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Thomas S. Bateman McIntire School of Commerce

University of Virginia

Scott A. Snell Darden Graduate School of Business

University of Virginia

LEADING & COLLABORATING IN A COMPETITIVE WORLD

Management

ELEVENTH EDITION

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MANAGEMENT: LEADING & COLLABORATING IN A COMPETITIVE WORLD, ELEVENTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2013, 2011, and 2009. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4

ISBN 978-0-07-786254-1 MHID 0-07-786254-6

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Library of Congress Cataloging-in-Publication Data Bateman, Thomas S. Management: leading & collaborating in a competitive world / Thomas S. Bateman, McIntire School of Commerce, University of Virginia, Scott A. Snell, Darden Graduate School of Business, University of Virginia.—ELEVENTH EDITION. pages cm Includes indexes. ISBN 978-0-07-786254-1 (alk. paper)—ISBN 0-07-786254-6 (alk. paper) 1. Management. I. Snell, Scott, 1958- II. Title. HD31.B369485 2015 658—dc23

2013037450

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

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For my parents, Tom and Jeanine Bateman,

and Mary Jo, Lauren, T.J., and James

and

My parents, John and Clara Snell,

and Marybeth, Sara, Jack, and Emily

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v

THOMAS S. BATEMAN Thomas S. Bateman is Bank of America Profes- sor and management area coordinator in the McIn- tire School of Com- merce at the University of Virginia. He teaches leadership courses and is director of a new lead- ership minor open to undergraduate students of all majors. Prior to joining the University of Virginia, he taught orga- nizational behavior at the Kenan-Flagler Business School of the University of North Carolina to undergraduates, MBA students, PhD students, and practicing managers. He also taught for two years in Europe as a visiting professor at the Institute for Management Development (IMD), one of the world’s leaders in the design and delivery of executive education. Professor Bateman completed his doctoral program in business administration in 1980 at Indiana University. Prior to receiving his doctorate, Dr. Bateman received his BA from Miami University. In addition to Virginia, UNC–Chapel Hill, and IMD, Dr. Bateman has taught at Texas A&M, Tulane, and Indiana universities.

Professor Bateman is an active management researcher, writer, and consultant. He serves on the editorial boards of the Academy of Management Review, the Academy of Management Journal, and the Asia Pacific Journal of Busi- ness and Management. His articles have appeared in pro- fessional journals such as the Academy of Management Journal, Academy of Management Review, Journal of Applied Psychology, Organizational Behavior and Human Decision Processes, Journal of Management, Business Horizons, Journal of Organizational Behavior, and Decision Sciences.

Tom’s current consulting and research center on practical wisdom in business executives, leadership in the form of problem solving at all organizational lev- els, various types of proactive behavior by employees at all levels, and the successful pursuit of long-term work goals. He works with organizations including Singapore Airlines, the Brookings Institution, the U.S. Chamber of Commerce, the Nature Conservancy, and LexisNexis.

SCOTT A. SNELL Scott Snell is Professor of Business Administration at the University of Vir- ginia’s Darden Graduate School of Business. He teaches courses in lead- ership, developing orga- nizational capability, and human capital consult- ing. His research focuses on human resources and the mechanisms by which organizations generate, transfer, and integrate new knowledge for com-

petitive advantage. He is co-author of four books: Man- aging People and Knowledge in Professional Service Firms, Management: Leading and Collaborating in a Competitive World, M: Management, and Managing Human Resources. His work has been published in a number of journals such as the Academy of Management Journal, Academy of Management Review, Strategic Management Journal, Journal of Management, Journal of Management Studies, and Human Resource Management, and he was recently listed among the top 100 most-cited authors in schol- arly journals of management. He has served on the boards of the Strategic Management Society’s human capital group, the Society for Human Resource Man- agement Foundation, the Academy of Management’s human resource division, the Human Resource Manage- ment Journal, the Academy of Management Journal and the Academy of Management Review. Professor Snell has worked with companies such as AstraZeneca, Deutsche Telekom, Shell, and United Technologies to align strategy, capability, and investments in talent. Prior to joining the Darden faculty in 2007, he was professor and director of executive education at Cornell Univer- sity’s Center for Advanced Human Resource Studies and a professor of management in the Smeal College of Business at Pennsylvania State University. He received a B.A. in psychology from Miami University, as well as M.B.A. and Ph.D. degrees in business administration from Michigan State University.

