activities apply not only to top executives such as Eric Schmidt of Google or Indra Nooyi of PepsiCo, but also to the manager of a restaurant in your home town, the leader of an airport security team, a supervisor of an accounting department, or a director of sales and marketing. Thus, our defi nition of management is as follows:

Management is the attainment of organizational goals in an effective and effi - cient manner through planning, organizing, leading, and controlling organizational resources.

This defi nition holds two important ideas: (1) the four functions of planning, orga- nizing, leading, and controlling, and (2) the attainment of organizational goals in an effective and effi cient manner. Let’s fi rst take a look at the four primary management functions. Later in the chapter, we’ll discuss organizational effectiveness and effi ciency, as well as the multitude of skills managers use to successfully perform their jobs.

As a new manager, remember that management means getting things done through other people. You can’t do it all yourself. As a manager, your job is to create the environment and conditions that engage other people in goal accomplishment.

THE FOUR MANAGEMENT FUNCTIONS Exhibit 1.1 illustrates the process of how managers use resources to attain organiza- tional goals through the functions of planning, organizing, leading, and controlling. Although some management theorists identify additional management functions, such as staffi ng, communicating, or decision making, those additional functions will be discussed as subsets of the four primary functions in Exhibit 1.1. Chapters of this book are devoted to the multiple activities and skills associated with each function, as well as to the environment, global competitiveness, and ethics, which infl uence how managers perform these functions.

Planning Planning means identifying goals for future organizational performance and decid- ing on the tasks and use of resources needed to attain them. In other words, mana- gerial planning defi nes where the organization wants to be in the future and how

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A business may develop from a founder’s talent, but good management and vision can take it to the next level. Tattoo artists Ami James (left) and Chris Núñez (right) started the business Miami Ink, which is the namesake of the TLC/ Discovery reality television program in its fourth season in 2008. The partners pitched the concept for the show with a friend and turned their business into the most well-known tattoo design studio in the United States. Planning for life after reality TV, James and Núñez are creating another Miami tattoo studio, Love Hate Tattoo, because TLC/Discovery will own the rights to the name Miami Ink when the series ends.

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PART 1 INTRODUCTION TO MANAGEMENT6

to get there. An example of good planning comes from Time Warner, Inc., where the marketing chiefs of the various divisions—HBO, Time Inc., Turner Broadcasting, Warner Bros., AOL, New Line Cinema, and Time Warner Cable—get together every three weeks to talk about future projects and how the divisions can work together to make them more successful. Thanks to careful planning, for example, almost every division is involved in promoting major fi lms such as The Golden Compass, Hairspray, and The Lord of the Rings trilogy.8

Organizing Organizing typically follows planning and refl ects how the organization tries to accomplish the plan. Organizing involves assigning tasks, grouping tasks into depart- ments, delegating authority, and allocating resources across the organization. In recent

years, companies as diverse as IBM, the Catholic Church, Motorola, and the Federal Bureau of Investigation have undergone structural reorganizations to accommodate their changing plans. At Avon Products, where sales have stalled and overhead costs have run amok, CEO Andrea Jung recently trimmed seven layers of management and reorganized the company into a structure where more decisions and functions are handled on a global basis to achieve greater effi ciency of scale.9

Leading Leading is the use of infl uence to motivate employees to achieve organizational goals. Leading means creat- ing a shared culture and values, communicating goals to employees throughout the organization, and infusing employees with the desire to perform at a high level. Leading involves motivating entire departments and divisions as well as those individuals working immedi- ately with the manager. In an era of uncertainty, global competition, and a growing diversity of the workforce, the ability to shape culture, communicate goals, and motivate employees is critical to business success.

E X H I B I T 1 .1 The Process of Management

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As Chairman and CEO of Google, Eric Schmidt works with co-founders Sergey Brin and Larry Page to strike the right balance between innovation and discipline. These managers place a high priority on leading through shared values and goals to keep Google’s employees motivated and energized. Yet from his experience of engineering a turnaround at struggling Novell, Schmidt knows the other management functions of planning, organizing, and controlling are just as important for success. In discussing his management role at Google, Schmidt says, “I keep things focused.”

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llllleading TheThe ma managnagemeementnt ffffuuunction that involves the uuuuuuse of infl uence to motivate eeeeemmployees to achieve the oooorororgrgo anization’s goals.

CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 7 Introduction

1 One doesn’t have to be a well-known top manager to be an exceptional leader.

Many managers working quietly in both large and small organizations around the world also provide strong leadership within departments, teams, nonprofi t organiza- tions, and small businesses. For example, Cara Kakuda is an area general manager in Hawaii for Nextel Partners, the rural-market division of Nextel Communications. Kakuda earned the job because of her ability to motivate and inspire employees. “Peo- ple give her 150 percent,” said a Nextel executive.10

Controlling Controlling is the fourth function in the management process. Controlling means monitoring employees’ activities, determining whether the organization is on tar- get toward its goals, and making corrections as necessary. Managers must ensure that the organization is moving toward its goals. Trends toward empowerment and trust of employees have led many companies to place less emphasis on top- down control and more emphasis on training employees to monitor and correct themselves.

Information technology is helping managers provide needed organizational control without strict top-down constraints. Companies such as Cisco Systems and Oracle use the Internet and other information technology to coordinate and monitor virtually every aspect of operations, which enables managers to keep tabs on perfor- mance without maintaining daily authoritarian control over employees.11

ORGANIZATIONAL PERFORMANCE The other part of our defi nition of management is the attainment of organizational goals in an effi cient and effective manner. Management is so important because organizations are so important. In an industrialized society where complex tech- nologies dominate, organizations bring together knowledge, people, and raw mate- rials to perform tasks no individual could do alone. Without organizations, how could technology be provided that enables us to share information around the world in an instant; electricity be produced from huge dams and nuclear power plants; and thousands of videogames, compact discs, and DVDs be made available for our entertainment? Organizations pervade our society, and managers are responsible for seeing that resources are used wisely to attain organizational goals.

Our formal defi nition of an organization is a social entity that is goal directed and deliberately structured. Social entity means being made up of two or more people. Goal directed means designed to achieve some outcome, such as make a profi t (Wal-Mart), win pay increases for members (AFL-CIO), meet spiritual needs (United Methodist Church), or provide social satisfaction (college sorority). Deliberately structured means that tasks are divided and responsibility for their performance is assigned to orga- nization members. This defi nition applies to all organizations, including both profi t and nonprofi t. Small, offbeat, and nonprofi t organizations are more numerous than large, visible corporations—and just as important to society.

Based on our defi nition of management, the manager’s responsibility is to coor- dinate resources in an effective and effi cient manner to accomplish the organization’s goals. Organizational effectiveness is the degree to which the organization achieves a stated goal, or succeeds in accomplishing what it tries to do. Organizational effec- tiveness means providing a product or service that customers value. Organizational effi ciency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. Effi ciency can be calculated as the amount of resources used to produce a product or service. Effi ciency and effectiveness can both be high in the same organization. Managers at retailer Target, for instance, continually look for ways to increase effi ciency while also meeting the company’s quality and customer satisfaction goals.

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eeeeeffi ciency The use of minimall rrrrreesources—raw materials, monn--- eeeeyeyy, andd peoplle—to prodduce a ddddddesd ired volume of output.

PART 1 INTRODUCTION TO MANAGEMENT8

Expect more, pay less. An astonishing 97 percent of Americans recognize Target’s red-and- white bull’s-eye brand, and almost as many are familiar with the slogan. “Sometimes we focus a little bit more on the ‘pay less,’ sometimes on the ‘expect more,’ but the guardrails are there,” says Gregg Steinhafel, who took over as CEO of the trendy retailer in May 2008.

Target’s slogan not only offers a promise to customers, it also refl ects the company’s emphasis on both effectiveness and effi ciency. Target has an elite, secret team, called the “creative cabinet” that is made up of outsiders of various ages, interests, and nationalities who provide ideas and insights that keep the company on the cutting edge of consumer trends and give their input regarding managers’ strategic initiatives. Innovation, design, and quality are key goals, and managers focus on providing a fun store experience and a unique, exciting product line. At the same time, they keep a close eye on costs and operating effi cien- cies to keep prices low. “I talk a lot about gross margin rate and the key drivers to improve our metrics and performance,” Steinhafel says. In its SuperTarget centers, the retailer is able to consistently underprice supermarkets on groceries by about 10 percent to 15 percent and comes very close to Wal-Mart’s rock-bottom prices.