About the Authors

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vi

Preface

Welcome to our 11th edition! Thank you to everyone who has used and learned from previous editions. We are proud to present to you our newest and most exciting edition.

Our Goals Our mission with this text hasn’t changed from that of our previous editions: to inform, instruct, and inspire. We hope to inform by providing descriptions of the important concepts and practices of modern manage- ment. We hope to instruct by describing how you can take action on the ideas discussed. We hope to inspire not only by writing in an interesting and optimistic way but also by providing a real sense of the opportunities ahead of you. Whether your goal is starting your own company, leading a team to greatness, building a strong organization, delighting your customers, or generally forging a positive future, we want to inspire you to take constructive actions.

We hope to inspire you to be both a thinker and a doer. We want you to think about the issues, think about the impact of your actions, think before you act. But being a good thinker is not enough; you also must be a doer. Management is a world of action. It is a world that requires timely and appropriate action. It is a world not for the passive but for those who commit to positive accomplishments.

Keep applying the ideas you learn in this course, read about management in sources outside of this course, and keep learning about management after you leave school and continue your career. Make no mistake about it: Learning about management is a personal voyage that will last years, an entire career.

Competitive Advantage Today’s world is competitive. Never before has the world of work been so challenging. Never before has it been so imperative to your career that you learn the skills of management. Never before have people had so many opportunities and challenges with so many potential risks and rewards.

You will compete with other people for jobs, resources, and promotions. Your organization will

compete with other firms for contracts, clients, and cus- tomers. To survive the competition, and to thrive, you must perform in ways that give you an edge over your competitors, that make the other party want to hire you, buy from you, and do repeat business with you. You will want them to choose you, not your competitor.

To survive and thrive, today’s managers have to think and act strategically. Today’s customers are well educated, aware of their options, and demanding of excellence. For this reason, managers today must think constantly about how to build a capable workforce and manage in a way that delivers the goods and services that provide the best possible value to the customer.

By this standard, managers and organizations must perform. Six essential types of performance, on which the organization beats, equals, or loses to the competi- tion, are cost, quality, speed, innovation, service, and sus- tainability. These six performance dimensions, when managed well, deliver value to the customer and com- petitive advantage to you and your organization. We will elaborate on all of these topics throughout the book.

The idea is to keep you focused on a type of bottom line to make sure you think continually about delivering the goods that make both you and your organization a competitive success. This results-oriented approach is unique among management textbooks.

Leading & Collaborating Yes, business is competitive. But it’s not that simple. In fact, to think strictly in terms of competition is overly cynical, and such cynicism can sabotage your perfor- mance. The other fundamental elements in the success equation are collaboration and leadership. People work- ing with, rather than against, one another are essential to competitive advantage. Put another way, you can’t do it alone—the world is too complex, and business is too challenging.

You need to work with your teammates. Leaders and followers need to work as collaborators more than as adversaries. Work groups throughout your organization need to cooperate with one another. Business and gov- ernment, often viewed as antagonists, can work produc- tively together. And today more than ever, companies

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Preface vii

• New text example of collaborating with customers via social media, focusing on L.L. Bean

• New example of car makers expanding production in the United States

• New In Practice about Mark Little, chief technology officer at GE

• New example of the importance of people skills to management success, beginning early in one’s career

• New In Practice about Anne Ackerley, chief market- ing officer of BlackRock, a money management firm

Chapter 2 • New Management Connection about Facebook and

Mark Zuckerberg

• New Figure 2.3 on employment trends following re- cent recessions

• New examples throughout chapter on cola wars and efforts, especially at PepsiCo, to include more healthful products in the mix

• New example of e-readers and eBooks as comple- mentary products

• New In Practice about the growth and challenges of using contingent workers

• New In Practice about Google’s organizational culture

Chapter 3 • New Management Connection about decisions

related to Boeing Dreamliner

• New example of logistics decisions to help Toys “R” Us compete with online-only retailers

• New Henry Ford example from The Greatest Business Decisions of All Time

• New text describing the significance of big data for decision making

• New In Practice about decision to launch Apple Maps

• New In Practice about GE and Virgin Airlines using social media to gather ideas for a “social airplane”

• New example of Pixar’s ideas for boosting creative thinking

• New Concluding Case: Soaring Eagle Skate Company

Chapter 4 • New Management Connection about Walt Disney

Company

that traditionally were competitors engage in joint ven- tures and find other ways to collaborate on some things even as they compete in others. Leadership is needed to make these collaborations happen.

How does an organization create competitive advan- tage through collaboration? It’s all about the people, and it derives from good leadership. Three stereotypes of leadership are that it comes from the top of the com- pany, that it comes from one’s immediate boss, and that it means being decisive and issuing commands. These stereotypes may contain grains of truth, but the real- ity is much more complex. First, the person at the top may or may not provide effective leadership—in fact, many observers believe that good leadership is far too rare. Second, organizations need leaders at all levels, in every team and work unit. This includes you, begin- ning early in your career, and this is why leadership is an important theme in this book. Third, leaders should be capable of decisiveness and of giving commands, but relying too much on this traditional approach isn’t enough. Great leadership is far more inspirational than this and helps people both to think differently and to work differently—including working collaboratively with a focus on results.

Leadership—from your boss as well as from you— generates collaboration, which in turn creates results that are good for the company and good for the people involved.

As Always, Currency and Variety in the 11th Edition It goes without saying that this textbook, in its 11th edi- tion, remains on the cutting edge of topical coverage, updated via both current business examples and recent management research. Chapters have been thoroughly updated, and students are exposed to a broad array of important current topics. As but two examples, we have expanded and strengthened our coverage of sustainabil- ity and social enterprise, topics on which we were early leaders and that we continue to care about as much as today’s students.

We have done our very best to draw from a wide vari- ety of subject matter, sources, and personal experiences. We continue to emphasize throughout the book themes such as real results, ethics, cultural considerations, and leadership and collaboration. Here is just a sampling of new highlights in the 11th edition—enough to convey the wide variety of people, organizations, issues, and contexts represented throughout the text.

Chapter 1 • New Management Connection about Jeff Bezos of

Amazon

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viii Preface

Chapter 7 • New Management Connection about Popchips

• New list of entrepreneurs in their 20s (Table 7.2)

• New example of Limor Fried, founder of Adafruit Industries

• New examples of SpaceX and Bigelow Aerospace

• New examples of itMD and Care at Hand—health care technology companies receiving grants in an area of new demand

• New In Practice about 3Cinteractive

• New example of Zipcar

• Material on financial needs of a start-up collected in one section, with the addition of material about crowdfunding expansion under the JOBS Act of 2012

• New In Practice about David Karp, founder of Tumblr

• New example of Neema Bahramzad and Caitlin Bales, founders of Locabal

• New Concluding Case: ScrollCo

Chapter 8 • New Management Connection about General

Motors

• New In Practice about Coca-Cola’s board of directors

• New example of outside directors helping companies during the Great Recession

• New example of Time Warner Cable

• New example of San Francisco Federal Credit Union

• New In Practice about enterprise social networks

Chapter 9 • New Management Connection about General

Electric

• Updated Walmart example

• New In Practice about Hewlett-Packard

• New example of DreamWorks Animation

• New In Practice about clothing customization by eShakti and Bow & Drape

• New example of Toyota

• New example of Japanese companies revisiting their approach to just-in-time, following the earthquake and tsunami’s impact

• New example of R. A. Jones & Co.