As the economy slows, Target, like other retailers, has found the need to adjust worker hours and look for other effi ciencies, which has drawn unfavorable attention from worker advocacy groups. Managers have to walk a fi ne line to continue to meet their goals for both effi ciency and effectiveness.12

All managers have to pay attention to costs, but severe cost cutting to improve effi ciency can sometimes hurt organizational effectiveness. The ultimate responsibil- ity of managers is to achieve high performance, which is the attainment of organiza- tional goals by using resources in an effi cient and effective manner.

MANAGEMENT SKILLS A manager’s job is complex and multidimensional and, as we shall see throughout this book, requires a range of skills. Although some management theorists propose a long list of skills, the necessary skills for managing a department or an organization can be summarized in three categories: conceptual, human, and technical.13 As illus- trated in Exhibit 1.2, the application of these skills changes as managers move up in the organization. Although the degree of each skill necessary at different levels of an organization may vary, all managers must possess skills in each of these important areas to perform effectively.

Conceptual Skills Conceptual skill is the cognitive ability to see the organization as a whole system and the relationships among its parts. Conceptual skill involves the manager’s think- ing, information processing, and planning abilities. It involves knowing where one’s department fi ts into the total organization and how the organization fi ts into the industry, the community, and the broader business and social environment. It means the ability to think strategically—to take the broad, long-term view—and to identify, evaluate, and solve complex problems.14

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cccconceptual skill The cogni- tttiiive ability to see the orga- nnnnnnization as a whole and the rrrrerereelelr ationshipps among ig ts parp ts.

E X H I B I T 1 . 2 Relationship of Conceptual, Human, and Technical Skills to Management

CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 9 Introduction

1 Conceptual skills are needed by all managers but are especially important for

managers at the top. Many of the responsibilities of top managers, such as decision making, resource allocation, and innovation, require a broad view. Consider how recent strategic changes at General Electric refl ect the conceptual skills of CEO Jeff Immelt. Immelt is remaking GE by thinking on a broad, long-term scale about the types of products and services people around the world are going to need in the future. He’s pushing for growth by investing heavily in basic scientifi c and tech- nological research, looking toward the needs of developing countries, and making structural and cultural changes that focus GE toward creating innovative products and services to meet shifting customer needs.15

Human Skills Human skill is the manager’s ability to work with and through other people and to work effectively as a group member. Human skill is demonstrated in the way a man- ager relates to other people, including the ability to motivate, facilitate, coordinate, lead, communicate, and resolve confl icts. A manager with human skills allows sub- ordinates to express themselves without fear of ridicule, encourages participation, and shows appreciation for employees’ efforts. Heather Coin, manager of the Sher- man Oaks, California, branch of The Cheesecake Factory, demonstrates exceptional human skills. She considers motivating and praising her staff a top priority. “I really try to seek out moments because it’s so hard to,” she says. “You could defi nitely go for days without doing it. You have to consciously make that decision [to show appreciation].”16

Human skills are essential for managers who work with employees directly on a daily basis. Organizations frequently lose good people because of front-line bosses who fail to show respect and concern for employees.17 However, human skills are becoming increasingly important for managers at all levels. In the past, many CEOs could get by without good people skills, but no longer. Today’s employees, boards, customers, and communities are demanding that top execu- tives demonstrate an ability to inspire respect, loyalty, and even affection rather than fear. “People are expecting more from the companies they’re working for, more from the companies they’re doing business with, and more from the com- panies they’re buying from,” says Raj Sisodia, a professor of marketing at Bentley College and co-author of a recent book called Firms of Endearment.18

Technical Skills Technical skill is the understanding of and profi ciency in the performance of specifi c tasks. Technical skill includes mastery of the methods, techniques, and equipment involved in specifi c functions such as engineering, manufacturing, or fi nance. Tech- nical skill also includes specialized knowledge, analytical ability, and the competent use of tools and techniques to solve problems in that specifi c discipline. Technical skills are particularly important at lower organizational levels. Many managers get promoted to their fi rst management jobs by having excellent technical skills. How- ever, technical skills become less important than human and conceptual skills as managers move up the hierarchy. For example, in his seven years as a manufactur- ing engineer at Boeing, Bruce Moravec developed superb technical skills in his area of operation. But when he was asked to lead the team designing a new fuselage for the Boeing 757, Moravec found that he needed to rely heavily on human skills in order to gain the respect and confi dence of people who worked in areas he knew little about.19

Complete the experiential exercise on page 25 that pertains to management skills. Refl ect on the strength of your preferences among the three skills and the implications for you as a manager.