• New example of New York Community Bancorp

• New In Practice about the Bill and Melinda Gates Foundation

• New example of Procter & Gamble, including A. G. Lafley on importance of strategy

• New example of Zappos.com

• New example of QlikTech, including sample graphic for a SWOT analysis

• New example of General Electric

• New In Practice about Valve’s online distribution of video games at the Steam website

• New example of Bloomin’ Brands

• New example of Spirit Airlines

• New Concluding Case: Wish You Wood

Chapter 5 • New Management Connection about IBM (includ-

ing Smarter Planet initiative)

• New In Practice fictional example of an ethical di- lemma at a sign company

• New example applying ethical principles to decisions about fracking

• New Table 5.2 with updated current examples of ethical issues in business, including health care, so- cial media, and telework

• New In Practice about Red Frog Events

• New Table 5.4 of Unisys Corporation’s code of ethics

• New example of Siemens

Chapter 6 • New Management Connection about Lenovo

• New examples (e.g., General Motors) of Chinese manufacturing shifting toward more skilled manu- facturing aimed at serving its growing middle class

• South America information updated to include growth beyond Brazil

• New example of IBM finding opportunities in Africa

• New example of Cinnabon in the Middle East and Russia

• New In Practice about Starbucks

• New example of Panasonic

• New example of U.S. tariffs on Chinese solar panels

• New In Practice about Celtel

• New Concluding Case: Net-Work Docs

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Preface ix

• New example of Northeast Georgia Health System

• New In Practice about RescueTime auto-analytics for performance feedback

• New example of Parasole restaurant group

• New example of Plante Moran accounting firm

• New In Practice about Mars Inc.

Chapter 14 • New Management Connection about Whole Foods

Market

• New example of FLEXcon

• New example of Game Freak

• New example of Lockheed Martin

• New example of trend toward rapid team formation

• New In Practice about Menlo Innovations

• New example of National Information Solutions Cooperative

• New In Practice about Stand Up to Cancer Dream Teams

• New Concluding Case: Excel Pro Drilling Systems

Chapter 15 • New Management Connection about Yahoo

• New example of Cisco

• New example of misperception when communicat- ing with high-tech workers

• Updated emphasis on social media in discussion of electronic media as a communications channel

• New IBM example of managing excessive e-mail

• New In Practice about Automattic

• New example of Exelon

• New In Practice about communications by Kaiser Permanente’s CEO

• New example of listening

• New example of horizontal communication at National Public Radio

Chapter 16 • New Management Connection about Best Buy

• New example of La-Z-Boy

• New example of BP

• New In Practice about McDonald’s

• New description of after-action reviews

• New example of Virginia Mason Medical Center

Chapter 10 • Updated Management Connection about Google

• New examples of Johnson & Johnson, Colgate

• New example of Ford Motor Company

• Updated Figure 10.2

• New In Practice about use of big data by Xerox and Catalyst IT Services

• Updated Table 10.1

• New example of Verizon

• Updated Figure 10.4

• Updated information about CEO pay

• New In Practice about Royal Dutch Shell

Chapter 11 • New Management Connection about NASCAR

• New Figure 11.2 about extent of diversity initiatives

• Updated information on gender gap in pay

• New information for Tables 11.1 and 11.2

• New Table 11.4

• New ranking of DiversityInc’s Best Companies for Diversity

• New In Practice about CVS Caremark

• New example of Etsy

• New In Practice about Ingersoll Rand

• New Concluding Case: Niche Hotel Group

Chapter 12 • New Management Connection about Meg Whitman

as leader of Hewlett-Packard

• New example of Maria Green at Illinois Tool Works

• New In Practice about Barbara Corcoran as leader of Corcoran Group

• New example of Jeff Bezos as leader of Amazon

• New In Practice about David Novak as leader of Yum Brands

• New example of John Heer as leader of Mississippi Health Services

• New Concluding Case: Breitt, Starr & Diamond LLC

Chapter 13 • New Management Connection about SAS

• New example of QuikTrip convenience-store chain

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x Preface

for yourself and for other people. What managers do matters tremendously.

Acknowledgments This book could not have been written and published without the valuable contributions of many individuals.