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PART 1 INTRODUCTION TO MANAGEMENT10

When Skills Fail Everyone has fl aws and weaknesses, and these shortcomings become most appar- ent under conditions of rapid change and uncertainty.20 Therefore, during turbulent times, managers really have to stay on their toes and apply all their skills and com- petencies in a way that benefi ts the organization and its stakeholders—employees, customers, investors, the community, and so forth. In recent years, numerous highly publicized examples showed us what happens when managers fail to effectively and ethically apply their skills to meet the demands of an uncertain, rapidly changing world. Companies such as Enron, Tyco, and WorldCom were fl ying high in the 1990s but came crashing down under the weight of fi nancial scandals. Others, such as Rub- bermaid and Kmart, are struggling because of years of management missteps.

Although corporate greed and deceit grab the headlines, many more companies falter or fail less spectacularly. Managers fail to listen to customers, misinterpret sig- nals from the marketplace, or can’t build a cohesive team and execute a strategic plan. Over the past several years, many CEOs, including Bob Nardelli at Home Depot, Carly Fiorina at Hewlett-Packard, and Michael Eisner at Disney have been ousted due to their failure to implement their strategic plans or keep stakeholders happy.

Recent examinations of struggling organizations and executives offer a glimpse into the mistakes managers often make in a turbulent environment.21 One of the big- gest blunders is managers’ failure to comprehend and adapt to the rapid pace of change in the world around them. A related problem is top managers who create a climate of fear in the organization so that people are afraid to tell the truth and strive primarily to avoid the boss’s wrath. Thus, bad news gets hidden and impor- tant signals from the marketplace are missed. People stop thinking creatively, avoid responsibility, and may even slide into unethical behavior if it keeps them on the boss’s good side.22

Other critical management missteps include poor communication skills and fail- ure to listen; poor interpersonal skills; treating employees as instruments to be used; a failure to clarify direction and performance expectations; suppressing dissenting viewpoints; and the inability to build a management team characterized by mutual trust and respect.23 Bob Nardelli was forced out at Home Depot largely because he was unable to build trust and cohesiveness among his board and management team, and his brusque and unfeeling style alienated executives and rank and fi le workers alike. Using expletives for emphasis at one meeting soon after his arrival as CEO, Nardelli reportedly said, “You guys don’t know how to run a . . . business.” At the annual meeting where shareholder advocates were protesting Nardelli’s extravagant pay package, the CEO limited shareholder questions to one minute, sealing his image as a callous executive unwilling to listen and compromise. He tried to redeem himself by going on a “listening tour,” but the damage had been done.24 Contrast Nardelli’s approach with that of Jim McNerney, who spent his fi rst six months as CEO of Boeing talking with employees around the company to understand Boeing’s strengths and challenges and emphasizing the need for cooperation and teamwork.25

MANAGEMENT TYPES Managers use conceptual, human, and technical skills to perform the four manage- ment functions of planning, organizing, leading, and controlling in all organiza- tions—large and small, manufacturing and service, profi t and nonprofi t, traditional and Internet-based. But not all managers’ jobs are the same. Managers are responsi- ble for different departments, work at different levels in the hierarchy, and meet dif- ferent requirements for achieving high performance. Twenty-fi ve-year-old Daniel Wheeler is a fi rst-line supervisor in his fi rst management job at Del Monte Foods, where he is directly involved in promoting products, approving packaging sleeves, and organizing people to host sampling events.26 Kevin Kurtz is a middle manager at Lucasfi lm, where he works with employees to develop marketing campaigns

CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 11 Introduction

1 for some of the entertainment company’s hottest fi lms.27 And Domenic Antonellis is CEO of the New England Confectionary Co. (Necco), the company that makes those tiny pastel candy hearts stamped with phrases such as “Be Mine” and “Kiss Me.”28 All three are managers and must contribute to planning, organizing, leading, and controlling their organizations—but in different amounts and ways.

Vertical Differences An important determinant of the manager’s job is hierarchical level. Exhibit 1.3 illus- trates the three levels in the hierarchy. A recent study of more than 1,400 managers examined how the manager’s job differs across these three hierarchical levels and found that the primary focus changes at different levels.29 For fi rst-level managers, the main concern is facilitating individual employee performance. Middle manag- ers, though, are concerned less with individual performance and more with linking groups of people, such as allocating resources, coordinating teams, or putting top management plans into action across the organization. For top-level managers, the primary focus is monitoring the external environment and determining the best strat- egy to be competitive.

Let’s look in more detail at differences across hierarchical levels. Top managers are at the top of the hierarchy and are responsible for the entire organization. They have such titles as president, chairperson, executive director, chief executive offi cer (CEO), and executive vice president. Top managers are responsible for setting organizational goals, defi ning strategies for achieving them, monitoring and interpreting the external environment, and making decisions that affect the entire organization. They look to the long-term future and concern themselves with general environmental trends and the organization’s overall success. Top managers are also responsible for communicating a shared vision for the organization, shaping corporate culture, and nurturing an entrepre- neurial spirit that can help the company innovate and keep pace with rapid change.30

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PART 1 INTRODUCTION TO MANAGEMENT12

Middle managers work at middle levels of the orga- nization and are responsible for business units and major departments. Examples of middle managers are depart- ment head, division head, manager of quality control, and director of the research lab. Middle managers typi- cally have two or more management levels beneath them. They are responsible for implementing the overall strate- gies and policies defi ned by top managers. Middle man- agers generally are concerned with the near future rather than with long-range planning.

The middle manager’s job has changed dramati- cally over the past two decades. Many organizations improved effi ciency by laying off middle managers and slashing middle management levels. Traditional pyrami- dal organization charts were fl attened to allow informa- tion to fl ow quickly from top to bottom and decisions to be made with greater speed. Exhibit 1.3 illustrates the shrinking middle management.

Yet even as middle management levels have been reduced, the middle manager’s job has taken on a new vital- ity. Rather than managing the fl ow of information up and down the hierarchy, middle managers create horizontal net-

works that can help the organization act quickly. Research shows that middle managers play a crucial role in driving innovation and enabling organizations to respond to rapid shifts in the environment.31 As Ralph Stayer, CEO of Johnsonville Sausage said, “Leaders can design wonderful strategies, but the success of the organization resides in the execu- tion of those strategies. The people in the middle are the ones who make it work.”32

Middle managers’ status has also escalated because of the growing use of teams and projects. Strong project managers are in hot demand. A project manager is responsible for a temporary work project that involves the participa- tion of people from various functions and levels of the organization, and perhaps from outside the company as well. Many of today’s middle managers work with a variety of projects and teams at the same time, some of which cross geographical and cultural as well as functional boundaries.

First-line managers are directly responsible for the production of goods and services. They are the fi rst or second level of management and have such titles as supervisor, line manager, section chief, and offi ce manager. They are responsible for groups of nonmanagement employees. Their primary concern is the application of rules and procedures to achieve effi cient production, provide technical assistance, and motivate subordinates. The time horizon at this level is short, with the empha- sis on accomplishing day-to-day goals. For example, Alistair Boot manages the menswear department for a John Lewis department store in Cheadle, England.33

Boot’s duties include monitoring and supervising shop fl oor employees to make sure sales procedures, safety rules, and customer service policies are followed. This type of managerial job might also involve motivating and guiding young, often inexperienced workers, providing assistance as needed, and ensuring adherence to company policies.

Horizontal Differences The other major difference in management jobs occurs horizontally across the orga- nization. Functional managers are responsible for departments that perform a sin- gle functional task and have employees with similar training and skills. Functional departments include advertising, sales, fi nance, human resources, manufacturing, and accounting. Line managers are responsible for the manufacturing and marketing departments that make or sell the product or service. Staff managers are in charge of departments such as fi nance and human resources that support line departments.