Ingrid Benson and her colleagues at Words & Numbers were instrumental in creating a strong 11th edition. Many thanks for their meticulous attention to detail, ideas, and contributions. Ingrid has become a valued friend throughout the process; we couldn’t have done it, or had as much fun, without Ingrid.

Special thanks to Lily Bowles, Taylor Gray, and Meg Nexsen for contributing their knowledge, insights, and research to Appendix B: Managing in Our Natural Environment.

Our reviewers over the last ten editions contrib- uted time, expertise, and terrific ideas that significantly enhanced the quality of the text. The reviewers of the 11th edition are

Laura L. Alderson University of Memphis Daniel Arturo Cernas Ortiz University of North Texas Claudia S. Davis Sam Houston State University Greg Dickens Sam Houston State University Michael Drafke College of DuPage Judson Faurer Metropolitan State University of Denver Shirley Fedorovich Embry-Riddle Aeronautical University Randall Fletcher Sinclair Community College Rebecca M. Guidice University of North Carolina-Wilmington Dan Hallock University of North Alabama Ivan Franklin Harber, Jr. Indian River State College David Lynn Hoffman Metropolitan State University of Denver Cathleen Hohner College of DuPage Carrie Hurst Tennessee State University Jacquelyn D. Jacobs University of Tennessee Donald E. Kreps Kutztown University Christopher McChesney Indian River State College

• New description of sustainability audits and the triple bottom line

• Updated In Practice about the Ritz Carlton

• New example of Ethicon

Chapter 17 • New Management Connection about Tesla Motors

• New paragraph on disruptive innovation

• New example of forces for innovation in higher edu- cation

• New In Practice about Square mobile payments

• New example of Rethink Robotics

• New example of GE’s ultra-tiny electronics cooling system

• New In Practice about manufacturing transformed by 3D printers

• New description of innovations as competency enhancing or competency destroying

• New example of acquisitions by Twitter

• New example of open innovation at Elmer’s Products

Chapter 18 • New Management Connection about Time Warner

• New example of resistance to a change in banking: use of universal agents with broad job descriptions

• New In Practice about change to open workspaces at American Express and other companies

• New example of Envision

• New paragraph updating Kotter’s model of change leadership for turbulent times

• New Concluding Case: EatWell Technologies

A Team Effort This book is the product of a fantastic McGraw-Hill team. Moreover, we wrote this book believing that we are part of a team with the course instructor and with students. The entire team is responsible for the learning process.

Our goal, and that of your instructor, is to create a positive learning environment in which you can excel. But in the end, the raw material of this course is just words. It is up to you to use them as a basis for further thinking, deep learning, and constructive action.

What you do with the things you learn from this course, and with the opportunities the future holds, counts. As a manager, you can make a dramatic difference

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Preface xi

Jeffrey E. McGee University of Texas at Arlington Jane Murtaugh College of DuPage Mansour Sharifzadeh Cal State Poly University-Pomona Qiumei Xu Northeastern Illinois University Many individuals contributed directly to our devel-

opment as textbook authors. Dennis Organ provided one of the authors with an initial opportunity and guid- ance in textbook writing. John Weimeister has been a friend and adviser from the very beginning. The entire McGraw-Hill Education team, starting with Executive Brand Manager Mike Ablassmeir (who spontaneously and impressively knew Rolling Stone ’s top three drum- mers of all time) provided great support and expertise to this new edition. Many thanks to Managing Devel- opment Editor Christine Scheid for so much good work on previous editions and for continued friendship.

And to our superb Senior Development Editor Laura Griffin, and to Elizabeth Trepkowski, marketing man- ager, thank you for your skills, professionalism, colle- giality, good fun, and for making the new edition rock! What a team!

Finally, we thank our families. Our parents, Jeanine and Tom Bateman and Clara and John Snell, provided us with the foundation on which we have built our careers. They continue to be a source of great support. Our wives, Mary Jo and Marybeth, demonstrated great encouragement, insight, and understanding through- out the process. Our children, Lauren, T. J., and James Bateman and Sara, Jack, and Emily Snell, inspire us in every way.