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Supported in part by USAID and published by The Killid Group, a media company headquartered in Kabul, Mursal is the fi rst nationally distributed women’s magazine in Afghanistan’s history. Aimed at average women, most of whom are illiterate due to the lack of educational opportunities, the publication makes liberal use of photographs to cover a wide range of women’s issues. It is the job of middle managers, such as the Mursal editors shown here talking with board member Palwasha Hassan, to help realize an organization’s strategic goals, which are typically defi ned by top management.

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CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 13 Introduction

1 General managers are responsible for several depart-

ments that perform different functions. A general manager is responsible for a self-contained division, such as a Macy’s department store or a General Motors assembly plant, and for all the functional departments within it. Project manag- ers also have general management responsibility because they coordinate people across several departments to accomplish a specifi c project.

WHAT IS IT LIKE TO BE A MANAGER? Unless someone has actually performed managerial work, it is hard to understand exactly what managers do on an hour-by-hour, day-to-day basis. The manager’s job is so diverse that a number of studies have been undertaken in an attempt to describe exactly what happens. The ques- tion of what managers actually do to plan, organize, lead, and control was answered by Henry Mintzberg, who followed managers around and recorded all their activi- ties.34 He developed a description of managerial work that included three general characteristics and ten roles. These characteristics and roles, discussed in the following sec- tions, have been supported in subsequent research.35

More recent research has looked at what managers like to do. The research found that both male and female managers across fi ve different countries reported that they most enjoy activities such as leading others, networking, and leading inno- vation. Activities managers like least include controlling subordinates, handling paperwork, and managing time pressures.36 Many new managers in particular fi nd the intense time pressures of management, the load of administrative paper- work, and the challenge of directing others to be quite stressful as they adjust to their new roles and responsibilities. Indeed, the initial leap into management can be one of the scariest moments in a person’s career.

How will you make the transition to a new manager’s position? Complete the New Manager Self-Test on page 14 to see how prepared you are to step into a management role.

Making the Leap: Becoming a New Manager Many people who are promoted into a manager position have little idea what the job actually entails and receive little training about how to handle their new role. It’s no wonder that, among managers, fi rst-line supervisors tend to experience the most job burnout and attrition.37

Organizations often promote the star performers—those who demonstrate indi- vidual expertise in their area of responsibility and have an ability to work well with others—both to reward the individual and to build new talent into the managerial ranks. But making the shift from individual contributor to manager is often tricky. Dianne Baker, an expert nurse who was promoted to supervisor of an out-patient cardiac rehabilitation center, quickly found herself overwhelmed by the challenge of supervising former peers, keeping up with paperwork, and understanding fi nancial and operational issues.38 Baker’s experience is duplicated every day as new man- agers struggle with the transition to their new jobs. Harvard professor Linda Hill

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The father-son team of Don (left) and Donnie (right) Nelson have both held the position of general manager for the NBA Mavericks. In 1997, when Don Nelson took over as general manager and head coach of the Mavericks, the bas- ketball team was in a freefall. Donnie joined his father the next year as assistant coach to help build the team. They were rewarded for their efforts in 2003 when the team broke through with a dynamic defense. Donnie moved into the general manager position in 2005 when his father stepped down and enjoyed overseeing the Mavericks play in the NBA fi nals in 2007 and 2008.

ggggggeneral manager A managererrrr wwwwwwwho is responsible for several ddddddepartments that perform dddddifferent functions.

PART 1 INTRODUCTION TO MANAGEMENT14

followed a group of 19 managers over the fi rst year of their managerial careers and found that one key to success is to recognize that becoming a manager involves more than learning a new set of skills. Rather, becoming a manager means a pro- found transformation in the way people think of themselves, called personal identity, that includes letting go of deeply held attitudes and habits and learning new ways of thinking.39 Exhibit 1.4 outlines the transformation from individual performer to manager.

Recall our earlier discussion of the role of manager as the executive function of the organization, the person who builds systems rather than doing specifi c tasks. The indi- vidual performer is a specialist and a “doer.” His or her mind is conditioned to think in terms of performing specifi c tasks and activities as expertly as possible. The manager, on the other hand, has to be a generalist and learn to coordinate a broad range of activi- ties. Whereas the individual performer strongly identifi es with his or her specifi c tasks, the manager has to identify with the broader organization and industry.

In addition, the individual performer gets things done mostly through his or her own efforts, and develops the habit of relying on self rather than others. The man- ager, though, gets things done through other people. Indeed, one of the most common mistakes new managers make is wanting to do all the work themselves rather than

Manager Achievement

Rate each item below based on your orientation toward personal achievement. Read each item and check either Mostly True or Mostly False as you feel right now.

Mostly True

Mostly False

1. I enjoy the feeling I get from mastering a new skill.

2. Working alone is typically better than working in a group.

3. I like the feeling I get from winning.

4. I like to develop my skills to a high level.

5. I rarely depend on anyone else to get things done.

6. I am frequently the most valuable contributor to a team.

7. I like competitive situations.

8. To get ahead, it is impor- tant to be viewed as a winner.

SCORING AND INTERPRETATION: Give yourself one point for each Mostly True answer. In this case, a low score is better. A high score means a focus on personal achievement separate from others, which is ideal for a specialist or individual contributor. However, a manager is a generalist who gets things done through others. A desire to be a winner may put you in competition with your people rather than a focus on developing their skills. As a manager, you will not succeed as a lone achiever who does not facilitate and coordinate others. If you checked three or fewer as Mostly True, your basic orientation is good. If you scored six or higher, your focus is on being an individual winner. You will want to shift your perspective to become an excellent manager.

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CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 15 Introduction

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delegating to others and developing others’ abilities.40 Lisa Drakeman made this mis- take when she moved from teaching religion to being CEO of a biotechnology startup.

Lisa Drakeman was teaching religion at Princeton when her husband asked her to help out at Medarex, a new biotechnology company he founded to develop antibody-based medicines for cancer, infl ammation, and infectious disease. Drakeman began performing various tasks part-time, but soon found herself heading up a spinoff company, Genmab AS of Denmark.

One of the toughest things Drakeman had to learn was to stop doing everything herself. In the beginning, she attended every meeting, interviewed every job candidate, and read every draft of clinical trial designs. She soon realized that she couldn’t master every detail and that trying to do so would stall the company’s growth. Although it was hard to step back, Drake- man eventually made the transition from doing individual tasks to performing the executive function. She established clear procedures and began delegating the details of products and clinical trials to others. Rather than interviewing job candidates herself, she set up human resources systems to enable others to interview, hire, and train employees. By developing from individual performer to manager, Drakeman helped Genmab grow from 25 employees to around 200 within a few years.41

Another problem for many new managers is that they expect to have greater free- dom to do what they think is best for the organization. In reality, though, manag- ers fi nd themselves hemmed in by interdependencies. Being a successful manager means thinking in terms of building teams and networks, becoming a motivator and organizer within a highly interdependent system of people and work. Although the distinctions may sound simple in the abstract, they are anything but. In essence, becoming a manager means becoming a new person and viewing oneself in a com- pletely new way.

Can you make a personal transformation from individual performer to manager, accomplishing work by engaging and coordinating other people? Look back at your results on the questionnaire at the beginning of this chapter to see how your priorities align with the demands placed on a manager.

Lisa Drakeman, Genmab AS

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• Specialist, performs specific tasks

• Gets things done through own efforts

• An individual actor

• Works relatively independently

• Generalist, coordinates diverse tasks

• Gets things done through others

• A network builder

• Works in highly interdependent manner

From Individual Identity

To Manager Identity

E X H I B I T 1 . 4 Making the Leap from Individual Performer to Manager

SOURCE: Based on Exhibit 1.1, “Transformation of Identity,” in Linda A. Hill, Becoming a Manager : Mastery of a New Identity, 2nd ed. (Boston, MA: Harvard Business School Press, 2003): 6.

PART 1 INTRODUCTION TO MANAGEMENT16

Many new managers have to make the transformation in a “trial by fi re,” learning on the job as they go, but organizations are beginning to be more responsive to the need for new manager training. The cost to organizations of losing good employees who can’t make the transition is greater than the cost of providing training to help new managers cope, learn, and grow. In addition, some of today’s organizations are using great care in selecting people for managerial positions, including ensuring that each candidate understands what management involves and really wants to be a manager. A career as a manager can be highly rewarding, but it can also be stressful and frustrating. The Manager’s Shoptalk further examines some of the challenges new managers face. After reading the Shoptalk, can you answer “Yes” to the question “Do I really want to be a manager?”