Thomas S. Bateman Charlottesville, VA

Scott A. Snell Charlottesville, VA

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Bottom Line The ability to manufacture even

customized products quickly

has become a competitive

requirement.

To meet this requirement, what

qualities would a company need

in its employees?

Bottom Line Most creative ideas come not

from the lone genius in the

basement laboratory, but from

people talking and working

together.

Why is listening part of

stimulating creativity?

Bottom Line In all businesses—services

as well as manufacturing—

strategies that emphasize good

customer service provide a

critical competitive advantage.

Name a company that has

delivered good customer service

to you.

Bottom Line As in this example, when you

want to pursue sustainability,

think in terms of the long-term

consequences of your decisions.

What might be the long-term

consequences of not investing in

energy efficiency?

In this ever more competitive environment, there

are six essential types of performance on which

the organization beats, equals, or loses to the

competition: cost, quality, speed, innovation,

service, and sustainability. These six performance

dimensions, when done well, deliver value to the

customer and competitive advantage to you and

your organization.

Throughout the text, Bateman and Snell remind

students of these six dimensions and their impact

on the bottom line with marginal icons. This

results-oriented approach is a unique hallmark of

this textbook.

Questions have also now been added to this edition

to emphasize the bottom line further. Answers to

these questions can be found in the Instructor’s

Manual.

Bottom Line Bottom Line

With increased competition

from foreign and domestic

companies, managers must pay

particular attention to cost.

Does low cost mean low quality?

Why or why not?

Bottom Line The Internet lets customers

quickly find products with the

cost and quality features they

want.

What might “flexible processes”

mean for a fast-food restaurant?

For an auto company?

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58

P R

O G

R E

S S

R E

P O

R T

M

A N

A G

E R

’S B

R IE

F

O N

W A

R D

Even as technology transformed the macroenvironment

for Facebook, its competitive environment is shifting

almost as rapidly. Four Internet-era giants—Facebook,

Amazon, Apple, and Google—once ruled separate

domains but now are increasingly fighting for the same

territory. Amazon started as a bookstore but now sells

information for its Kindle e-reader, making it a competitor

with Apple. Google created a social-networking service

(Google 1 ), and Facebook launched a search tool for its

site. Some observers predict Google and Facebook will

be players in the market for mobile devices, to drive more

usage of their services.

As they seek ever-larger shares of online activity, Face-

book and these competitors rely on their customer data.

As you saw at the beginning of this chapter, details about

consumers and their behavior make advertising on Face-

book valuable. Facebook has commissioned studies of the

value of social marketing. In one case, it found that if Face-

book users were fans of Starbucks (by “liking” the brand’s

page and therefore getting messages from the brand),

they and their friends bought from Starbucks more often.

Promoting such results helps Facebook charge more for

promotions on its site. The other Internet giants gather

different kinds of data. Amazon has information about

product searches and purchases. Google knows what a

person is searching for but not necessarily the person’s

Management Connection FACEBOOK’S FIERCELY COMPETITIVE ENVIRONMENT

opinions about the content. Until it launched Google 1 ,

Google would not have known personal details such as

age, interests, and relationships; adding a social network

delivers a powerful combination of information sources.

No wonder, then, that Facebook launched its own

search tool. But can a social search engine compete with

Google? It’s handy for discovering what restaurants your

friends like. But it won’t give you a weather forecast or

directions to your job interview; for that, Facebook’s search

engine has partnered with Microsoft’s Bing. Facebook’s

hope is that the tools will be helpful enough to keep people

from leaving Facebook. If it can do so, it will have succeeded

against a formidable competitor. So far, Google is taking in

three-quarters of the ad spending on search ads (the links

that show up beside users’ search results). Some people

see Facebook at a disadvantage because it waited until

recently to offer a search function; others see Google 1 as

far behind Facebook in the social-networking arena. 32

• Are Amazon, Apple, and Google competitors in Face-

book’s competitive environment or sellers of comple-

ments? Explain.