Is management for you? Becoming a manager is considered by most people to be a positive, forward-looking career move and, indeed, life as a manager offers appealing aspects. However, it also holds many challenges, and not every person will be happy and fulfi lled in a management position. Here are some of the issues would-be managers should consider before deciding they want to pursue a man- agement career:

1. Th e increased workload. It isn’t unusual for managers to work 70 to 80 hours per week, and some work even longer hours. A manager’s job always starts before a shift and ends hours after the shift is over. When Ray Sarnacki was pro- moted to manager at an aerospace company, he found himself frustrated by the incessant travel, endless paperwork, and crowded meeting sched- ule. He eventually left the job and found happi- ness in a position earning about one-fi fth of his peak managerial salary.

2. Th e challenge of supervising former peers. This issue can be one of the toughest for new manag- ers. They frequently struggle to fi nd the right approach, with some trying too hard to remain “one of the gang,” and others asserting their authority too harshly. In almost all cases, the transition from a peer-to-peer relationship to a manager-to-subordinate one is challenging and stressful.

3. Th e headache of responsibility for other people. A lot of people get into management because they like the idea of having power, but the real- ity is that many managers feel overwhelmed by the responsibility of hiring, supervising, and dis- ciplining others. New managers are often aston- ished at the amount of time it takes to handle

“people problems.” Kelly Cannell, who quit her job as a manager, puts it this way: “What’s the big deal [about managing people]? The big deal is that people are human. . . . To be a good man- ager, you have to mentor them, listen to their problems, counsel them, and at the end of the day you still have your own work on your plate. . . . Don’t take the responsibility lightly, because no matter what you think, managing people is not easy.”

4. Being caught in the middle. Except for those in the top echelons, managers fi nd themselves acting as a backstop, caught between upper management and the workforce. Even when managers disagree with the decisions of top executives, they are responsible for implement- ing them.

For some people, the frustrations of management aren’t worth it. For others, management is a fulfi ll- ing and satisfying career choice and the emotional rewards can be great. One key to being happy as a manager may be carefully evaluating whether you can answer yes to the question, “Do I really want to be a manager?”

SOURCES: Erin White, “Learning to Be the Boss,” The Wall Street Journal, November 21, 2005; Jared Sandberg, “Down Over Moving Up: Some New Bosses Find They Hate Their Jobs,” The Wall Street Journal, July 27, 2005; Heath Row, “Is Management for Me? That Is the Question,” Fast Company (February–March 1998): 50–52; Timothy D. Schellhardt, “Want to Be a Manager? Many People Say No, Calling Job Miser- able,” The Wall Street Journal, April 4, 1997; and Matt Murray, “Managing Your Career—The Midcareer Crisis: Am I in This Business to Become a Manager?” The Wall Street Journal, July 25, 2000.

Do You Really Want To Be A Manager?

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CHAPTER 1 INNOVATIVE MANAGEMENT FOR TURBULENT TIMES 17 Introduction

1 Manager Activities Most new managers are unprepared for the variety of activities managers routinely perform. One of the most interesting fi ndings about managerial activities is how busy managers are and how hectic the average workday can be.

Adventures in Multitasking Managerial activity is characterized by variety, fragmentation, and brevity.42 The widespread and voluminous nature of a manager’s involvements leaves little time for quiet refl ection. The average time spent on any one activity is less than nine minutes.

Managers shift gears quickly. Signifi cant crises are interspersed with trivial events in no predictable sequence. Every manager’s job, while in most cases not as poten- tially dangerous, is similar in its diversity and fragmentation to that of U.S. Marine Corps offi cers managing the reconstruction efforts in Iraq. Consider the diverse events in a typical day for Capt. Sean Miller in Fallujah, Iraq:43

▪ Begins the day meeting with tribal sheiks and local offi cials to decide which proj- ects to fi nance.

▪ Drives to a command center to check the status of a job that a contractor has left unfi nished.

▪ Walks to a nearby school to discuss awards for students who recite passages from the Koran.

▪ Is interrupted by a handful of people who have come with questions or demands: one asks about a relative he says had been detained several years ago; another pushes a contract for review into Miller’s hands; a third is seeking work; and so on.

▪ Finally returns to the discussion of student awards. ▪ Agrees to a tour of the school, where a contractor explains his request for a $50,000